REG - Galantas Gold Corp - Results for the year ended 31 December 2022
02/05/2023 07:00
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RNS Number : 9590X Galantas Gold Corporation 02 May 2023
GALANTAS GOLD CORPORATION
TSXV & AIM: Symbol GAL
GALANTAS REPORT ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2022
May 2, 2023: Galantas Gold Corporation (the 'Company') is pleased to
announce its audited annual financial results for the year ended December 31,
2022.
A copy of the Financial Statements and Management Discussion and Analysis will
be sent to shareholders in due course and are available on the Company's
website at www.galantas.com/investors (http://www.galantas.com/investors)
.
The Annual and Special Meeting of the Company is to be held at 11:00 a.m.
(Toronto time) on 27th June 2023 at The Canadian Venture Building, 82 Richmond
Street East, Toronto, Ontario, M5C1P1, Canada.
Financial Highlights
Highlights of the 2022 audited annual results, which are expressed in Canadian
Dollars, are summarized below:
All figures denominated in Canadian Dollars (CDN$)
Year Ended
December 31
2022 2021
Revenue $ 0 $ 0
Cost and expenses of operations $ (284,262) $ (255,901)
Loss before the undernoted $ (284,262) $ (255,901)
Depreciation $ (624,620) $ (547,991)
General administrative expenses $ (5,401,289) $ (4,332,865)
Foreign exchange (loss) $ (195,308) $ (154,798)
Impairment of Exploration and Evaluation Assets $ 0 $ 0
(Loss) / Gain on disposal of property, plant and equipment $ (2,910) $ 7,124
Impairment $ (10,124,920) $ 0
Net Loss for the year $ (16,633,939) $ (5,284,431)
Working Capital Deficit $ (11,027,964) $ (1,095,882)
Cash loss from operating activities before changes in non-cash working capital $ (2,254,291) $ (1,678,797)
Cash at December 31, 2022 $ 1,038,643 $ 1,069,751
Sales revenue for year ended December 31, 2022 amounted to $ Nil as per the
year ended December 31, 2021. Provisional concentrate sales totalled US$
608,000 for 2022 compared to US $ 1,114,000 for the year 2021. However, until
the mine commences commercial production, the net proceeds from concentrate
sales are being offset against development assets.
The Net Loss for the year ended December 31, 2022 amounted to $ 16,633,939
(2021: $5,284,431) and the cash outflow from operating activities before
changes in non-cash working capital for the year ended December 31, 2022
amounted to $2,254,291 (2021: $1,678,797).
The Company had a cash balance of $ 1,038,643 at December 31, 2022 compared to
$ 1,069,751 at December 31, 2021. The working capital deficit at December 31,
2022 amounted to $ 11,027,964 compared to a working capital deficit
of $1,095,882 at December 31, 2021. Current liabilities include financing
facilities and loans. Negotiations with current finance providers to extend
short-term loans have commenced, are progressing positively and the maturity
dates for these loans are expected to be extended beyond December 31, 2023
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/9590X_1-2023-4-28.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9590X_1-2023-4-28.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 (CEO), and the exploration and geological components by Dr.
Sarah Coulter, all 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 CEO
Email: info@galantas.com (mailto:info@galantas.com)
Website: www.galantas.com (http://www.galantas.com/)
Telephone: +44 (0) 2882 241100
Grant Thornton UK LLP (Nomad)
Philip Secrett, Harrison Clarke, George Grainger, Samuel LittlerTelephone:
+44(0)20 7383 5100
S.P Angel Corporate Finance (AIM Broker)
David Hignell, Charlie Bouverat (Corporate Finance)
Grant Barker (Sales and Broking)
Telephone: +44(0)20 3470 0470
GALANTAS GOLD CORPORATION
Consolidated Financial Statements
(Expressed in Canadian Dollars)
Years Ended December 31, 2022 and 2021
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of
Galantas Gold Corporation
Report on the Audit of the Consolidated Financial Statements Opinion
We have audited the consolidated financial statements of Galantas Gold
Corporation (the Company), which
comprise the consolidated statements of financial position as at December 31,
2022 and 2021, and the consolidated statements of loss, consolidated
statements of comprehensive loss, consolidated statements of cash flows and
consolidated statements of changes in equity for the years then ended, and
notes to the consolidated financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2022 and 2021 and its financial performance and its cash flows
for the years then ended, in accordance with International Financial Reporting
Standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Our responsibilities under those standards are further described in
the Auditor's Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Company in
accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada, and we have fulfilled our other
ethical responsibilities in accordance with those requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Material Uncertainty Relating to Going Concern
We draw your attention to Note 1 in the consolidated financial statements,
which indicates that the Company incurred a comprehensive loss of $17,797,425
during the year ended December 31, 2022. As stated in Note 1, these events or
conditions, along with other matters as set forth in Note 1, indicate that a
material uncertainty exists that may cast significant doubt on the Company's
ability to continue as a going concern. Our opinion is not modified in respect
of this matter.
Information Other than the Consolidated financial statements and Auditor's
Report Thereon Management is responsible for the other information. The other
information comprises the annual management's discussion and analysis, but
does not include the consolidated financial statements and our auditor's
report thereon.
Our opinion on the consolidated financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless management either intends to
liquidate the Company or to cease operations, or has no realistic alternative
but to do so.
Those charged with governance are responsible for overseeing the Company's
financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the
consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report
that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with Canadian
generally accepted auditing standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these consolidated financial statements. As part of an audit in
accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the
audit. We also:
· Identify and assess the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The
risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal
control.
· Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control.
· Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by
management.
· Conclude on the appropriateness of management's use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Company's ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw
attention in our auditor's report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor's report. However, future events or conditions
may cause the Company to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the consolidated
financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
· Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within the
Company to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement that we have
complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, related
safeguards.
The engagement partner on the audit resulting in this independent auditor's
report is Pat Kenney.
Chartered Professional Accountants Licensed Public Accountants
Mississauga, Ontario
April 28, 2023
Galantas Gold Corporation
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at December
31,
2022 2021
ASSETS
Current assets
Cash and cash equivalents
$ 1,038,643
$ 1,069,751
Accounts receivable and prepaid expenses (note 8)
1,810,993
1,279,935
Inventories (note 9)
83,242 108,788
Total current assets
2,932,878 2,458,474
Non‑current
assets
Property, plant and equipment (note 10)
24,255,849
25,688,836
Long‑term deposit (note 12)
489,660 513,960
Exploration and evaluation assets (note 11)
2,665,313
1,574,183
Total non‑current assets
27,410,822 27,776,979
Total assets
$ 30,343,700 $ 30,235,453
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (notes 13 and 22)
$ 4,052,041 $
3,013,999
Current portion of financing facilities (note 14)
4,836,267
-
Due to related parties (note 20)
5,072,534 124,317
Leases (note 15)
- 416,040
Total current liabilities
13,960,842 3,554,356
Non‑current liabilities
Non‑current portion of financing facilities (note
14)
-
4,247,488
Due to related parties (note
20)
-
2,444,376
Decommissioning liability (note
12)
582,441 600,525
Other liability (note
20)
1,085,426
-
Total non‑current
liabilities
1,667,867 7,292,389
Total
liabilities
15,628,709 10,846,745
Equity
Share capital (note 16(a)(b))
69,664,056
57,783,570
Reserves
15,515,105 15,435,369
Deficit
(70,464,170) (53,830,231)
Total equity
14,714,991 19,388,708
Total equity and liabilities
$
30,343,700 $ 30,235,453
The notes to the consolidated financial statements are an integral part of
these statements.
Going concern (note 1)
Incorporation and nature of operations (note 2)
Contingency (note 22)
Events after the reporting period (note 23)
Approved on behalf of the Board:
"Mario Stifano" ,
Director
"Jim Clancy" , Director
Galantas Gold Corporation
Consolidated Statements of Loss
(Expressed in Canadian Dollars)
Year Ended
December 31,
2022 2021
Revenues
Sales of concentrate (note
18)
$ - $ -
Cost and expenses of operations
Cost of sales
284,262 255,901
Depreciation (note
10)
624,620 547,991
908,882 803,892
Loss before general administrative and other expenses
(908,882) (803,892)
General administrative expenses
Management and administration wages (note
20)
647,763 454,594
Other operating expenses
526,162 200,507
Accounting and
corporate
291,535 155,615
Legal and
audit
226,185 123,005
Stock‑based compensation (note 16(d))
1,470,418 2,035,878
Shareholder communication and investor relations
506,090
419,590
Transfer agent
45,034
20,165
Director fees (note 20)
140,000 99,417
General
office
57,423 31,026
Accretion expenses (notes 12, 14 and
20)
691,105 382,178
Loan interest and bank charges less deposit interest (notes 14 and
20) 799,574
410,890
5,401,289 4,332,865
Other expenses
Foreign exchange loss
195,938 154,798
Loss (gain) on disposal of property, plant and equipment
2,910 (7,124)
Impairment of property, plant and equipment (note 10)
10,124,920 -
10,323,768 147,674
Net loss for the year
$ (16,633,939) $ (5,284,431)
Basic and diluted net loss per share (note 17)
$ (0.19)
$ (0.08)
Weighted average number of common shares outstanding
‑ basic and
diluted
89,401,620 64,122,021
The notes to the consolidated financial statements are an integral part of
these statements.
Galantas Gold Corporation
Consolidated Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
Year Ended
December 31,
2022 2021
Net loss for the year
$ (16,633,939) $ (5,284,431)
Other comprehensive loss
Items that will be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
(1,163,486)
(124,830)
Total comprehensive loss
$ (17,797,425) $ (5,409,261)
The notes to the consolidated financial statements are an integral part of
these statements.
Galantas Gold Corporation
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Year Ended
December 31,
2022 2021
Operating activities
Net loss for the year
$ (16,633,939) $(5,284,431)
Adjustment for:
Depreciation (note 10)
624,620 547,991
Stock‑based compensation (note
16(d))
1,470,418 2,035,878
Accrued interest (notes 14 and
20)
1,172,976 321,824
Foreign exchange (gain) loss
292,699 91,973
Accretion expenses (notes 12, 14 and 20)
691,105 345,808
Impairment of property, plant and equipment (note 10)
10,124,920 -
Loss (gain) on disposal of property, plant and equipment
2,910
(7,124)
Non‑cash working capital items:
Accounts receivable and prepaid expenses
438,113 (701,573)
Inventories
21,415
(29,200)
Accounts payable and other liabilities
1,216,455 918,974
Due to related parties
(327,111) 37,256
Other
liability
1,085,426 -
Net cash and cash equivalents used in by operating activities
180,007 (1,722,624)
Investing activities
Net purchase of property, plant and equipment
(10,414,099)
(4,426,696)
Proceeds from sale of property, plant and
equipment
- 8,562
Exploration and evaluation assets
(1,165,561) (834,193)
Lease payments (note 15)
(701,782) (260,743)
Net cash and cash equivalents used in investing activities
(12,281,442) (5,513,070)
Financing activities
Proceeds of private placements (note
16(b)(i))
5,900,003 7,998,980
Share issue costs
(607,860) (775,137)
Proceeds from exercise of warrants
5,287,147 495,333
Advances from related
parties
2,062,693 -
Repayments to related
parties
(524,255) -
Repayment of financing facilities (note
14)
- (23,802)
Net cash and cash equivalents provided by financing
activities
12,117,728 7,695,374
Net change in cash and cash equivalents
16,293
459,680
Effect of exchange rate changes on cash held in foreign
currencies
(47,401) (2,023)
Cash and cash equivalents, beginning of year
1,069,751
612,094
Cash and cash equivalents, end of year
$ 1,038,643
$ 1,069,751
Cash
$ 1,038,643 $ 1,069,751
Cash
equivalents
-
-
Cash and cash
equivalents
$ 1,038,643 $ 1,069,751
The notes to the consolidated financial statements are an integral part of
these statements.
Galantas Gold Corporation
Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
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 (note 16(b)(i))
7,998,980
- -
- -
7,998,980
Warrants issued (note 16(b)(i))
(3,258,578) 3,258,578
- - -
-
Warrants issued (note 14(ii))
- 670,000
- -
- 670,000
Share issue costs
(783,920)
8,783 - -
- (775,137)
Warrant extension (note
20(a)(iii))
- 251,000
-
-
- 251,000
Stock‑based compensation (note 16(d))
- -
2,035,878 -
- 2,035,878
Exercise of warrants
893,494 (398,161)
- -
- 495,333
Exchange differences on translating
foreign
operations
-
-
- (124,830)
- (124,830)
Net loss for the year
-
- - -
(5,284,431) (5,284,431)
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 16(b)(ii))
5,900,003
- - -
- 5,900,003
Shares issued for services arrangement (note 16(b)(ii))
1,000,000 -
- - -
1,000,000
Warrants issued (note 16(b)(ii))
(1,644,859)
1,644,859 -
- - -
Warrants issued (note
20(a)(iii))
- 74,000
-
-
- 74,000
Share issue costs (note 16(b)(ii))
(752,324) 144,464
- - -
(607,860)
Stock‑based compensation (note 16(d))
- -
1,470,418 -
- 1,470,418
Exercise of warrants
7,377,666
(2,090,519) - -
- 5,287,147
Exchange differences on translating
foreign
operations
-
-
- (1,163,486)
- (1,163,486)
Net loss for the year
-
- - -
(16,633,939) (16,633,939)
Balance, December 31, 2022
$ 69,664,056 $ 3,903,004 $ 11,887,678
$ (275,577) $ (70,464,170) $ 14,714,991
The notes to the consolidated financial statements are an integral part of
these statements.
1. Going Concern
These 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
commenced, are progressing positively and the maturity dates for both the
G&F Phelps Ltd. ("G&F Phelps") and Ocean Partners UK Ltd. ("Ocean
Partners") loans are expected to be extended beyond December 31, 2023 (see
notes 14 and 20).
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
year ended December 31, 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 consolidated financial statements on the going
concern basis.
As at December 31, 2022, the Company had a deficit of $70,464,170 (December
31, 2021 ‑ $53,830,231). Comprehensive loss for the year ended December 31,
2022 was $17,797,425 (year ended December 31, 2021 ‑ $5,409,261). 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 believes that it will continue as a going concern. However, this is
subject to a number of factors including market conditions. These consolidated
financial statements do not reflect adjustments to the carrying values of
assets and liabilities, the reported expenses and financial position
classifications used that would be necessary if the going concern assumption
was not appropriate. These adjustments could be material.
2. Incorporation and Nature of Operations
The Company was formed on September 20, 1996 under the name Montemor Resources
Inc. on the amalgamation of 1169479 Ontario Inc. and Consolidated Deer Creek
Resources Limited. The name was changed to European Gold Resources Inc. by
articles of amendment dated July 25, 1997. On May 5, 2004, the Company changed
its name from European Gold Resources Inc. to Galantas Gold Corporation. The
Company was incorporated to explore for and develop mineral resource
properties, principally in Europe. In 1997, it purchased all of the shares of
Omagh which owns a mineral property in Northern Ireland, including a
delineated gold deposit. Omagh obtained full planning and environmental
consents necessary to bring its property into production.
The Company entered into an agreement on April 17, 2000, approved by
shareholders on June 26, 2000, whereby Cavanacaw, a private Ontario
corporation, acquired Omagh. Cavanacaw has established an open pit mine to
extract the Company's gold deposit near Omagh, Northern Ireland. Cavanacaw
also has developed a premium jewellery business founded on the gold produced
under the name Galántas Irish Gold Limited ("Galántas"). As at July 1, 2007,
the Company's Omagh mine began production and in 2013 production was
suspended. On April 1, 2014, Galántas amalgamated its jewelry business with
Omagh.
On April 8, 2014, Cavanacaw acquired Flintridge. Following a strategic review
of its business by the Company during 2014 certain assets owned by Omagh were
acquired by Flintridge.
The Company's operations include the consolidated results of Cavanacaw, and
its wholly‑owned subsidiaries Omagh, Galántas and Flintridge.
The Company's common shares are listed on the TSX Venture Exchange ("TSXV")
and London Stock Exchange AIM under the symbol GAL. 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.
3. Basis of Preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") issued by the
International Accounting Standards Board ("IASB") and interpretations issued
by the IFRS Interpretations Committee ("IFRIC"). The Board of Directors
approved the consolidated financial statements on April 27, 2023.
(b) Basis of presentation
These consolidated financial statements have been prepared on a historical
cost basis with the exception of certain financial instruments, which are
measured at fair value. In addition, these consolidated financial statements
have been prepared using the accrual basis of accounting except for cash flow
information.
In the preparation of these consolidated financial statements, management is
required to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of
expenses during the year. Actual results could differ from these estimates. Of
particular significance are the estimates and assumptions used in the
recognition and measurement of items included in note 3(e).
(c) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and its subsidiaries.
The results of subsidiaries acquired or disposed of during the years presented
are included in the consolidated statement of loss from the effective date of
control and up to the effective date of disposal or loss of control, as
appropriate. An investor controls an investee if the investor has the power
over the investee, has the exposure, or rights, to variable returns from its
involvement with the investee and the ability to use its power over the
investee to affect the amount of the investor's returns. All intercompany
transactions, balances, income and expenses are eliminated upon consolidation.
The following wholly owned companies have been consolidated within the
consolidated financial statements:
Company
Registered
Principal activity
Galantas Gold Corporation Ontario,
Canada Parent company
Cavanacaw Corporation ((1)) Ontario,
Canada Holding company
Omagh Minerals Limited ((2)(3)) Northern
Ireland Operating company
Galántas Irish Gold Limited ((2)(4)) Northern
Ireland Dormant company
Flintridge Resources Limited ((2)(5)) United Kingdom
Operating company
((1)) 100% owned by Galantas Gold Corporation;
((2)) 100% owned by Cavanacaw Corporation;
((3)) Referred to as Omagh (as defined herein);
((4)) Referred to as Galántas (as defined herein); and
((5)) Referred to as Flintridge (as defined herein).
(d) Functional and presentation currency
The consolidated financial statements are presented in Canadian Dollars
("CAD"), which is the parent Company's presentation and functional currency.
Items included in the financial statements of each of the Company's operating
subsidiaries are measured using the currency of the primary economic
environment in which the entity operates (the "functional currency"). The
functional currency of the operating subsidiaries is the U.K. Pound Sterling
("GBP"). The functional currency of the subsidiary Cavanacaw, the holding
company, is the CAD.
Assets and liabilities of entities with functional currencies other than CAD
are translated at the year‑end closing rate of exchange, and the results of
their operations are translated at average rates of exchange for the period
unless this average is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which case the results of
their operations are translated at the rate prevailing on the dates of the
transactions. The resulting translation adjustments are recognized as a
separate component of equity.
Year Ended
December 31,
2022 2021
Closing rate (GBP to CAD)
1.6322 1.7132
Average for the year
1.6080 1.7246
(e) Use of estimates and judgments
The preparation of these consolidated financial statements in conformity with
IFRS requires management to make certain estimates, judgments and assumptions
that affect the reported amounts of assets and liabilities at the date of the
consolidated financial statements and reported amounts of revenues and
expenses during the reporting period. Actual outcomes could differ from these
estimates. These consolidated financial statements include estimates that, by
their nature, are uncertain. The impacts of such estimates are pervasive
throughout the consolidated financial statements, and may require accounting
adjustments based on future occurrences. Revisions to accounting estimates are
applied prospectively. These estimates are based on historical experience,
current and future economic conditions and other factors, including
expectations of future events that are believed to be reasonable under the
circumstances.
Critical accounting estimates
Significant assumptions about the future that management has made that could
result in a material adjustment to the carrying amounts of assets and
liabilities, in the event that actual results differ from assumptions made,
relate to, but are not limited to, the following:
· the recoverability of accounts receivable that are included in the
consolidated statements of financial position;
· the recoverability of property, plant and equipment in the consolidated
statements of financial position. The Omagh underground mine and the open pit
mine are considered as one Cash generating unit ("CGU") and is tested for
impairment when potential indicators of impairment are present. The
calculations of the recoverable amount of CGU determined using the
value‑in‑use method require the use of methods such as the discounted cash
flow method, which uses assumptions to estimate future cash flows. Significant
assumptions applied in the discounted cash flow calculation include: discount
rate, foreign exchange rate, gold sale price, grade of ore mined, mill
throughput and mill recovery rate;
· the estimated life of the Omagh underground mine ore body based on the
estimated recoverable ounces or pounds mined from proven and probable reserves
of the mine development costs which impacts the consolidated statements of
financial position and the related depreciation included in the consolidated
statements of loss;
· the estimated useful lives and residual value of property, plant and
equipment which are included in the consolidated statements of financial
position and the related depreciation included in the consolidated statements
of loss;
· stock‑based compensation - management is required to make a number of
estimates when determining the compensation expense resulting from
share‑based transactions, including volatility, which is an estimate based
on historical price of the Company's share, the forfeiture rate and expected
life of the instruments;
· warrants - management is required to make a number of estimates when
determining the fair value of the warrants, including volatility and expected
life of the instruments;
· premium on call option agreement ‑ management is required to make a
number of estimates when determining the premium on the call option agreement
including the gold price in future dates.
· decommissioning liabilities has been created based on the estimated
settlement amounts. Assumptions, based on the current economic environment,
have been made which management believes are a reasonable basis upon which to
estimate the future liability. These estimates take into account any material
changes to the assumptions that occur when reviewed regularly by management.
Estimates are reviewed quarterly and are based on current regulatory
requirements and constructive obligations. Significant changes in estimates of
contamination, restoration standards and techniques will result in changes to
liability on a quarterly basis. Actual decommissioning costs will ultimately
depend on actual future settlement amount for the decommissioning costs which
will reflect the market condition at the time the decommissioning costs are
actually incurred. The final cost of the currently recognized decommissioning
provisions may be higher or lower than currently provided for.
Critical accounting judgments
· functional currency - the functional currency for the parent entity and
each of its subsidiaries, is the currency of the primary economic environment
in which the entity operates. Determination of functional currency may involve
certain judgments to determine the primary economic environment and the parent
entity reconsiders the functional currency of its entities if there is a
change in events and conditions which determined primary economic environment;
· exploration and evaluation assets ‑ the determination of the
demonstration of technical feasibility and commercial viability is subject to
a significant degree of judgment and assessment of all relevant factors;
· Income taxes - measurement of income taxes payable and deferred income tax
assets and liabilities requires management to make judgments in the
interpretation and application of the relevant tax laws. The actual amount of
income taxes only becomes final upon filing and acceptance of the tax return
by the relevant authorities, which occurs subsequent to the issuance of the
consolidated financial statements;
· Going concern assumption - Going concern presentation of the consolidated
financial statements which assumes that the Company will continue in operation
for the foreseeable future and will be able to realize its assets and
discharge its liabilities in the normal course of operations as they come due;
and
· Whether there are any indicators that the Company's property, plant and
equipment assets and exploration and evaluation assets are impaired. Where an
indicator of impairment exists for its non‑current assets, the Company
performs an analysis to estimate the recoverable amount, which includes
various key estimates and assumptions as discussed above.
4. Significant Accounting Policies
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional
currencies of the operations at exchange rates at the dates of transactions.
Monetary assets and liabilities denominated in foreign currencies at the
reporting date are retranslated to the functional currency at the exchange
rate at that date. Non‑monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date that the fair value was
determined. Foreign currency differences arising in retranslation are
recognized in the consolidated statements of loss, except for differences
arising on the retranslation of available‑for‑sale equity instruments
which are recognised in other comprehensive loss. Non‑monetary items that
are measured in terms of historical cost in foreign currency are translated
using the exchange rate at the date of the transaction.
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash at banks and on hand, and short‑term
deposits with an original maturity of three months or less, which are readily
convertible into a known amount of cash.
(c) Financial instruments
Under IFRS 9 ‑ Financial Instruments ("IFRS 9"), financial assets are
classified and measured based on the business model in which they are held and
the characteristics of their contractual cash flows. IFRS 9 contains the
primary measurement categories for financial assets: measured at amortized
cost, fair value through other comprehensive income ("FVTOCI") and fair value
through profit and loss ("FVTPL").
Below is a summary showing the classification and measurement bases of our
financial instruments.
Financial
instruments
Classification
Cash and cash
equivalents
FVTPL
Accounts
receivable
Amortized cost
Long‑term
deposit
Amortized cost
Accounts payable and other
liabilities
Amortized cost
Financing
facilities
Amortized cost
Due to related
parties
Amortized cost
Financial assets
Financial assets are classified as either financial assets at FVTPL, amortized
cost, or FVTOCI. The Company determines the classification of its financial
assets at initial recognition.
i. Financial assets recorded at FVTPL
Financial assets are classified as FVTPL if they do not meet the criteria of
amortized cost or FVTOCI. Gains or losses on these items are recognized in
profit or loss.
The Company's cash and cash equivalents is classified as financial assets
measured at FVTPL.
ii. Amortized cost
Financial assets are classified as measured at amortized cost if both of the
following criteria are met and the financial assets are not designated as at
FVTPL: 1) the object of the Company's business model for these financial
assets is to collect their contractual cash flows; and 2) the asset's
contractual cash flows represent "solely payments of principal and interest".
The Company's accounts receivable and long‑term deposit are classified as
financial assets measured at amortized cost.
iii. Financial assets recorded at FVTOCI
Financial assets are recorded at FVTOCI when the change in fair value is
attributable to changes in the Company's credit risk.
Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL
or at amortized cost. The Company determines the classification of its
financial liabilities at initial recognition.
i. Amortized cost
Financial liabilities are classified as measured at amortized cost unless they
fall into one of the following categories: financial liabilities at FVTPL,
financial liabilities that arise when a transfer of a financial asset does not
qualify for derecognition, financial guarantee contracts, commitments to
provide a loan at a below‑market interest rate, or contingent consideration
recognized by an acquirer in a business combination.
The Company's accounts payable and other liabilities, financing facilities,
due to related parties and leases do not fall into any of the exemptions and
are therefore classified as measured at amortized cost.
ii. Financial liabilities recorded FVTPL
Financial liabilities are classified as FVTPL if they fall into one of the
five exemptions detailed above.
Transaction costs
Transaction costs associated with financial instruments, carried at FVTPL, are
expensed as incurred, while transaction costs associated with all other
financial instruments are included in the initial carrying amount of the asset
or the liability.
Subsequent measurement
Instruments classified as FVTPL are measured at fair value with unrealized
gains and losses recognized in profit or loss. Instruments classified as
amortized cost are measured at amortized cost using the effective interest
rate method. Instruments classified as FVTOCI are measured at fair value with
unrealized gains and losses recognized in other comprehensive loss.
Derecognition
The Company derecognizes financial liabilities only when its obligations under
the financial liabilities are discharged, cancelled, or expired. The
difference between the carrying amount of the financial liability derecognized
and the consideration paid and payable, including any non‑cash assets
transferred or liabilities assumed, is recognized in profit or loss.
Expected credit loss impairment model
IFRS 9 introduced a single expected credit loss impairment model, which is
based on changes in credit quality since initial application. The adoption of
the expected credit loss impairment model had no impact on the Company's
consolidated financial statements.
The Company assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due. The Company considers a
financial asset to be in default when the borrower is unlikely to pay its
credit obligations to the Company in full or when the financial asset is more
than 90 days past due.
The carrying amount of a financial asset is written off (either partially or
in full) to the extent that there is no realistic prospect of recovery. This
is generally the case when the Company determines that the debtor does not
have assets or sources of income that could generate sufficient cash flows to
repay the amounts subject to the write‑off.
(d) Impairment of non‑financial assets
When events or circumstances indicate that the carrying value may not be
recoverable, the Company reviews the carrying amounts of its non‑financial
assets to determine whether events or changes in circumstances indicate that
the carrying value may not be recoverable. If any such indication exists, the
recoverable amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). The estimated recoverable amount is
determined on an asset by asset basis, except where such assets do not
generate cash flows independent of other assets, in which case the recoverable
amount is estimated at the CGU level.
The recoverable amount is the higher of fair value less costs of disposal and
value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre‑tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset.
If the recoverable amount of an asset (or CGU) is estimated to be less than
its carrying amount, the carrying amount of the asset (or CGU) is reduced to
its recoverable amount. An impairment loss is recognized immediately in the
consolidated statement of comprehensive loss.
If an impairment loss subsequently reverses, the carrying amount of the asset
(or CGU) is increased up to the revised estimate of its recoverable amount,
but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognized for the
asset (or CGU) in prior years.
(e) Property, plant and equipment
Property, plant and equipment are carried at cost, less accumulated
depreciation and accumulated impairment losses.
The cost of an item of property, plant and equipment consists of the purchase
price, any costs directly attributable to bringing the asset to the location
and condition necessary for its intended use and an initial estimate of the
costs of dismantling and removing the item and restoring the site on which it
is located.
Depreciation is recognized based on the cost of an item of property, plant and
equipment, less its estimated residual value, over its estimated useful life
at the following rates:
Detail
Percentage Method
Buildings
20%
Declining balance
Plant and
machinery
20%
Declining balance
Motor
vehicles
25%
Declining balance
Office
equipment
15%
Declining balance
Development
assets
No depreciation
Assets under
construction
No depreciation
An asset's residual value, useful life and depreciation method are reviewed,
and adjusted if appropriate, on an annual basis.
(f) Borrowing Costs
General and specific borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset
for its intended use or sale.
Qualifying assets are assets that necessarily take a substantial period of
time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings
pending their expenditure on qualifying assets is deducted from the borrowing
costs eligible for capitalisation.
Other borrowing costs are expensed in the period in which they are incurred.
(g) Exploration and evaluation assets
These assets relate to the exploration and evaluation expenditures incurred in
respect to resource projects that are in the exploration and evaluation stage.
Exploration and evaluation expenditures include costs which are directly
attributable to acquisition and evaluation activities, assessing technical
feasibility and commercial viability. These expenditures are capitalized using
the full cost method until the technical feasibility and commercial viability
of extracting the mineral resource of a project are demonstrable. During the
exploration period, exploration and evaluation assets are not amortized.
Exploration and evaluation assets are allocated to CGU for the purpose of
assessing such assets for impairment. At the end of each reporting period, the
asset is reviewed for impairment indicators in accordance with IFRS 6.20:
(i) the period for which the entity has the right to explore in
the specific area has expired during the period or will expire in the near
future, and is not expected to be renewed.
(ii) substantive expenditure on further exploration for and
evaluation of mineral resources in the specific area is neither budgeted nor
planned.
(iii) exploration for and evaluation of mineral resources in the
specific area have not led to the discovery of commercially viable quantities
of mineral resources and the entity has decided to discontinue such activities
in the specific area.
(iv) sufficient data exist to indicate that, although a development in
the specific area is likely to proceed, the carrying amount of the exploration
and evaluation asset is unlikely to be recovered in full from successful
development or by sale.
If such indicators exist, the asset is tested for impairment and the
recoverable amount of the asset is estimated. If the recoverable amount of the
asset is estimated to be less than its carrying amount, the carrying amount of
the asset is reduced to its recoverable amount. An impairment loss is
recognized immediately in consolidated statements of loss.
Once the technical feasibility and commercial viability of extracting a
mineral resource of a project are demonstrable, the relevant exploration and
evaluation asset is assessed for impairment, and any impairment loss
recognized, prior to the balance being reclassified as a development asset in
property, plant and equipment.
The determination of the demonstration of technical feasibility and commercial
viability is subject to a significant degree of judgment and assessment of all
relevant factors. In general, technical feasibility may be demonstrable once a
positive feasibility study is completed. When determining the commercial
viability of a project, in addition to the receipt of a feasibility study, the
Company also considers factors such as the availability of project financing,
the existence of markets and/or long term contracts for the product, and the
ability of obtaining the relevant operating permits.
All subsequent expenditures to ready the property for production are
capitalized within development assets, other than those costs related to the
construction of property, plant and equipment.
Once production has commenced, all costs included in development assets are
reclassified to mine development costs.
Exploration and evaluation expenditures incurred prior to the Company
obtaining mineral rights related to the property being explored are recorded
as expense in the period in which they are incurred.
(h) Stripping costs
Till stripping costs involving the removal of overburden are capitalized where
the underlying ore will be extracted in future periods. The Company defers
these till stripping costs and amortizes them on a unit‑of‑production
basis as the underlying ore is extracted.
(i) Inventories
Inventories are comprised of finished goods, concentrate inventory and
work‑in‑process amounts.
All inventories are recorded at the lower of production costs on a first‑in,
first‑out basis, and net realizable value. Production costs include costs
related to mining, crushing, mill processing, as well as depreciation on
production assets and certain allocations of mine‑site overhead expenses
attributable to the manufacturing process.
Net realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
(j) Revenue recognition
Revenue from sales of finished goods is recognized at the time of shipment
when significant risks and rewards of ownership are considered to be
transferred, the terms are fixed or determinable, collection is probable, the
associated costs and possible return of goods can be estimated reliably, and
there is no continuing management involvement in the goods, and the amount of
revenue can be measured reliably.
Revenue from sales of gold concentrate is recognized at the time of shipment
when title passes and significant risks and benefits of ownership are
considered to be transferred and the amount of revenue to be receivable by the
Company is known or could be accurately estimated. The final revenue figure at
the end of any given period is subject to adjustment at the date of ultimate
settlement as a result of final assay agreement and metal prices changes.
(k) Provisions
A provision is recognized when the Company has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of
economic benefits will be required to settle the obligation, and the amount of
the obligation can be reliably estimated. If the effect is material,
provisions are determined by discounting the expected future cash flows at a
pre‑tax rate that reflects current market assessments of the time value of
money and, where appropriate, the risks specific to the liability.
A provision for onerous contracts is recognized when the expected benefits to
be derived by the Company from a contract are lower than the unavoidable cost
of meeting its obligations under the contract.
(l) Share‑based compensation transactions
Share‑based compensation transactions
Employees (including directors and senior executives) of the Company receive a
portion of their remuneration in the form of share‑based compensation
transactions, whereby employees render services as consideration for equity
instruments ("equity‑settled transactions").
In situations where equity instruments are issued and some or all of the goods
or services received by the entity as consideration cannot be specifically
identified, such as share‑based payments to employees, they are measured at
fair value of the share‑based payment.
Share‑based payments to employees of the subsidiaries are recognized as cash
settled share‑based compensation transactions.
Equity‑settled transactions
The costs of equity‑settled transactions with employees are measured by
reference to the fair value at the date on which they are granted.
The costs of equity‑settled transactions are recognized, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award ("the vesting date").
The cumulative expense is recognized for equity‑settled transactions at each
reporting date until the vesting date reflects the Company's best estimate of
the number of equity instruments that will ultimately vest. The profit or loss
charge or credit for a period represents the movement in cumulative expense
recognized as at the beginning and end of that period and the corresponding
amount is represented in "equity settled share‑based payments reserve".
No expense is recognized for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition, which are treated
as vesting irrespective of whether or not the market condition is satisfied
provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity‑settled award are modified, the minimum expense
recognized is the expense as if the terms had not been modified. An additional
expense is recognized for any modification which increases the total fair
value of the share‑based payment arrangement, or is otherwise beneficial to
the employee as measured at the date of modification.
The dilutive effect of outstanding options (if any) is reflected as additional
dilution in the computation of loss per share.
Cash‑settled transactions
The cost of cash‑settled transactions is measured initially at fair value.
The liability is re‑measured to fair value at each reporting date up to, and
including the settlement date, with changes in fair value recognised in
employee benefits expense.
(m) Income taxes
Income tax on the consolidated statements of loss for the years presented
comprises current and deferred tax. Income tax is recognized in the
consolidated statements of loss except to the extent that it relates to items
recognized directly in equity, in which case it is recognized in equity.
Current tax expense is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at period end, adjusted
for amendments to tax payable with regards to previous years.
Deferred tax is recognized in respect of taxable temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss, and differences
relating to investments in subsidiaries and joint ventures to the extent that
it is probable that they will not reverse in the foreseeable future. In
addition, deferred tax is not recognized for taxable temporary differences
arising on the initial recognition of goodwill. Deferred tax is measured at
the tax rates that are expected to be applied to taxable temporary differences
when they reverse, based on the laws that have been enacted or substantively
enacted by the reporting date. Deferred tax assets and liabilities are offset
if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be realized
simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be
realized.
(n) Decommissioning liability
A legal or constructive obligation to incur restoration, rehabilitation and
environmental costs may arise when environmental disturbance is caused by the
exploration, development or ongoing production of a mineral property
interest. Such costs arising from the decommissioning of plant and other
site preparation work, discounted to their net present value, are provided for
and capitalized at the start of each project to the carrying amount of the
asset, when there is a present obligation, as a result of a past event, it is
probable to be settled by a future outflow of resources and a reliable
estimate can be made of the obligation. Discount rates using a pretax rate
that reflects the risk and the time value of money are used to calculate the
net present value. These costs are charged against the consolidated statements
of loss over the economic life of the related asset, through amortization
using either a unit‑of‑production or the straight‑line method as
appropriate. The related liability is adjusted for each period for the
unwinding of the discount rate and for changes to the current market‑based
discount rate, amount or timing of the underlying cash flows needed to settle
the obligation. Costs for restoration of subsequent site damage that is
created on an ongoing basis during production are provided for at their net
present values and charged against profits and/or inventories as extraction
progresses.
(o) Loss per share
The Company presents basic and diluted loss per share data for its common
shares, calculated by dividing the loss attributable to common shareholders of
the Company by the weighted average number of common shares outstanding during
the year. Diluted loss per share is computed similarly to basic loss per share
except that the weighted average shares outstanding are increased to include
additional shares for the assumed exercise of stock options and warrants, if
dilutive. The number of additional shares is calculated by assuming that
outstanding stock options and warrants were exercised and that the proceeds
from such exercises were used to acquire common stock at the average market
price during the years. Options and warrants are anti‑dilutive and,
therefore, have not been taken into account in the per share calculation.
(p) Leases
At inception of a contract, the Company assesses whether a contract is, or
contains, a lease. Contracts that convey the right to control the use of an
identified asset for a period of time in exchange for consideration are
accounted for as leases giving rise to right‑of‑use assets.
