Galantas Gold Regulatory News (GAL)

GALANTAS GOLD CORPORATION

TSXV & AIM: Symbol GAL

GALANTAS REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018

August 28, 2018: Galantas Gold Corporation (the 'Company') is pleased to announce its financial results for the Three and Six Months ended June 30, 2018.

Financial Highlights

Highlights of the 2018 second quarter's and first six month's results, which are expressed in Canadian Dollars, are summarized below:

The Net Loss for the three months ended June 30, 2018 amounted to CDN$ 700,510 (2017: CDN$ 511,876) and the cash loss from operating activities before changes in non-cash working capital for the second quarter of 2018 amounted to CDN$ 429,920 (2017 Q2: CDN$ 404,783). The Net Loss for the six months ended June 30, 2018 amounted to CDN $ 1,225,008 (2017:CDN$ 1,196,110) and the cash loss from operating activities before changes in non-cash working capital for the first six months of 2018 amounted to CDN$ 762,340 (2017: CDN$ 799,382).

The Company had cash balances of $ 732,603 at June 30, 2018 compared to $ 1,681,739 at June 30, 2017. The working capital deficit at June 30, 2018 amounted to $ 2,328,303 compared to a working capital deficit of $ 2,328,303 at June 30, 2017. 

There were no financing activities during the first half of 2018. Additional loan advances from G&F Phelps Ltd, a related party, during the six months totaled $ 549,193 (UK£ 316,410). During the second quarter Galantas announced that its operating subsidiary, Flintridge Resources Ltd. had signed a concentrate pre-payment agreement and a loan facility agreement for US$ 1.6 million (CDN$ 2.012 million) with Ocean Partners UK Ltd., together with an increased, on-demand loan facility of £600,000 with G&F Phelps Ltd. (See press release dated April 12, 2018 for further details).

Permitting

In November 2017, Galantas reported that it had received notice of an application, by a third party, to the Court of Appeal, in relation to a positive judicial review judgment regarding the grant of planning permission. This was subsequently heard in February 2018. The Court will deliver its judgement at a later date, currently unknown but indicated for September 2018.

Production/Mine Development

Production of flotation concentrate at the Omagh mine from development ore restarted in the third quarter of 2018. The granting of planning consent in 2015 for an underground operation at the Omagh site, now subject to the result of a judicial review appeal, permits the continuation and expansion of gold mining, following the exhaustion of accessible resources available to the previous open pit operation. The underground mine, which is in active development, will utilize the same processing methods and the processing plant has received a partial upgrade. The strategy is to establish the underground mine and look for further expansion of gold resources on the property, which has many undrilled targets.

The phased development arrangement, in terms of mine access dimensions, is expected to allow for rapid expansion of production as additional capital becomes available.

Underground development of a decline tunnel, located at the base of the existing open pit, commenced in the first quarter 2017. After over-coming initial difficulties, tunneling continued through 2017 and to date in 2018. A detailed plan is being implemented to accelerate progress in line with the planning consent. The main decline tunnel descends at a slope of 1 in 7, from near the base of the former Kearney open pit. A horizontal west to east access tunnel driven from the decline tunnel intersected the north / south Kearney vein during June at approximately a right angle and has exposed the vein to be approximately 2.8 metres wide at that point. The vein intersection is located some 15 metres below the base of the Kearney open-pit. A horizontal development tunnel is planned to be driven on vein, at this level, in both directions, beneath a safety (Crown) pillar which will initially provide limited feed to the mill in the third quarter. The decline tunnel is planned to be extended in depth, along with construction of a second means of egress. The decline is planned to provide access to lower levels and permit stoping between the first two horizontal levels in late 2018 or early 2019. Stoping operations are expected to provide an enhanced supply of mill feed. The underground development, using drill and blast techniques, is being carried out by an in-house crew which is fully trained in safety and operating procedures. An in-house, mines rescue team has also been trained and equipped.

Whilst the present drilling and loading equipment, which was purchased for training and early tunnel development purposes, is performing above expectations it has lower productivity when compared with current technology. New drilling equipment has been acquired on a rental basis, with options to purchase, and is expected to improve advance rates significantly. A substitute tunneling drill rig has been available on rental to cover delays in manufacture. The interim rig has led to a significant improvement in advance rate. In addition a new 4t capacity load-haul-dump unit, has been ordered on a rental purchase basis. This is expected to improve productivity in loading operations from the smaller cross-section vein drives. It is equipped with radio remote control which enhances safety in stope mucking operations. Delivery is expected in September 2018. Further equipment purchases are under negotiation.

