REG - Galantas Gold Corp - Results for the year ended 31 December 2023
25/04/2024 07:00
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RNS Number : 9313L Galantas Gold Corporation 25 April 2024
GALANTAS GOLD CORPORATION
TSXV & AIM: Symbol GAL
GALANTAS REPORT ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED DECEMBER 31, 2023
April 25, 2024: Galantas Gold Corporation (the 'Company') is pleased to
announce its audited annual financial results for the year ended December 31,
2023.
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 24th June 2024 at The Canadian Venture Building, 82 Richmond
Street East, Toronto, Ontario, M5C1P1, Canada.
Financial Highlights
Highlights of the 2023 audited annual results, which are expressed in Canadian
Dollars, are summarized below:
All figures denominated in Canadian Dollars (CDN$)
Year Ended
December 31
2023 2022
Revenue $ 0 $ 0
Cost and expenses of operations $ (182,295) $ (284,262)
Loss before the undernoted $ (182,295) $ (284,262)
Depreciation $ (515,003) $ (624,620)
General administrative expenses $ (4,243,507) $ (5,401,289)
Foreign exchange (loss) $ (233,651) $ (195,938)
Impairment of Exploration and Evaluation Assets $ 0 $ 0
Unrealized gain on derivative fair value adjustment $ 241,886 $ 0
(Loss) / Gain on disposal of property, plant and equipment $ 0 $ (2,910)
Impairment $ (3,635,570) $ (10,124,920)
Net Loss for the year $ (8,568,140) $ (16,633,939)
Working Capital Deficit $ (12,599,514) $ (11,027,964)
Cash loss from operating activities before changes in non-cash working capital $ (981,283) $ (2,254,291)
Cash at December 31, 2022 $ 2,593,265 $ 1,038,643
Sales revenue for year ended December 31, 2023 amounted to $ Nil as per the
year ended December 31, 2022. Provisional concentrate sales totalled US$
1,103,532 for 2023 compared to US $ 608,000 for the year 2022. 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, 2023 amounted to $ 8,568,140
(2022: $ 16,633,939) and the cash outflow from operating activities before
changes in non-cash working capital for the year ended December 31, 2023
amounted to $ 981,283 (2022: $ 2,254,291).
The Company had a cash balance of $ 2,593,265 at December 31, 2023 compared to
$ 1,038,643 at December 31, 2022. The working capital deficit at December 31,
2023 amounted to $ 12,599,514 compared to a working capital deficit
of $11,027,964 at December 31, 2022. Current liabilities include financing
facilities and loans.
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/9313L_1-2024-4-24.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9313L_1-2024-4-24.pdf)
Qualified Person
The financial components of this disclosure has been reviewed by Alan Buckley
(Chief Financial Officer) and the production and permitting components by
Brendan Morris (COO), 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'
forward-looking statements are discussed in greater detail in the section
entitled "Risk Factors" in Galantas' Management Discussion & Analysis of
the financial statements of Galantas and elsewhere in documents filed from
time to time with the Canadian provincial securities regulators and other
regulatory authorities. These factors should be considered carefully, and
persons reviewing this press release should not place undue reliance on
forward-looking statements. Galantas has no intention and undertakes no
obligation to update or revise any forward-looking statements in this press
release, except as required by law.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
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, Enzo Aliaj, Elliot
Peters
Telephone: +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, 2023 and 2022
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, 2023 and 2022, 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, 2023 and 2022 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 $7,604,947
during the year ended December 31, 2023. 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the consolidated financial statements for
the year ended December 31, 2023. These matters were addressed in the context
of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these
matters.
In addition to the matter described in the Emphasis of Matter - Material
Uncertainty Related to Going Concern section of our report, we have determined
the matter described below to be the key audit matter to be communicated in
our report.
Impairment of Long-lived Assets
Description of the matter
In accordance with IAS 36 - Impairment of Assets, management is required to
test long-lived assets not yet available for use for impairment annually, or
when facts and circumstances suggest they may be impaired. An impairment loss
is recognized if the carrying amount of an asset, or its cash generating unit
(CGU), exceeds its estimated recoverable amount. The recoverable amount of an
asset is the greater of its value-in-use (VIU) and its fair value less costs
of disposal. Management estimated the recoverable amount of its property,
plant and equipment (PP&E) with a five-year discounted cashflow VIU
approach and concluded an impairment charge was required as a result of the
impairment testing performed. The Company recorded impairment of PP&E of
$3,353,077 as of December 31, 2023, see note 10 for further details.
Why the matter is a key audit matter
This matter represented an area of significant risk of material misstatement
given the magnitude of PP&E balance and the significant management
judgment involved in assessing the existence of impairment indicators. In
addition, significant auditor judgement, knowledge and effort were required in
evaluating the results of our audit procedures.
How the matter was addressed in the audit
The following were the primary procedures we performed to address this key
audit matter:
• We validated the underlying data used in the recoverable amount
calculations and tested the mathematical accuracy;
• Evaluated reasonableness of judgments made in management's assessment of
the cash generating units (CGU);
• Evaluated reasonableness of key assumptions to management's cash flow
projection used to determine recoverable amount of the CGU; including discount
rate, mine production levels factoring published 43- 101 resources, gold
prices, foreign exchange rates and input costs;
• We performed our own sensitivity analysis to further assess estimation
uncertainty; and;
• We assessed the appropriateness and completeness of the related
disclosures in the consolidated financial statements.
Measurement and Classification of Convertible Debentures
Description of the matter
As described in Note 15 to the financial statements, on December 20, 2023, the
Company completed a convertible debenture financing (the Loan) for gross
proceeds of $3,502,054. The Loan was determined to be a compound financial
instrument and management applied judgment in assessing the accounting
treatment for the individual components of the Loan. Notably whether the
conversion feature qualified as a derivative liability or equity instrument
based on the "fixed-for-fixed" requirement in IAS 32, Financial Instruments:
Presentation.
The initial value of the conversion feature of the Loan, determined to be a
derivative liability, was determined using the Black-Scholes option pricing
model.
The initial value of the financial liability component of the Loan was
determined using the residual method and accordingly measured as the
difference between the face value of the convertible debentures and the
initial value of the derivative liability component.
Why the matter is a key audit matter
This matter represented an area of significant risk of material misstatement
given the magnitude of the value of the Loan and the high degree of estimation
uncertainty in determining the initial measurement of the components of the
Loan. Further, the involvement of those with specialized skills and knowledge
were required in evaluating the results of our audit procedures.
Management applied judgment in assessing the accounting treatment of the Loan
including whether the conversion feature met the "fixed-for-fixed" requirement
to be classified as equity and in determining the appropriate discount rate to
apply. This in turn, led to a high degree of auditor judgement and effort in
performing procedures to test management's assumptions.
How the matter was addressed in the audit
The following were the primary procedures we performed to address this key
audit matter:
• We read the underlying agreements and evaluated whether management's
interpretation of the agreements in relation to accounting for the Loan was
reasonable, markedly observing the fixed conversion price, as is a requirement
for the "fixed-for-fixed" condition, not being met, on the basis the Loan was
denominated in a foreign currency (USD);
• Compared discount rate applied by the Company to discount rates for
comparable entities;
• Reviewed, recalculated and analyzed interest expense using effective
interest rate method; and;
• Assessed the appropriateness and completeness of the related disclosures
in the financial statements.
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
consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.
• Plan and perform the group audit to obtain sufficient
appropriate audit evidence regarding the financial information of the entities
or business units within the group as a basis for forming an opinion on the
group financial statements. We are responsible for the direction, supervision
and review of the audit work performed for purposes 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.
From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the consolidated
financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in
our report because of the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
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 23, 2024
Galantas Gold Corporation
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at December 31, 2023 2022
ASSETS
Current assets
Cash and cash equivalents $ 2,593,265 $ 1,038,643
Accounts receivable and prepaid expenses (note 8) 1,596,880 1,810,993
Inventories (note 9) 18,184 83,242
Total current assets 4,208,329 2,932,878
Non-current assets
Property, plant and equipment (note 10) 23,094,171 24,255,849
Long-term deposit (note 12) 505,110 489,660
Exploration and evaluation assets (note 11) 4,776,409 2,665,313
Total non-current assets 28,375,690 27,410,822
Total assets $ 32,584,019 $ 30,343,700
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (notes 13 and 23) $ 3,662,842 $ 4,052,041
Current portion of financing facilities (note 14) 6,119,308 4,836,267
Due to related parties (note 21) 5,838,256 5,072,534
Other liability (note 21) 1,187,437 -
Total current liabilities 16,807,843 13,960,842
Non-current liabilities
Due to related parties (note 21) 638,432 -
Decommissioning liability (note 12) 611,452 582,441
Other liability (note 21) - 1,085,426
Convertible debenture (note 15) 1,923,509 -
Derivative liability (note 15) 1,245,627 -
Total non-current liabilities 4,419,020 1,667,867
Total liabilities 21,226,863 15,628,709
Equity
Share capital (note 17(a)(b)) 71,809,999 69,664,056
Reserves 18,579,467 15,515,105
Deficit (79,032,310 ) (70,464,170 )
Total equity 11,357,156 14,714,991
Total equity and liabilities $ 32,584,019 $ 30,343,700
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 23)
Events after the reporting period (note 24)
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,
2023 2022
Revenues
Sales of concentrate (note 19) $ - $ -
Cost and expenses of operations
Cost of sales 182,295 284,262
Depreciation (note 10) 515,003 624,620
697,298 908,882
Loss before general administrative and other expenses (697,298 ) (908,882 )
General administrative expenses
Management and administration wages (note 21) 552,901 647,763
Other operating expenses 301,475 526,162
Accounting and corporate 273,694 291,535
Legal and audit 170,074 226,185
Stock-based compensation (note 17(d)) 353,712 1,470,418
Shareholder communication and investor relations 478,059 506,090
Transfer agent 79,273 45,034
Director fees (note 21) 140,000 140,000
General office 85,804 57,423
Accretion expenses (notes 12, 14, 15 and 21) 492,393 691,105
Loan interest and bank charges less deposit interest (notes 14, 15 and 21) 1,316,122 799,574
4,243,507 5,401,289
Other expenses (income)
Foreign exchange loss 233,651 195,938
Unrealized gain on derivative fair value adjustment (note 15) (241,886 ) -
Loss on disposal of property, plant and equipment - 2,910
Impairment of property, plant and equipment and exploration and evaluation 3,635,570 10,124,920
assets (notes 10 and 11)
3,627,335 10,323,768
Net loss for the year $ (8,568,140 ) $ (16,633,939 )
Basic and diluted net loss per share (note 18) $ (0.08 ) $ (0.19 )
Weighted average number of common shares outstanding 111,949,878 89,401,620
- basic and diluted
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,
2023 2022
Net loss for the year $ (8,568,140 ) $ (16,633,939 )
Other comprehensive income (loss)
Items that will be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations 963,193 (1,163,486 )
Total comprehensive loss $ (7,604,947 ) $ (17,797,425 )
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,
2023 2022
Operating activities
Net loss for the year $ (8,568,140 ) $ (16,633,939 )
Adjustment for:
Depreciation (note 10) 515,003 624,620
Stock-based compensation (note 17(d)) 353,712 1,470,418
Accrued interest (notes 14, 15 and 21) 1,784,034 1,172,976
Foreign exchange loss 240,861 292,699
Accretion expenses (notes 12, 14, 15 and 21) 492,393 691,105
Impairment of property, plant and equipment and exploration and evaluation 3,635,570 10,124,920
assets (notes 10 and 11)
Gain on derivative fair value adjustment (241,886 ) -
Loss on disposal of property, plant and equipment - 2,910
Non-cash working capital items:
Accounts receivable and prepaid expenses 214,113 438,113
Inventories 65,058 21,415
Accounts payable and other liabilities 205,830 1,216,455
Due to related parties - (327,111 )
Other liability - 1,085,426
Net cash and cash equivalents (used in) provided by operating activities (1,303,452 ) 180,007
Investing activities
Net purchase of property, plant and equipment (1,959,306 ) (10,414,099 )
Exploration and evaluation assets (1,882,825 ) (1,165,561 )
Lease payments (note 16) - (701,782 )
Net cash and cash equivalents used in investing activities (3,842,131 ) (12,281,442 )
Financing activities
Proceeds of private placements (note 17(b)(i)(ii)) 2,963,142 5,900,003
Share issue costs (377,143 ) (607,860 )
Proceeds from exercise of warrants 31,200 5,287,147
Advances from related parties 580,392 2,062,693
Repayments to related parties (24,735 ) (524,255 )
Proceeds from convertible debenture (note 15) 3,502,054 -
Share issue costs - convertible debenture (53,991 ) -
Net cash and cash equivalents provided by financing activities 6,620,919 12,117,728
Net change in cash and cash equivalents 1,475,336 16,293
Effect of exchange rate changes on cash held in foreign currencies 79,286 (47,401 )
Cash and cash equivalents, beginning of year 1,038,643 1,069,751
Cash and cash equivalents, end of year $ 2,593,265 $ 1,038,643
Cash $ 2,593,265 $ 1,038,643
Cash equivalents - -
Cash and cash equivalents $ 2,593,265 $ 1,038,643
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, 2021 $ 57,783,570 $ 4,130,200 $ 10,417,260 $ 887,909 $ (53,830,231 ) $ 19,388,708
Shares issued in private placement (note 17(b)(i)) 5,900,003 - - - - 5,900,003
Shares issued for services arrangement (note 17(b)(i)) 1,000,000 - - - - 1,000,000
Warrants issued (note 17(b)(i)) (1,644,859 ) 1,644,859 - - - -
Warrants issued (note 21(a)(iv)) - 74,000 - - - 74,000
Share issue costs (note 17(b)(i)) (752,324 ) 144,464 - - - (607,860 )
Stock-based compensation (note 17(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
Shares issued in private placement (note 17(b)(ii)) 2,963,142 - - - - 2,963,142
Shares issue for services arrangement (note 17(b)(iii)) 420,000 - - - - 420,000
Shares issue for debt settlement (note 17(b)(iv)) 749,020 - - - - 749,020
Warrants issued (note 17(b)(ii)(iv)) (1,609,634 ) 1,609,634 - - - -
Warrants issued (notes 15 and 21(a)(iv)(vi)) - 107,181 - - - 107,181
Share issue costs (note 17(b)(ii)) (417,318 ) 40,175 - - - (377,143 )
Stock-based compensation (note 17(d)) - - 353,712 - - 353,712
Exercise of warrants 40,733 (9,533 ) - - - 31,200
Warrants expired - (2,104,148 ) 2,104,148 - - -
Exchange differences on translating foreign operations - - - 963,193 - 963,193
Net loss for the year - - - - (8,568,140 ) (8,568,140 )
Balance, December 31, 2023 $ 71,809,999 $ 3,546,313 $ 14,345,538 $ 687,616 $ (79,032,310 ) $ 11,357,156
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
subsidiaries Gairloch Resources Limited ("Gairloch") incorporated on November
16, 2023 and Cavanacaw Corporation ("Cavanacaw"). Cavanacaw has a 100%
shareholding in Galántas Irish Gold Limited ("Galántas"), 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 on forecast cash flows being met,
further financing negotiations being completed together. Management'
assumptions in relation to future financing, levels of production, gold prices
and mine operating costs are crucial to forecast cash flows being achieved.
Should production be significantly delayed, revenues fall short of
expectations or operating costs and capital costs increase significantly,
there may be insufficient cash flows to sustain day to day operations without
seeking further finance.
Based on the financial projections which have been prepared for a five-year
period and using assumptions which management believes to be prudent,
alongside ongoing negotiations with both current and prospective investors and
creditors, management believes it is appropriate to prepare the consolidated
financial statements on the going concern basis.
Should the Company be unsuccessful in securing the above, there would be
significant uncertainty over the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that would result if forecast cash flows were not achieved, if the existing
creditors withdrew their support or if further financing could not be raised
from current or potential investors.
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
to meet the financial requirements of the Company. During the year ended
December 31, 2023, the Company raised gross proceeds of $3M through the
issuance of shares to investors and $3.5M through the issuance of convertible
debentures.
As at December 31, 2023, the Company had a deficit of $79,032,310 (December
31, 2022 - $70,464,170). Comprehensive loss for the year ended December 31,
2023 was $7,604,947 (year ended December 31, 2022 - $17,797,425). 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. As at July 1, 2007, the Company's Omagh mine began
production and in 2013 production was suspended. On April 1, 2014, Galántas
amalgamated its jewelry business with Omagh.
On April 8, 2014, Cavanacaw acquired Flintridge. Following a strategic review
of its business by the Company during 2014 certain assets owned by Omagh were
acquired by Flintridge.
On November 16, 2023, Gairloch was incorporated. Refer to note 11.
The Company's operations include the consolidated results of Gairloch,
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 23, 2024.
(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
Gairloch Resources Limited (1)(6) 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);
(5) Referred to as Flintridge (as defined herein); and
(6) Referred to as Gairloch (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,
2023 2022
Closing rate (GBP to CAD) 1.6837 1.6322
Average for the year 1.6783 1.6080
(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, mill recovery rate and external contractor costs;
· 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;
· convertible debenture is separated into its liability (host loan)
and embedded derivative liability (conversion feature). The fair value of the
embedded derivative at the time of issue is calculated by using black-scholes
valuation model. Subsequent to the measurement of derivative liability, the
residual value will be allocated as fair value of the host loan. The host loan
will be subsequently measured at amortized cost by using an effective interest
rate of 37%. Changes in the input assumptions can materially affect the fair
value estimates and the Company's classification between debt and derivative
components. The transaction costs incurred to obtain the convertible debenture
are pro-rated between equity and debt liability;
· derivative liability - management is required to make a number of
estimates when determining the fair value of the derivative liability,
including volatility and expected life of the instruments;
· share issued for non-cash consideration - the Company measures
equity-settled share-based payment transactions based on an estimate of the
fair value of goods or services received, unless that fair value cannot be
estimated reliably, in which case the Company measures the fair value of the
goods or services received based on the fair value of the equity instruments
granted.
· 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
Convertible debenture (host loan) Amortized cost
Other liability Amortized cost
Derivative liability FVTPL
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, convertible debenture and other liability 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. The Company's derivative liability is measured
at FVTPL.
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, exploration 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) Convertible debentures
The convertible debenture is convertible into units in US$ and the Company's
functional currency is the Canadian Dollars. As a result the instrument
contains an embedded derivative liability.
The proceeds received on issuance of the Company's convertible debenture are
allocated to the host debt and derivative liability component. The fair value
of the component is determined based on the residual method.
At the time of issue, the derivative liability feature was measured using the
Black-Scholes option pricing model. The residual value was allocated as fair
value of the host debt component. The derivative liability is fair valued at
each statement of financial position date using the Black-Scholes option
pricing model.
The host debt component accretes up to the principal balance at maturity with
the accretion expense included in the consolidated statements of loss. The
derivative liability component will be reclassified to share capital on
conversion.
Transaction costs are apportioned to the debt liability and derivative
liability component in proportion to the allocation of proceeds.
(o) 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.
(p) 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.
(q) 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, 2023 totaled $11,357,156 (December
31, 2022 - $14,714,991). 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, 2023. 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,
2023, the Company had working capital deficit of $12,599,514 (December 31,
2022 - working capital deficit of $11,027,964). All of the Company's financial
liabilities have contractual maturities of less than 30 days other than
certain related party loans 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, a loan facility with a third party and
convertible debentures are subject to interest rate risk. As at December 31,
2023, if interest rates had decreased/increased by 1% with all other variables
held constant, the net loss for the year ended December 31, 2023, would have
been approximately $150,000 lower/higher respectively, as a result of
lower/higher interest rates from certain related party loans, a loan facility
and convertible debentures. Similarly, as at December 31, 2023, shareholders'
equity would have been approximately $150,000 higher/lower as a result of a 1%
(ii) The Company is exposed to foreign currency risk on fluctuations related
to cash and cash equivalents, accounts receivable, long-term deposit, accounts
payable and other liabilities, financing liability, lease liability and due to
related parties that are denominated in GBP as well as convertible debentures
that are denominated in US$. As at December 31, 2023, had the GBP and US$
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, 2023 would have been approximately $620,000 higher/lower as a
result of foreign exchange losses/gains on translation of non-CAD denominated
financial instruments. Similarly, as at December 31, 2023, shareholders'
equity would have been approximately $620,000 higher/lower had the GBP and US$
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, 2023.
7. Categories of Financial Instruments
As at December 31, 2023 2022
Financial assets:
FVTPL
Cash and cash equivalents $ 2,593,265 $ 1,038,643
Amortized cost
Accounts receivable 108,292 420,653
Long-term deposit 505,110 489,660
Financial liabilities:
FVTPL
Derivative liability 1,245,627 -
Amortized cost
Accounts payable and other liabilities 3,662,842 4,052,041
Financing facilities 6,757,740 4,836,267
Due to related parties 5,838,256 5,072,534
Convertible debenture 1,923,509 -
Other liability 1,187,437 1,085,426
As of December 31, 2023 and 2022, the fair value of all the Company's
financial instruments approximates the carrying value.
8. Accounts Receivable and Prepaid Expenses
As at December 31, 2023 2022
Sales tax receivable - Canada $ 15,067 $ 22,971
Valued added tax receivable - Northern Ireland 9,959 281,308
Accounts receivable 83,266 116,374
Prepaid expenses 1,488,588 1,390,340
$ 1,596,880 $ 1,810,993
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 for the underground development at the Omagh
Gold Project.
The following is an aged analysis of receivables:
As at December 31, 2023 2022
Less than 3 months $ 50,614 $ 343,381
3 to 12 months 45,330 51,868
More than 12 months 12,348 25,404
Total accounts receivable $ 108,292 $ 420,653
9. Inventories
As at December 31, 2023 2022
Concentrate inventories $ 18,184 $ 83,242
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, 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
Additions - - - - 3,423,820 26,939 3,450,759
Cash receipts from concentrate sales - - - - (1,491,453 ) - (1,491,453 )
Impairment (iii) - - - - (3,353,077 ) - (3,353,077 )
Foreign exchange adjustment 71,058 274,128 6,969 6,816 658,736 - 1,017,707
Balance, December 31, 2023 $ 2,323,111 $ 8,995,926 $ 227,835 $ 222,845 $ 20,640,066 $ 26,939 $ 32,436,722
Accumulated depreciation
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
Disposals - - (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
Depreciation 3,954 482,088 17,864 11,097 - - 515,003
Foreign exchange adjustment 59,213 201,755 5,062 4,581 - - 270,611
Balance, December 31, 2023 $ 1,939,409 $ 7,061,856 $ 181,541 $ 159,745 $ - $ - $ 9,342,551
Carrying value
Balance, December 31, 2022 $ 375,811 $ 2,343,785 $ 62,251 $ 71,962 $ 21,402,040 $ - $ 24,255,849
Balance, December 31, 2023 $ 383,702 $ 1,934,070 $ 46,294 $ 63,100 $ 20,640,066 $ 26,939 $ 23,094,171
(i) Right-of-use assets of $nil is included in additions of the plant and
machinery for the year ended December 31, 2023 (year ended December 31, 2022 -
$282,041).
(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, 2023, 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
16-17%.
As at December 31, 2023, the Company determined the development assets was
impaired by $3,353,077 (December 31, 2022 - $10,124,920).
11. Exploration and Evaluation Assets
Cost Acquisition Exploration Total
costs
costs
Balance, December 31, 2021 $ - $ 1,574,183 $ 1,574,183
Additions - 1,165,561 1,165,561
Foreign exchange adjustment - (74,431 ) (74,431 )
Balance, December 31, 2022 - 2,665,313 2,665,313
Additions (i) 1,140,115 1,162,710 2,302,825
Impairment - (282,493 ) (282,493 )
Foreign exchange adjustment - 90,764 90,764
Balance, December 31, 2023 $ 1,140,115 $ 3,636,294 $ 4,776,409
Carrying value
Balance, December 31, 2022 $ - $ 2,665,313 $ 2,665,313
Balance, December 31, 2023 $ 1,140,115 $ 3,636,294 $ 4,776,409
(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 made a payment of $580,392 (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.
As of December 31, 2023, the Company assessed that the exploration assets were
impaired by $282,493 (December 31, 2022 - $Nil).
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, 2023 based on a risk-free discount rate of 1%
(December 31, 2022 - 1%) and an inflation rate of 1.50% (December 31, 2022 -
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, 2023, the
estimated fair value of the liability is $611,452 (December 31, 2022 -
$582,441). Changes in the provision during the year ended December 31, 2023
are as follows:
As at December 31, 2023 2022
Decommissioning liability, beginning of year $ 582,441 $ 600,525
Accretion 10,601 10,154
Foreign exchange 18,410 (28,238 )
Decommissioning liability, end of year $ 611,452 $ 582,441
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, 2022 - GBP 300,000), of which GBP 300,000 was funded as
of December 31, 2023 (GBP 300,000 was funded as of December 31, 2022) and
reported as long-term deposit of $505,110 (December 31, 2022 - $489,660).
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, 2023 2022
Accounts payable $ 2,131,257 $ 2,528,245
Accrued liabilities 1,531,585 1,523,796
Total accounts payable and other liabilities $ 3,662,842 $ 4,052,041
The following is an aged analysis of the accounts payable and other
liabilities:
As at December 31, 2023 2022
Less than 3 months $ 1,672,744 $ 2,939,972
3 to 12 months 807,338 412,168
12 to 24 months 474,290 61,247
More than 24 months (see also note 23) 708,470 638,654
Total accounts payable and other liabilities $ 3,662,842 $ 4,052,041
14. Financing Facilities
Amounts payable on the Company's financial facilities are as follow:
As at December 31, 2023 2022
G&F Phelps
Financing facility, beginning of period (i) 4,836,267 4,247,488
Accretion (i) 259,354 269,512
Interest (i) 961,722 618,903
Shares for debt settlement (100,000 ) (24,120 )
Foreign exchange adjustment 161,965 (275,516 )
6,119,308 4,836,267
Less current portion (6,119,308 ) (4,836,267 )
Financing facilities - non-current portion $ - $ -
(i) As at December 31, 2023, G&F Phelps had amalgamated loans to the
Company of $3,139,728 (GBP 1,864,779) (December 31, 2022 - $2,719,042 - GBP
1,665,875) included with financing facilities bearing interest at 2% above UK
base rates, repayable on demand and secured by a mortgage debenture on all the
Company's assets. In April 2018, the interest increased to 6.75% + US$ 12
month LIBOR. Interest accrued on G&F Phelps loan is included with
financing facilities. As at December 31, 2023, the amount of interest accrued
is $2,979,582 (GBP 1,769,663) (December 31, 2022 - $1,950,675 - GBP
1,195,120).
The G&F Phelps loans expired on December 31, 2023 and are being rolled
forward on a month to month basis. 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 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, 2023, the Company recorded accretion
expense of $259,354 in the consolidated statements of loss in regards with
this loan facility (year ended December 31, 2022 - $269,512).
During the year ended December 31, 2023, the Company recorded interest expense
of $961,722 in the consolidated statements of loss in regards with this loan
facility (year ended December 31, 2022 - $618,903).
15. Convertible Debenture
On December 20, 2023, the Company closed a $3,502,054 (US$ 2,627,000)
convertible debenture. The convertible debenture is unsecured, is for a term
of three year commencing on the date that it is issued, carries a coupon of
10% per annum and is convertible into common shares of the Company. Each
debenture consists of US$1,000 principal amount of unsecured convertible
debentures. The convertible debentures have a term of 36 months from the date
of issuance with a conversion price of US$0.255 being the equivalent of a
conversion price of $0.35 per conversion share. A four month hold period will
apply to common shares converted through the convertible debenture. The hold
period will expire on April 21, 2024.
In accordance with the terms of the convertible debentures, if, at any time
following the issuance of the convertible debentures, the closing price of the
common shares of the Company on the TSXV equals or exceeds $0.70 per common
share for 10 consecutive trading days or more, the Company may elect to
convert all but not less than all of the outstanding principal amount of the
convertible debentures into conversion shares at the conversion price, upon
giving the holders of the convertible debentures not less than 30 calendar
days advance written notice. On December 20, 2026, any outstanding principal
amount of convertible debentures plus any accrued and unpaid interest thereon
shall be repaid by the Company in cash.
Interest on the principal amount outstanding under each convertible debenture
shall accrue during the period commencing on December 20, 2023 until December
20, 2026 and shall be payable in cash on an annual basis on December 31st of
each year (each, an "Interest Payment Date"); provided, however, that the
first interest payment date shall be December 31, 2024. Each convertible
debenture shall bear interest at a minimum interest rate of 10% per annum (the
"Base Interest Rate"). During each interest period (an "Interest Period"),
being the period commencing on December 20, 2023 to but excluding the first
Interest Payment Date and thereafter the period from and including an Interest
Payment Date to but excluding the next Interest Payment Date or other
applicable payment date, the Base Interest Rate will be adjusted based on a
gold price of US$2,000 per ounce, with the Base Interest Rate being increased
by 1% per annum for each US$100 in which the average gold price for such
Interest Period exceeds US$2,000 per ounce, up to a maximum interest rate of
30% per annum; provided, however, that, without the prior acceptance of the
TSXV, the average interest rate shall not exceed 24% per annum during the term
of the convertible debentures. Any adjustment to the Base Interest Rate in
respect of an Interest Period shall be calculated based on the average gold
price quoted by the London Bullion Market Association, being the LBMA Gold
Price PM, in respect of the Interest Period ending on December 31, 2024, from
December 20, 2023 to and including December 15, 2024, and for each subsequent
Interest Period, from January 1st to and including December 15th of that year
or 15 days prior to the applicable payment date.
Melquart, an insider and control person of the Company (as defined by the
TSXV), subscribed for US$875,000. Ocean Partners, which has a common director
with the Company, acquired US$875,000 aggregate principal amount of
convertible debentures.
The Company paid a cash finder's fee of US$40,500 (CAD$53,990) and issued
158,823 non-transferable finder's warrants to Canaccord Genuity Corp. in
consideration for providing certain finder services to the Company under the
offering. Each finder warrant is exercisable to acquire one common share in
the capital of the Company at an exercise price of $0.35 per common share at
any time on or before December 20, 2026. The fair value of the 158,823 finder
warrants was estimated at $24,670 using the Black-Scholes option pricing model
with the following assumptions: expected dividend yield - 0%, expected
volatility - 107.02%, risk-free interest rate - 3.71% and an expected average
life of 3 years.
The debentures consist of the liability component and conversion feature. Due
to the convertible debenture being denominated in US$, the conversion feature
has been presented as a non-cash derivative liability.
On the date of issuance, the fair value of the derivative liability was
estimated to be $1,495,208 using the Black-Scholes option pricing model with
the following assumptions: expected dividend yield - 0%, expected volatility -
95.0%, risk-free interest rate - 3.94% and an expected average life of 3
years.
As at December 31, 2023, the fair value of the derivative liability was
revalued at $1,245,627 using the Black-Scholes option pricing model with the
following assumptions: expected dividend yield - 0%, expected volatility -
94.9%, risk-free interest rate - 3.91% and an expected average life of 2.97
years.
The fair value of the liability component was recorded at $2,006,846,
discounted at an effective interest rate of 37%.
The Company incurred transaction costs of $153,481 which was allocated
pro-rata on the value of the conversion feature and the liability component.
During the year ended December 31, 2023, the Company recorded accretion
expense of $33,265 and interest expense of $29,184 as loan interest and bank
charges less deposit interest in the consolidated statement of loss.
Convertible Derivative
debenture liability
Balance, December 31, 2021 and 2022 $ - $ -
Principal amount 3,502,054 -
Derivative liability component (1,495,208 ) 1,495,208
Transaction costs (153,481 ) -
Transaction costs allocated to derivative liability component 7,695 (7,695 )
Interest expense 29,184 -
Accretion expense 33,265 -
Change in fair value - (241,886 )
Balance, December 31, 2023 $ 1,923,509 $ 1,245,627
16. Leases
Balance, December 31, 2021 $ 416,040
Addition (i) 282,041
Interest expense 18,857
Lease payments (701,782 )
Foreign exchange (15,156 )
Balance, December 31, 2022 and 2023 $ -
(i) 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.
17. Share Capital and Reserves
a) Authorized share capital
At December 31, 2023, 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, 2023, the issued share capital amounted to $71,809,999. The
continuity of issued share capital for the years presented is as follows:
Number of Amount
common
shares
Balance, December 31, 2021 74,683,801 $ 57,783,570
Shares issued in private placement (i) 13,111,119 5,900,003
Shares issued for services arrangement (i) 2,222,222 1,000,000
Warrants issued (i) - (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
Shares issued in private placement (ii) 8,230,951 2,963,142
Shares issued for services arrangement (iii) 933,334 420,000
Shares issued for debt settlement (iv) 2,080,609 749,020
Warrants issued (ii)(iv) - (1,609,634 )
Share issue costs (ii) - (417,318 )
Exercise of warrants 78,000 40,733
Balance, December 31, 2023 114,841,403 $ 71,809,999
(i) On August 30, 2022, Galantas completed a private placement of 13,111,119
units at a price of $0.45 per unit for aggregate gross proceeds of $5,900,003.
In addition, 2,222,222 units were sold to a third-party service provider on
the same term as the offering. The gross proceeds being $1,000,000 was offset
against certain fees to be paid to the third-party service provider by the
Company pursuant to a service agreement between the third-party service
provider and the Company dated August 30, 2022, for the underground
development at the Omagh Gold Project.
Each unit comprises one common share and one-half common share purchase
warrant. Each warrant will be exercisable into one additional common share at
an exercise price of $0.55 until February 28, 2025.
The fair value of the 7,666,669 warrants was estimated at $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 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.
(ii) On March 27, 2023, the Company 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. The fair value of the 7,924,841 warrants was estimated at $1,284,806
using the Black-Scholes option pricing model with the following assumptions:
expected dividend yield - 0%, expected volatility - 126.22%, risk-free
interest rate - 2.96% and an expected average life of 5 years.
The Company paid the agents a cash commission equal to $146,966 and issued
407,962 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. The fair value of the 407,962 warrants was estimated at
$40,175 using the Black-Scholes option pricing model with the following
assumptions: expected dividend yield - 0%, expected volatility - 99.18%,
risk-free interest rate - 3.61% and an expected average life of 2 years.
Ocean Partners acquired 691,666 units for consideration of $249,000 and
Brendan Morris, an officer of the Company, acquired 468,416 units for
consideration of $168,630.
(iii) The Company has entered into an agreement to acquire the historical
Gairloch drill and exploration database (refer to note 11) 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. On April 13, 2023, the Company issued 933,334 common
shares per terms of the agreement.
(iv) On April 26, 2023, the Company agreed to the terms of a proposed
shares-for-debt transaction with several arm's length creditors of the Company
and 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. 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 April 26, 2028.
The fair value of the 2,080,609 warrants was estimated at $324,828 using the
Black-Scholes option pricing model with the following assumptions: expected
dividend yield - 0%, expected volatility - 126.25%, risk-free interest rate -
2.98% and an expected average life of 5 years.
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, 2021 28,691,598 $ 0.39
Issued (notes 17(b)(i) and 21(a)(iv)) 8,861,669 0.54
Exercised (13,501,367 ) 0.39
Balance, December 31, 2022 24,051,900 0.45
Issued (notes 15, 17(b)(ii)(iv) and 21(a)(iv)(vi)) 11,172,235 0.54
Exercised (78,000 ) 0.40
Expired (15,487,231 ) 0.40
Balance, December 31, 2023 19,658,904 $ 0.54
The following table reflects the actual warrants issued and outstanding as of
December 31, 2023:
Number Grant date Exercise
Expiry date
of warrants
fair value
price
($)
($)
August 30, 2024 820,000 144,464 0.45
January 31, 2025 500,000 65,527 0.55
February 13, 2025 100,000 16,984 0.41
February 28, 2025 7,666,669 1,644,859 0.55
March 27, 2025 407,962 40,175 0.36
December 20, 2026 158,823 24,670 0.35
March 27, 2028 7,924,841 1,284,806 0.55
April 26, 2028 2,080,609 324,828 0.55
19,658,904 3,546,313 0.54
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, 2021 4,885,000 $ 0.88
Granted (ii) 1,742,500 0.60
Expired (255,000 ) 1.35
Cancelled (i) (220,000 ) 0.94
Balance, December 31, 2022 6,152,500 0.78
Expired (25,000 ) 1.10
Cancelled (i) (265,000 ) 0.76
Balance, December 31, 2023 5,862,500 $ 0.78
(i) The portion of the estimated fair value of options granted in the current
and prior years and vested during the year ended December 31, 2023, amounted
to $353,712 (year ended December 31, 2022 - $1,470,418). In addition, during
the year ended December 31, 2023, 265,500 options granted in the prior years
were cancelled (year ended December 31, 2022 - 220,000 options cancelled).
(ii) 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 $900,000 and was expensed in
the consolidated statements of loss and credited to equity settled share-based
payments reserve.
The following table reflects the actual stock options issued and outstanding
as of December 31, 2023:
Weighted average Number of Number of Number of
Exercise
remaining
options
options
options
Expiry date
price ($)
contractual
outstanding
vested
unvested
life (years)
(exercisable)
February 13, 2024 0.90 0.12 85,000 85,000 -
June 27, 2024 0.90 0.49 100,000 100,000 -
May 19, 2026 0.86 2.38 3,635,000 3,635,000 -
June 21, 2026 0.73 2.47 425,000 425,000 -
August 27, 2026 0.86 2.66 20,000 20,000 -
May 3, 2027 0.60 3.34 1,597,500 1,065,000 532,500
0.78 2.60 5,862,500 5,330,000 532,500
18. Net Loss per Common Share
The calculation of basic and diluted loss per share for the year ended
December 31, 2023 was based on the loss attributable to common shareholders of
$8,568,140 (year ended December 31, 2022 - $16,633,939) and the weighted
average number of common shares outstanding of 111,949,878 (year ended
December 31, 2022 - 89,401,620) for basic and diluted loss per share. Diluted
loss did not include the effect of 19,658,904 warrants (year ended December
31, 2022 - 24,051,900) and 5,862,500 options (year ended December 31, 2022 -
6,152,500) for the year ended December 31, 2023, as they are anti-dilutive.
19. 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, 2023 totalled approximately US$1,103,532
(CAD$1,491,453) (year ended December 31, 2022 - US$608,000 (CAD$823,475).
However, until the mine reaches the commencement of commercial production, the
net proceeds from concentrate sales will be offset against Development assets.
20. 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, 2023 2022
Loss before income taxes $ (8,568,140 ) $ (16,633,939 )
Expected tax recovery at statutory rate of 26.5% (2022 - 26.5%) (2,270,557 ) (4,407,994 )
Difference resulting from:
Foreign tax rate differential 93,504 191,802
Stock-based compensation 93,734 389,661
Share issue costs directly in equity (96,650 ) (128,866 )
Permanent differences and other (630,248 ) 1,587,816
Change in deferred income tax assets not recognized 2,810,217 2,367,581
$ - $ -
(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, 2023 2022
Deferred income tax assets (liabilities)
Losses carried forward $ 17,696,034 $ 14,600,831
Share issue costs and other 263,746 270,340
Non-current assets (3,408,901 ) (3,130,509 )
Deferred tax assets not recognized (14,550,879 ) (11,740,662 )
$ - $ -
(c) Losses carried forward
As at December 31, 2023, 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
2043 2,557,630
Indefinite 51,566,359
$ 69,583,243
At December 31, 2023, 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.
21. 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,
2023 2022
Interest on related party loans (i) $ 729,033 $ 554,073
(i) Refer to note 21(a)(iv).
(ii) Refer to note 17(b).
(iii) Refer to note 15.
(iv) On May 14, 2021, the maturity date of the US$1.6 million loan facility
with Ocean Partner due on December 31, 2021 has been extended to December 31,
2023. Ocean Partners and the Company have a common director. Interest may be
deferred and added to the balance outstanding until March 31, 2022, at which
point interest will be paid monthly.
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. Subsequent to year end, this loan was
converted into a convertible debenture. Refer to note 24(i).
(a) The Company entered into the following transactions with related parties:
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.
Subsequent to year end, this loan was converted into a convertible debenture.
Refer to note 24(i).
As at December 31, 2023, the Company owes Ocean Partners $5,673,150 (December
31, 2022 - $4,978,069) which is recorded as due to related parties on the
consolidated statement of financial position.
2023 2022
Balance, beginning of year $ 4,978,069 $ 2,444,376
Loan received - 2,062,693
Less bonus warrants - (74,000 )
Share issue costs ((1)(2)) - (93,444 )
Advance - 93,284
Repayment (24,735 ) (524,255 )
Accretion 116,569 391,128
Interest 729,033 554,073
Foreign exchange adjustment (125,786 ) 124,214
Balance, end of year 5,673,150 4,978,069
Less current balance (5,673,150 ) (4,978,069 )
Due to related parties - non-current balance $ - $ -
(v) 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 was used to fund development of the underground
mining operations at the Omagh Gold Project in Northern Ireland and working
capital.
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 were subject to a hold period under applicable securities laws and
the rules of the TSXV. The fair value of the 500,000 warrants was valued at
$65,527 using the following Black-Scholes option pricing model with the
following assumptions: expected dividend yield - 0%, expected volatility -
97.85%, risk-free interest rate - 3.73% and an expected average life of 1.9
year.
In October 2023, the Trading Agreement was terminated and converted to a loan.
As at December 31, 2023, balance related to the loan is recorded as other
liability on the consolidated statement of financial position is $1,187,437
(December 31, 2022 - $1,085,426).
Subsequent to year end, the loan was converted to convertible debenture. Refer
to note 24(i).
(vi) On February 13, 2023, the Company announced that it entered into a loan
agreement for $580,392 (GBP 347,000) with London-based family office Melquart
Limited ("Melquart"), an insider and control person of the Company (as defined
by the TSXV). The loan is to be used for the initial lease payment for the
Gairloch Project in Scotland (refer to note 11). 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. The Company granted to Melquart a
security interest in the lease for the Gairloch Project. As at December 31,
2023, the amount of interest accrued is $64,095 (GBP 38,068).
During the year ended December 31, 2023, the Company recorded accretion
expense of $7,077 in the consolidated statements of loss in regards with this
loan facility.
During the year ended December 31, 2023, the Company recorded interest expense
of $64,095 in the consolidated statements of loss in regards with this loan
facility.
As consideration for providing the loan, Melquart received 100,000 warrants of
Galantas. Each bonus warrant are exercisable into one common share of Galantas
at an exercise price of $0.41, with said warrants expiring on February 13,
2025. The fair value of the 100,000 warrants was estimated at $16,984 using
the following Black-Scholes option pricing model with the following
assumptions: expected dividend yield - 0%, expected volatility - 97.54%,
risk-free interest rate - 3.47% and an expected average life of 1.90 years.
2023 2022
Melquart Limited
Financing facilities, beginning of period $ - $ -
Financing facility received 580,392 -
Less bonus warrants issued (16,984 ) -
Accretion 7,077 -
Interest 64,095 -
Foreign exchange adjustment 3,852 -
Balance, end of year 638,432 -
Less current portion - -
Due to related parties - non-current balance $ 638,432 $ -
(b) Remuneration of officer and directors of the Company was as follows:
Year Ended
December 31,
2023 2022
Salaries and benefits ((1)) $ 450,861 $ 558,941
Stock-based compensation 263,333 930,223
$ 714,194 $ 1,489,164
(1) Salaries and benefits include director fees. As at December 31, 2023, due
to directors for fees amounted to $140,000 (December 31, 2022 - $70,000) and
due to officers, mainly for salaries and benefits accrued amounted to $25,106
(December 31, 2022 - $24,465), and is included with due to related parties.
(c) As at December 31, 2023, the issued shares of Galantas total 114,841,403.
Ross Beaty owns 3,744,747 common shares of the Company or approximately 3.3%
of the outstanding common shares. Premier Miton owns 4,848,243 common shares
of the Company or approximately 4.2%. Melquart owns, directly and indirectly,
28,140,195 common shares of the Company or approximately 24.5% of the
outstanding common shares of the Company. G&F Phelps owns 5,353,818 common
shares of the Company or approximately 4.7%. Eric Sprott owns 10,166,667
common shares of the Company or approximately 8.9%. Mike Gentile owns
6,217,222 common shares of the Company or approximately 5.4%.
Excluding the Melquart Ltd, Premier Miton, Mr. Beaty, Mr. Phelps, Mr. Sprott
and Mr. Gentile shareholdings discussed above, the remaining 49% 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 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 21(a)(vi), Melquart i participated in the private
placement in February 2023.
2. Related party balances Loan accounts - owed to related parties
December 31,
2023 2022
Melquart (i) $ 638,432 $ -
Ocean Partners (ii) 5,673,150 4,978,069
Total $ 6,311,582 $ 4,978,069
(i) 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.
(ii) 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 2023 2022
Mario Stifano, CEO $ 197,748 $ 246,894
Alan Buckley, CFO 113,113 172,047
Brent Omland, director 30,000 30,000
David Cather, director 30,000 30,000
James B. Clancy, director 30,000 30,000
Roisin Magee, director 50,000 50,000
$ 450,861 $ 558,941
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 2023 2022 2023 2022
Mario Stifano, CEO 17(d) - 500,000 $ 142,744 $ 498,713
Alan Buckley, CFO 17(d) - 125,000 29,795 97,427
Brendan Morris, COO 17(d) - 125,000 22,928 63,186
Brent Omland, director 17(d) - 62,500 17,673 81,754
David Cather, director 17(d) - 62,500 14,897 48,713
James B. Clancy, director 17(d) - 62,500 9,006 48,713
Roisin Magee, director 17(d) - 92,500 26,290 91,717
- 1,030,000 $ 263,333 $ 930,223
22. 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, 2023 United Kingdom Canada Total
Current assets $ 1,831,473 $ 2,376,856 $ 4,208,329
Non-current assets $ 26,702,212 $ 1,673,478 $ 28,375,690
Revenues $ - $ - $ -
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 $ - $ - $ -
23. Contingency
During the year ended December 31, 2010, the Company's subsidiary Omagh
received a payment demand from Her Majesty's Revenue and Customs ("HMRC") in
the amount of $512,333 (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.
24. Events After the Reporting Period
(i) On February 5, 2024, the Company announced that it closed a debt
settlement transaction, pursuant to which the Company settled US$2,711,000 of
indebtedness owing to Ocean Partners through the issuance of US$2,711,000
aggregate principal amount of unsecured convertible debentures of the Company.
The convertible debenture issued in connection with the debt settlement were
issued on substantially the same terms as the unsecured convertible debentures
closed on December 20, 2023 (refer to note 15).
The debt settlement remains subject to the final acceptance of the TSXV. The
convertible debentures issued pursuant to the debt settlement are subject to a
four-month hold period which will expire on June 6, 2024.
(ii) On February 13, 2024, 125,000 stock options with exercise price of $0.90
expired unexercised.
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