Galantas Gold Regulatory News (GAL)

GALANTAS GOLD CORPORATION

TSXV & AIM: Symbol GAL

GALANTAS REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND DATE FOR ANNUAL GENERAL AND SPECIAL MEETING

November 25 2020: Galantas Gold Corporation (the 'Company') is pleased to announce its financial results for the Three and Nine months ended September 30, 2020.

Financial Highlights

Highlights of the 2020 third quarter and first nine month's results, which are expressed in Canadian Dollars, are summarized below:

The Net Loss for the three months ended September 30, 2020 amounted to CDN$ 776,956 (2019 Q3: CDN$ 718,046) and the cash loss from operating activities before changes in non-cash working capital for the third quarter of 2020 amounted to CDN$ 359,304 (2019 Q3: CDN$ 514,132). The Net Loss for the nine months ended September 30, 2020 amounted to CDN $ 2,249,412 (2019: CDN$ 2,389,426) and the cash loss from operating activities before changes in non-cash working capital for the first nine months of 2020 amounted to CDN$ 1,002,785 (2019: CDN$ 1,578,613).

The Company had cash balances of $ 638,433 at September 30, 2020 compared to $ 1,356,147 at September 30, 2019. The working capital deficit at September 30, 2020 amounted to $ 7,936,041 compared to a working capital deficit of $ 5,108,181 at September 30, 2019.

Shipments of concentrate under the off-take arrangements commenced during the second quarter of 2019. Provisional revenues from concentrate sales during the three and nine months ended September 30, 2020 totaled approximately US$ 690,000 and US$ 876,000 respectively. However, until the mine reaches the commencement of commercial production, the net proceeds from concentrate sales will be offset against Development assets.

During the third quarter of 2020 and following the receipt of TSXV and regulatory approvals Galantas reported the closure of a fully subscribed brokered private placement of common shares and amendments to the terms of its loan facility with Ocean Partners UK Ltd. The private placement included funds raised in both UK and Canadian currency for the issue of 2,833,132 shares, at an issue price of $ 0.225 (UK£ 0.1328) per share for gross proceeds of $ 637,454 (UK£ 376,240). The Company also amended the terms of its loan facility with Ocean Partners UK Ltd following an increase in the outstanding loan facility in July 2020. The amount of the loan facility increased by US$ 200,000 to a total of US$1.8 million. The interest rate applicable on the loan facility increased from US$ 12 month LIBOR + 8.75% to US$ 12 month LIBOR + 9.9% and the maturity date was extended from December 30, 2020 to December 31, 2021. Interest may be rolled into the loan facility until December 31, 2020, at the Company's option. Drawdown of the loan increase took place on November 12, 2020.The existing second charge debenture over mine assets will remain in place. Galantas had entered into the loan facility through a concentrate pre-payment agreement/loan agreement signed by its subsidiary Flintridge and the Lender in April 2018. The proceeds raised by both the private placement and the additional Ocean Partners loan are to be used to support mine operations and provide general working capital for the Company.

Production/Mine Development

Certain underground work continued during the first nine months of 2020, but ore production is suspended until finance is available to expand the underground operation. The processing plant continued to operate on a limited basis with feedstock for the plant being from low grade stock. In the fourth quarter of 2019 there was a temporary suspension of blasting operations at the mine due mainly to the blasting arrangement limitations imposed by the PSNI, which were not sufficient to allow for the expansion of mine operations. The Company has been working with the PSNI on an ongoing basis to agree arrangements that would increase blasting availability to normal levels for an underground mine. During the second quarter the Company reported that confirmation had been received from PSNI, regarding their satisfaction of certain secure storage and handling protocols required for an increase in blasting to a commercial level subject to financial matters being agreed. The Company understands that these financial matters have now been mutually agreed. Specialist safety training of key personnel continues to ensure a restart is not impaired in regard to safety matters.

The processing plant continued to operate on a limited basis, following the suspension of blasting operations, initially being fed from underground stock. In March 2020 and following UK government guidelines regarding Covid-19, processing operations temporarily ceased until later in May when the Company announced that concentrate processing had recommenced. The company carried out maintenance to the processing plant during the milling suspension, to minimise future maintenance interruptions. The restart followed a review of Northern Ireland / UK government health advice regarding Covid-19, a risk assessment and the introduction of appropriate modifications to working practices. Feedstock for the processing plant is now from low grade stock until suitable arrangements are in place to recommence development underground. Concentrate production during the three and nine months ended September 30,2020 totalled 96 tonnes and 186 tonnes of concentrate provisionally assessed as grading 90 grams per tonne (g/t) and 90 g/t respectively. Shipments of concentrate had commenced during the second quarter of 2019 and until the mine reaches the commencement of commercial production, the net proceeds from concentrate sales will be offset against Development assets.