Environmental monitoring continues to demonstrate compliance with the standards imposed by the regulatory authorities. Safety is a high priority and the zero lost time accident rate, since the start of underground operations, continues.

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.

http://www.rns-pdf.londonstockexchange.com/rns/8956Y_1-2018-8-27.pdf

The Annual General and Special Meeting of the Company was held at Thursday, June 28, 2018 at 11:00 a.m. (Toronto time) at the registered office of the Company, DSA Corporate Services Inc. 82 Richmond Street East, Toronto, Ontario, M5C 1P1.

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 anticipated production and development projections, 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 Jack Gunter P.Eng - ChairmanRoland Phelps C.Eng - President & CEOEmail: info@galantas.comWebsite: www.galantas.comTelephone: +44 (0) 2882 241100

Grant Thornton UK LLP (Nomad)

Philip Secrett, Richard Tonthat.

Telephone: +44(0)20 7383 5100

Whitman Howard Ltd (Broker & Corporate Adviser) 

Ranald McGregor-Smith, Nick Lovering

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.

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

Going concern (note 1)Contingency (note 15)

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

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

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

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

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"). Cavanacaw has a 100% shareholding in both Omagh Minerals Limited ("Omagh") and Flintridge Resources Limited ("Flintridge") who are engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland. The Omagh mine has an open pit mine, which was in production and is reported as property, plant and equipment and an underground mine which is in the development stage and reported as exploration and evaluation assets. The production at the open pit mine was suspended in 2013.

The going concern assumption is dependent upon the ability of the Company to obtain the following:

Should the Company be unsuccessful in securing the above, there would be significant uncertainty over the Company's ability to continue as a going concern. The Company is currently in discussions with a number of potential financiers.

As at June 30, 2018, the Company had a deficit of $40,092,310 (December 31, 2017 - $38,867,302). 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. These adjustments could be material.

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 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.

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 IFRSs issued and outstanding as of August 22, 2018 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, 2017, 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, 2018 could result in restatement of these unaudited condensed interim consolidated financial statements.

New accounting standard adopted 

Effective January 1, 2018, the Company adopted IFRS 9 - Financial Instruments ("IFRS 9"). In July 2014, the IASB issued the final publication of the IFRS 9 standard, which supersedes lAS 39 - Financial Instruments: Recognition and Measurement ("lAS 39"). IFRS 9 includes revised guidance on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and new hedge accounting guidance. The Company has adopted IFRS 9 on a retrospective basis, however, this guidance had no impact to the Company's unaudited condensed interim consolidated financial statements.

Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 contains the primary measurement categories for financial assets: measured at amortized cost, fair value through other comprehensive income ("FVTOCI") and fair value through profit and loss ("FVTPL").

The new hedge accounting guidance aligns hedge accounting more closely with an entity's risk management objectives and strategies. IFRS 9 does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness; however, it allows more hedging strategies used for risk management to qualify for hedge accounting and introduces more judgement to assess the effectiveness of a hedging relationship, primarily from a qualitative standpoint. The Company has elected to continue with lAS 39 for hedging. This does not have an effect on our reported results.

Below is a summary showing the classification and measurement bases of our financial instruments as at January 1, 2018 as a result of adopting IFRS 9 (along with comparison to lAS 39).

As a result of the adoption of IFRS 9, the accounting policy for financial instruments as disclosed in the Company's December 31, 2017 consolidated financial statements has been updated as follows:

Financial assets 

Financial assets are classified as either financial assets at FVTPL, amortized cost, or FVTOCI. The Company determines the classification of its financial assets at initial recognition.

i. Financial assets recorded at FVTPL

Financial assets are classified as FVTPL if they do not meet the criteria of amortized cost or FVTOCI. Gains or losses on these items are recognized in profit or loss.

The Company's cash is classified as financial assets measured at FVTPL.

ii. Amortized cost

Financial assets are classified as measured at amortized cost if both of the following criteria are met and the financial assets are not designated as at FVTPL: 1) the object of the Company's business model for these financial assets is to collect their contractual cash flows; and 2) the asset's contractual cash flows represent "solely payments of principal and interest".

The Company's accounts receivable and long-term deposit are classified as financial assets measured at amortized cost.

Financial liabilities 

Financial liabilities are classified as either financial liabilities at FVTPL or at amortized cost. The Company determines the classification of its financial liabilities at initial recognition.

i. Amortized cost

Financial liabilities are classified as measured at amortized cost unless they fall into one of the following categories: financial liabilities at FVTPL, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, financial guarantee contracts, commitments to provide a loan at a below-market interest rate, or contingent consideration recognized by an acquirer in a business combination.

The Company's accounts payable and other liabilities, financing facilities and due to related parties do not fall into any of the exemptions and are therefore classified as measured at amortized cost.

ii. Financial liabilities recorded FVTPL

Financial liabilities are classified as FVTPL if they fall into one of the five exemptions detailed above.

Transaction costs 

Transaction costs associated with financial instruments, carried at FVTPL, are expensed as incurred, while transaction costs associated with all other financial instruments are included in the initial carrying amount of the asset or the liability.

Subsequent measurement 

Instruments classified as FVTPL are measured at fair value with unrealized gains and losses recognized in profit or loss. Instruments classified as amortized cost are measured at amortized cost using the effective interest rate method. Instruments classified as FVTOCI are measured at fair value with unrealized gains and losses recognized in other comprehensive income.

Derecognition

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Expected credit loss impairment model 

IFRS 9 introduced a single expected credit loss impairment model, which is based on changes in credit quality since initial application. The adoption of the expected credit loss impairment model had no impact on the Company's unaudited condensed interim consolidated financial statements.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full or when the financial asset is more than 90 days past due.

The carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

New accounting standards not yet effective 

(i) On June 7, 2017, the IASB issued IFRIC 23 - Uncertainty Over Income Tax Treatments. The interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted. The Company intends to adopt the Interpretation in its consolidated financial statements for the annual period beginning on January 1, 2019. The Company does not expect the interpretation to have a material impact on the consolidated financial statements.

 (ii) On January 13, 2016, the IASB issued IFRS 16 - Leases ("IFRS 16"). The new standard is effective for annual periods beginning on or after January 1, 2019. IFRS 16 will replace IAS 17 - Leases ("IAS 17"). This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures to be provided by lessors. Other areas of the lease accounting model have been impacted, including the definition of a lease. Transitional provisions have been provided. The Company intends to adopt IFRS 16 in its consolidated financial statements for the period beginning on January 1, 2019. The Company is evaluating the impact of adoption and expects to report more detailed information in its consolidated financial statements as the effective date approaches.

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:

Exploration and evaluation assets are expenditures for the underground mining operations in Omagh. The proposed underground mine is dependent on the ability of the Company to obtain the necessary planning permission. On June 11, 2015, the Company announced that it had obtain planning consent (the "Consent") for an underground gold mine at the Omagh site. In February 2017, the planning permission was subject to a Judicial Review. The Consent includes operating and environmental conditions. On March 13, 2017, the Company announced that underground development had commenced on the Omagh mine. On April 24, 2017, the Company announced that the underground development has been put on hold and on May 15, 2017, the Company announced that the underground development would continue. On September 29, 2017, the Company announced that it received the judgement for the Judicial Review. The third party's request for a quashing of the Consent was denied. Underground development is underway and the Company has a detailed plan to accelerate progress, in line with the confirmed Consent.

On January 18, 2018, the Company announced that a date has been set up by the Court of Appeal for a hearing into a third party appeal against a positive Judicial Review of the Company's Consent. The hearing is anticipated for February 6, 2018. On February 6, 2018, the Company announced a date change for the third party appeal against a positive Judicial Review of its Consent. Due to the illness of the third party, who is a litigant in person, the date of the hearing of the appeal has been postponed until February 15, 2018. The hearing may continue on February 16, 2018, if the Court so determines. On February 16, 2018, the Company announced that it was advised that an appeal brought by a third party against its planning consent has completed the hearing stage. The Court of Appeal at the Royal Courts of Justice in Belfast, Northern Ireland heard the appeal against a judicial review decision that upheld the Department for Environment Northern Ireland (now Department of Infrastructure) grant of planning consent for an underground mine on the former open-pit gold-mine site. The Court will deliver its judgement at a later date, currently unknown.

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 June 30, 2018 based on a risk-free discount rate of 1% (December 31, 2017 - 1%) and an inflation rate of 1.50% (December 31, 2017 - 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 June 30, 2018, the estimated fair value of the liability is $570,042 (December 31, 2017 - $551,680). Changes in the provision during the six months ended June 30, 2018 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, 2017 - GBP 300,000), of which GBP 300,000 was funded as of June 30, 2018 (GBP 300,000 was funded as of December 31, 2017) and reported as long-term deposit of $520,710 (December 31, 2017 - $508,830).

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: