TIDMGAL
RNS Number : 6217D
Galantas Gold Corporation
28 April 2017
GALANTAS GOLD CORPORATION
TSXV & AIM : Symbol GAL
GALANTAS REPORTS RESULTS FOR THE YEARED DECEMBER 31, 2016
April 28, 2017: Galantas Gold Corporation (the 'Company') is
pleased to announce its audited annual financial results for the
year ended December 31, 2016.
Financial Highlights
Highlights of the 2016 audited annual results, which are
expressed in Canadian Dollars, are summarized below:
Year Ended December 31
----------------------------------------------------------------- ---------------------------------------------------
All in CDN$ 2016 2015
----------------------------------------------------------------- ----------------------- --------------------------
Revenue $ 74,068 $ 80,989
----------------------------------------------------------------- ----------------------- --------------------------
Cost of Sales $ (345,057) $ (356,836)
----------------------------------------------------------------- ----------------------- --------------------------
Loss before the items below $ (270,989) $ (275,847)
----------------------------------------------------------------- ----------------------- --------------------------
Amortization $ (168,736) $ (207,911)
----------------------------------------------------------------- ----------------------- --------------------------
General administrative expenses $ (1,199,023) $ (1,462,359)
----------------------------------------------------------------- ----------------------- --------------------------
Sundry income $ 0 $ 18,689
----------------------------------------------------------------- ----------------------- --------------------------
Gain on disposal of property, plant and equipment $ 5,479 $ 0
----------------------------------------------------------------- ----------------------- --------------------------
Unrealized gain on fair value of derivative financial liability $ 108,000 $ 268,000
----------------------------------------------------------------- ----------------------- --------------------------
Foreign exchange loss $ (88,029) $ (133,649)
----------------------------------------------------------------- ----------------------- --------------------------
Net loss for the year $ (1,613,298) $ (1,793,077)
----------------------------------------------------------------- ----------------------- --------------------------
Working Capital Deficit $ (3,095,124) $ (3,606,059)
----------------------------------------------------------------- ----------------------- --------------------------
Cash (loss) generated from operations before changes in non-cash
working capital $ (1,341,273) $ (1,527,331)
----------------------------------------------------------------- ----------------------- --------------------------
Cash at December 31, 2015 $ 557,005 $ 1,518,332
----------------------------------------------------------------- ----------------------- --------------------------
The Net Loss for the year ended December 31, 2016 amounted to
CDN$ 1,613,298 (2015: CDN$ 1,793,077) and the cash outflow from
operating activities before changes in non-cash working capital for
the year ended December 31, 2016 amounted to CDN$ 1,341,273 (2015:
CDN$ 1,527,331).
Sales revenues for the year ended December 31, 2016 consisted
mainly of jewelry sales and amounted to CDN$ 74,068 and (2015: CDN
$ 80,989). Following the suspension of production during the fourth
quarter of 2013 there have not been any shipments of concentrates
from the mine.
Cost of sales, which includes production costs and inventory
movement, for the year ended December 31, 2016 amounted to CDN$
345,057 (2015: CDN$ 356,836). Production costs were mainly in
connection with ongoing care and maintenance costs at the Omagh
mine site.
The Company had a cash balance of $ 557,005 at December 31, 2016
compared to $ 1,518,332 at December 31, 2015. The working capital
deficit at December 31, 2016 amounted to $ 3,095,125 compared to a
working capital deficit of $ 3,606,059 at December 31, 2015.
During the second quarter of 2016 the Company announced a
private placement of shares and shares for debt exchange. Placing
priority was given to existing shareholders, with 18,619,841 common
shares issued, at a price of CDN$ 0.07875 per common share for a
total of CDN$1,466,312. The majority of the placement was taken up
by Mr. Ross Beaty, who acquired 12,825,397 common shares. As a
consequence of the placing, Mr. Beaty had an interest in 28,825,397
of the Company's issued common shares.
In addition to the private placement, Roland Phelps, President
& CEO, Galantas Gold Corporation, entered into a shares for
debt exchange on the same terms as the placement during the second
quarter. Mr. Phelps exchanged CDN$ 935,852 debt accruing to him for
11,883,835 common shares. Shareholder consent was received for the
debt exchange by means of a written resolution, with a majority of
disinterested shareholder votes consenting. Following the debt
exchange, Mr. Phelps holds 33,356,750 common shares, representing
24.2% of the enlarged number of common shares currently in
issue.
Subsequent to December 31, 2016 Galantas also completed a part
brokered private placement in two parts for aggregate gross
proceeds of $ 2,446,299 (approximately UKGBP1,482,875) during the
first quarter of 2017. The placement comprised of the issue of
33,093,258 common shares. United Kingdom placees subscribed for a
total of 27,087,778 shares at a price of UKGBP0.045 per share.
Canadian placees subscribed for a total of 6,005,480 shares at a
price of $0.0725 per shares. The net proceeds raised by the Placing
are intended to be used for working capital purposes and to
commence development of the underground mine on the Omagh property.
Melquart Ltd, a UK based investment institution, subscribed for
22,222,222 Common Shares, which has resulted in a holding of 13% of
the Company's issued common shares. In addition Mr. Ross Beaty
subscribed for an additional 3,326,170 common shares in the
placing. As a consequence of the placing, Mr. Beaty now has an
interest in 32,151,567 common shares or 18.8% of the Company's
issued common shares.
Production
Production at the Omagh mine remains suspended. However the
granting of planning consent during the second quarter of 2015 for
an underground operation at the Omagh site, now subject to a
judicial review, will permit the continuation and expansion of gold
mining. The underground mine will utilize the same processing
methods and will be the first underground gold mine, of any scale,
in Ireland. The strategy is to establish the underground mine as
soon as finance is available and look for further expansion of gold
reserves on the property, which has many undrilled targets.
Galantas announced In December that subject to suitable
financing, it intends to commence the first phase of underground
development and re-start concentrate shipments at its Omagh mine.
The Company, under the planning consent which it can implement, has
been carrying out pre-conditions attaching to the planning consent
and is ready for the next phase of implementation. On the basis of
legal advice received, the Board of Directors have decided to press
ahead with immediate implementation of underground mining, to a
plan as outlined in a NI 43-101 economic study (reported 4th
September 2014). It is anticipated that a phased start-up of that
plan will deliver early positive cash flow for a relatively modest
capital expenditure. The phased arrangement, in terms of mine
access dimensions, will allow for rapid expansion of production as
additional capital becomes available. The mill has now been
re-commissioned in anticipation of a restarting of concentrate
shipments in the first half of 2017, subject to suitable financing.
A budget of GBP 2,000,000 (excluding lease finance) for the first
phase of underground mining has been estimated. The Company is at
an advanced stage of negotiation with a provider of lease finance,
which will provide funding for additional mine equipment (see press
release dated December 6, 2016). Subsequent to December 31, 2016
and following the closure of a part-brokered private placement for
aggregate gross proceeds of $ 2,446,299 (approximately UKGBP
1,482,875) the Company announced that underground development has
commenced on the Omagh gold property. The initial works are for the
formation of a portal (initial tunnel entry area) in the western
side wall at the base of the Kearney open pit. The portal works
were completed in mid-April 2017, the underground development will
continue in order to access ore beneath a crown pillar retained in
the base of the open pit when arrangements have been put in place
with the Police Service of Northern Ireland. Galantas subsequently
reported that the underground development at the Omagh mine has
been put on hold following the receipt of notification that the
Police Service of Northern Ireland (PSNI) will not provide its
required
anti-terrorism cover in regard to blasting operations required
for mine development. The Company has been told that, due to PSNI
resource constraints and competing priorities, PSNI is currently
only prepared to provide anti-terrorism cover for a maximum of a 2
hour period, 2 days per week which is insufficient to sustain the
development or operation of the mine. The PSNI will also require a
cost recovery agreement. The Company disagreed with the principle
of cost recovery for anti-terrorism policing but advised the PSNI
that the Company was prepared to enter into a costs recovery
agreement, without prejudice to its legal remedies in that respect,
for a 2 hour period, 5 days per week. Although PSNI provided the
costs analysis for the 5 day and 2 hour period anti-terrorism
cover, which was agreed without prejudice, the PSNI has refused to
provide the cover, citing competing priorities. The Company has
been given no alternative other than pursuing its legal options,
which may include seeking substantial compensation for the cost of
delays.