The Company is seeking strategic alternatives including reviewing its licenses and operations and considering the possibility of engaging in a sale, joint venture, partnership or other options with third parties and alternative financing structures. The Company is actively engaged in that process.

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.

Click on, or paste the following link into your web browser, to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/3886G_1-2020-11-24.pdf

Annual General Meeting

The Annual and Special Meeting of shareholders of Galantas Gold Corporation will be held on Wednesday, December 16, 2020 at 11:00 a.m. (Toronto time). Due to Covid restrictions, it will be held via teleconference. Meeting materials, including proxies and access arrangements are being mailed to shareholders.

Qualified Person

The financial components of this disclosure has been reviewed by Alan Buckley (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.

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.

Enquiries

Galantas Gold Corporation Roland Phelps C.Eng - President & CEOEmail: info@galantas.comWebsite: www.galantas.comTelephone: +44 (0) 2882 241100

Grant Thornton UK LLP (Nomad)

Philip Secrett, Harrison Clarke:

Telephone: +44(0)20 7383 5100

Panmure Gordon & Co (AIM Broker & Corporate Adviser) 

Nick Lovering, Hugh Rich:

Telephone: +44(0)20 7659 1234 

NOTICE TO READER

The accompanying unaudited condensed interim consolidated financial statements of Galantas Gold Corporation (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

Going concern (note 1)

Contingency (note 17)

Event after the reporting period (note 18)

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

(i) Adjusted for 10:1 share consolidation effective April 17, 2020 (note 13).

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)

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)

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)

The notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

1. Going Concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that Galantas Gold Corporation (the "Company") will be able to realize assets and discharge liabilities in the normal course of business. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of uncertainties related to events or conditions that may cast doubt on the Company's ability to continue as a going concern. The Company's future viability depends on the consolidated results of the Company's wholly-owned subsidiary Cavanacaw Corporation ("Cavanacaw"). Cavanacaw has a 100% shareholding in both Flintridge Resources Limited ("Flintridge") who are engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland and Omagh Minerals Limited ("Omagh") who are engaged in the exploration of gold properties, mainly in the Republic of Ireland. The Omagh mine has an open pit mine, which was in production until 2013 when production was suspended and is reported as property, plant and equipment and as an underground mine which having established technical feasibility and commercial viability in December 2018 has resulted in associated exploration and evaluation assets being reclassified as an intangible development asset and reported as property, plant and equipment.

The going concern assumption is dependent upon forecast cash flows being met, further financing currently being negotiated being completed and blasting arrangement with the Police Service of Northern Ireland ("PSNI") being resolved. The directors assumptions in relation to future 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.

Negotiations with current finance providers to extend short-term loans are progressing satisfactory. The Company is also in advanced negotiations with potential new investors to meet the financial requirements of the Company for the foreseeable future. Based on the five-year period financial projections prepared, the directors believe it's appropriate to prepare the unaudited condensed interim consolidated financial statements on the going concern basis.

On April 17, 2020, the Company completed a share consolidation of its share capital on the basis of ten existing common shares for one new common share consolidation. All common shares, per common share amounts, stock options and warrants in these unaudited condensed interim consolidated financial statements have been retroactively restated to reflect the share consolidation.

As at September 30, 2020, the Company had a deficit of $47,566,760 (December 31, 2019 - $45,317,348). Comprehensive loss for the nine months ended September 30, 2020 was $2,440,216 (nine months ended September 30, 2019 - $3,242,092). These losses raise material uncertainties which may cast significant doubt as to whether the Company will be able to continue as a going concern. Management is confident that it will continue as a going concern. However, this is subject to a number of factors including market conditions.

These unaudited condensed interim consolidated financial statements do not reflect adjustments to the carrying values of assets and liabilities, the reported expenses and financial position classifications used that would be necessary if the going concern assumption was not appropriate. These adjustments could be material.

2. Incorporation and Nature of Operations

The Company was formed on September 20, 1996 under the name Montemor Resources Inc. on the amalgamation of 1169479 Ontario Inc. and Consolidated Deer Creek Resources Limited. The name was changed to European Gold Resources Inc. by articles of amendment dated July 25, 1997. On May 5, 2004, the Company changed its name from European Gold Resources Inc. to Galantas Gold Corporation. The Company was incorporated to explore for and develop mineral resource properties, principally in Europe. In 1997, it purchased all of the shares of Omagh which owns a mineral property in Northern Ireland, including a delineated gold deposit. Omagh obtained full planning and environmental consents necessary to bring its property into production.

The Company entered into an agreement on April 17, 2000, approved by shareholders on June 26, 2000, whereby Cavanacaw, a private Ontario corporation, acquired Omagh. Cavanacaw has established an open pit mine to extract the Company's gold deposit near Omagh, Northern Ireland. Cavanacaw also has developed a premium jewellery business founded on the gold produced under the name Galántas Irish Gold Limited ("Galántas"). As at July 1, 2007, the Company's Omagh mine began production and in 2013 production was suspended. On April 1, 2014, Galántas amalgamated its jewelry business with Omagh.

On April 8, 2014, Cavanacaw acquired Flintridge. Following a strategic review of its business by the Company during 2014 certain assets owned by Omagh were acquired by Flintridge.

The Company's operations include the consolidated results of Cavanacaw, and its wholly-owned subsidiaries Omagh, Galántas and Flintridge.

The Company's common shares are listed on the TSX Venture Exchange ("TSXV") and London Stock Exchange AIM under the symbol GAL. The primary office is located at The Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

In March 2020, the World Health Organization declared coronavirus (COVID-19) a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds.

3. Basis of Preparation

Statement of compliance

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements.

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRS issued and outstanding as of November 23, 2020 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, 2019, except as noted below. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2020 could result in restatement of these unaudited condensed interim consolidated financial statements.

New accounting standards adopted

IFRS 3, Business Combinations ("IFRS 3")

Amendments to IFRS 3, issued in October 2018, provide clarification on the definition of a business. The amendments permit a simplified assessment to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

The amendments are effective for transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020. The adoption of the amendments had no impact on the Company's unaudited condensed interim consolidated financial statements.

IAS 1, Presentation of Financial Statements ("IAS 1")

Amendments to IAS 1, issued in October 2018, provide clarification on the definition of material and how it should be applied. The amendments also align the definition of material across IFRS and other publications.

The amendments are effective for annual periods beginning on or after January 1, 2020 and are required to be applied prospectively. The adoption of the amendments had no impact on the Company's unaudited condensed interim consolidated financial statements.

IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors ("IAS 8")

Amendments to IAS 8, issued in October 2018, provide clarification on the definition of material and how it should be applied. The amendments also align the definition of material across IFRS and other publications.

The amendments are effective for annual periods beginning on or after January 1, 2020 and are required to be applied prospectively. The adoption of the amendments had no impact on the Company's unaudited condensed interim consolidated financial statements.

4. Accounts Receivable and Prepaid Expenses

Prepaid expenses includes advances for consumables and for construction of the passing bays in the Omagh mine.

The following is an aged analysis of receivables:

5. Inventories

6. Property, Plant and Equipment

(i) Development assets are expenditures for the underground mining operations in Omagh. The Company had announced in December 2016 that it would commence the first phase of underground development and re-start concentrate shipments at its Omagh mine. Underground development of a decline tunnel, located at the base of the existing open pit, commenced in the first quarter 2017. During 2018 the mine commenced limited production of gold concentrate from feed produced in the development of the Kearney vein and in the fourth quarter Galantas reported that delivery of the first consignment of concentrate derived from underground feedstock at the mine had been made. Underground development of the decline tunnel continued to be progressed during 2019 with further crosscuts allowing access to lower levels of vein development which forms the development necessary to demarcate production panels. By the end of the third quarter of 2019 some two kilometres of underground drivages had been developed, with exposure of the main Kearney vein on four levels with a fifth level is near the point of intersection. The mine is serviced by a decline tunnel of 1 in 6 gradients, of dimensions approximately 4.5m by 4.5m. However, during the fourth quarter Galantas announced a temporary suspension of blasting operations at its Omagh gold mine. Blasting operations had been limited, since all blasting must be supervised by the PSNI. The blasting arrangements were not sufficient for the desired level of operations and were not sufficient to allow for the expansion of mine operations as envisaged by the Company's existing mine plan. Until changes were agreed, the present inefficiencies caused by these blasting arrangements form an increasing financial burden, which has proved a significant drain on the financial resources of the Company. Accordingly, in order to reduce costs, while some mine operations will continue at the Omagh gold mine, consultation with the workforce has resulted in the numbers employed at the operation being reduced from 46 to 21. During the nine months ended September 30, 2020, Galantas reported that confirmation had been received from PSNI, in regard to their satisfaction of certain secure storage and handling protocols required for an increase in blasting to a commercial level subject to financial matters being agreed. The Company understands that these financial matters have now been mutually agreed. Ore production is suspended until finance is available to expand the underground operation. The processing plant continues to operate on a limited basis with feedstock for the plant being from low grade stock.

On October 6, 2020, the Company announced that active discussions continue with a number of potential partners regarding funding to provide the investment required for additional mine development and exploration. On-site inspections have been restricted by Covid-19 related matters. On November 9, 2020, the Company announced that an increase in gold concentrate processing has been achieved at the Company's Omagh mine.

7. Exploration and Evaluation Assets

8. Decommissioning Liability

The Company's decommissioning liability is a result of mining activities at the Omagh mine in Northern Ireland. The Company estimated its decommissioning liability at September 30, 2020 based on a risk-free discount rate of 1% (December 31, 2019 - 1%) and an inflation rate of 1.50% (December 31, 2019 - 1.50%). The expected undiscounted future obligations allowing for inflation are GBP 330,000 and based on management's best estimate the decommissioning is expected to occur over the next 5 to 10 years. On September 30, 2020, the estimated fair value of the liability is $589,295 (December 31, 2019 - $580,303). Changes in the provision during the nine months ended September 30, 2020 are as follows:

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, 2019 - GBP 300,000), of which GBP 300,000 was funded as of September 30, 2020 (GBP 300,000 was funded as of December 31, 2019) and reported as long-term deposit of $515,970 (December 31, 2019 - $515,220).

9. Accounts Payable and Other Liabilities

Accounts payable and other liabilities of the Company are principally comprised of amounts outstanding for purchases relating to exploration costs on exploration and evaluation assets, general operating activities and professional fees activities.

The following is an aged analysis of the accounts payable and other liabilities:

10.  Financing Facilities

Amounts payable on the Company's long-term debts are as follow:

(i) In June 2015, the Company obtained financing in the amount of GBP 19,900 for the purchase of a vehicle. The financing is for three years at interest of 6.79% per annum with monthly principal and interest payments of GBP 377 together with a final payment in August 2019 of GBP 9,540. The financing was secured on the vehicle.

(ii) In April 2018, the Company signed a concentrate pre-payment agreement and loan facility for US$1.6 million with a United Kingdom based company (the "Lender"), with a maturity date of December 31, 2020. The interest is set at US$ 12 month LIBOR + 8.75% and payable monthly. No interest shall be charged for 6 months and repayments shall commence against deliveries in 2019. There was a US$25,000 arrangement fee.

In respect of the loan facility, a fixed and floating security, subordinated to an existing security to G&F Phelps Ltd. ("G&F Phelps"), is being put in place over Flintridge assets. G&F Phelps has a first charge on Flintridge assets in respect of its loan facility and the Lender required an intercreditor agreement between G&F Phelps and the Lender.

As consideration for the loan facility, the United Kingdom based company received 1,500,000 bonus warrants of the Company. Each bonus warrant is exercisable into one common share of the Company and is subject to an initial four months plus one day hold period from the date of issuance of the bonus warrants. The bonus warrants have a maximum life of two years (the "Expiry Time"). On April 19, 2018, the 1,500,000 bonus warrants were granted. In the event that the weighted average closing price per common share of the Company is more than $2.00 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Time to a date that is 30 days from the date on which the Company announces the accelerated Expiry Time by press release.

The fair value of the 1,500,000 bonus warrants was estimated at $786,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 113.55%, risk-free interest rate - 1.91% and an expected average life of 2 years.

On July 9, 2020, the Company amended the terms of its loan facility of an increase in the outstanding loan facility. The amount of the loan facility increased by US$200,000 to a total of US$1.8 million. As at September 30, 2020, the additional US$200,000 loan facility has not yet been drawn down by the Company. The interest rate applicable on the loan facility increased from US$ 12 month LIBOR + 8.75% to US$ 12 month LIBOR + 9.9% and the maturity date was extended from December 30, 2020 to December 31, 2021. Interest may be rolled into the loan facility until December 31, 2020, at the Company's option.

As consideration for amending the terms of the loan facility, the Lender received on August 14, 2020, 1,700,000 bonus warrants of Galantas ("Bonus Warrants"). Each Bonus Warrant will be exercisable for one common share of Galantas (a "Bonus Share") at an exercise price of $0.33 per Bonus Share. The Bonus Warrants will expire on December 31, 2021 (the "Expiry Date") and the Bonus Shares will be subject to an initial four month plus one day hold period from the date of their issuance. In the event that the weighted average closing price per common share of the Company is more than $0.4125 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Date to a date that is 30 days from the date on which the Company announces the accelerated Expiry Date by press release.

The fair value of the 1,700,000 bonus warrants was estimated at $340,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 165.75%, risk-free interest rate - 0.27% and an expected average life of 1.38 years.

During the three and nine months ended September 30, 2020, the Company recorded accretion expense of $152,293 and $227,035, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2019 - $248,238).

During the three and nine months ended September 30, 2020, the Company recorded interest expense of $93,257 and $151,252, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2019 - $279,151).

11.  Convertible Debenture

On December 17, 2019, the Company closed a $1,731,190 (GBP 1,000,000) convertible debenture. The convertible debenture is unsecured, is for a term of one year commencing on the date that it is issued, carries a coupon of 15% per annum and is convertible into common shares of the Company. The conversion price is a 25% discount to the closing price of the common shares of the Company on the day prior to announcement.

The convertible debenture has been fully subscribed by Melquart Limited ("Melquart"), an insider and control person of the Company (as defined by the TSXV). Melquart are under no obligation to convert the convertible debenture and should Melquart choose not to convert, the Company will need to raise further funds to repay the convertible debenture within 12 months. As at December 31, 2019, Melquart held 7,756,572 common shares equivalent to 24% of the Company. As September 30, 2020, Melquart held 9,262,565 common shares equivalent to 26.35% of the Company (refer to note 15(c)).

The share issued pursuant to the convertible debenture will rank pari passu with the existing common shares issued by the Company.

Commission payable to Whitman Howard Ltd. for acting as the broker in relation to the convertible debenture offering total $86,308 (GBP 50,000).

The debentures consist of the liability component and equity component. The fair value of the liability was recorded at $1,467,110, discounted at an effective interest rate of 18%. The residual value of the debentures is allocated to the conversion feature. The value of the conversion feature was $264,080. The Company incurred transaction costs of $104,903 which was allocated pro-rata on the value of the conversion feature and the liability component.

During the three and nine months ended September 30, 2020, the Company recorded accretion expense of $65,454 and $194,937, respectively (year ended December 31, 2019 - $12,425) and interest expense of $96,393 and $246,435, respectively (year ended December 31, 2019 - $9,960) as loan interest and bank charges less deposit interest in the unaudited condensed interim consolidated statement of loss. 

12.  Share Capital and Reserves

a) Authorized share capital

At September 30, 2020, the authorized share capital consisted of an unlimited number of common and preference shares issuable in Series.

On April 17, 2020, the Company completed a share consolidation of its share capital on the basis of ten then existing common shares for one new common share consolidation. All common shares, per common share amounts, stock options and warrants in these unaudited condensed interim consolidated financial statements have been retroactively restated to reflect the share consolidation.

The common shares do not have a par value. All issued shares are fully paid.

No preference shares have been issued. The preference shares do not have a par value.

b)  Common shares issued

At September 30, 2020, the issued share capital amounted to $50,706,384. The change in issued share capital for the periods presented is as follows:

(i) On August 21, 2019, the Company closed a private placement of 2,352,941 common shares for gross proceeds of GBP 1,000,000 ($1,600,000) at an issue price of GBP 0.425 (CAD$0.68) per share. 

Miton subscribed for a total of 376,471 common shares and Miton's staked increased to 16.63% of the Company's issued common shares.

Melquart subscribed for a total of 1,534,117 common shares and Melquart's staked increased to 24.00% of the Company's issued common shares.

(ii) On July 17, 2020, the Company completed a private placement for 2,833,132 common shares at an issue price of $0.225 (UK£0.1328) per share for gross proceeds of $637,454 (GBP 376,240). The net proceeds to be raised by the private placement are intended to be used to support mine operations and provide general working capital of the Company.

The private placement included a subscription by LF Miton UK Smaller Companies Fund, which has subscribed for 527,108 common shares in the private placement and is managed by Premier Fund Managers Ltd ("Premier Miton"). Post-closing, this fund holds 3,222,330 shares, equivalent to 9.17% of the Company's common shares. The total number of shares controlled by Premier Miton post completion of the private Placement is 4,884,243, representing 13.89% of the Company's enlarged issued and outstanding common shares.

The private placement also included a subscription from Melquart, for 1,506,024 common shares, which gives rise to an enlarged holding of 9,262,595 common shares post completion of the private placement, or 26.35% of the Company's enlarged issued and outstanding common shares.

A four month hold period will apply to the common shares of the private placement. The hold period will expire on November 18, 2020. The shares issued pursuant to the private placement will rank pari passu with the existing common shares in issue of the Company.

Commission payable to brokers in Canada and the United Kingdom in relation to the private placement totals $33,673 (GBP 19,874).

c)  Warrant reserve

The following table shows the continuity of warrants for the periods presented: