Last checked at 27 Aug 2009 15:00
GALANTAS GOLD CORPORATION
TORONTO VENTURE EXCHANGE / LONDON STOCK EXCHANGE - AIM
Symbol : GAL
GALANTAS CASH POSITIVE IN SECOND QUARTER 2009
27 August 2009
Galantas Gold Corporation ("Galantas" or the "Company"), which has a 100% interest in an operating, open-pit, gold mine near Omagh, Northern Ireland, today announced its unaudited financial results for the second quarter, ending June 30th 2009. Highlights of the results are tabulated below. They should be read in conjunction with the full Unaudited Accounts, including notes and the corresponding Management Discussion and Analysis available on www.sedar.com and www.galantas.com.
| HIGHLIGHTS CDN$ | Second Quarter 2009 | Year to Date 2009 | Second Quarter 2008 | Year to Date 2008 |
| Sales | $ 1,648,243 | $ 2,791,247 | $ 650,565 | $1,272,352 |
| Mine Cost of Sales excluding Financing charges etc | $ 1,149,926 | $ 2,118,111 | $ 693,104 | $ 1,709,463 |
| Financing, interest & other cash costs | $ 134,198 | $ 169,231 | $ 94,732 | $ 297,898 |
| Profit/(Loss) before amortization, foreign exchange and non-cash costs | $ 364,119 | $ 503,905 | ($ 137,271) | ($ 735,009) |
| Amortization, depreciation, foreign exchange and non cash costs | $ 598,444 | $ 1,028,243 | $ 575,002 | $ 1,123,183 |
| Net Profit/(Loss) | ($ 234,325) | ($ 524,338) | ($ 712,273) | ($ 1,858,192) |
As noted in a Trading Update of 6th July 2009, production in the second quarter increased to approximately 1977 troy ounces of gold, 5972 troy ozs of silver and 90.4 tonnes of lead. 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.
This release has been reviewed by Leo O'Shaughnessy, Chief Financial Officer of the Company and a Qualified Person, from information prepared under his direction.
Galantas Gold Corporation Issued and Outstanding Shares total 190,100,055.
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 Jack Gunter P.Eng - ChairmanRoland Phelps C.Eng - President & CEOEmail: info@galantas.comWebsite: www.galantas.com Telephone: +44 (0) 2882 241100
Blomfield Corporate Finance Ltd Nick HarrissTelephone: +44 (0) 207 489 4500
Lewis Charles Securities Limited. Kealan Doyle & Nicholas NicolaidesTelephone: +44 (0) 207 456 9100
Interim Consolidated Financial Statements
(Expressed in Canadian Dollars)
(Unaudited)
For the Three and Six Months Ended June 30, 2009
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying unaudited interim consolidated financial statements of Galantas Gold Corporation were prepared by management in accordance with Canadian generally accepted accounting principles. The most significant of these accounting principles have been set out in the December 31, 2008 audited consolidated financial statements. Only changes in accounting policies have been disclosed in these unaudited interim consolidated financial statements. Management acknowledges responsibility for the preparation and presentation of the unaudited interim consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company's circumstances.
Management has established processes, which are in place to provide them sufficient knowledge to support management representations that they have exercised reasonable diligence that (i) the unaudited interim consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the unaudited interim consolidated financial statements and (ii) the unaudited interim consolidated financial statements fairly present in all material respects the financial condition, results of operations and cash flows of the Company, as of the date of and for the periods presented by the unaudited interim consolidated financial statements.
The Board of Directors is responsible for reviewing and approving the unaudited interim consolidated financial statements together with other financial information of the Company and for ensuring that management fulfills its financial reporting responsibilities. An Audit Committee assists the Board of Directors in fulfilling this responsibility. The Audit Committee meets with management to review the financial reporting process and the unaudited interim consolidated financial statements together with other financial information of the Company. The Audit Committee reports its findings to the Board of Directors for its consideration in approving the unaudited interim consolidated financial statements together with other financial information of the Company for issuance to the shareholders.
Management recognizes its responsibility for conducting the Company's affairs in compliance with established financial standards, and applicable laws and regulations, and for maintaining proper standards of conduct for its activities.
NOTICE TO READER
Under National Instrument 51ߛ102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management.
The Company's independent auditor has not performed a review of these unaudited interim consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.
INTERIM CONSOLIDATED BALANCE SHEETS
(Expressed in Canadian Dollars)
(Unaudited)
June 30, December 31,
2009 2008
Assets
Current
Cash $ 488,354 $ 587,489
Accounts receivable and advances 694,346 330,467
Inventory (Note 6) 680,858 652,306
1,863,558 1,570,262
Property, plant and equipment (Note 7) 5,858,344 6,152,874
Long-term deposit 101,900 101,900
Deferred development and exploration costs (Note 8) 10,282,832 10,601,856
Future income taxes 2,094,043 2,094,043
$ 20,200,677 $ 20,520,935
Liabilities
Current
Accounts payable and accrued liabilities $ 2,109,111 $ 2,298,303
Current portion of financing facility (Note 9) 271,781 309,043
Due to related party (Note 11) 2,911,999 2,504,275
5,292,891 5,111,621
Asset retirement obligation 447,400 447,400
Due to related party (Note 11) 343,933 418,161
Long-term portion of financing facility (Note 9) 81,869 199,864
6,166,093 6,177,046
Shareholders' Equity
Share capital (Note 10(a)) 26,530,787 26,435,998
Warrants (Note 10(b)) 227,650 180,640
Contributed surplus 3,721,522 3,648,288
30,479,959 30,264,926
Deficit (16,445,375) (15,921,037)
14,034,584 14,343,889
$ 20,200,677 $ 20,520,935
Going concern (Note 1)
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Revenues
Gold sales $ 1,648,243 $ 650,565 $ 2,791,247 $ 1,272,352
Cost and expenses of operations
Cost of sales 989,285 431,708 1,802,669 1,134,187
Amortization and depreciation 325,561 352,082 629,439 697,081
1,314,846 783,790 2,432,108 1,831,268
Income (loss) before the undernoted 333,397 (133,225) 359,139 (558,916)
Other expenses and (income)
Other operating expenses 160,641 261,396 315,442 575,276
Accounting and corporate 13,200 13,569 26,993 29,029
Legal and audit 24,196 14,339 38,589 28,946
Stockߛbased compensation (Note 10(c)) 35,505 117,656 73,234 248,708
Shareholder communication and
public relations 40,581 38,614 69,922 68,143
Transfer agent 11,376 9,786 12,652 12,659
Consulting fees - 6,186 - 6,186
General office 12,139 12,238 21,075 25,338
Bank charges and interest 32,706 83,714 64,342 127,892
Foreign exchange loss 237,378 21,583 261,228 177,394
Interest income - (33) - (295)
567,722 579,048 883,477 1,299,276
Net loss and comprehensive loss
for the period $ (234,325) $(712,273) $ (524,338) $ (1,858,192)
Basic and diluted loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.01)
Weighted average number of shares
outstanding -basic 190,100,055 175,675,855 189,833,863 175,675,855
Dilutive effect of stock options and warrants - - - -
Weighted average number of shares
outstanding- diluted 190,100,055 175,675,855 189,833,863 175,675,855
INTERIM CONSOLIDATED STATEMENTS OF DEFICIT
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
Deficit, beginning of period $ (16,211,050) $ (15,105,862) $ (15,921,037) $ (13,959,943)
Net loss for the period (234,325) (712,273) (524,338) (1,858,192)
Deficit, end of period $ (16,445,375) $ (15,818,135) $ (16,445,375) $ (15,818,135)
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Expressed in Canadian Dollars)
(Unaudited)
Share Contributed
Capital Warrants Surplus Deficit Total
Balance, December 31, 2007 $ 26,134,279 $ 2,417,700 $ 844,247 $ (13,959,943) $ 15,436,283
Shares issued under private placements 496,760 - - - 496,760
Warrants issued (180,640) 180,640 - - -
Share issue costs (14,401) - - - (14,401)Warrants expired - (2,417,700) 2,417,700 - -
Stock-based compensation - - 386,341 - 386,341
Net loss - - - (1,961,094) (1,961,094)
Balance, December 31, 2008 26,435,998 180,640 3,648,288 (15,921,037) 14,343,889
Shares issued for debt (Note 10(a)) 141,799 - - - 141,799
Warrants issued (47,010) 47,010 - - -
Stock-based compensation (Note 10(c)) - - 73,234 - 73,234
Net loss - - - (524,338) (524,338) Balance, June 30, 2009 $ 26,530,787 $ 227,650 $ 3,721,522 $ (16,445,375) $ 14,034,584 INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in Canadian Dollars)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2008 2009 2008
CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES
Net loss for the period $ (234,325) $ (712,273) $ (524,338) $ (1,858,192)Adjustments for non-cash items:
Amortization and depreciation 325,561 352,082 629,439 697,081
Stock-based compensation (Note 10(c)) 35,505 117,656 73,234 248,708
Foreign exchange 27,397 (5,250) 29,901 3,333
Net change in non-cash working capital
(Note 12(a)) (150,530) 40,466 (439,824) 347,504
3,608 (207,319) (231,588) (561,566)
INVESTING ACTIVITIES
Sale (purchase) of property, plant
and equipment 4,086 (105,095) 4,086 (349,651)
Deferred development and exploration costs (18,082) - (19,971) -
(13,996) (105,095) (15,885) (349,651)
FINANCING ACTIVITIES
Net repayments of financing facility (57,518) (131,522) (155,257) (207,915)
Advances from related party 206,498 332,052 333,496 1,214,352
148,980 200,530 178,239 1,006,437
NET CHANGE IN CASH 138,592 (111,884) (69,234) 95,220
Effect of exchange rate changes on cash
held in foreign currencies (27,397) 5,250 (29,901) (3,333)
CASH, BEGINNING OF PERIOD 377,159 219,829 587,489 21,308
CASH, END OF PERIOD $ 488,354 $ 113,195 $ 488,354 $ 113,195
SUPPLEMENTAL CASH FLOW INFORMATION (Note 12)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in Canadian Dollars)
(Unaudited)
THREE AND SIX MONTHS ENDED JUNE 30, 2009
1. GOING CONCERN
These unaudited 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 whollyߛowned 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.
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 interim consolidated financial statements do not reflect adjustments to the carrying value of assets and liabilities, the reported expenses and balance sheet 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 whollyߛowned subsidiaries Omagh and Galántas.
3. BASIS OF PRESENTATION AND ACCOUNTING POLICIES
The unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") for interim financial information. Accordingly, they do not include all of the information and notes to the consolidated financial statements required by Canadian GAAP for annual consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2009 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2009.
The consolidated balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by Canadian GAAP for annual consolidated financial statements. The unaudited interim consolidated financial statements have been prepared by management in accordance with the accounting policies described in the Company's annual audited consolidated financial statements for the year ended December 31, 2008, except as noted below. For further information, refer to the audited consolidated financial statements and notes thereto for the year ended December 31, 2008.
New accounting policies
Goodwill and Intangible Assets
Effective January 1, 2009, the Company adopted Section 3064, "Goodwill and Intangible Assets" which replaced the Canadian Institute of Chartered Accountants' Handbook ("CICA Handbook") sections 3062 and 3450, EICߛ27 and part of Accounting Guideline 11. Under previous Canadian standards, more items were recognized as assets than under International Financial Reporting Standards ("IFRS"). The objectives of CICA 3064 are to reinforce the principle based approach to the recognition of assets only in accordance with the definition of an asset and the criteria for asset recognition and to clarify the application of the concept of matching revenues and expenses such that the current practice of recognizing asset items that do not meet the definition and recognition criteria is eliminated. The portions in the new standard with respect to Goodwill remain unchanged. The provisions relating to the definition and initial recognition of intangible assets intends to reduce the differences with IFRS in the accounting for intangible assets. The new standard also provides guidance for the recognition of internally developed intangible assets (including research and development activities), ensuring consistent treatment of all intangible assets.
The adoption of this standard had no impact on the Company's presentation of its financial position or results of operations as at June 30, 2009.
Credit Risk and the Fair Value of Financial Assets and Financial Liabilities
In January 2009, the Emerging Issues Committee of the CICA issued EICߛ173, "Credit Risk and the Fair Value of Financial Assets and Financial Liabilities", which applies to interim and annual financial statements for periods ending on or after January 20, 2009. The adoption of this standard had no impact on the Company's presentation of its financial position or results of operations as at June 30, 2009.
Future Accounting Pronouncements
IFRS
In January 2006, the CICA's Accounting Standards Board ("AcSB") formally adopted the strategy of replacing Canadian GAAP with IFRS for Canadian enterprises with public accountability. On February 13, 2008 the AcSB confirmed that the use of IFRS will be required in 2011 for publicly accountable profitߛoriented enterprises. For these entities, IFRS will be required for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011. The Company will be required to have prepared, in time for its first quarter of fiscal 2011 filing, comparative financial statements in accordance with IFRS for the three months ended March 31, 2010. While the Company has begun assessing the impact of the adoption of IFRS on its consolidated financial statements, the financial reporting impact of the transition to IFRS cannot be reasonably estimated at this time.
Business Combinations, Consolidated Financial Statements and NonߛControlling Interests
The CICA issued three new accounting standards in January 2009: Section 1582, "Business Combinations", Section 1601, "Consolidated Financial Statements" and Section 1602, "Nonߛ Controlling interests". These new standards will be effective for fiscal years beginning on or after January 1, 2011. Section 1582 replaces section 1581 and establishes standards for the accounting for a business combination. It provides the Canadian equivalent to IFRS 3 ߛ Business Combinations. Sections 1601 and 1602 together replace section 1600, "Consolidated Financial Statements". Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a nonߛcontrolling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS lAS 27 ߛ Consolidated and Separate Financial Statements. The Company is in the process of evaluating the requirements of the new standards.
4. CAPITAL MANAGEMENT
The Company's objective when managing capital is to safeguard its accumulated capital in order to provide an adequate return to shareholders by maintaining a sufficient level of funds, in order to support continued production and maintenance at the Omagh Mine and to acquire, explore and develop other precious and base metal deposits in Northern Ireland.
The Company manages its capital structure and makes adjustments to it, based on the level of funds available to the Company to manage its operations. In order to maintain or adjust the capital structure, the Company expects that it will be able to obtain equity financing and generate positive cash flow from operations to maintain and expand its operations. There are no assurances that these initiatives will be successful. Management reviews its capital management approach on an ongoing basis.
There were no changes in the Company's approach to capital management during the three and six months ended June 30, 2009. Neither the Company nor its subsidiaries are subject to externally imposed capital requirements.
5. FINANCIAL RISK FACTORS
(a) 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 financial condition and results of operations.
(b) Financial risk
The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk, and market risk (including interest rate, foreign exchange rate and commodity 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.
Credit risk
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, accounts receivable and longߛterm deposit. Cash and longߛterm deposit are held with reputable financial institutions and the United Kingdom Crown, respectively, from which management believes the risk of loss to be minimal. Accounts receivable consist mainly of a trade account receivable from one customer and Value Added Tax receivable. The Company is exposed to concentration of credit risk with one of its customers. Management believes that the credit risk is minimized due to the financial worthiness of this Company. Value Added Tax receivable is collectable from the Government of Northern Ireland. The Company does not have derivative financial instruments. No trade accounts receivable balances are past due or impaired.
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 related to 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 June 30, 2009, the Company had negative working capital. All of the Company's financial liabilities have contractual maturities of less than 30 days other than the financing facility and certain related party loans. The Company is using operating cash flows to manage and is seeking additional capital to increase liquidity.
Market Risk
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 minimal cash balances and significant interestߛbearing debt. The Company is exposed to interest rate risk on the term loan facility and certain related party loans which bear interest at variable rates.
Foreign currency risk
Certain of the Company's expenses and revenues are incurred and received in the currencies of Northern Ireland and the United Kingdom and are therefore subject to gains and losses due to fluctuations in these currencies against the Canadian dollar.
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 six month period:
(i) The term loan facility and certain related party loans are subject to interest rate risk. As at June 30, 2009, if interest rates had decreased/increased by 1% with all other variables held constant, the loss for the six months ended June 30, 2009 would have been approximately $17,000 lower/higher, as a result of lower/higher interest rates from the term loan facility and certain related party loans. Similarly, as at June 30, 2009, shareholders' equity would have been approximately $17,000 higher/lower as a result of a 1% decrease/increase in interest rates from the term loan facility and certain related party loans.
(ii) The Company is exposed to foreign currency risk on fluctuations related to cash, accounts receivable and advances, longߛterm deposit, accounts payable and accrued liabilities, due to related party and financing facility that are denominated in British pounds. As at June 30, 2009, had the British pound weakened/strengthened by 5% against the Canadian dollar with all other variables held constant, the Company's loss for the six months ended June 30, 2009 would have been approximately $228,000 higher/lower as a result of foreign exchange losses/gains on translation of nonߛCanadian dollar denominated financial instruments. Similarly, as at June 30, 2009, shareholders' equity would have been approximately $228,000 lower/higher had the British pound weakened/strengthened by 5% against the Canadian dollar as a result of foreign exchange losses/gains on translation of nonߛCanadian dollar 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. Net loss would be impacted by changes in average realized gold prices. Sensitivity to a plus or a minus 10% change in average realized gold prices would affect net loss and shareholders' equity by approximately $232,000.
6. INVENTORY
June 30, December 31,
2009 2008
Concentrate inventory $ - $ 12,796
Finished goods 680,858 639,510
$ 680,858 $ 652,306
7. PROPERTY, PLANT AND EQUIPMENT
June 30, 2009
Accumulated
Cost Amortization Net
Freehold land and buildings $ 3,020,913 $ 420,442 $ 2,600,471
Plant and machinery 5,584,828 2,369,628 3,215,200
Motor vehicles 65,724 47,444 18,280
Office equipment 79,575 55,182 24,393
Moulds 81,802 81,802 -
$ 8,832,842 $ 2,974,498 $ 5,858,344
December 31, 2008
Accumulated
Cost Amortization Net
Freehold land and buildings $ 3,020,913 $ 393,941 $ 2,626,972
Plant and machinery 5,589,818 2,110,532 3,479,286
Motor vehicles 64,820 45,395 19,425
Office equipment 79,575 52,384 27,191
Moulds 81,802 81,802 -
$ 8,836,928 $ 2,684,054 $ 6,152,874
8. DEFERRED DEVELOPMENT AND EXPLORATION COSTS
June 30, 2009
Accumulated
Cost Amortization Net
Deferred development and exploration costs $ 11,466,661 $ 1,183,829 $ 10,282,832
December 31, 2008
Accumulated
Cost Amortization Net
Deferred development and exploration costs $ 11,446,690 $ 844,834 $ 10,601,856
9. FINANCING FACILITY
Amounts payable on the long term debt are as follows:
June 30, December 31,
Interest 2009 2008
Financing facility (238,700 GBP) 3.71% $ - $ 44,659
Financing facility (180,000 GBP) 3.97% - 29,602
Financing facility (199,160 GBP) 4.03% 168,095 194,735
Term loan facility (250,000 GBP) Bank rate + 2% 185,555 239,911
353,650 508,907
Less current portion 271,781 309,043
$ 81,869 $ 199,864
Principal repayments over the next three years are as follows:
10. SHARE CAPITAL
(a) Authorized and issued
Authorized
Unlimited number of common and preference shares issuable in Series
Issued common shares
Number of Stated
Shares Value
Balance, December 31, 2008 186,965,855 $ 26,435,998
Shares issued for debt (i) 3,134,200 141,799
Warrants issued - (47,010)
Balance, June 30, 2009 190,100,055 $ 26,530,787
(i) On January 14, 2009, the Company has received consent from the TSX Venture Exchange for the issue of Company shares for debt. The creditor, who supplied drilling services, has exchanged $141,799 (78,355 GBP) of debt for 3,134,200 units. Each unit comprises one common share and one warrant, such warrant being exercisable for one year at a price of $0.09 (0.05 GBP). The shares exchanged for debt are subject to a four month hold period, which expired May 15, 2009.
The fair value of the 3,134,200 warrants was estimated using the BlackߛScholes option pricing model with the following assumptions: dividend yield ߛ 0%; volatility ߛ 153%; riskߛfree interest rate ߛ 0.92% and an expected life of 1 year. The fair value attributed to the warrants was $47,010.
(b) Warrants
The following table shows the continuity of warrants for the period ended June 30, 2009:
Weighted
Average
Number of Warrants Price
Balance, December 31, 2008 11,290,000 $ 0.09
Issued (Note 10(a)(i)) 3,134,200 0.09
Balance, June 30, 2009 14,424,200 $ 0.09
As at June 30, 2009, the following warrants were outstanding:
Number Fair Exercise Expiry
of Warrants Value ($) Price ($) Date
11,290,000 180,640 0.09 December 29, 2009
3,134,200 47,010 0.09 January 14, 2010
14,424,200 227,650
(c) Stock options
The following table shows the continuity of options for the period ended June 30, 2009:
Weighted
Average
Number of Options Price
Balance, December 31, 2008 and June 30, 2009 8,650,000 $ 0.14
Stock-based compensation expense includes $35,505 and $73,234, respectively ($117,656 and $248,708, respectively for the three and six months ended June 30, 2008) relating to stock options granted in previous years that vested during the three and six months ended June 30, 2009.
The following table reflects the Company's stock options outstanding and exercisable as at June 30, 2009:
Weighted Weighted
Average Average
Remaining Remaining
Options Contractual Life Exercise Options Contractual Life Exercise Expiry
Outstanding (years) Price ($) Exercisable (years) Price ($) Date
200,000 0.87 0.10 200,000 0.87 0.10 May 13, 2010
500,000 1.95 0.26 500,000 1.95 0.26 June 14, 2011
500,000 2.96 0.23 500,000 2.96 0.23 June 15, 2012
5,700,000 3.48 0.14 3,800,000 3.48 0.14 December 24, 2012
250,000 3.64 0.16 166,667 3.64 0.16 February 20, 2013
1,500,000 4.25 0.10 500,000 4.25 0.10 October 2, 2013
8,650,000 3.44 0.14 5,666,667 3.28 0.15
11. RELATED PARTY TRANSACTIONS
Transactions with related parties were in the normal course of operations and were measured at the exchange amounts.
The Company has the following transactions with related parties:
Director fees of $9,000 and $18,000, respectively ($9,000 and $18,000, respectively for the three and six months ended June 30, 2008) were paid or accrued during the three and six months ended June 30, 2009.
During the period, the Company signed an agreement for the rent of mining equipments with G&F Phelps, a Company controlled by a director of the Company. The Company can decide to purchase the mining equipments within the next year. If the Company decides to purchase the mining equipments, the Company may deduct from the purchase price 50% of the charges that it has paid to rent the equipment. During the three and six months ended June 30, 2009, the Company paid $40,075 and $40,075 respectively to G&F Phelps for the rent of the mining equipments.
June 30, 2009 December 31, 2008
GBP CDN$ GBP CDN$
| Amount owing to the President and companies controlled by the President of the Company. $513,963 (268,781 GBP) of the loan is secured by a second charge on the land owned by Omagh and the balance of the loan is unsecured. The loan bears interest at a base rate plus 2%. $749,164 (391,781 GBP) is due over a period of 3 years and the balance due on demand. | 834,746 | 1,596,198 | 869,801 | 1,556,597 |
| Amount owing to the company controlled by a director of the Company for financing of mining equipment. $789,088 (412,660 GBP) of the loan is for a period of 4.25 years, interest bearing at 4.04% and is secured by all of the equipment owned by the Company's whollyߛowned subsidiary Omagh. | 647,660 | 1,238,455 | 647,660 | 1,159,052 |
| Amount owing to the President and Chief Executive Officer of the Company who agreed to lend up to a total of $956,100 (500,000 GBP) to the Company for a period of 6 months. The loan is secured by the Company's inventory with cross guarantees provided by the Company's subsidiaries. The loan bears interest at a base rate of 4.5% per annum, such interest to be calculated monthly and compounded until repaid. | 220,311 | 421,279 | 115,549 | 206,787 |
1,702,717 3,255,932 1,633,010 2,922,436
Less: Current portion (2,911,999) (2,504,275)
Long-term portion 343,933 418,161
12. SUPPLEMENTAL CASH FLOW INFORMATION
(a) Net change in non-cash working capital
Three Months Six Months
Ended Ended
June 30, June 30,
2009 2008 2009 2008
Accounts receivable and advances $ (191,586) $ (40,467) $ (363,879) $ 16,541
Inventory 37,710 (424,750) (28,552) (719,250)
Accounts payable and accrued liabilities 3,346 366,954 (47,393) 648,939
Deferred revenue - 138,729 - 401,274
$ (150,530) $ 40,466 $ (439,824) $ 347,504
(b) Supplemental information
Interest paid $ 23,628 $ 20,081 $ 48,736 $ 30,850
Shares issued for debt payment $ - $ - $ 141,799 $ -
Interest paid includes $23,628 and $48,736, respectively (comparable period ߛ $20,081 and $30,850, respectively) of interest paid on the financing facility during the three and six months ended June 30, 2009, which was expensed to the statements of operations.
13. 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.