Exploration
An exploration programme carried out between 2011 and 2013
included the drilling of 17,348 metres of core and channel sampling
on the Joshua, Kearney and Kerr vein systems. Assay results from
both the drilling and channel sampling programmes were encouraging
with significant gold intersections encountered. A new programme
commenced in September 2015 to target the Joshua vein at depth. In
total, 3,602 metres were drilled by March 2016. In early 2016
Galantas reported the assay results for three holes completed in
2015 (see press release dated January 26, 2016). Most notable was
hole OML-DD-15-155 which intersected a wide zone (13 m true width)
of the Joshua vein at a vertical depth of 117 m grading 9.9 g/t Au.
This drilling programme also identified a new vein, Kestrel,
running 70 m west of Joshua. An initial shallow (42.4 m) intersect
returned 35.8 g/t Au over 0.7 m true width. A further drill hole
targeted the Kestrel vein 80 metres north and hit mineralisation at
a vertical depth of 73 m (3.2 g/t Au over 1.2 m true width).
Vertical longitudinal sections were constructed in Micromine for
the Joshua and Kearney veins. Each intersect was categorised
according to its width and grade. This enabled an evaluation of the
spatial variability of mineralisation across the site and has
identified key areas that should be investigated during the next
drill programme. A series of new targets has been drawn up in
preparation for future drilling.
A re-mapping exercise was completed during the second quarter,
focussing on a 2 km stretch of the Creeven Burn running directly
south of the main veins. This section of the burn incorporates
several known vein outcrops, the most recent exploration phase
uncovered two new mineralised outcrops which were identified close
to the 'Discovery' veins. Good evidence for both ductile and
brittle deformation was recorded, particularly around Sharkey.
Field observations and existing geophysical evidence confirm a
dextral offset and support the theory that Sharkey and McCrossan
veins are sheared extensions of the main Joshua vein. Structural
measurements fed into the construction of a conceptual model, later
tested through comparison with lithological and textural changes in
logged drill core. The geological model is one of an imbricated
thrust stack, the upward extension of which may have formed weak
zones which were later re-activated by the Creevan Burn Shear.
Results for final samples collected during the Creevan mapping
project were received during Q3 (see press release dated August 9,
2016). Of particular note are grab samples on strike extensions to
two of the 'Discovery' vein outcrops which register 38.3 g/t and
25.9 g/t gold; 90.9 g/t and 13.5 g/t silver, respectively.
Mapping of the existing open pit walls was completed during the
second quarter. Lithological and structural information were
recorded for areas which previously could not be accessed. A change
in strike of the visible units is coincident with vein location, an
important observation for future exploration.
The geology team completed Advanced Micromine training at the
beginning of July; the Joshua vein has since been re-strung,
encompassing the results of the latest drilling programme
(completed in March 2016). Arsenic levels have also been modelled
for Joshua for the purpose of ore processing planning. A similar
re-modelling of the Kearney vein is currently in progress.
Following approval of exploration plans by Department for the
Economy (Northern Ireland), two soil grids were completed in a
central area of licence OM4 during September. A total of 102 soil
samples were collected. This extends the original (2013) grid 1.2
km to the west and 400 m to the east, incorporating two major NE-SW
trending faults within Southern Highland and Argyll group
lithologies. Outcrop within this central region is poor, with
exposures generally limited to small quartzite crags on hill sides.
However, an outcropping quartz vein with visible sulphides was
identified within a small portion of the western grid and samples
were collected for analysis. The vein is trending NE-SW coinciding
with regional scale faulting. Further fieldwork included stream
sediment and heavy mineral concentrate sampling within both central
and south-east areas of OM4. Geochemical results for all of the OM4
2016 samples were recently released. These show minor Ag anomalies
(0.2, 0.3 and 0.8 g/t) in clustered soils within 200 m of the Derg
Fault, the central soil also contains raised Pb (2210 g/t), Zn (192
g/t) and trace Au (0.03 g/t). The outcropping vein referred to
above returned Ag 0.7 g/t, Cu 218 g/t, and a first order panned
stream sediment collected 600 m north contained 0.3 g/t Au. Raised
Zinc is common throughout the gridded area with seven samples
yielding >150 g/t and peaks of 637 g/t and 1030 g/t recorded for
sites <100 m apart.
Part of licence area PL3039 in the Republic of Ireland was
revisited during Q2. The results of earlier fieldwork had shown
bedrock gold anomalies of 2.1 and 1.8 g/t, associated with
significant silver. A recently excavated road cutting now reveals
narrow mineralised quartz veins along 5 m strike. Samples of these
were taken for analysis and the results were received in September.
All nine outcrop samples contain detectable gold ranging from 0.1
g/t to 1.8 g/t; and silver: 0.1 g/t to 8.7 g/t. During the last
quarter geologists examined an area of PL 3135 associated with
strong magnetic and conductivity signals. Earlier work in the
vicinity showed high Cr and Ni values associated with a possible
ultramafic intrusion (see press release 5(th) November, 2015). New
results for sediments and heavy mineral concentrates extracted from
nearby streams indicate low level Mo (0.2-3.1 g/t) and As (<238
g/t) with an important gold component (0.01 - 2.13 g/t). Gold in
stream sediments was previously reported for samples in close
proximity to a similar, but larger, ultramafic intrusion in
bordering licence 4034. Follow up work planned for 2017 will focus
on this area and the aforementioned site in PL3039.
Towards the end of the year near mine site targets were
revisited and prioritised. West and east stretches of the Aghadulla
Burn were examined due to structural setting similarities with the
Kearney deposit. Outcrop samples contained only trace Ag, with
veinlets yielding unusually raised levels of Li (117 g/t) and Sb
(3.5 g/t). In addition, a thorough review of historic data
associated with the Elkins target was completed and a plan for
future diamond drill locations constructed.
The renewal of Republic exploration licences 1469, 3162
(Leitrim), and 2315, 3039, 3040 3235 in Co. Donegal were confirmed
in November. New two year phases of the licences will continue
until March 2018. Exploration reports covering activities within
the first ten months of renewed options OM1 and OM4 were sent to
the Crown Estate Commissioners in December and have been approved.
Exploration options for OM1 and OM4 are in place until July 2021
and December 2020, respectively.
Permitting
In June 2015 the Company reported that the Minister of
Environment, Northern Ireland had granted planning consent for an
underground gold mine at the Omagh site. The planning consent will
permit the continuation and expansion of gold mining and is
expected to create hundreds of jobs locally. The positive decision
is the result of 3 years of examination of environmental and other
factors regarding the application. Included were environmental
studies by NIEA (Northern Ireland Environment Agency) and
independent specialists. The consent includes operating and
environmental conditions, which the Company has reviewed. A number
of conditions precedent to development are required to be satisfied
and the Company is carrying those out.
During the first quarter of 2016 Galantas reported that a third
party had obtained leave from Belfast High Court to bring a
judicial review challenging the actions of the DOENI in granting
planning permission for underground mining beneath the existing
open pit. The judicial review hearing commenced in late September
when the Company was notified of an extension for the time required
for the hearing beyond the September listing dates. Galantas was
subsequently advised that the continuation of the review hearing
has been listed for the 6(th) , 7(th) and 8(th) of December.
However the Company was later informed that the dates previously
allocated in December were no longer available and the hearing was
subsequently listed for February 13 - 15(th) 2017. Most of the
Applicant's evidence was heard during the September listing dates.
The judicial review hearing was subsequently completed in February
and Galantas is presently awaiting judgement for which no date has
been advised.
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/6217D_-2017-4-27.pdf
Qualified Person
The financial components of this disclosure has been reviewed by
Leo O' Shaughnessy (Chief Financial Officer) and the production,
exploration and permitting components by Roland Phelps (President
& CEO), qualified persons under the meaning of NI. 43-101. The
information is based upon local production and financial data
prepared under their supervision.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press
release contains forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995
and applicable Canadian securities laws, including revenues and
cost estimates, for the Omagh Gold project. Forward-looking
statements are based on estimates and assumptions made by Galantas
in light of its experience and perception of historical trends,
current conditions and expected future developments, as well as
other factors that Galantas believes are appropriate in the
circumstances. Many factors could cause Galantas' actual results,
the performance or achievements to differ materially from those
expressed or implied by the forward looking statements or strategy,
including: gold price volatility; discrepancies between actual and
estimated production, actual and estimated metallurgical recoveries
and throughputs; mining operational risk, geological uncertainties;
regulatory restrictions, including environmental regulatory
restrictions and liability; risks of sovereign involvement;
speculative nature of gold exploration; dilution; competition; loss
of or availability of key employees; additional funding
requirements; uncertainties regarding planning and other permitting
issues; and defective title to mineral claims or property. These
factors and others that could affect Galantas's forward-looking
statements are discussed in greater detail in the section entitled
"Risk Factors" in Galantas' Management Discussion & Analysis of
the financial statements of Galantas and elsewhere in documents
filed from time to time with the Canadian provincial securities
regulators and other regulatory authorities. These factors should
be considered carefully, and persons reviewing this press release
should not place undue reliance on forward-looking statements.