At the commencement date, a right‑of‑use asset is measured at cost, where
cost comprises: (a) the amount of the initial measurement of the lease
liability; (b) any lease payments made at or before the commencement date,
less any lease incentives received; (c) any initial direct costs incurred by
the Company; and (d) an estimate of costs to be incurred by the Company in
dismantling and removing the underlying asset, restoring the site on which it
is located or restoring the underlying asset to the condition required by the
terms and conditions of the lease, unless those costs are incurred to produce
inventories.
The Company subsequently measures a right‑of‑use asset at cost less any
accumulated depreciation and any accumulated impairment losses; and adjusted
for any re‑measurement of the lease liability. Right‑of‑use assets are
depreciated over the shorter of the asset's useful life and the lease term.
A lease liability is initially measured at the present value of the unpaid
lease payments. Subsequently, the Company measures a lease liability by: (a)
increasing the carrying amount to reflect interest on the lease liability; (b)
reducing the carrying amount to reflect the lease payments made; and (c)
remeasuring the carrying amount to reflect any reassessment or lease
modifications, or to reflect revised in‑substance fixed lease payments. Each
lease payment is allocated between repayment of the lease principal and
interest. Interest on the lease liability in each period during the lease term
is allocated to produce a constant periodic rate of interest on the remaining
balance of the lease liability.
Except where the costs are included in the carrying amount of another asset,
the Company recognizes in profit or loss (a) the interest on a lease liability
and (b) variable lease payments not included in the measurement of a lease
liability in the period in which the event or condition that triggers those
payments occurs.
The Company elected to not recognize right‑of‑use assets and lease
liabilities that have a lease term of 12 months or less and leases of
low‑value assets. The lease payments associated with these leases are
charged directly to profit on a straight‑line basis over the lease term.
5. Capital Risk Management
The Company manages its capital with the following objectives:
· to ensure sufficient financial flexibility to achieve
the ongoing business objectives including funding of future growth
opportunities, and pursuit of accretive acquisitions; and
· to maximize shareholder return.
The Company monitors its capital structure and makes adjustments according to
market conditions in an effort to meet its objectives given the current
outlook of the business and industry in general. The Company may manage its
capital structure by issuing new shares, repurchasing outstanding shares,
adjusting capital spending, or disposing of assets. The capital structure is
reviewed by management and the Board of Directors on an ongoing basis.
The Company considers its capital to be equity, comprising share capital,
reserves and deficit which at December 31, 2022 totaled $14,714,991 (December
31, 2021 ‑ $19,388,708). The Company manages capital through its financial
and operational forecasting processes. The Company reviews its working capital
and forecasts its future cash flows based on future sales revenues, operating
expenditures, and other investing and financing activities. The forecast is
updated based on its operating and exploration activities. Selected
information is provided to the Board of Directors of the Company. The
Company's capital management objectives, policies and processes have remained
unchanged during the year ended December 31, 2022. The Company is not subject
to any capital requirements imposed by a lending institution or regulatory
body.
6. Financial and Property Risk Management
Property risk
The Company's significant project is the Omagh mine. Unless the Company
acquires or develops additional significant projects, the Company will be
solely dependent upon the Omagh mine. If no additional projects are acquired
by the Company, any adverse development affecting the Omagh mine would have a
material effect on the Company's consolidated financial condition and results
of operations.
Financial risk
The Company's activities expose it to a variety of financial risks: credit
risk and sales concentration, liquidity risk and market risk (including
interest rate risk, foreign currency risk and commodity and equity price
risk). Risk management is carried out by the Company's management team with
guidance from the Audit Committee under policies approved by the Board of
Directors. The Board of Directors also provides regular guidance for overall
risk management.
(i) Credit risk and sales concentration
Credit risk is the risk of loss associated with a counterparty's inability to
fulfill its payment obligations. The Company's credit risk is primarily
attributable to cash and cash equivalents, accounts receivable and long‑term
deposit. Cash and long‑term deposit are held with financial institutions and
the United Kingdom Crown, respectively, from which management believes the
risk of loss to be minimal. All the revenue from sales are from one customer
and the accounts receivable consist mainly of a trade account receivable from
one customers, value added tax receivable and sales tax receivable. The
Company is exposed to concentration of credit and sales risk with one of its
customers. Management believes that the credit risk is minimized due to the
financial worthiness of this company. Valued added tax receivable is
collectable from the Government of Northern Ireland. Sales tax receivable is
collectable from government authorities in Canada.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will not have sufficient cash
resources to meet its financial obligations as they come due. The Company's
liquidity and operating results may be adversely affected if the Company's
access to the capital market is hindered, whether as a result of a downturn in
stock market conditions generally or matters specific to the Company. The
Company manages liquidity risk by monitoring maturities of financial
commitments and maintaining adequate cash reserves and available borrowing
facilities to meet these commitments as they come due. As at December 31,
2022, the Company had working capital deficit of $11,027,964 (December 31,
2021 ‑ working capital deficit of $1,095,882). All of the Company's
financial liabilities have contractual maturities of less than 30 days other
than certain related party loans which are due on demand and the financing
liabilities.
(iii) Market risk
Market risk is the risk of loss that may arise from changes in market factors
such as interest rate risk, foreign exchange rate risk and commodity price
risk.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate due to changes in market interest rates.
The Company has cash balances, significant interest‑bearing debt due to
related parties and financing facility. The Company is exposed to interest
rate risk on certain related party loans and third party loans which bear
interest at variable rates.
(b) Foreign currency risk
Certain of the Company's assets, liabilities are designated in GBP and
expenses are incurred in GBP which is the currency of Northern Ireland and the
United Kingdom while the Company's primary revenues are received in the
currency of United States and are therefore subject to gains and losses due to
fluctuations in these currencies against the functional currency. The loan
from third party is designated in US dollars.
(c) Commodity price risk
The Company is exposed to price risk with respect to commodity prices.
Commodity price risk is defined as the potential adverse impact on earnings
and economic value due to commodity price movements and volatilities. The
Company closely monitors commodity prices, as it relates to gold to determine
the appropriate course of action to be taken by the Company.
Sensitivity analysis
Based on management's knowledge and experience of the financial markets, the
Company believes the following movements are reasonably possible over a twelve
month period:
(i) Certain related party loans and a loan facility with a third party are
subject to interest rate risk. As at December 31, 2022, if interest rates had
decreased/increased by 1% with all other variables held constant, the net loss
for the year ended December 31, 2022, would have been approximately $98,000
lower/higher respectively, as a result of lower/higher interest rates from
certain related party loans and a loan facility. Similarly, as at December 31,
2022, shareholders' equity would have been approximately $98,000 higher/lower
as a result of a 1% decrease/increase in interest rates from certain related
party loans and a loan facility.
(ii) The Company is exposed to foreign currency risk on fluctuations related
to cash and cash equivalents, accounts receivable, long‑term deposit,
accounts payable and other liabilities, financing liability, lease liability
and due to related parties that are denominated in GBP. As at December 31,
2022, had the GBP weakened/strengthened by 5% against the CAD with all other
variables held constant, the Company's consolidated comprehensive loss for the
year ended December 31, 2022 would have been approximately $487,000
higher/lower as a result of foreign exchange losses/gains on translation of
non‑CAD denominated financial instruments. Similarly, as at December 31,
2022, shareholders' equity would have been approximately $487,000 higher/lower
had the GBP weakened/strengthened by 5% against the CAD as a result of foreign
exchange losses/gains on translation of non‑CAD denominated financial
instruments.
(iii) Commodity price risk could adversely affect the Company. In particular,
the Company's future profitability and viability of development depends upon
the world market price of gold. Gold prices have fluctuated widely in recent
years. There is no assurance that, even as commercial quantities of gold may
be produced in the future, a profitable market will exist for them. A decline
in the market price of gold may also require the Company to reduce production
of its mineral resources, which could have a material and adverse effect on
the Company's value. Management believes that the impact would be immaterial
for the year ended December 31, 2022.
7. Categories of Financial Instruments
As at December
31,
2022 2021
Financial
assets:
FVTPL
Cash and cash
equivalents
$ 1,038,643 $ 1,069,751
Amortized cost
Accounts receivable
420,653 998,728
Long‑term
deposit
489,660 513,960
Financial liabilities:
Amortized cost
Accounts payable and other
liabilities
4,052,041 3,013,999
Financing
facilities
4,836,267 4,247,488
Due to related parties
5,072,534 2,568,693
As of December 31, 2022 and 2021, the fair value of all the Company's
financial instruments approximates the carrying value.
8. Accounts Receivable and Prepaid Expenses
As at December
31,
2022 2021
Sales tax receivable ‑ Canada
$
22,971 $ 4,471
Valued added tax receivable ‑ Northern Ireland
281,308
239,774
Accounts receivable
116,374 594,071
Prepaid expenses
1,390,340 281,207
Other
debtors
-
160,412
$ 1,810,993 $
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 16(b)(ii).
The following is an aged analysis of receivables:
As at December
31,
2022 2021
Less than 3 months
$
343,381 $ 884,550
3 to 12 months
51,868 105,526
More than 12 months
25,404 8,652
Total accounts receivable
$
420,653 $ 998,728
9. Inventories
As at December
31,
2022 2021
Concentrate
inventories
$ 83,242 $ 108,788
Galantas Gold Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2022 and 2021
(Expressed in Canadian Dollars)
10. 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
-
464,632
45,599 9,619
11,008,120 -
11,527,970
Disposals
-
- (14,531)
-
- -
(14,531)
Transfer
-
529,972
-
-
- (529,972)
-
Cash receipts from concentrate
sales
-
-
-
- (823,475)
- (823,475)
Impairment
(iii)
-
-
- -
(10,124,920) -
(10,124,920)
Foreign exchange adjustment
(111,761) (381,794) (9,419)
(10,243) (1,219,359)
(26,301)
(1,758,877)
Balance, December 31, 2022 $
2,252,053 $ 8,721,798 $ 220,866
$ 216,029 $ 21,402,040 $ -
$ 32,812,786
Accumulated
depreciation
Balance, December 31, 2020 $
1,986,461 $ 5,648,586 $ 130,107 $
125,791 $ - $
- $
7,890,945
Depreciation
6,347 507,876
19,776 13,992
- -
547,991
Disposals
-
(4,801)
-
-
-
-
(4,801)
Foreign exchange adjustment (28,499)
(83,963) (1,995)
(1,895) -
-
(116,352)
Balance, December 31, 2021 1,964,309
6,067,698 147,888
137,888 -
-
8,317,783
Depreciation 4,734
587,131 20,676
12,510 -
-
625,051
Disposal
-
- (3,268)
-
- -
(3,268)
Foreign exchange adjustment (92,801) (276,816)
(6,681) (6,331)
-
-
(382,629)
Balance, December 31, 2022 $
1,876,242 $ 6,378,013 $ 158,615 $
144,067 $ - $
- $
8,556,937
Carrying value
Balance, December 31, 2021 $ 399,505 $
2,041,290 $ 51,329 $ 78,765
$ 22,561,674 $
556,273 $ 25,688,836
Balance, December 31, 2022 $
375,811 $ 2,343,785 $ 62,251 $
71,962 $ 21,402,040 $ -
$
24,255,849
(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
$282,041 is included in additions of the plant and machinery for the year
ended December 31, 2022.
(ii) Development assets are expenditures for the underground mining operations
in Omagh.
(iii) The Company conducts impairment testing on an annual basis. The cash
generating unit for the purpose of impairment testing is the Omagh Mine. The
basis on which the recoverable amount is assessed is its value in use. The
cash flow forecast employed for the value in use computation is for a five
year period discounted at a rate reflective of market conditions.
The most critical assumption for the value in use calculation was the granting
of planning permission for the development of an underground mine. Planning
permission was granted but was the subject of a judicial review which found in
favour of the Company in September 2017. The judicial review decision was then
appealed by a third party to the Court of Appeal in relation to the positive
judicial review judgment. This appeal was completed in February 2018 and later
in 2018 the Court of Appeal delivered its judgement in regard to an appeal
against the Company's planning consent. The Court determined that the appeal
had failed and thus the planning consent is confirmed.
As of December 31, 2022, the Company performed its annual impairment tests for
development assets. The recoverable amount of the Company's cash generating
unit was determined based on their value‑in‑use using Level 3 inputs in a
discounted cash flow model. The key assumptions used in the estimates of the
recoverable amounts are described as follows:
· Cash flows: Estimated cash flows were projected based on the
Company's business plans, which are based on actual operating results from
internal sources as well as industry and market trends. The forecasts were
extended to a total of 5 years;
· Discount rate: The post tax discount rates were approximately
15‑16%.
As at December 31, 2022, management determined the development assets was
impaired by $10,124,920.
11. 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
1,165,561
Foreign exchange
adjustment
(74,431)
Balance, December 31,
2022
$ 2,665,313
Carrying
value
Balance, December 31,
2021
$ 1,574,183
Balance, December 31,
2022
$ 2,665,313
12. 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 December 31, 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 December
31, 2022, the estimated fair value of the liability is $582,441 (December 31,
2021 ‑ $600,525). Changes in the provision during the year ended December
31, 2022 are as follows:
As at As at
December 31, December 31,
2022 2021
Decommissioning liability, beginning of
year
$ 600,525 $ 598,275
Accretion
10,154
10,892
Foreign
exchange
(28,238) (8,642)
Decommissioning liability, end of
year
$ 582,441 $ 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 December 31, 2022 (GBP 300,000 was funded as of December 31, 2021) and
reported as long‑term deposit of $489,660 (December 31, 2021 ‑ $513,960).
13. 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 December
31,
2022 2021
Accounts
payable
$ 2,528,245 $ 1,463,316
Accrued
liabilities
1,523,796 1,550,683
Total accounts payable and other
liabilities
$ 4,052,041 $ 3,013,999
The following is an aged analysis of the accounts payable and other
liabilities:
As at December
31,
2022 2021
Less than 3
months
$ 2,939,972 $ 2,246,440
3 to 12
months
412,168 98,415
12 to 24
months
61,247
-
More than 24 months (see also note
22)
638,654 669,144
Total accounts payable and other
liabilities
$ 4,052,041 $ 3,013,999
14. Financing Facilities
Amounts payable on the Company's financial facilities are as follow:
As at December
31,
2022 2021
Ocean Partners
Financing facilities, beginning of period
(i)
$ - $ 2,186,272
Repayment of financing facilities
(i)
-
(23,802)
Accretion
(i)
-
126,949
Interest
(i)
-
86,820
Foreign exchange
adjustment
-
200,898
Financing facility reallocated to due to related parties
(i)
-
(2,577,137)
Less current
portion
(4,836,267)
-
(4,836,267)
-
G&F Phelps
Financing facility, beginning of period
4,247,488
-
Financing facility reallocated from due to related parties
(ii)
-
4,578,039
Less bonus warrants issued
(ii)
-
(670,000)
Accretion
(ii)
269,512 151,290
Interest
(ii)
618,903 164,197
Repayment
(24,120)
-
Foreign exchange
adjustment
(275,516) 23,962
4,836,267 4,247,488
Financing facilities ‑ non‑current
portion
$ - $
4,247,488
(i) In April 2018, the Company signed a concentrate pre‑payment agreement
and loan facility for US$1.6 million with a United Kingdom based company (the
"Lender"), with a maturity date of December 31, 2020. The interest was set at
US$ 12 month LIBOR + 8.75% and payable monthly. No interest shall be charged
for 6 months and repayments commenced against deliveries in 2019. There was a
US$25,000 arrangement fee.
In respect of the loan facility, a fixed and floating security, subordinated
to an existing security to G&F Phelps, is being put in place over
Flintridge assets. G&F Phelps has a first charge on Flintridge assets in
respect of its loan facility and the Lender required an intercreditor
agreement between G&F Phelps and the Lender.
As consideration for the loan facility, the United Kingdom based company
received 1,500,000 bonus warrants of the Company. Each bonus warrant is
exercisable into one common share of the Company and is subject to an initial
four months plus one day hold period from the date of issuance of the bonus
warrants. The bonus warrants had a maximum life of two years (the "Expiry
Time"). On April 19, 2018, the 1,500,000 bonus warrants were granted. In the
event that the weighted average closing price per common share of the Company
is more than $2.00 per share for more than five consecutive trading days, the
Company shall be entitled to accelerate the Expiry Time to a date that is 30
days from the date on which the Company announces the accelerated Expiry Time
by press release.
The fair value of the 1,500,000 bonus warrants was estimated at $786,000 using
the Black‑Scholes option pricing model with the following assumptions:
expected dividend yield ‑ 0%, expected volatility ‑ 113.55%, risk‑free
interest rate ‑ 1.91% and an expected average life of 2 years.
On July 9, 2020, the Company amended the terms of its loan facility of an
increase in the outstanding loan facility. The amount of the loan facility
increased by US$200,000 to a total of US$1.8 million. On November 12, 2020,
the additional US$200,000 loan facility was drawn down by the Company. The
interest rate applicable on the loan facility increased from US$ 12 month
LIBOR + 8.75% to US$ 12 month LIBOR + 9.9% and the maturity date was extended
from December 31, 2020 to December 31, 2021. Interest could be rolled into the
loan facility until December 31, 2021, at the Company's option.
As consideration for amending the terms of the loan facility, the Lender
received on August 14, 2020, 1,700,000 bonus warrants of Galantas ("Bonus
Warrants"). Each Bonus Warrant was exercisable for one common share of
Galantas (a "Bonus Share") at an exercise price of $0.33 per Bonus Share. The
Bonus Warrants had an expiration date of December 31, 2021 (the "Expiry Date")
and the Bonus Shares were subject to an initial four month plus one day hold
period from the date of their issuance. In the event that the weighted average
closing price per common share of the Company is more than $0.4125 per share
for more than five consecutive trading days, the Company shall be entitled to
accelerate the Expiry Date to a date that is 30 days from the date on which
the Company announces the accelerated Expiry Date by press release.
The fair value of the 1,700,000 bonus warrants was estimated at $340,000 using
the Black‑Scholes option pricing model with the following assumptions:
expected dividend yield ‑ 0%, expected volatility ‑ 165.75%, risk‑free
interest rate ‑ 0.27% and an expected average life of 1.38 years.
2021 activities
On May 14, 2021, the maturity date of the loan facility due on December 31,
2021 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.
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.
During the year ended December 31, 2021, the Company recorded accretion
expense of $126,949 in the consolidated statements of loss in regards with
this loan facility.
During the year ended December 31, 2021, the Company recorded interest expense
of $86,820 in the consolidated statements of loss in regards with this loan
facility.
During the year ended December 31, 2021, the Company recorded a repayment of
$23,802 in regards with this loan facility.
As at June 30, 2021, the Lender and the Company have a common director. As a
result, the balance due to the Lender was reallocated from financing
facilities to due to related parties. Total balance reallocated consisted of
$2,577,137. Refer to note 20(a)(iii).
(ii) In connection with the closing of the private placement completed on May
14, 2021 (refer to note 16(b)(ii)), Roland Phelps has retired as the Company's
President and Chief Executive Officer and as a member of the Board of
Directors. As a result, the balance due to G&F Phelps, a company
controlled by Roland Phelps was reallocated from due to related parties to
financing facilities. The total balance reallocated consisted of $3,163,593
(GBP 1,824,764) amalgamated loans balance and $1,414,446 (GBP 815,854)
interest accrued balance. Refer to note 20(a)(i).
2022 activities
As at December 31, 2022, G&F Phelps had amalgamated loans to the Company
of $2,719,042 (GBP 1,665,875) (December 31, 2021 ‑ $2,607,493 ‑ GBP
1,522,802) included with financing facilities bearing interest at 2% above UK
base rates, repayable on demand and secured by a mortgage debenture on all the
Company's assets. In April 2018, the interest increased to 6.75% + US$ 12
month LIBOR. Interest accrued on G&F Phelps loan is included with
financing facilities. As at December 31, 2022, the amount of interest accrued
is $1,950,675 (GBP 1,195,120) (December 31, 2021 ‑ $1,639,995 ‑ GBP
957,270).
The maturity date of the G&F Phelps loan has been 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 has
received, subject to regulatory approval, 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.
During the year ended December 31, 2022, the Company recorded accretion
expense of $269,512 in the consolidated statements of loss in regards with
this loan facility (year ended December 31, 2021 ‑ $151,290).
During the year ended December 31, 2022, the Company recorded interest expense
of $618,903 in the consolidated statements of loss in regards with this loan
facility (year ended December 31, 2021 ‑ $164,197).
15. 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)
282,041
Interest
expense
18,857
Lease
payments
(701,782)
Foreign
exchange
(15,156)
Balance, December 31,
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 year ended December 31, 2022, the Company entered into lease
agreements in respect to rent of equipments, all of which expired in July
2022.
16. Share Capital and Reserves
a) Authorized share capital
At December 31, 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 December 31, 2022, the issued share capital amounted to $69,664,056. The
continuity of issued share capital for the years 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
41,667 (783,920)
Exercise of
warrants
1,413,333 893,494
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)
- (1,644,859)
Share issue costs
- (752,324)
Exercise of warrants
13,501,367 7,377,666
Balance, December 31, 2022
103,518,509 $ 69,664,056
(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 commencing in January 2023.
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 $1,644,859 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
$144,464 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.
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 years presented:
Weighted
average
Number of exercise
warrants price
Balance, December 31, 2020
1,700,000 $ 0.33
Issued (notes 14(i) and 16(b)(i))
28,404,931 0.40
Expired
(1,413,333) 0.35
Balance, December 31, 2021
28,691,598 0.39
Issued (notes 16(b)(ii) and 20(a)(iii))
8,861,669 0.54
Exercised
(13,501,367) 0.39
Balance, December 31, 2022
24,051,900 $ 0.45
The following table reflects the actual warrants issued and outstanding as of
December 31, 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
20(a)(iii)(1))
14,410,231
1,764,798 0.40
July 25,
2023
125,000
23,000 0.48
December 31,
2023
780,000
274,883 0.33
August 30,
2024
820,000
212,000 0.45
February 28,
2025
7,666,669
2,320,000 0.55
24,051,900
4,645,681 0.45
d) Stock options
The Company has a stock option plan (the "Plan"), the purpose of which is to
attract, retain and compensate qualified persons as directors, senior officers
and employees of, and consultants to the Company and its affiliates and
subsidiaries by providing such persons with the opportunity, through share
options, to acquire an increased proprietary interest in the Company. The
number of shares reserved for issuance under the Plan cannot be more than a
maximum of 10% of the issued and outstanding shares at the time of any grant
of options. The period for exercising an option shall not extend beyond a
period of five years following the date the option is granted.
Insiders of the Company are restricted on an individual basis from holding
options which when exercised would entitle them to receive more than 5% of the
total issued and outstanding shares at the time the option is granted. The
exercise price of options granted in accordance with the Plan must not be
lower than the closing price of the shares on the TSXV immediately preceding
the date on which the option is granted and in no circumstances may it be less
than the permissible discounting in accordance with the Corporate Finance
Policies of the TSXV.
The Company records a charge to the consolidated statements of loss using the
Black‑Scholes option pricing model. The valuation is dependent on a number
of inputs and estimates, including the strike price, exercise price,
risk‑free interest rate, the level of stock volatility, together with an
estimate of the level of forfeiture. The level of stock volatility is
calculated with reference to the historic traded daily closing share price at
the date of issue.
Option pricing models require the inputs including the expected price
volatility. Changes in the inputs can materially affect the fair value
estimate.
The following table shows the continuity of stock options for the years
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
Cancelled
(v)
(45,000) 1.13
Balance, December 31, 2021
4,885,000 0.88
Granted
(iv)
1,742,500 0.60
Expired
(255,000) 1.35
Cancelled
(v)
(220,000) 0.94
Balance, December 31,
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
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 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 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
consolidated statements of loss and credited to equity settled share‑based
payments reserve.
(v) The portion of the estimated fair value of options granted in the current
and prior years and vested during the year ended December 31, 2022, amounted
to $1,470,418 (year ended December 31, 2021 ‑ $2,035,878, respectively). In
addition, during the year ended December 31, 2022, 200,000 options granted in
the prior years were cancelled (year ended December 31, 2021 ‑ 45,000
options cancelled).
The following table reflects the actual stock options issued and outstanding
as of December 31, 2022:
Weighted
average
Number of
remaining Number of
options Number of
Exercise
contractual
options
vested options
Expiry date price ($) life
(years) outstanding
(exercisable) unvested
April 19, 2023
1.10
0.30
25,000
25,000 -
February 13, 2024 0.90
1.12
85,000
85,000 -
June 27, 2024
0.90
1.49
100,000
100,000 -
May 19, 2026
0.86
3.38
3,760,000 2,506,667
1,253,333
June 21, 2026
0.73
3.47
425,000
283,333 141,667
August 27, 2026
0.86
3.66
20,000
13,333 6,667
May 3, 2023
0.60
4.34
1,737,500 579,167
1,158,333
0.78
3.59
6,152,500 3,592,500
2,560,000
17. Net Loss per Common Share
The calculation of basic and diluted loss per share for the year ended
December 31, 2022 was based on the loss attributable to common shareholders of
$16,633,939 (year ended December 31, 2021 ‑ $5,284,431) and the weighted
average number of common shares outstanding of 89,401,620 (year ended December
31, 2021 ‑ 64,122,021) for basic and diluted loss per share. Diluted loss
did not include the effect of 24,051,900 warrants (year ended December 31,
2021 ‑ 28,691,598) and 6,152,500 options (year ended December 31, 2021 ‑
4,885,000) for the year ended December 31, 2022, as they are anti‑dilutive.
18. Revenues
Shipments of concentrate under the off‑take arrangements commenced during
the second quarter of 2019. Concentrate sales provisional revenues during the
year ended December 31, 2022 totalled approximately US$608,000 (CAD$823,475)
(year ended December 31, 2021 ‑ US$1,114,000 (CAD$1,412,329)). However,
until the mine reaches the commencement of commercial production, the net
proceeds from concentrate sales will be offset against Development assets.
19. Taxation
(a) Provision for income taxes
The reported recovery of income taxes differs from amounts computed by
applying the statutory income tax rates to the reported loss before income
taxes due to the following:
Year Ended December
31,
2022 2021
Loss before income
taxes
$ (16,633,939) $ (5,284,431)
Expected tax recovery at statutory rate of 26.5% (2021 ‑
26.5%)
(4,407,994) (1,400,374)
Difference resulting from:
Foreign tax rate
differential
191,802 29,556
Stock‑based
compensation
389,661 539,508
Share issue costs directly in
equity
(128,866) -
Permanent differences and
other
1,587,816 (645,388)
Change in deferred income tax assets not
recognized
2,367,581 1,476,698
$ - $ -
(b) Deferred tax balances
The temporary differences and unused tax losses that give rise to deferred
income tax balances are presented below:
As at December
31,
2022 2021
Deferred income tax assets
(liabilities)
Losses carried
forward
$ 14,600,831 $ 12,849,356
Share issue costs and
other
270,340 221,875
Non‑current
assets
(3,130,509) (3,698,150)
Deferred tax assets not
recognized
(11,740,662) (9,373,081)
$ - $ -
(c) Losses carried forward
As at December 31, 2022, the Company had non‑capital losses carried forward,
available to offset future taxable income for income tax purposes as follows:
Expires
2026
$ 1,064,484
2027
598,595
2029
373,962
2030
440,512
2031
993,770
2032
600,689
2033
1,100,268
2034
906,488
2035
884,526
2036
901,063
2037
772,787
2038
891,330
2039
1,027,232
2040
1,321,064
2041
1,409,184
2042
2,173,300
Indefinite
43,389,979
$ 58,849,233
At December 31, 2022, the potential benefit of these losses and deductible
temporary differences in excess of the deferred tax liabilities have not been
recognized in these consolidated financial statements as it is not considered
probable that sufficient future tax profit will allow the deferred tax assets
to be recovered.
20. 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:
Year Ended
December 31,
2022 2021
Interest on related party
loans
(i)
$ 554,073 $ 340,092
(i) Refer to note 20(a)(iii).
(ii) Refer to note 16(b).
(iii) As at December 31, 2021, Ocean Partners and the Company have a common
director. As a result, the balance due to the Lender was reallocated from
financing facilities to due to related parties. Total balance reallocated
consisted of $2,577,137. Refer to note 14(i).
On May 14, 2021, the maturity date of the loan facility due on December 31,
2021 has been 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. During the year ended December 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.
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.
· 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.
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 December 31, 2022, financial liabilities due to the lender and recorded
as due to related parties on the consolidated statement of financial position
is $4,978,069 (December 31, 2021 ‑ $2,444,376).
December 31, December 31,
2022 2021
Balance, beginning of
year
$ 2,444,376 $ -
Financing facility reallocated to due to related
parties
- 2,577,137
Loan
received
2,062,693 -
Less bonus warrants
(74,000) (251,000)
Share issue
costs
(93,444) -
Advance
93,284 -
Repayment
(524,255) -
Accretion
391,128 57,338
Interest
554,073 27,506
Foreign exchange
adjustment
124,214 33,395
Balance, end of
year
4,978,069 2,444,376
Less current
balance
(4,978,069) -
Due to related parties ‑ non‑current
balance
$ - $ 2,444,376
Trading agreement
In December 2022, the Company entered into an agreement (the "Trading
Agreement") with Ocean Partners, whereby Ocean Partners has sold on behalf of
Galantas call options on 6,000 ounces of gold at 500 ounces per month from
February 2024 to January 2025 at a strike price of US$1,775 per ounce for
proceeds of US$804,000 to Galantas (an option premium of US$134 per gold
ounce). Proceeds from the sale will be used to fund development of the
underground mining operations at the Omagh Gold Project in Northern Ireland
and working capital.
If the gold price during February 2024 to January 2025 is at or below US$1,775
per ounce, Galantas will receive the price of gold at the time for the sale of
its gold produced. If the gold price is above US$1,775 per ounce, Galantas
will receive US$1,775 per ounce in revenue for the sale of its gold.
Pursuant to the Trading Agreement, and in return for Ocean Partners
facilitating the call option sale and agreeing to maintain all margin
requirements on Galantas' behalf, which Galantas has determined has a value of
at least $150,000, Galantas has agreed to grant 500,000 warrants to Ocean
Partners at an exercise price of $0.55 expiring on January 31, 2025. The
warrants are subject to a hold period under applicable securities laws and the
rules of the TSXV.
The Trading Agreement and the issuance of warrants to Ocean Partners shall be
subject to the approval of the TSXV. There is no assurance that TSXV approval
will be obtained.
No finder's fees will be paid in connection with the Trading Agreement.
As at December 31, 2022, balance related to the Trading Agreement is recorded
as other liability on the consolidated statement of financial position is
$1,085,426 (December 31, 2021 ‑ $nil).
(b) Remuneration of officer and directors of the Company was as follows:
Year Ended
December 31,
2022 2021
Salaries and benefits
((1))
$ 558,941 $ 382,570
Stock‑based
compensation
930,223 1,365,577
$ 1,489,164 $ 1,748,147
((1)) Salaries and benefits include director fees. As at December 31, 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
$24,465 (December 31, 2021 ‑ $21,400), and is included with due to related
parties.
(c) As at December 31, 2022, Ross Beaty owns 3,744,748 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, 28,140,195 common shares of the Company or
approximately 27.2% 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 9.8%.
Mike Gentile owns 6,217,222 common shares of the Company or approximately
6.0%. The remaining 43.5% 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.
(d) Additional disclosures required for Alternate Investment Market ("AIM")
reporting:
Pursuant to the AIM Rules for Companies (the "AIM Rules"), a related party is
any person who is; a director of an AIM company, a substantial shareholder
(any person who has a shareholding greater than 10%), their associates, or any
person who was a director of an AIM company or a substantial shareholder
within the twelve months preceding the date of the transaction.
1. As described in note 14, Roland Phelps (i) and Melquart (ii)
participated in the private placement in May 2021.
2. As described in note 14, the maturity date of the G&F Phelps
(i) loan was extended to December 31, 2023.
3. Related party balances Loan accounts - owed to related parties
December 31,
2022 2021
G&F Phelps
(i)
$ - $ 4,247,488
Ocean Partners
(iii)
4,978,069 2,444,376
Total
$ 4,978,069 $ 6,691,864
(i) G&F Phelps is deemed to be a related party of the Company by virtue of
being controlled by Roland Phelps who has been a Director of the Company in
the last twelve months.
(ii) Pursuant to the AIM Rules, Melquart is deemed to be a related party of
the Company by virtue of being a substantial shareholder in the Company.
(iii) Pursuant to IFRS, Ocean Partners are deemed to be a related of the
Company as they have a common director.
Year Ended
December 31,
Salaries and
benefits
2022 2021
Roland Phelps, former
CEO
$ - $ 86,230
Mario Stifano,
CEO
246,894 107,406
Alan Buckley,
CFO
172,047 91,767
Brent Omland,
director
30,000 17,500
David Cather,
director
30,000 20,500
James B. Clancy,
director
30,000 21,000
James L. Golla,
director
- 3,000
Ronald Alexander,
director
- 2,750
Roisin Magee,
director
50,000 32,417
$ 558,941 $ 382,570
The Company awarded incentive stock options on the Company's common shares to
directors and officers in accordance with the terms of the Company's incentive
Stock Option Plan as set out in the below table. The table also shows the fair
value of stock received during the year using the Black‑Scholes option
pricing model.
Number of options Share‑based compensation
Year Ended Year Ended
December 31, December 31,
Notes 2022
2021 2022 2021
Roland Phelps, former CEO
16(d) -
- $
- $ 304
Mario Stifano,
CEO
16(d) 500,000
1,500,000 498,713 716,083
Alan Buckley,
CFO
16(d) 125,000
250,000 97,427 119,347
Brendan Morris,
COO
16(d) 125,000
100,000 63,186 37,410
Brent Omland,
director
16(d) 62,500
375,000 81,754 179,021
David Cather,
director
16(d) 62,500
125,000 48,713 60,614
James B. Clancy,
director
16(d) 62,500
125,000 48,713 59,825
James L. Golla,
director
16(d) -
125,000 -
59,825
Ronald Alexander,
director
16(d) -
-
- 152
Roisin Magee,
director
16(d) 92,500
275,000 91,717 132,996
1,030,000 2,875,000 $ 930,223
$ 1,365,577
21. 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:
December 31,
2022
United Kingdom Canada Total
Current
assets
$ 1,659,045 $ 1,273,833 $ 2,932,878
Non‑current
assets
$ 27,271,081 $ 139,741 $ 27,410,822
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
$ - $
- $ -
22. 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 $496,662 (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 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.
23. Events After the Reporting Period
(i) On January 26, 2023, the Company announced that it entered into an
agreement to acquire a 100% interest and the exclusive rights to explore and
develop the Gairloch Project from the owners of the Gairloch Estate lands. The
Company has acquired exploration and developments rights for an initial
payment of GBP 347,000 and annual payments of GBP 69,000 beginning in year 6.
The lease agreement will continue for 30 years and will be renewable at the
election of Galantas, upon 90 days' prior written notice and upon the approval
of the lessor, not to be unreasonably withheld, for a further 20‑year
period, assuming all conditions of this agreement have been met satisfactorily
according to the Lessor, acting reasonably, in respect of the Galantas'
conduct and operations. Galantas may terminate the agreement with 18 months'
notice.
Galantas will make a payment of GBP 347,000 representing payment for the first
five years of the lease. If the exploration phase continues past the fifth
anniversary of the effective date of the agreement, Galantas will pay the
lessor GBP 69,400 index linked per lease year for each such lease year
following the fifth anniversary of the effective date, with such payment to be
made at the commencement of each such lease year.
During any mining phase, Galantas will pay the lessor GBP 50,000 index linked
per lease year, with such payment to be made at the commencement of each such
lease year. Galantas will grant a 5% net profits interest royalty (the "NPI"),
calculated according to standard industry terms and practices with the option
by the Lessor to convert the NPI to a 2% net smelter returns royalty,
calculated according to standard industry terms and practices.
The Company has separately entered into an agreement to acquire the historical
drill and exploration database for (i) a payment of $420,000 (approximately
GBP 252,153), to be satisfied through the issuance of common shares of the
Company based on the 5‑day volume weighted average price at the time of
signing (subject to the approval of the TSXV) and (ii) GBP 50,000 in cash.
(ii) On February 13, 2023, the Company announced that it entered into a loan
agreement for GBP 347,000 with London‑based family office Melquart. The loan
is to be used for the initial lease payment for the Gairloch Project in
Scotland. The loan is payable 24 months from the date of the loan agreement
and will bear interest at an annual rate of 12% payable upon repayment of the
loan.
As consideration for providing the loan, Melquart will receive upon closing of
the loan agreement, 100,000 warrants of Galantas, subject to acceptance by the
TSXV. Each bonus warrant will be exercisable into one common share of Galantas
for a period of 24 months from the closing at an exercise price equal to the
closing price of the Company's common shares on the TSXV on February 10, 2023.
The above terms are subject to TSXV approval under the TSXV Policy 5.1 ‑
Loans, Loan Bonuses, Finder's Fees and Commissions.
(iii) On March 27, 2023, the Company announced that it closed a non‑brokered
private placement of 8,230,951 units at a price of $0.36 per unit for gross
proceeds of $2,963,142. Each unit consists of one common share of the Company
and one common share purchase warrant, with each warrant entitling the holder
to purchase an additional common share at a price of $0.55 per share until
March 27, 2028. There is a 4‑month hold period on the trading of securities
issued in connection with this offering.
The Company paid the agents a cash commission equal to $130,966 and issued
237,162 non‑transferable broker warrants of the Company. Each broker warrant
is exercisable to acquire one common share at an exercise price of $0.36 until
March 27, 2025.
In addition, the Company announced it agreed to the terms of a proposed
shares‑for‑debt transaction with several additional arm's length creditors
of the Company. In connection with the debt settlement, the Company agreed to
settle a total of approximately $749,020 of indebtedness through the issuance
of an aggregate of 2,080,609 units a deemed price of $0.36 per unit on
substantially in the same terms as the units issued under the offering. The
securities pursuant to the debt settlement will be subject to a four‑month
hold period under applicable Canadian securities laws.
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