Earnings Release • May 28, 2013
Earnings Release
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RNS Number : 7002F
Galantas Gold Corporation
28 May 2013
GALANTAS GOLD CORPORATION
TSXV & AIM : Symbol GAL
GALANTAS REPORTS RESULTS FOR THE QUARTER ENDED MARCH 31, 2013
May 28th, 2013: Galantas Gold Corporation (the 'Company') is pleased to announce its financial results for the Quarter Ended March 31, 2013.
Financial Highlights
The Net Loss for the Quarter Ended March 31, 2013 amounted to CDN$440,554 (March 31 2012: Net Loss of CDN$643,389). The cash loss generated from operating activities before changes in non-cash working capital for the first quarter of 2013 amounted to CDN$239,907 (2012: CDN$ 303,318). Highlights of the first quarter 2013 results, which are expressed in Canadian Dollars, are:
| Quarter Ended March 31 | ||
| All in CDN$ | 2013 | 2012 |
| Revenue | $364,676 | $1,025,146 |
| Cost of Sales | $397,588 | $1,020,507 |
| Income(Loss) before the undernoted | $ (32,912) | $4,639 |
| Amortization | $124,606 | $184,565 |
| General administrative expenses | $297,059 | $453,956 |
| Loss on disposal of property, plant and equipment | $0 | $1,506 |
| Foreign exchange (gain) loss | $ (14,023) | $8,001 |
| Net Loss for the quarter | $ (440,554) | $(643,389) |
| Working Capital (Deficit) | $ (2,772,908) | $(2,072,975) |
| Cash loss generated from operating activities before changes in non-cash working capital | $( 239,907) | $(303,318) |
| Cash at March 31, 2013 | $823,661 | $2,924,890 |
Sales revenues for the quarter ended March 31, 2013 amounted to CDN$ 364,676 (2012: CDN$ 1,025,146). The reduction in sales revenues when compared to 2012 was mainly due to the lower level of metal produced and shipped during the first quarter. The lower production levels were primarily due to the requirement to process lower grade ore from stockpile as a result of difficulties in accessing ore from the open pits.
Cost of sales for the quarter ended March 31, 2013 amounted to CDN$ 397,588 (2012: CDN$ 1,020,507). There was a decrease in various production costs at the Omagh mine during 2013 including Production wages, Oil and Fuel costs, Repairs and maintenance, Equipment hire and Consumables which reductions were primarily attributable to the reduced level of open pit mining activity during the first quarter of 2013 when compared to 2012.
The Net Loss for the quarter ended March 31, 2013, amounted to CDN$ 440,554 (2012: Net Loss CDN$ 643,389). The cash loss generated from operating activities before changes in non-cash working capital amounted to CDN$ 239,907 (2012: $ 303,318).
The Company had cash balances at March 31, 2013 of CDN$ 823,661 (2012:CDN$ 2,924,890). The working capital deficit at March 31, 2013 amounted to CDN$ 2,772,908 (2012: deficit of CDN$ 2,072,975).
Production Highlights
Production at the Omagh mine for the Quarter ended March 31, 2013 is summarized below:
| Quarter Ended March 31 | ||
| 2013 | 2012 | |
| Tonnes Milled | 11,753 | 9,420 |
| Average Grade g/t gold | 1.05 | 3.54 |
| Dry Tonnes Concentrate | 145 | 268 |
| Concentrate Gold Grade (g/t) | 85.3 | 108.4 |
| Gold Produced - kg (troy ozs) | 12.3 kg (398oz) | 29 kg( 933oz) |
| Concentrate Silver Grade (g/t) | 111.5 | 260.7 |
| Silver Produced kg (troy ozs) | 16.2 kg (520oz) | 69.9 kg (2,247oz) |
| Lead Produced (tonnes) | 4.1 | 24.9 |
| Gold Equivalent ( troy.ozs) | 413 | 1,006 |
The main production focus during the first quarter has been the on processing of ore from the low grade stockpile together with limited open pit mining on the Kerr vein. Production from Kearney became totally restricted from the second half of 2012 as a result of the surplus rock stockpile on the site reaching capacity levels. This surplus rock was due to be transported from the site in 2012 with the Omagh mine having completed construction of public road improvements at its own cost to comply with the conditions of the planning consent. However, following a judicial review brought by a private individual on the grounds of procedural failings by Planning Service, the planning consent was quashed with the surplus rock remaining on site. Later in the quarter mining ceased on the Kerr vein when the pit met its planned design limit. This ongoing limitation will result in future production being from the low grade stockpile. To generate cash from its operations going forward, the Company is continuing to improve efficiencies and cut costs.
During the first quarter the mill was fed with a combination of lower grade ore which was blended with a limited amount of ore from the Kerr vein. Production continued to be hampered during the quarter by both the ongoing variations in the metallurgy due to the inconsistent grade of ore being milled and an increased clay content. Production was also hampered by some unplanned downtime in the plant. Despite these difficulties the mill processed nearly 25% more ore in the first quarter of 2013 than the first quarter of 2012.
Good progress had been achieved during 2012 with regards to the on-going reinstatement process of the mine site with two completed rehabilitation paste cells being capped with a layer of till and peat and covered in grass seed during 2012. The reinstatement of the remaining paste cell was completed during the first quarter. Work which had commenced in early 2012 on the development of a number of paste cells, already permitted, in preparation for their future utilization when underground mining at the Omagh mine commences was also completed during the first quarter following the cessation of mining on the Kerr vein. Mining from stockpiles of lower gold grade continues.
Exploration
The major focus of exploration activities in 2012 and the first quarter of 2013 has been the continuation of the successful drilling programme. In total, 16,707 metres have been drilled since the programme commenced in March 2011 and significant gold intersects have been reported.
The drilling programme began in 2011 with the objective of extending the depth and extent of the Joshua vein and providing data for a potential underground operation based upon the Joshua and Kearney veins. During 2011 and 2012 95 holes were drilled totalling 16,347 metres. Channel sampling was also carried out, during this period, on the Joshua, Kearney and Kerr vein systems. On Joshua, a total strike length of 213 metres was sampled. On Kerr, an increase in average vein width and gold grade was identified within depth over a 30 metre strike length.
The exploration programme expanded considerably in 2012 with six drills operational during the first half of the year. The second half of the year saw the number of rigs progressively reduce with one rig, owned by the Company, remaining in operation by the end of 2012. The two principal objectives of the drilling programme were to complete the deeper holes on Kearney in order to gain a more accurate picture of the zone of mineralization for the purpose of the underground mine plan and to extend the strike of Joshua to the north and the south, and begin to target deeper sections of the vein. Drilling continued in to the first quarter of 2013 when two further holes targeting north Kearney and central Joshua were completed. In the first quarter a total, 360 metres were drilled, bringing the total for the current programme up to 16,707 metres. Following the scale back of drilling, more time was dedicated to logging remaining drill cores, the sealing off of all accessible drill holes, updating databases and progressing towards a resource estimate using Micromine.
Assay results released to date from both the drilling and channel sampling programme have been encouraging with significant gold intersections being identified (see press releases dated September 15, 2011, September 20, 2011, October 4, 2011, October 20, 2011, November 28, 2011, January 12, 2012, April 5, 2012, June 11, 2012, October 29, 2012 and January 8, 2013). Assay results from this programme will continue to be announced as and when they are received. Results to date have been positive, in particular the assays from the ten drill holes on Joshua released in January 2013 with thirteen significant mineral intersects. Drilling will continue using the company's own core drilling rig manned by in-house drillers. Up to a further 1,250 metres of drilling are planned, following up the recently reported gold intersects on the Joshua vein.
During 2012 the Company appointed ACA Howe International Ltd (Howe UK) to prepare an Interim Resource for the Omagh Gold Project to Canadian National Instrument NI 43-101 standard. During the third quarter of 2012 Galantas reported that it had received initial data from ACA Howe related to the preparation of an NI 43-101 compliant mineral resource estimate and a Preliminary Economic Assessment (see press release dated July 3, 2012).This report, which was based on drilling results and analyses received to June 8, 2012, identified all resources discovered at that date. The Company subsequently filed a complete Technical Report on SEDAR in August 2012. A further updated report will be prepared later in 2013 when the remaining results of the extended 18,000 metre drilling programme are received. This updated report will incorporate all drilling results and analyses received subsequent to June 2012.
Limited exploration outside the mine license area continued during the first quarter of 2013. With regards to the four licences held in the Republic of Ireland, geochemical soil sampling and geophysical data generated by the Tellus Border Project, a cross border initiative funded by the EU regional development fund, was released during the quarter. The data reveals the continuation of a trend established on license OM4 with anomalously high concentrations of gold pathfinder elements. In addition, following a detailed review of this data, application has been made for three new prospecting licenses in the Republic of Ireland which join and extend our existing licenses to the southwest. Subsequent to the quarter end, Omagh Minerals Ltd was awarded a grant to carry out a project which will determine the prospectivity potential of the Tellus border zone as a whole. This research is supported by the EU INTERREG IVA-funded Tellus Border project. It will be based around new Tellus Border data and will involve significant fieldwork over the summer months.
Permitting
Discussions continued with the planning services in Northern Ireland during the first quarter of 2013 with regards to the planning application for an underground mine plan and accompanying Environmental Statement which were submitted to the Planning Services in 2012. Consultations with statutory consultees continue to progress, with a number now confirming that they are satisfied. Consultations with the remainder are well advanced and the Company believes it can address outstanding matters raised by the consultees.
Roland Phelps, President & CEO, Galantas Gold Corporation, commented, "The Company is working hard for underground planning consent and expects to satisfy any remaining issues. Meanwhile, there is a supply of low grade material available for milling. Further efficiency changes and reductions in manpower have reduced costs during the current quarter. Solid results from the drilling program support continued investment in the Omagh Mine and grant aid, with publicly funded exploration activity, will permit early stage exploration to take place on new licence areas at low financial cost to the company."
The detailed results and Management Discussion and Analysis (MD&A) are available on www.sedar.com and www.galantas.com and the highlights in this release should be read in conjunction with the detailed results and MD&A. The MD&A provides an analysis of comparisons with previous periods, trends affecting the business and risk factors. Some of the production and metal figures are provisional and subject to averaging or umpiring provisions under the concentrate off-take contract with Xstrata Corporation detailed in a press release dated 3rd October 2007.
Qualified Person
The financial components of this disclosure has been reviewed by Leo O' Shaughnessy (Chief Financial Officer) and the production, exploration and permitting components by Roland Phelps (President & CEO), qualified persons under the meaning of NI. 43-101. The information is based upon local production and financial data prepared under their supervision.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including revenues and cost estimates, for the Omagh Gold project. Forward-looking statements are based on estimates and assumptions made by Galantas in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Galantas believes are appropriate in the circumstances. Many factors could cause Galantas' actual results, the performance or achievements to differ materially from those expressed or implied by the forward looking statements or strategy, including: gold price volatility; discrepancies between actual and estimated production, actual and estimated metallurgical recoveries and throughputs; mining operational risk, geological uncertainties; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign involvement; speculative nature of gold exploration; dilution; competition; loss of or availability of key employees; additional funding requirements; uncertainties regarding planning and other permitting issues; and defective title to mineral claims or property. These factors and others that could affect Galantas's forward-looking statements are discussed in greater detail in the section entitled "Risk Factors" in Galantas' Management Discussion & Analysis of the financial statements of Galantas and elsewhere in documents filed from time to time with the Canadian provincial securities regulators and other regulatory authorities. These factors should be considered carefully, and persons reviewing this press release should not place undue reliance on forward-looking statements. Galantas has no intention and undertakes no obligation to update or revise any forward-looking statements in this press release, except as required by law.
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Galantas Gold Corporation Issued and Outstanding Shares total 256,210,395.
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.
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Enquiries
Galantas Gold Corporation
Jack Gunter P.Eng - Chairman Investor Relations Consultant
Roland Phelps C.Eng - President & CEO Courtenay Heading (Maclir Consulting Ltd)
Email: [email protected] Email : [email protected]Website: www.galantas.com Telephone : (UK) +44 (0) 7624 424 455
Telephone: +44 (0) 2882 241100
Charles Stanley Securities (AIM Nomad & Broker)
Mark Taylor
Telephone +44 (0)20 7149 6000
| Galantas Gold Corporation | ||||||
| Condensed Interim Consolidated Statements of Financial Position | ||||||
| (Expressed in Canadian Dollars) | ||||||
| (Unaudited) | ||||||
| As at | As at | |||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash (note 5) | $ | 823,661 | $ | 1,164,868 | ||
| Accounts receivable and advances (note 6) | 425,053 | 673,054 | ||||
| Inventory (note 7) | 353,100 | 326,249 | ||||
| Total current assets | 1,601,814 | 2,164,171 | ||||
| Non-current assets | ||||||
| Property, plant and equipment (note 8) | 3,296,470 | 3,566,778 | ||||
| Long-term deposit (note 5) | 408,551 | 428,717 | ||||
| Deferred development and exploration costs (note 9) | 7,736,220 | 7,859,445 | ||||
| Total assets | $ | 13,043,055 | $ | 14,019,111 | ||
| EQUITY AND LIABILITIES | ||||||
| Current liabilities | ||||||
| Accounts payable and other liabilities (note 10) | $ | 1,604,251 | $ | 1,670,729 | ||
| Due to related parties (note 15) | 2,770,471 | 2,802,749 | ||||
| Total current liabilities | 4,374,722 | 4,473,478 | ||||
| Non-current liabilities | ||||||
| Asset retirement obligation (note 9) | 385,425 | 404,450 | ||||
| Total liabilities | 4,760,147 | 4,877,928 | ||||
| Capital and reserves | ||||||
| Share capital (note 12) | 29,874,693 | 29,874,693 | ||||
| Reserves | 5,022,475 | 5,440,196 | ||||
| Deficit | (26,614,260 | ) | (26,173,706 | ) | ||
| Total equity | 8,282,908 | 9,141,183 | ||||
| Total equity and liabilities | $ | 13,043,055 | $ | 14,019,111 |
The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
Going concern (note 1)
Contingent liability (note 17)
| Approved on behalf of the Board: | |||
| "Roland Phelps" | , Director | "Lionel J. Gunter" | , Director |
| Galantas Gold Corporation | ||||||
| Condensed Interim Consolidated Statements of Loss | ||||||
| (Expressed in Canadian Dollars) | ||||||
| (Unaudited) | ||||||
| Three Months | ||||||
| Ended | ||||||
| March 31, | ||||||
| 2013 | 2012 | |||||
| Revenues | ||||||
| Gold sales | $ | 364,676 | $ | 1,025,146 | ||
| Cost and expenses of operations | ||||||
| Cost of sales (note 14) | 397,588 | 1,020,507 | ||||
| Amortization and depreciation | 124,606 | 184,565 | ||||
| 522,194 | 1,205,072 | |||||
| Loss before the undernoted | (157,518 | ) | (179,926 | ) | ||
| General administrative expenses | ||||||
| Management and administration wages (note 15) | 125,648 | 152,231 | ||||
| Other operating expenses | 70,378 | 70,234 | ||||
| Accounting and corporate | 10,730 | 13,167 | ||||
| Legal and audit | 26,913 | 24,631 | ||||
| Stock-based compensation (note 12(d)) | 13,090 | 47,566 | ||||
| Shareholder communication and investor relations | 29,750 | 58,789 | ||||
| Transfer agent | 2,017 | 2,687 | ||||
| Director fees (note 15) | 5,000 | 7,350 | ||||
| General office | 2,113 | 2,447 | ||||
| Accretion expenses (note 11) | - | 45,529 | ||||
| Loan interest and bank charges | 11,420 | 29,325 | ||||
| 297,059 | 453,956 | |||||
| Other expense | ||||||
| Loss on disposal of property, plant and equipment | - | 1,506 | ||||
| Foreign exchange (gain) loss | (14,023 | ) | 8,001 | |||
| (14,023 | ) | 9,507 | ||||
| Net loss for the period | $ | (440,554 | ) | $ | (643,389 | ) |
| Basic net loss per share (note 13) | $ | (0.00 | ) | $ | (0.00 | ) |
| Weighted average number of common shares outstanding - basic | 256,210,395 | 235,650,055 | ||||
| Diluted net loss per share (note 13) | $ | (0.00 | ) | $ | (0.00 | ) |
| Weighted average number of common shares outstanding - diluted | 256,210,395 | 235,650,055 |
The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
| Galantas Gold Corporation | ||||||
| Condensed Interim Consolidated Statements of Comprehensive Loss | ||||||
| (Expressed in Canadian Dollars) | ||||||
| (Unaudited) | ||||||
| Three Months | ||||||
| Ended | ||||||
| March 31, | ||||||
| 2013 | 2012 | |||||
| Net loss for the period | $ | (440,554 | ) | $ | (643,389 | ) |
| Items that will not be reclassified subsequently to loss | ||||||
| Foreign currency translation differences | (430,811 | ) | 77,005 | |||
| Total comprehensive loss | $ | (871,365 | ) | $ | (566,384 | ) |
The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
| Galantas Gold Corporation | ||||||
| Condensed Interim Consolidated Statements of Cash Flows | ||||||
| (Expressed in Canadian Dollars) | ||||||
| (Unaudited) | ||||||
| Three Months | ||||||
| Ended | ||||||
| March 31, | ||||||
| 2013 | 2012 | |||||
| Operating activities | ||||||
| Net loss for the period | $ | (440,554 | ) | $ | (643,389 | ) |
| Adjustment for: | ||||||
| Amortization and depreciation | 124,606 | 184,565 | ||||
| Stock-based compensation (note 12(d)) | 13,090 | 47,566 | ||||
| Foreign exchange | 62,951 | 60,905 | ||||
| Loss on disposal of property, plant and equipment | - | 1,506 | ||||
| Accretion expenses (note 11) | - | 45,529 | ||||
| Non-cash working capital items: | ||||||
| Accounts receivable and advances | 248,001 | 159,269 | ||||
| Inventory | (26,851 | ) | (45,753 | ) | ||
| Accounts payable and other liabilities | (66,478 | ) | (3,125 | ) | ||
| Net cash used in operating activities | (85,235 | ) | (192,927 | ) | ||
| Investing activities | ||||||
| Purchase of property, plant and equipment | (160 | ) | (505,428 | ) | ||
| Proceeds from sale of property, plant and equipment | - | 32,100 | ||||
| Deferred development and exploration costs | (263,697 | ) | (631,353 | ) | ||
| Long-term deposit | - | (15,970 | ) | |||
| Net cash used in investing activities | (263,857 | ) | (1,120,651 | ) | ||
| Financing activities | ||||||
| Repayment of related party loan | (32,278 | ) | (94,392 | ) | ||
| Advances from related parties | - | 123,370 | ||||
| Net cash (used in) provided by financing activities | (32,278 | ) | 28,978 | |||
| Net change in cash | (381,370 | ) | (1,284,600 | ) | ||
| Effect of exchange rate changes on cash held in foreign currencies | 40,163 | (30,591 | ) | |||
| Cash, beginning of period | 1,164,868 | 4,240,081 | ||||
| Cash, end of period | $ | 823,661 | $ | 2,924,890 |
The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
| Galantas Gold Corporation | |||||||||||||||||||||
| Condensed Interim Consolidated Statements of Changes in Equity | |||||||||||||||||||||
| (Expressed in Canadian Dollars) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Reserves | |||||||||||||||||||||
| Equity settled | Foreign | Equity | |||||||||||||||||||
| share-based | currency | portion of | |||||||||||||||||||
| Share | payments | Warrant | translation | convertible | |||||||||||||||||
| capital | reserve | reserve | reserve | debenture | Deficit | Total | |||||||||||||||
| Balance, December 31, 2011 | $ | 27,808,316 | $ | 4,320,247 | $ | 976,414 | $ | (206,713 | ) | $ | 168,082 | $ | (25,571,040 | ) | $ | 7,495,306 | |||||
| Stock-based compensation (note 12(d)) | - | 47,566 | - | - | - | - | 47,566 | ||||||||||||||
| Net loss and comprehensive income for the period | - | - | - | 77,005 | - | (643,389 | ) | (566,384 | ) | ||||||||||||
| Balance, March 31, 2012 | $ | 27,808,316 | $ | 4,367,813 | $ | 976,414 | $ | (129,708 | ) | $ | 168,082 | $ | (26,214,429 | ) | $ | 6,976,488 | |||||
| Balance, December 31, 2012 | $ | 29,874,693 | $ | 4,477,699 | $ | 957,450 | $ | 5,047 | $ | - | $ | (26,173,706 | ) | $ | 9,141,183 | ||||||
| Stock-based compensation (note 12(d)) | - | 13,090 | - | - | - | - | 13,090 | ||||||||||||||
| Net loss and comprehensive loss for the period | - | - | - | (430,811 | ) | - | (440,554 | ) | (871,365 | ) | |||||||||||
| Balance, March 31, 2013 | $ | 29,874,693 | $ | 4,490,789 | $ | 957,450 | $ | (425,764 | ) | $ | - | $ | (26,614,260 | ) | $ | 8,282,908 |
The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.
| Galantas Gold Corporation |
| Notes to Condensed Interim Consolidated Financial Statements |
| Three Months Ended March 31, 2013 |
| (Expressed in Canadian Dollars) |
| (Unaudited) |
| 1. | Going Concern |
These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that Galantas Gold Corporation (the "Company") will be able to realize assets and discharge liabilities in the normal course of business. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. The Company's future viability depends on the consolidated results of the Company's wholly-owned subsidiary Cavanacaw Corporation ("Cavanacaw"), the ability of the Company to obtain future financing and to recover its investment in Omagh Minerals Limited ("Omagh"). Cavanacaw has a 100% shareholding in Omagh which is engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland.
As at December 31, 2001, studies performed on Omagh's mineral property confirmed the existence of economically recoverable reserves. As at July 1, 2007, the mineral property was in the production stage and the directors believe that the capitalized development expenditures will be fully recovered by the future operation of the mine. The recoverability of Omagh's capitalized development costs is thus dependent on the ability to secure financing, future profitable production or proceeds from the disposition of the mineral property. While the Company is expending its best efforts in this regard, the outcome of these matters can not be predicted at this time.
As at March 31, 2013, the Company had a deficit of $26,614,260 (December 31, 2012 - $26,173,706). Management is confident that it will be able to secure the required financing to enable the Company to continue as a going concern. However, this is subject to a number of factors including market conditions. These unaudited condensed interim consolidated financial statements do not reflect adjustments to the carrying values of assets and liabilities, the reported expenses and financial position classifications used that would be necessary if the going concern assumption was not appropriate. Such 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. Cavanacaw also has developed a premium jewellery business founded on the gold produced under the name Galántas Irish Gold Limited ("Galántas").
As at July 1, 2007, the Company's Omagh mine began production.
The Company's operations include the consolidated results of Cavanacaw and its wholly-owned subsidiaries Omagh and Galántas.
The Company's common shares are listed on the TSX Venture Exchange and London Stock Exchange AIM under the symbol GAL. The primary office is located at 36 Toronto Street, Suite 1000, Toronto, Ontario, Canada, M5C 2C5.
| 3. | Basis of Preparation |
Statement of compliance
The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IASB. These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements.
The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRSs issued and outstanding as of May 23, 2013, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim consolidated financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended December 31, 2012. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2013 could result in restatement of these unaudited condensed interim consolidated financial statements.
| 4. | Significant Accounting Policies |
Change in accounting policies
(i) IFRS 10 - Consolidated financial statements ("IFRS 10") was issued by the IASB in May 2011. IFRS 10 is a new standard which identifies the concept of control as the determining factor in assessing whether an entity should be included in the consolidated financial statements of the parent company. Control is comprised of three elements: power over an investee; exposure to variable returns from an investee; and the ability to use power to affect the reporting entity's returns. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
(ii) IFRS 11 - Joint arrangements ("IFRS 11") was issued by the IASB in May 2011. IFRS 11 is a new standard which focuses on classifying joint arrangements by their rights and obligations rather than their legal form. Entities are classified into two groups: parties having rights to the assets and obligations for the liabilities of an arrangement, and rights to the net assets of an arrangement. Entities in the former case account for assets, liabilities, revenues and expenses in accordance with the arrangement, whereas entities in the latter case account for the arrangement using the equity method. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
(iii) IFRS 12 - Disclosure of interests in other entities ("IFRS 12") was issued by the IASB in May 2011. IFRS 12 is a new standard which provides disclosure requirements for entities reporting interests in other entities, including joint arrangements, special purpose vehicles, and off balance sheet vehicles. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
(iv) IFRS 13 - Fair Value Measurement is effective for the Company beginning on January 1, 2013, provides the guidance on the measurement of fair value and related disclosures through a fair value hierarchy. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements given the existing asset and liability mix of the Company to which fair value accounting applies.
(v) IAS 1 - Presentation of financial statements ("IAS 1") was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with United States Generally Accepted Accounting Principles. Items in other comprehensive income will be required to be presented in two categories: items that will be reclassified into profit or loss and those that will not be reclassified. The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss and other comprehensive income remains unchanged. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
(vi) IAS 27 - Separate Financial Statements ("IAS 27") was effective for annual periods beginning on or after January 1, 2013, as a result of the issue of the new consolidation suite of standards, IAS 27 has been reissued, as the consolidation guidance will now be included in IFRS 10. IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
(vii) IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine ("IFRIC 20"). On 19 October 2011, the IASB issued IFRIC 20. The interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.
Recent accounting pronouncements
(i) IFRS 9 - Financial instruments ("IFRS 9") was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments: Recognition and Measurement ("IAS 39"). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. Earlier adoption is permitted. The Company is presently assessing the impact of this pronouncement.
(ii) IAS 32 - Financial instruments, Presentation ("IAS 32") was effective for annual periods beginning on or after January 1, 2014. IAS 32 was amended to clarify that the right of offset must be available on the current date and cannot be contingent on a future date. The Company is presently assessing the impact of this pronouncement.
| 5. | Cash Position |
| As at | As at | |||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| Cash | $ | 823,661 | $ | 1,164,868 | ||
| Long-term deposit | 408,551 | 428,717 | ||||
| Total cash position | $ | 1,232,212 | $ | 1,593,585 |
| 6. | Accounts Receivable and Advances |
| As at | As at | |||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| Sales tax receivable - Canada | $ | 6,797 | $ | 21,705 | ||
| Valued added tax receivable - Northern Ireland | 94,332 | 147,987 | ||||
| Accounts receivable | 113,634 | 258,504 | ||||
| Prepaid expenses | 210,290 | 244,858 | ||||
| $ | 425,053 | $ | 673,054 |
| 7. | Inventory |
| As at | As at | |||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| Concentrate inventory | $ | 52,759 | $ | 10,246 | ||
| Finished goods | 300,341 | 316,003 | ||||
| $ | 353,100 | $ | 326,249 |
| 8. | Property, Plant and Equipment |
| March 31, 2013 | |||||||||
| Accumulated | |||||||||
| Cost | amortization | Net | |||||||
| Freehold land and buildings | $ | 2,579,451 | $ | 1,184,818 | $ | 1,394,633 | |||
| Plant and machinery | 5,716,162 | 3,896,555 | 1,819,607 | ||||||
| Motor vehicles | 80,212 | 53,391 | 26,821 | ||||||
| Office equipment | 100,599 | 45,190 | 55,409 | ||||||
| Moulds | 56,076 | 56,076 | - | ||||||
| $ | 8,532,500 | $ | 5,236,030 | $ | 3,296,470 |
| December 31, 2012 | |||||||||
| Accumulated | |||||||||
| Cost | amortization | Net | |||||||
| Freehold land and buildings | $ | 2,706,776 | $ | 1,240,146 | $ | 1,466,630 | |||
| Plant and machinery | 5,996,937 | 3,987,043 | 2,009,894 | ||||||
| Motor vehicles | 84,171 | 54,149 | 30,022 | ||||||
| Office equipment | 105,396 | 45,164 | 60,232 | ||||||
| Moulds | 58,844 | 58,844 | - | ||||||
| $ | 8,952,124 | $ | 5,385,346 | $ | 3,566,778 |
| 9. | Deferred Development and Exploration Costs |
| March 31, 2013 | |||||||||
| Accumulated | |||||||||
| Cost | amortization | Net | |||||||
| Deferred development and exploration costs | $ | 13,442,472 | $ | 5,706,252 | $ | 7,736,220 |
| December 31, 2012 | |||||||||
| Accumulated | |||||||||
| Cost | amortization | Net | |||||||
| Deferred development and exploration costs | $ | 13,825,983 | $ | 5,966,538 | $ | 7,859,445 |
As at March 31, 2013, the Company has recorded an asset retirement obligation in the amount to $385,425 (GBP 250,000) (December 31, 2012 - $404,450 (GBP 250,000)). This is the amount of the bond that is required by the Crown in Northern Ireland. The Company has paid a deposit against this obligation.
| 10. | Accounts Payable and Other Liabilities |
| As at | As at | |||||
| March 31, | December 31, | |||||
| 2013 | 2012 | |||||
| Falling due within the year | ||||||
| Trade payables | $ | 1,604,251 | $ | 1,670,729 |
| 11. | Convertible Debenture |
| Equity | ||||||
| portion of | ||||||
| Convertible | convertible | |||||
| debenture | debenture | |||||
| Balance, December 31, 2011 | $ | 1,979,603 | $ | 168,082 | ||
| Accretion charges - effective interest rate | 45,529 | - | ||||
| Accretion charges - financing charges | 2,538 | - | ||||
| Interest expenses | 12,725 | - | ||||
| Foreign exchange | 21,481 | - | ||||
| Balance, March 31, 2012 | $ | 2,061,876 | $ | 168,082 | ||
| Balance, December 31, 2012 and March 31, 2013 | $ | - | $ | - |
| 12. | Share Capital and Reserves |
| a) | Authorized share capital |
At March 31, 2013, the authorized share capital consisted of 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.
| b) | Common shares issued |
At March 31, 2013, the issued share capital amounted to $29,874,693. The change in issued share capital for the periods presented:
| Number of | ||||||
| common | ||||||
| shares | Amount | |||||
| Balance, December 31, 2011 and March 31, 2012 | 235,650,055 | $ | 27,808,316 | |||
| Balance, December 31, 2012 and March 31, 2013 | 256,210,395 | $ | 29,874,693 |
| c) | Warrant reserve |
The following table shows the continuity of warrants for the periods presented:
| Weighted | ||||||
| average | ||||||
| Number of | exercise | |||||
| warrants | price | |||||
| Balance, December 31, 2011 and March 31, 2012 | 45,550,000 | $ | 0.10 | |||
| Balance, December 31, 2012 and March 31, 2013 | 24,550,000 | $ | 0.10 |
| c) | Warrant reserve (continued) |
As at March 31, 2013, the following warrants were outstanding:
| Number | Fair | Exercise | |||||||
| Expiry date | of warrants | value ($) | price ($) | ||||||
| July 22, 2013 | 24,550,000 | 957,450 | 0.10 |
| (d) | Stock options |
The following table shows the continuity of stock options for the periods presented:
| Weighted | ||||||
| average | ||||||
| Number of | exercise | |||||
| options | price | |||||
| Balance, December 31, 2011 and March 31, 2012 | 15,750,000 | $ | 0.12 | |||
| Balance, December 31, 2012 and March 31, 2013 | 9,950,000 | $ | 0.10 |
Stock-based compensation includes $13,090 (three months ended March 31, 2012 - $47,566) relating to stock options granted in previous years that vested during the three months ended March 31, 2013.
The following table reflects the actual stock options issued and outstanding as of March 31, 2013:
| Weighted average | Number of | ||||||||||||||
| remaining | Number of | options | Number of | ||||||||||||
| Exercise | contractual | options | vested | options | |||||||||||
| Expiry date | price ($) | life (years) | outstanding | (exercisable) | unvested | ||||||||||
| April 5, 2013 | 0.10 | 0.01 | 500,000 | 500,000 | - | ||||||||||
| October 2, 2013 | 0.10 | 0.51 | 1,500,000 | 1,500,000 | - | ||||||||||
| November 23, 2015 | 0.10 | 2.65 | 3,500,000 | 3,500,000 | - | ||||||||||
| January 28, 2016 | 0.10 | 2.83 | 250,000 | 250,000 | - | ||||||||||
| September 6, 2016 | 0.10 | 3.44 | 4,200,000 | 2,800,000 | 1,400,000 | ||||||||||
| 0.10 | 2.53 | 9,950,000 | 8,550,000 | 1,400,000 |
| 13. | Net loss per Common Share |
The calculation of basic and diluted loss per share for the three months ended March 31, 2013 and 2012 was based on the loss attributable to common shareholders of $440,554 (three months ended March 31, 2012 - $643,389) and the weighted average number of common shares outstanding of 256,210,395 (March 31, 2012 - 235,650,055) for basic loss per share and 256,210,395 (March 31, 2012 - 235,650,055) for diluted loss per share. Diluted loss did not include the effect of warrants and options for the three months ended March 31, 2013 and 2012, as they are anti-dilutive.
| 14. | Cost of Sales |
| Three Months Ended | ||||||
| March 31, | ||||||
| 2013 | 2012 | |||||
| Production wages | $ | 151,586 | $ | 360,898 | ||
| Oil and fuel | 173,845 | 369,324 | ||||
| Repairs and servicing | 45,675 | 137,653 | ||||
| Equipment hire | 15,032 | 89,643 | ||||
| Consumable | 32,098 | 51,511 | ||||
| Royalties | 8,509 | 21,235 | ||||
| Carriage | 6,058 | 11,168 | ||||
| Other costs | (8,364 | ) | 23,324 | |||
| Production costs | 424,439 | 1,064,756 | ||||
| Inventory movement | (26,851 | ) | (44,249 | ) | ||
| Cost of sales | $ | 397,588 | $ | 1,020,507 |
| 15. | Related Party Balances and Transactions |
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.
Related parties include the Board of Directors, close family members 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 value (the amount established and agreed to by the related parties).
| (a) | The Company entered into the following transactions with related parties: |
| Three Months Ended | |||||||||
| March 31, | |||||||||
| Notes | 2013 | 2012 | |||||||
| Interests on related party loans | (i) | $ | 9,788 | $ | 10,330 |
(i) G&F Phelps Limited ("G&F Phelps"), a company controlled by a director of the Company, had amalgamated loans to Galantas of $1,582,635 (GBP 1,026,552) (December 31, 2012 - $1,660,756 - GBP 1,026,552) bearing interest at 2% above UK base rates, repayable on demand and secured by a mortgage debenture on all the Company's assets. Interest accrued on related party loans is included with due to related parties. As at March 31, 2013, the amount of interest accrued is $91,625 (GBP 59,431) (December 31, 2012 - $86,023 - GBP 53,173).
| (b) | Remuneration of Directors and key management of the Company was as follows: |
| Three Months Ended | ||||||
| March 31, | ||||||
| 2013 | 2012 | |||||
| Salaries and benefits (1) | $ | 99,505 | $ 94,820 | |||
| Stock-based compensation | 7,705 | 25,781 | ||||
| $ | 107,210 | $ | 120,601 |
(1) Salaries and benefits include director fees. As at March 31, 2013, due to directors for fees amounted to $5,000 (December 31, 2012 - $nil) and due to directors and key management, mainly for salaries and benefits accrued amounted to $1,091,211 (GBP 707,797) (December 31, 2012 - $1,055,970 - GBP 652,720), and is included with due to related parties.
| 16. | Segment Disclosure |
The Company, after reviewing its reporting systems, 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 Galántas. 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 follow:
| March 31, 2013 | United Kingdom | Canada | Total | ||||||
| Current assets | $ | 1,077,271 | $ | 524,543 | $ | 1,601,814 | |||
| Non-current assets | 11,379,441 | 61,800 | 11,441,241 | ||||||
| Revenues | $ | 364,676 | $ | - | $ | 364,676 |
| 17. | Contingent Liability |
During the year ended December 31, 2010, the Company's subsidiary Omagh received a payment demand from Her Majesty's Revenue and Customs in the amount of $513,619 (GBP 333,151) in connection with an aggregate levy arising from the removal of waste rock from the mine site during 2008 and early 2009. The Company believes this claim is without merit. An appeal has been lodged and the Company's subsidiary Omagh intends to vigorously defend itself against this claim. No provision has been made for the claim in the unaudited condensed interim consolidated financial statements.
| 18. | Subsequent Event |
On April 5, 2013, 500,000 options with an exercise price of $0.10 expired unexercised.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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