Galantas has no intention and undertakes no obligation to update or
revise any forward-looking statements in this press release, except
as required by law.
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 - Chairman
Roland Phelps C.Eng - President & CEO
Email: info@galantas.com
Website: www.galantas.com
Telephone: +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
Independent Auditor's Report
To the Shareholders of
Galantas Gold Corporation
We have audited the accompanying consolidated financial
statements of Galantas Gold Corporation which comprise the
consolidated statements of financial position as at December 31,
2016 and December 31, 2015, and the consolidated statements of
comprehensive loss, other comprehensive income, cash flows and
changes in equity for each of the years then ended and a summary of
significant accounting policies and other explanatory
information.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards, and
for such internal control as management determines is necessary to
enable the preparation of the consolidated financial statements
that are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we comply with ethical
requirements and plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain evidence about
the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's
judgement, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and
fair presentation of the consolidated financial statements in order
to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of
Galantas Gold Corporation, as at December 31, 2016 and December 31,
2015 and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting
Standards.
Emphasis of Matter
Without qualifying our opinion, we draw attention to note 1 in
the consolidated financial statements which indicates that the
Company's current liabilities exceeded its current assets by
$3,095,124, the Company has accumulated deficit of $36,789,163 and
expects to incur further losses. These conditions, along with other
matters set out in note 1, indicate the existence of material
uncertainty that may cast significant doubt about the Company's
ability to continue as a going concern.
"Abraham Chan LLP"
Toronto, Canada
April 24, 2017 Abraham Chan LLP
Chartered Professional Accountants
Licensed Public Accountants
Galantas Gold Corporation
Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
As at December 31, 2016 2015
----------------------------------------------------- ----------- -----------
ASSETS
Current assets
Cash $ 557,005 $ 1,518,332
Accounts receivable and prepaid expenses (note 8) 106,732 249,659
Inventories (note 9) 23,852 43,875
----------------------------------------------------- ----------- -----------
Total current assets 687,589 1,811,866
Non-current assets
Property, plant and equipment (note 10) 7,449,991 8,686,902
Long-term deposit (note 12) 496,920 612,210
Exploration and evaluation assets (note 11) 2,294,254 2,371,328
----------------------------------------------------- ----------- -----------
Total non-current assets 10,241,165 11,670,440
----------------------------------------------------- ----------- -----------
Total assets $ 10,928,754 $ 13,482,306
----------------------------------------------------- ----------- -----------
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 13) $ 893,570 $ 1,388,762
Current portion of financing facility (note 14) 4,956 6,947
Due to related parties (note 19) 2,884,187 4,022,216
----------------------------------------------------- ----------- -----------
Total current liabilities 3,782,713 5,417,925
Non-current liabilities
Non-current portion of financing facility (note 14) 25,265 31,122
Decommissioning liability (note 12) 528,305 637,988
Derivative financial liability (note 15(c)) 24,000 132,000
----------------------------------------------------- ----------- -----------
Total non-current liabilities 577,570 801,110
----------------------------------------------------- ----------- -----------
Total liabilities 4,360,283 6,219,035
----------------------------------------------------- ----------- -----------
Capital and reserves
Share capital (note 15(a)(b)) 36,331,577 33,960,190
Reserves 7,026,057 8,478,946
Deficit (36,789,163) (35,175,865)
----------------------------------------------------- ----------- -----------
Total equity 6,568,471 7,263,271
----------------------------------------------------- ----------- -----------
Total equity and liabilities $ 10,928,754 $ 13,482,306
----------------------------------------------------- ----------- -----------
The notes to the consolidated financial statements are an
integral part of these statements.
Going concern (note 1)
Contingency (note 21)
Events after the reporting period (note 23)
Approved on behalf of the Board:
"Roland Phelps" , Director "Lionel J. Gunter" , Director
Galantas Gold Corporation
Consolidated Statements of Loss
(Expressed in Canadian Dollars)
Year Ended
December 31,
2016 2015
------------------------------------------------------------------------------ ----------- -----------
Revenues
Gold sales $ 74,068 $ 80,989
Cost and expenses of operations
Cost of sales (note 17) 345,057 356,836
Depreciation (note 10) 168,736 207,911
------------------------------------------------------------------------------ ----------- -----------
513,793 564,747
------------------------------------------------------------------------------ ----------- -----------
Loss before general administrative and other (incomes) expenses (439,725) (483,758)
------------------------------------------------------------------------------ ----------- -----------
General administrative expenses
Management and administration wages (note 19) 645,071 581,002
Other operating expenses 86,315 80,907
Accounting and corporate 66,434 66,077
Legal and audit 80,850 95,953
Stock-based compensation (note 15(d)(i)(ii)) - 338,000
Shareholder communication and investor relations 192,486 164,617
Transfer agent 12,324 13,705
Director fees (note 19) 26,500 28,750
General office 7,756 6,981
Accretion expenses (note 12) 11,345 12,341
Loan interest and bank charges (note 19) 69,942 74,026
------------------------------------------------------------------------------ ----------- -----------
1,199,023 1,462,359
Other (incomes) expenses
Sundry income - (18,689)
Gain on disposal of property, plant and equipment (5,479) -
Unrealized gain on fair value of derivative financial liability (note 15(c)) (108,000) (268,000)
Foreign exchange loss 88,029 133,649
------------------------------------------------------------------------------ ----------- -----------
(25,450) (153,040)
------------------------------------------------------------------------------ ----------- -----------
Net loss for the year $ (1,613,298) $ (1,793,077)
------------------------------------------------------------------------------ ----------- -----------
Basic and diluted net loss per share (note 16) $ (0.01) $ (0.02)
------------------------------------------------------------------------------ ----------- -----------
Weighted average number of common shares outstanding
- basic and diluted 124,385,093 94,687,024
------------------------------------------------------------------------------ ----------- -----------
The notes to the consolidated financial statements are an
integral part of these statements.
Galantas Gold Corporation
Consolidated Statements of Other Comprehensive (Loss) Income
(Expressed in Canadian Dollars)
Year Ended
December 31,
2016 2015
--------------------------------------------------------------- ----------- -----------
Net loss for the year $ (1,613,298) $ (1,793,077)
Other comprehensive (loss) income
Items that will be reclassified subsequently to profit or loss
Foreign currency translation differences (1,452,889) 770,616
--------------------------------------------------------------- ----------- -----------
Total comprehensive loss $ (3,066,187) $ (1,022,461)
--------------------------------------------------------------- ----------- -----------
The notes to the consolidated financial statements are an
integral part of these statements.
Galantas Gold Corporation
Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Year Ended
December 31,
2016 2015
------------------------------------------------------------------------------ ----------- -----------
Operating activities
Net loss for the year $ (1,613,298) $ (1,793,077)
Adjustment for:
Depreciation 168,736 207,911
Stock-based compensation (note 15(d)(i)(ii)) - 338,000
Interest expense 63,539 70,612
Foreign exchange 141,884 (95,118)
Gain on disposal of property, plant and equipment (5,479) -
Accretion expenses (note 12) 11,345 12,341
Unrealized gain on fair value of derivative financial liability (note 15(c)) (108,000) (268,000)
Non-cash working capital items:
Accounts receivable and prepaid expenses 120,050 (121,393)
Inventories 14,489 72,284
Accounts payable and other liabilities (242,078) 367,910
Due to related parties 314,793 463,953
------------------------------------------------------------------------------ ----------- -----------
Net cash used in operating activities (1,134,019) (744,577)
------------------------------------------------------------------------------ ----------- -----------
Investing activities
Purchase of property, plant and equipment (824,477) (906,413)
Proceeds from sale of property, plant and equipment 39,554 -
Exploration and evaluation assets (367,893) (40,636)
------------------------------------------------------------------------------ ----------- -----------
Net cash used in investing activities (1,152,816) (947,049)
------------------------------------------------------------------------------ ----------- -----------
Financing activities
Proceeds of private placements 1,466,312 3,007,062
Share issue costs (30,777) (74,447)
Advances from related parties - 47,064
Proceeds from financing facility - 40,610
Repayment of financing facility (4,007) (2,541)
------------------------------------------------------------------------------ ----------- -----------
Net cash provided by financing activities 1,431,528 3,017,748
------------------------------------------------------------------------------ ----------- -----------
Net change in cash (855,307) 1,326,122
Effect of exchange rate changes on cash held in foreign currencies (106,020) 171,951
Cash, beginning of year 1,518,332 20,259
------------------------------------------------------------------------------ ----------- -----------
Cash, end of year $ 557,005 $ 1,518,332
------------------------------------------------------------------------------ ----------- -----------
Supplement schedule of non-cash transactions (note 22).
The notes to the consolidated financial statements are an
integral part of these statements.
Galantas Gold Corporation
Consolidated Statements of Changes in Equity
(Expressed in Canadian Dollars)
--------------------------------------------
Reserves
-------------------------------------
Equity Foreign
settled
share-based currency
Share payments Warrant translation
capital reserve reserve reserve Deficit Total
------------------------- ----------- ----------- -------- ----------- ------------ ----------
Balance, December 31,
2014 $ 31,825,575 $ 5,471,109 $ - $ 1,133,221 $ (33,382,788) $ 5,047,117
Shares issued in
private placements
(note 15(b)(i)(ii)) 3,007,062 - - - - 3,007,062
Warrants issued
(note 15(b)(i)(ii)) (798,000) - 766,000 - - (32,000)
Share issue costs (74,447) - - - - (74,447)
Stock-based
compensation (note
15(d)(i)(ii)) - 338,000 - - - 338,000
Net loss and other
comprehensive
income for the year - - - 770,616 (1,793,077) (1,022,461)
------------------------- ----------- ----------- -------- ----------- ------------ ----------
Balance, December 31,
2015 33,960,190 5,809,109 766,000 1,903,837 (35,175,865) 7,263,271
Shares issued in
private placement
(note 15(b)(iii)) 1,466,312 - - - - 1,466,312
Share issue costs (30,777) - - - - (30,777)
Common shares issued
for debt (note
15(b)(iv)) 935,852 - - - - 935,852
Expiry of warrants - 766,000 (766,000) - - -
Net loss and other
comprehensive loss
for the year - - - (1,452,889) (1,613,298) (3,066,187)
------------------------- ----------- ----------- -------- ----------- ------------ ----------
Balance, December 31,
2016 $ 36,331,577 $ 6,575,109 $ - $ 450,948 $ (36,789,163) $ 6,568,471
------------------------- ----------- ----------- -------- ----------- ------------ ----------
The notes to the consolidated financial statements are an
integral part of these statements.
Galantas Gold Corporation
Notes to Consolidated Financial Statements
Years Ended December 31, 2016 and 2015
(Expressed in Canadian Dollars)
------------------------------------------
1. Going Concern
These consolidated financial statements have been prepared on a
going concern basis which contemplates that Galantas Gold
Corporation (the "Company") will be able to realize assets and
discharge liabilities in the normal course of business. In
assessing whether the going concern assumption is appropriate,
management takes into account all available information about the
future, which is at least, but is not limited to, twelve months
from the end of the reporting period. Management is aware, in
making its assessment, of 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:
a. Securing sufficient financing to fund ongoing operational activity and the development of
the underground mine.
b. Obtaining consent for an underground mine which is currently subject to a judicial review
process.
c. Refer to note 23(iv) with regard to notification that the underground development at the Omagh
mine has been put on hold until further notice.
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 December 31, 2016, the Company had a deficit of
$36,789,163 (December 31, 2015 - $35,175,865). 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. Refer
to note 23(i).
These consolidated financial statements do not reflect
adjustments to the carrying values of assets and liabilities, the
reported expenses and financial position classifications used that
would be necessary if the going concern assumption was not
appropriate. These adjustments could be material.
2. Incorporation and Nature of Operations
The Company was formed on September 20, 1996 under the name
Montemor Resources Inc. on the amalgamation of 1169479 Ontario Inc.
and Consolidated Deer Creek Resources Limited. The name was changed
to European Gold Resources Inc. by articles of amendment dated July
25, 1997. On May 5, 2004, the Company changed its name from
European Gold Resources Inc. to Galantas Gold Corporation. The
Company was incorporated to explore for and develop mineral
resource properties, principally in Europe. In 1997, it purchased
all of the shares of Omagh which owns a mineral property in
Northern Ireland, including a delineated gold deposit. Omagh
obtained full planning and environmental consents necessary to
bring its property into production.
The Company entered into an agreement on April 17, 2000,
approved by shareholders on June 26, 2000, whereby Cavanacaw, a
private Ontario corporation, acquired Omagh. Cavanacaw has
established an open pit mine to extract the Company's gold deposit
near Omagh. 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 82 Richmond Street East,
Toronto, Ontario, Canada, M5C 1P1.
3. Basis of Preparation
(a) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") issued by the International Accounting Standards Board
("IASB") and interpretations issued by the International Financial
Reporting Interpretations Committee ("IFRIC") as of April 24, 2017,
the date the Board of Directors approved the consolidated financial
statements.
(b) Basis of presentation
These consolidated financial statements have been prepared on a
historical cost basis with the exception of certain financial
instruments, which are measured at fair value. In addition, these
consolidated financial statements have been prepared using the
accrual basis of accounting except for cash flow information.
In the preparation of these consolidated financial statements,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of
expenses during the year. Actual results could differ from these
estimates. Of particular significance are the estimates and
assumptions used in the recognition and measurement of items
included in note 3(e).
(c) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries.
The results of subsidiaries acquired or disposed of during the
years presented are included in the consolidated statement of loss
from the effective date of control and up to the effective date of
disposal or loss of control, as appropriate. An investor controls
an investee if the investor has the power over the investee, has
the exposure, or rights, to variable returns from its involvement
with the investee and the ability to use its power over the
investee to affect the amount of the investor's returns. All
intercompany transactions, balances, income and expenses are
eliminated upon consolidation.
The following wholly owned companies have been consolidated
within the consolidated financial statements:
Company Registered Principal activity
--------------------------------------- ---------------- ------------------
Galantas Gold Corporation Ontario, Canada Parent company
Cavanacaw Corporation (1) Ontario, Canada Holding company
Omagh Minerals Limited (2)(3) Northern Ireland Operating company
Galántas Irish Gold Limited (2)(4) Northern Ireland Dormant company
Flintridge Resources Limited (2)(5) United Kingdom Operating company
--------------------------------------- ---------------- ------------------
(1) 100% owned by Galantas Gold Corporation;
(2) 100% owned by Cavanacaw Corporation;
(3) Referred to as Omagh (as defined herein);
(4) Referred to as Galántas (as defined herein); and
(5) Referred to as Flintridge (as defined herein).
(d) Functional and presentation currency
The consolidated financial statements are presented in Canadian
Dollars ("CAD"), which is the parent Company's presentation and
functional currency.
Items included in the financial statements of each of the
Company's operating subsidiaries are measured using the currency of
the primary economic environment in which the entity operates (the
"functional currency"). The functional currency of the operating
subsidiaries is the U.K. Pound Sterling ("GBP"). The functional
currency of the subsidiary Cavanacaw, the holding company, is the
CAD.
Assets and liabilities of entities with functional currencies
other than CAD are translated at the period end rates of exchange,
and the results of their operations are translated at average rates
of exchange for the period unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the results of their
operations are translated at the rate prevailing on the dates of
the transactions. The resulting translation adjustments are
recognized as a separate component of equity.
Year Ended
December 31,
2016 2015
-------------------------- ------ ------
Closing rate (GBP to CAD) 1.6564 2.0407
Average for the year 1.7962 1.9540
--------------------------- ------ ------
(e) Use of estimates and judgments
The preparation of these consolidated financial statements in
conformity with IFRS requires management to make certain estimates,
judgments and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated financial
statements and reported amounts of revenues and expenses during the
reporting period. Actual outcomes could differ from these
estimates. These consolidated financial statements include
estimates that, by their nature, are uncertain. The impacts of such
estimates are pervasive throughout the consolidated financial
statements, and may require accounting adjustments based on future
occurrences. Revisions to accounting estimates are applied
prospectively. These estimates are based on historical experience,
current and future economic conditions and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
Critical accounting estimates
Significant assumptions about the future that management has
made that could result in a material adjustment to the carrying
amounts of assets and liabilities, in the event that actual results
differ from assumptions made, relate to, but are not limited to,
the following:
-- the recoverability of accounts receivable that are included in the consolidated statements
of financial position;
-- the recoverability of exploration and evaluation assets incurred on the Omagh underground
mine is dependent upon the ability to obtain planning permission and secure sufficient funding
for the development of the underground mine. The Omagh underground mine and the open pit mine
are considered as one Cash generating unit ("CGU") and were further tested for impairment
at year end. The calculations of the recoverable amount of CGU require the use of methods
such as the discounted cash flow method, which uses assumptions to estimate future cash flows.
No additional impairment was noted and management is exploring opportunities to secure financing
in anticipation of approval of planning permission;
-- the estimated life of the ore body based on the estimated recoverable ounces or pounds mined
from proven and probable reserves of the mine development costs which impacts the consolidated
statements of financial position and the related depreciation included in the consolidated
statements of loss;
-- the estimated useful lives and residual value of property, plant and equipment which are included
in the consolidated statements of financial position and the related depreciation included
in the consolidated statements of loss;
-- stock-based compensation - management is required to make a number of estimates when determining
the compensation expense resulting from share-based transactions, including volatility, which
is an estimate based on historical price of the Company's share, the forfeiture rate and expected
life of the instruments;
-- derivative financial liability - management is required to make a number of estimates when
determining the fair value of the derivative financial liability, including volatility, the
forfeiture rate and expected life of the instruments; and
-- decommissioning liabilities has been created based on the estimated settlement amounts. Assumptions,
based on the current economic environment, have been made which management believes are a
reasonable basis upon which to estimate the future liability. These estimates take into account
any material changes to the assumptions that occur when reviewed regularly by management.
Estimates are reviewed quarterly and are based on current regulatory requirements and constructive
obligations. Significant changes in estimates of contamination, restoration standards and
techniques will result in changes to liability on a quarterly basis. Actual decommissioning
costs will ultimately depend on actual future settlement amount for the decommissioning costs
which will reflect the market condition at the time the decommissioning costs are actually
incurred. The final cost of the currently recognized decommissioning provisions may be higher
or lower than currently provided for.
Critical accounting judgments
-- functional currency - the functional currency for the parent entity and each of its subsidiaries,
is the currency of the primary economic environment in which the entity operates. Determination
of functional currency may involve certain judgments to determine the primary economic environment
and the parent entity reconsiders the functional currency of its entities if there is a change
in events and conditions which determined primary economic environment;
-- exploration and evaluation assets - the determination of the demonstration of technical feasibility
and commercial viability is subject to a significant degree of judgment and assessment of
all relevant factors;
-- Income taxes - measurement of income taxes payable and deferred income tax assets and liabilities
requires management to make judgments in the interpretation and application of the relevant
tax laws. The actual amount of income taxes only becomes final upon filing and acceptance
of the tax return by the relevant authorities, which occurs subsequent to the issuance of
the consolidated financial statements; and
-- Going concern assumption - Going concern presentation of the consolidated financial statements
which assumes that the Company will continue in operation for the foreseeable future and will
be able to realize its assets and discharge its liabilities in the normal course of operations
as they come due.
4. Significant Accounting Policies
(a) Foreign currency transactions
Transactions in foreign currencies are translated to the
respective functional currencies of the operations at exchange
rates at the dates of transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate at
that date. Non-monetary assets and liabilities denominated in
foreign currencies that are measured at fair value are retranslated
to the functional currency at the exchange rate at the date that
the fair value was determined. Foreign currency differences arising
in retranslation are recognized in the consolidated statements of
loss, except for differences arising on the retranslation of
available-for-sale equity instruments which are recognised in other
comprehensive income. Non-monetary items that are measured in terms
of historical cost in foreign currency are translated using the
exchange rate at the date of the transaction.
(b) Financial instruments
The Company's financial instruments consist of the
following:
Financial assets: Classification:
-------------------------------------- ---------------------------------
Cash Fair value through profit or loss
Accounts receivable Loans and receivables
Long-term deposit Loans and receivables
-------------------------------------- ---------------------------------
Financial liabilities: Classification:
-------------------------------------- ---------------------------------
Accounts payable and other liabilities Other financial liabilities
Financing facility Other financial liabilities
Due to related parties Other financial liabilities
Derivative financial liability Fair value through profit or loss
-------------------------------------- ---------------------------------
Fair value through profit or loss ("FVTPL"):
Financial assets or financial liabilities are classified as
FVTPL when acquired principally for the purpose of trading, if so
designated by management (fair value option), or if they are
derivative assets that are not part of an effective and designated
hedging relationship. Financial assets and financial liabilities
classified as FVTPL are measured at fair value, with changes
recognized in the consolidated statements of loss.
Loans and receivables:
Loans and receivables are financial assets with fixed or
determinable payments that are not quoted in an active market. Such
assets are initially recognized at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition,
loans and receivables are measured at amortized cost using the
effective interest method, less any impairment losses.
Other financial liabilities:
Other financial liabilities are recognized initially at fair
value net of any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are
measured at amortized cost using the effective interest method. The
effective interest method is a method of calculating the amortized
cost of a financial liability and of allocating interest and any
transaction costs over the relevant period. The effective interest
rate is the rate that exactly discounts estimated future cash
payments through the expected life of the financial liability or
(where appropriate) to the net carrying amount on initial
recognition. Other financial liabilities are de-recognized when the
obligations are discharged, cancelled or expired.
Impairment of financial assets:
Financial assets are assessed for objective evidence of
impairment on an incurred loss basis at the end of each reporting
period. Financial assets are impaired when there is objective
evidence that, as a result of one or more events that occurred
after the initial recognition of the financial assets, the
estimated future cash flows of the investments have been negatively
impacted. Evidence of impairment could include:
-- significant financial difficulty of the issuer or counterparty; or
-- default or delinquency in interest or principal payments; or
-- the likelihood that the borrower will enter bankruptcy or financial re-organization.
The carrying amount of financial assets is reduced by any
impairment loss directly for all financial assets with the
exception of accounts receivable, where the carrying amount is
reduced through the use of an allowance account. When an accounts
receivable is considered uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously
written off are credited against the allowance account. Changes in
the carrying amount of the allowance account are recognized in the
consolidated statements of loss.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognized, the previously
recognized impairment loss is reversed through the consolidated
statements of loss to the extent that the carrying amount of the
financial asset at the date the impairment is reversed does not
exceed what the amortized cost would have been had the impairment
not been recognized.
Financial instruments recorded at fair value:
Financial instruments recorded at fair value on the consolidated
statements of financial position are classified using a fair value
hierarchy that reflects the significance of the inputs used in
making the measurements. The fair value hierarchy has the following
levels:
-- Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or
liabilities Cash was measured as a level 1;
-- Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices); and
-- Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable
market data (unobservable inputs). Derivative financial liabilities was measured as a level
3.
(c) Impairment of non-financial assets
At the end of each reporting period, the Company reviews the
carrying amounts of its non-financial assets with finite lives to
determine whether there is any indication that those assets have
suffered an impairment loss. Where such an indication exists, the
recoverable amount of the asset is estimated in order to determine
the extent of the impairment loss. The recoverable amount is the
higher of an asset's fair value less disposal cost or its value in
use. In addition, non-current assets that are not amortized are
subject to an annual impairment assessment.
(d) Property, plant and equipment
Property, plant and equipment are carried at cost, less
accumulated depreciation and accumulated impairment losses. The
cost of an item of property, plant and equipment consists of the
purchase price, any costs directly attributable to bringing the
asset to the location and condition necessary for its intended use
and an initial estimate of the costs of dismantling and removing
the item and restoring the site on which it is located.
Depreciation is recognized based on the cost of an item of
property, plant and equipment, less its estimated residual value,
over its estimated useful life at the following rates:
Detail Percentage Method
---------------------- ---------- ------------------
Buildings 20% Declining balance
Plant and machinery 20% Declining balance
Motor vehicles 25% Declining balance
Office equipment 15% Declining balance
Moulds 25% Straight-line
Mine development costs Unit-of-production
---------------------- ---------- ------------------
An asset's residual value, useful life and depreciation method
are reviewed, and adjusted if appropriate, on an annual basis.
(e) Exploration and evaluation assets
These assets relate to the exploration and evaluation
expenditures incurred in respect to resource projects that are in
the exploration and evaluation stage.
Exploration and evaluation expenditures include costs which are
directly attributable to acquisition and evaluation activities,
assessing technical feasibility and commercial viability. These
expenditures are capitalized using the full cost method until the
technical feasibility and commercial viability of extracting the
mineral resource of a project are demonstrable. During the
exploration period, exploration and evaluation assets are not
amortized.
Exploration and evaluation assets are allocated to CGU for the
purpose of assessing such assets for impairment. At the end of each
reporting period, the asset is reviewed for impairment indicators
as per IFRS 6.20:
(i) the period for which the entity has the right to explore in the specific area has expired
during the period or will expire in the near future, and is not expected to be renewed.
(ii) substantive expenditure on further exploration for and evaluation of mineral resources in
the specific area is neither budgeted nor planned.
(iii) exploration for and evaluation of mineral resources in the specific area have not led to the
discovery of commercially viable quantities of mineral resources and the entity has decided
to discontinue such activities in the specific area.
(iv) sufficient data exist to indicate that, although a development in the specific area is likely
to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be
recovered in full from successful development or by sale.
If such indicators exist, the asset is tested for impairment and
the recoverable amount of the asset is estimated. If the
recoverable amount of the asset is estimated to be less than its
carrying amount, the carrying amount of the asset is reduced to its
recoverable amount. An impairment loss is recognized immediately in
consolidated statements of loss. Once the technical feasibility and
commercial viability of extracting a mineral resource of a project
are demonstrable, the relevant exploration and evaluation asset is
assessed for impairment, and any impairment loss recognized, prior
to the balance being reclassified as a development asset in
property, plant and equipment.
The determination of the demonstration of technical feasibility
and commercial viability is subject to a significant degree of
judgment and assessment of all relevant factors. In general,
technical feasibility may be demonstrable once a positive
feasibility study is completed. When determining the commercial
viability of a project, in addition to the receipt of a feasibility
study, the Company also considers factors such as the availability
of project financing, the existence of markets and/or long term
contracts for the product, and the ability of obtaining the
relevant operating permits.
All subsequent expenditures to ready the property for production
are capitalized within development assets, other than those costs
related to the construction of property, plant and equipment.
Once production has commenced, all costs included in development
assets are reclassified to mine development costs.
Exploration and evaluation expenditures incurred prior to the
Company obtaining mineral rights related to the property being
explored are recorded as expense in the period in which they are
incurred.
(f) Stripping costs
Till stripping costs involving the removal of overburden are
capitalized where the underlying ore will be extracted in future
periods. The Company defers these till stripping costs and
amortizes them on a unit-of-production basis as the underlying ore
is extracted.
(g) Inventories
Inventories are comprised of finished goods, concentrate
inventory and work-in-process amounts.
All inventories are recorded at the lower of production costs on
a first-in, first-out basis, and net realizable value. Production
costs include costs related to mining, crushing, mill processing,
as well as depreciation on production assets and certain
allocations of mine-site overhead expenses attributable to the
manufacturing process.
Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion
and selling expenses.
(h) Revenue recognition
Revenue from sales of finished goods is recognized at the time
of shipment when significant risks and rewards of ownership are
considered to be transferred, the terms are fixed or determinable,
collection is probable, the associated costs and possible return of
goods can be estimated reliably, and there is no continuing
management involvement in the goods, and the amount of revenue can
be measured reliably.
Revenue from sales of gold concentrate is recognized at the time
of shipment when title passes and significant risks and benefits of
ownership are considered to be transferred and the amount of
revenue to be receivable by the Company is known or could be
accurately estimated. The final revenue figure at the end of any
given period is subject to adjustment at the date of ultimate
settlement as a result of final assay agreement and metal prices
changes.
(i) Provisions
A provision is recognized when the Company has a present legal
or constructive obligation as a result of a past event, it is
probable that an outflow of economic benefits will be required to
settle the obligation, and the amount of the obligation can be
reliably estimated. If the effect is material, provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability.
A provision for onerous contracts is recognized when the
expected benefits to be derived by the Company from a contract are
lower than the unavoidable cost of meeting its obligations under
the contract.
(j) Share-based compensation transactions
Share-based compensation transactions
Employees (including directors and senior executives) of the
Company receive a portion of their remuneration in the form of
share-based compensation transactions, whereby employees render
services as consideration for equity instruments ("equity-settled
transactions").
In situations where equity instruments are issued and some or
all of the goods or services received by the entity as
consideration cannot be specifically identified, such as
share-based payments to employees, they are measured at fair value
of the share-based payment.
Share-based payments to employees of the subsidiaries are
recognized as cash settled share-based compensation
transactions.
Equity-settled transactions
The costs of equity-settled transactions with employees are
measured by reference to the fair value at the date on which they
are granted.
The costs of equity-settled transactions are recognized,
together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled,
ending on the date on which the relevant employees become fully
entitled to the award ("the vesting date"). The cumulative expense
is recognized for equity-settled transactions at each reporting
date until the vesting date reflects the Company's best estimate of
the number of equity instruments that will ultimately vest. The
profit or loss charge or credit for a period represents the
movement in cumulative expense recognized as at the beginning and
end of that period and the corresponding amount is represented in
"equity settled share-based payments reserve".
No expense is recognized for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied provided that all other
performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, the
minimum expense recognized is the expense as if the terms had not
been modified. An additional expense is recognized for any
modification which increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial to the
employee as measured at the date of modification.
The dilutive effect of outstanding options (if any) is reflected
as additional dilution in the computation of loss per share.
Cash-settled transactions
The cost of cash-settled transactions is measured initially at
fair value. The liability is re-measured to fair value at each
reporting date up to, and including the settlement date, with
changes in fair value recognised in employee benefits expense.
(k) Warrants with an exercise price denominated in a foreign currency
Warrants with an exercise price denominated in a foreign
currency are recorded at fair value and classified as a derivative
financial liability. The liability is initially measured at fair
value using the Black-Scholes pricing model with subsequent changes
in fair value recorded as a gain or loss in the consolidated
statements of loss. As the warrants are exercised, the value of the
recorded liability will be included in share capital along with the
proceeds from the exercise. If these warrants expire, the related
liability is reversed through the consolidated statements of
loss.
(l) Income taxes
Income tax on the consolidated statements of loss for the years
presented comprises current and deferred tax. Income tax is
recognized in the consolidated statements of loss except to the
extent that it relates to items recognized directly in equity, in
which case it is recognized in equity.
Current tax expense is the expected tax payable on the taxable
income for the year, using tax rates enacted or substantively
enacted at period end, adjusted for amendments to tax payable with
regards to previous years.
Deferred tax is recognized in respect of taxable temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized for the following
temporary differences: the initial recognition of assets or
liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss, and
differences relating to investments in subsidiaries and joint
ventures to the extent that it is probable that they will not
reverse in the foreseeable future. In addition, deferred tax is not
recognized for taxable temporary differences arising on the initial
recognition of goodwill. Deferred tax is measured at the tax rates
that are expected to be applied to taxable temporary differences
when they reverse, based on the laws that have been enacted or
substantively enacted by the reporting date. Deferred tax assets
and liabilities are offset if there is a legally enforceable right
to offset current tax liabilities and assets, and they relate to
income taxes levied by the same tax authority on the same taxable
entity, but they intend to settle current tax liabilities and
assets on a net basis or their tax assets and liabilities will be
realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences, to the extent that it
is probable that future taxable profits will be available against
which they can be utilized. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
(m) Decommissioning liability
A legal or constructive obligation to incur restoration,
rehabilitation and environmental costs may arise when environmental
disturbance is caused by the exploration, development or ongoing
production of a mineral property interest. Such costs arising from
the decommissioning of plant and other site preparation work,
discounted to their net present value, are provided for and
capitalized at the start of each project to the carrying amount of
the asset, when there is a present obligation, as a result of a
past event, it is probable to be settled by a future outflow of
resources and a reliable estimate can be made of the obligation.
Discount rates using a pretax rate that reflects the risk and the
time value of money are used to calculate the net present value.
These costs are charged against the consolidated statements of loss
over the economic life of the related asset, through amortization
using either a unit-of-production or the straight-line method as
appropriate. The related liability is adjusted for each period for
the unwinding of the discount rate and for changes to the current
market-based discount rate, amount or timing of the underlying cash
flows needed to settle the obligation. Costs for restoration of
subsequent site damage that is created on an ongoing basis during
production are provided for at their net present values and charged
against profits and/or inventories as extraction progresses.
(n) Loss per share
The Company presents basic and diluted loss per share data for
its common shares, calculated by dividing the loss attributable to
common shareholders of the Company by the weighted average number
of common shares outstanding during the year. Diluted loss per
share is computed similarly to basic loss per share except that the
weighted average shares outstanding are increased to include
additional shares for the assumed exercise of stock options and
warrants, if dilutive. The number of additional shares is
calculated by assuming that outstanding stock options and warrants
were exercised and that the proceeds from such exercises were used
to acquire common stock at the average market price during the
years. Options and warrants are anti-dilutive and, therefore, have
not been taken into account in the per share calculation.
(o) Change in accounting policies
IAS 1 - Presentation of Financial Statements was amended in
December 2014 in order to clarify, among other things, that
information should not be obscured by aggregating or by providing
immaterial information, that materiality consideration apply to all
parts of the financial statements and that even when a standard
requires a specific disclosure, materiality considerations do
apply. At January 1, 2016, the Company adopted this pronouncement
and there was no material impact on the Company's consolidated
financial statements.
(p) Recent accounting pronouncements
(i) IFRS 9 - Financial Instruments ("IFRS 9") was issued by the
IASB in October 2010 and will replace IAS 39 -Financial
Instruments: Recognition and Measurement ("IAS 39"). IFRS 9 uses an
incurred loss approach to determine whether a financial asset is
measured at amortized cost or fair value, replacing the expected
loss approach in IAS 39. The approach in IFRS 9 is based on how an
entity manages its financial instruments in the context of its
business model and the contractual cash flow characteristics of the
financial assets. In July 2014, the IASB issued the final version
of IFRS 9. The final amendments made in the new version include
guidance for the classification and measurement of financial assets
and a third measurement category for financial assets, fair value
through other comprehensive income. The standard also contains a
new expected loss impairment model for debt instruments measured at
amortized cost or fair value through other comprehensive income,
lease receivables, contract assets and certain written loan
commitments and financial guarantee contracts. Most of the
requirements in IAS 39 for classification and measurement of
financial liabilities were carried forward unchanged to IFRS 9.
IFRS 9 will be effective for accounting periods beginning January
1, 2018. The Company is currently assessing the impact of this
pronouncement.
(ii) In May 2014, the IASB issued IFRS 15 - Revenue from
Contracts with Customers ("IFRS 15") to replace IAS 18 -Revenue and
IAS 11 - Construction Contracts and the related interpretations on
revenue recognition. The new revenue standard introduces a single,
principles based, five-step model for the recognition of revenue
when control of a good or service is transferred to the customer.
The five steps are identify the contract(s) with the customer,
identify the performance obligations in the contract, determine
transaction price, allocate the transaction price and recognize
revenue when the performance obligation is satisfied. IFRS 15 also
requires enhanced disclosures about revenue to help investors
better understand the nature, amount, timing and uncertainty of
revenue and cash flows from contracts with customers and improves
the comparability of revenue from contracts with customers. IFRS 15
will be effective for annual periods beginning on or after January
1, 2018, with early adoption permitted.
(iii) IFRS 16 - Leases ("IFRS 16") was issued on January 13,
2016 to require lessees to recognize assets and liabilities for
most leases. For lessors, there is little change to the existing
accounting in IAS 17 - Leases.
The IASB issued its standard as part of a joint project with the
Financial Accounting Standards Board ("FASB"). The FASB has not yet
issued its new standard, but it is also expected to require lessees
to recognize most leases on their statement of financial
position.
The new standard will be effective for annual periods beginning
on or after January 1, 2019. Early application is permitted,
provided the new revenue standard, IFRS 15, has been applied, or is
applied at the same date as IFRS 16.
5. Capital Risk Management
The Company manages its capital with the following
objectives:
-- to ensure sufficient financial flexibility to achieve the
ongoing business objectives including funding of future growth
opportunities, and pursuit of accretive acquisitions; and
-- to maximize shareholder return.
The Company monitors its capital structure and makes adjustments
according to market conditions in an effort to meet its objectives
given the current outlook of the business and industry in general.
The Company may manage its capital structure by issuing new shares,
repurchasing outstanding shares, adjusting capital spending, or
disposing of assets. The capital structure is reviewed by
management and the Board of Directors on an ongoing basis.
The Company considers its capital to be equity, comprising share
capital, reserves and deficit which at December 31, 2016 totaled
$6,568,471 (December 31, 2015 - $7,263,271). The Company manages
capital through its financial and operational forecasting
processes. The Company reviews its working capital and forecasts
its future cash flows based on operating expenditures, and other
investing and financing activities. The forecast is regularly
updated based on its exploration activities. Selected information
is provided to the Board of Directors of the Company. The Company's
capital management objectives, policies and processes have remained
unchanged during the year ended December 31, 2016. The Company is
not subject to any capital requirements imposed by a lending
institution or regulatory body.
6. Financial and Property Risk Management
Property risk
The Company's significant project is the Omagh mine. Unless the
Company acquires or develops additional significant projects, the
Company will be solely dependent upon the Omagh mine. If no
additional projects are acquired by the Company, any adverse
development affecting the Omagh mine would have a material effect
on the Company's consolidated financial condition and results of
operations.
Financial risk
The Company's activities expose it to a variety of financial
risks: credit risk and sales concentration, liquidity risk and
market risk (including interest rate risk, foreign currency risk
and commodity price risk).
Risk management is carried out by the Company's management team
with guidance from the Audit Committee under policies approved by
the Board of Directors. The Board of Directors also provides
regular guidance for overall risk management.
(i) Credit risk and sales concentration
Credit risk is the risk of loss associated with a counterparty's
inability to fulfill its payment obligations. The Company's credit
risk is primarily attributable to cash, accounts receivable and
long-term deposit. Cash and long-term deposit are held with
financial institutions and the United Kingdom Crown, respectively,
from which management believes the risk of loss to be minimal. All
the revenue from sales are from one customer and the accounts
receivable consist mainly of a trade account receivable from one
customer, value added tax receivable and sales tax receivable. The
Company is exposed to concentration of credit and sales risk with
one of its customers. Management believes that the credit risk is
minimized due to the financial worthiness of this company. Valued
added tax receivable is collectable from the Government of Northern
Ireland. Sales tax receivable is collectable from government
authorities in Canada.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will not have
sufficient cash resources to meet its financial obligations as they
come due. The Company's liquidity and operating results may be
adversely affected if the Company's access to the capital market is
hindered, whether as a result of a downturn in stock market
conditions generally or matters specific to the Company. The
Company manages liquidity risk by monitoring maturities of
financial commitments and maintaining adequate cash reserves and
available borrowing facilities to meet these commitments as they
come due. As at December 31, 2016, the Company had working capital
deficit of $3,095,124 (December 31, 2015 - $3,606,059). All of the
Company's financial liabilities have contractual maturities of less
than 30 days other than certain related party loans which are due
on demand. The Company is seeking additional capital to meet its
current and ongoing commitments. As of December 31, 2016, the
Company was cash flow negative. The Company's ongoing viability is
dependent on obtaining planning consent for the development of an
underground mine at Omagh and securing sufficient financing to fund
ongoing operational activity and the development of the underground
mine. Refer to note 23.
(iii) Market risk
Market risk is the risk of loss that may arise from changes in
market factors such as interest rate risk, foreign exchange rate
risk and commodity price risk.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate due to changes
in market interest rates. The Company has cash balances,
significant interest-bearing debt due to related parties and
financing facility. The Company is exposed to interest rate risk on
certain related party loans which bear interest at variable
rates.
b) Foreign currency risk
Certain of the Company's expenses are incurred in GBP which is
the currencies of Northern Ireland and the United Kingdom while the
Company's revenues are received in the currency of United States
and are therefore subject to gains and losses due to fluctuations
in these currencies against the functional currency.
(c) Commodity price risk
The Company is exposed to price risk with respect to commodity
prices. Commodity price risk is defined as the potential adverse
impact on earnings and economic value due to commodity price
movements and volatilities. The Company closely monitors commodity
prices, as it relates to gold to determine the appropriate course
of action to be taken by the Company.
Sensitivity analysis
Based on management's knowledge and experience of the financial
markets, the Company believes the following movements are
reasonably possible over a twelve month period:
(i) Certain related party loans are subject to interest rate
risk. As at December 31, 2016, if interest rates had
decreased/increased by 1% with all other variables held constant,
the net loss for the year ended December 31, 2016, would have been
approximately $25,000 lower/higher respectively, as a result of
lower/higher interest rates from certain related party loans.
Similarly, as at December 31, 2016, shareholders' equity would have
been approximately $25,000 higher/lower as a result of a 1%
decrease/increase in interest rates from certain related party
loans.
(ii) The Company is exposed to foreign currency risk on
fluctuations related to cash, accounts receivable, long-term
deposit, accounts payable and other liabilities, financing
liability and due to related parties that are denominated in GBP.
As at December 31, 2016, had the GBP weakened/strengthened by 5%
against the CAD with all other variables held constant, the
Company's consolidated other comprehensive loss for the year ended
December 31, 2016 would have been approximately $133,000
higher/lower as a result of foreign exchange losses/gains on
translation of non-CAD denominated financial instruments.
Similarly, as at December 31, 2016, shareholders' equity would have
been approximately $133,000 higher/lower had the GBP
weakened/strengthened by 5% against the CAD as a result of foreign
exchange losses/gains on translation of non-CAD denominated
financial instruments.
(iii) Commodity price risk could adversely affect the Company.
In particular, the Company's future profitability and viability of
development depends upon the world market price of gold. Gold
prices have fluctuated widely in recent years. There is no
assurance that, even as commercial quantities of gold may be
produced in the future, a profitable market will exist for them. A
decline in the market price of gold may also require the Company to
reduce production of its mineral resources. Management believes
that the impact would be immaterial for the year ended December 31,
2016.
7. Categories of Financial Instruments
As at December 31, 2016 2015
---------------------------------------- --------- ----------
Financial assets:
FVTPL
Cash $ 557,005 $ 1,518,332
Loans and receivables
Accounts receivable 91,222 207,784
Long-term deposit 496,920 612,210
---------------------------------------- --------- ----------
Financial liabilities:
FVTPL
Derivative financing liability 24,000 132,000
Other financial liabilities
Accounts payable and other liabilities 893,570 1,388,762
Financing facility 30,221 38,069
Due to related parties 2,884,187 4,022,216
---------------------------------------- --------- ----------
As of December 31, 2016 and 2015, the fair value of all the
Company's financial instruments approximates the carrying
value.
8. Accounts Receivable and Prepaid Expenses
As at December 31, 2016 2015
----------------------------------------------- -------- --------
Sales tax receivable - Canada $ 1,480 $ 3,083
Valued added tax receivable - Northern Ireland 76,536 141,976
Accounts receivable 13,206 62,725
Prepaid expenses 15,510 41,875
----------------------------------------------- -------- --------
$ 106,732 $ 249,659
----------------------------------------------- -------- --------
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:
As at December 31, 2016 2015
-------------------------- ------- --------
Less than 3 months $ 88,838 $ 165,666
3 to 12 months - 1,837
More than 12 months 2,384 40,281
-------------------------- ------- --------
Total accounts receivable $ 91,222 $ 207,784
-------------------------- ------- --------
9. Inventories
As at December 31, 2016 2015
------------------------ ------- -------
Concentrate inventories $ 10,767 $ 13,265
Finished goods 13,085 30,610
------------------------ ------- -------
$ 23,852 $ 43,875
------------------------ ------- -------
Refer to note 17 for inventory movement.
10. Property, Plant and Equipment
Freehold Plant Mine
land and and Motor Office development
Cost buildings machinery vehicles equipment costs Total
----------- ---------- ---------- -------- --------- ----------- -----------
Balance,
December
31, 2014 $ 2,440,515 $ 5,159,328 $ 81,732 $ 111,292 $ 14,943,018 $ 22,735,885
Additions - 10,278 40,198 - 855,937 906,413
Foreign
exchange
adjustment 315,480 663,775 14,714 14,387 1,931,651 2,940,007
----------- ---------- ---------- -------- --------- ----------- -----------
Balance,
December
31, 2015 2,755,995 5,833,381 136,644 125,679 17,730,606 26,582,305
Additions 46,407 111,298 32,762 - 634,010 824,477
Disposals - - (34,075) - - (34,075)
Foreign
exchange
adjustment (519,002) (1,093,260) (25,733) (23,668) (3,580,988) (5,242,651)
----------- ---------- ---------- -------- --------- ----------- -----------
Balance,
December
31, 2016 $ 2,283,400 $ 4,851,419 $ 109,598 $ 102,011 $ 14,783,628 $ 22,130,056
----------- ---------- ---------- -------- --------- ----------- -----------
Freehold Plant Mine
land and and Motor Office development
Accumulated buildings machinery vehicles equipment costs Total
depreciation
------------- ---------- ---------- -------- --------- ----------- -----------
Balance,
December 31,
2014 $ 1,969,052 $ 4,300,385 $ 75,803 $ 85,203 $ 9,217,987 $ 15,648,430
Depreciation 24,105 173,340 6,466 4,000 - 207,911
Foreign
exchange
adjustment 266,155 560,042 10,085 11,191 1,191,589 2,039,062
------------- ---------- ---------- -------- --------- ----------- -----------
Balance,
December 31,
2015 2,259,312 5,033,767 92,354 100,394 10,409,576 17,895,403
Depreciation 18,046 137,341 10,195 3,154 - 168,736
Disposals - - (5,866) - - (5,866)
Foreign
exchange
adjustment (426,872) (953,435) (18,441) (19,151) (1,960,309) (3,378,208)
------------- ---------- ---------- -------- --------- ----------- -----------
Balance,
December 31,
2016 $ 1,850,486 $ 4,217,673 $ 78,242 $ 84,397 $ 8,449,267 $ 14,680,065
------------- ---------- ---------- -------- --------- ----------- -----------
Freehold Plant Mine
land and and Motor Office development
Carrying value buildings machinery vehicles equipment costs Total
-------------------- --------- --------- -------- --------- ----------- ----------
Balance, December
31, 2015 $ 496,683 $ 799,614 $ 44,290 $ 25,285 $ 7,321,030 $ 8,686,902
-------------------- --------- --------- -------- --------- ----------- ----------
Balance, December
31, 2016 $ 432,914 $ 633,746 $ 31,356 $ 17,614 $ 6,334,361 $ 7,449,991
-------------------- --------- --------- -------- --------- ----------- ----------
11. Exploration and Evaluation Assets
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 for an underground
gold mine at the Omagh site. In February 2017, the planning
permission was subject to a judicial review and the Company is
awaiting judgement (refer to note 23(ii)) . The consent includes
operating and environmental conditions.
Exploration
and
evaluation
Cost assets
---------------------------- -----------
Balance, December 31, 2014 $ 2,070,772
Additions 40,636
Foreign exchange adjustment 259,920
---------------------------- -----------
Balance, December 31, 2015 2,371,328
Additions 367,893
Foreign exchange adjustment (444,967)
---------------------------- -----------
Balance, December 31, 2016 $ 2,294,254
---------------------------- -----------
Exploration
and
evaluation
Carrying value assets
--------------------------- -----------
Balance, December 31, 2015 $ 2,371,328
--------------------------- -----------
Balance, December 31, 2016 $ 2,294,254
--------------------------- -----------
12. Decommissioning Liability
The Company's decommissioning liability is a result of mining
activities at the Omagh mine in Northern Ireland. The Company
estimated its decommissioning liability at December 31, 2016 based
on a risk-free discount rate of 1% (December 31, 2015 - 1%) and an
inflation rate of 1.50% (December 31, 2015 - 1.50%) . The expected
undiscounted future obligations allowing for inflation are GBP
330,000 and based on management's best estimate the decommissioning
is expected to occur over the next 5 to 10 years. On December 31,
2016, the estimated fair value of the liability is $528,305
(December 31, 2015 - $637,988). Changes in the provision during the
year ended December 31, 2016 are as follows:
As at December 31, 2016 2015
--------------------------------------------- -------- --------
Decommissioning liability, beginning of year $ 637,988 $ 553,544
Accretion 11,345 12,341
Foreign exchange (121,028) 72,103
--------------------------------------------- -------- --------
Decommissioning liability, end of year $ 528,305 $ 637,988
--------------------------------------------- -------- --------
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, 2015 - GBP
300,000), of which GBP 300,000 was funded as of December 31, 2016
(GBP 300,000 was funded as of December 31, 2015) and reported as
long-term deposit of $496,920 (December 31, 2015 - $612,210).
13. Accounts Payable and Other Liabilities
Accounts payable and other liabilities of the Company are
principally comprised of amounts outstanding for purchases relating
to exploration costs on exploration and evaluation assets, general
operating activities, amounts payable for financing activities and
professional fees activities.
As at December 31, 2016 2015
--------------------------------------------- -------- ----------
Accounts payable $ 336,121 $ 756,682
Accrued liabilities 557,449 632,080
--------------------------------------------- -------- ----------
Total accounts payable and other liabilities $ 893,570 $ 1,388,762
--------------------------------------------- -------- ----------
The following is an aged analysis of the accounts payable and
other liabilities:
As at December 31, 2016 2015
--------------------------------------------- -------- ----------
Less than 3 months $ 365,448 $ 680,077
3 to 12 months 154,456 220,071
12 to 24 months 54,992 67,029
More than 24 months 318,674 421,585
--------------------------------------------- -------- ----------
Total accounts payable and other liabilities $ 893,570 $ 1,388,762
--------------------------------------------- -------- ----------
14. Financing Facility
Amounts payable on the long-term debt are as follow:
As at December 31, Interest 2016 2015
----------------------------------------- -------- -------- -------
Financing facility, beginning of period $ 38,069 $ -
Financing facility received (GBP 19,900) 6.79% - 40,610
Less current portion (4,956) (6,947)
Repayment of financing facility (4,007) (2,541)
Foreign exchange adjustment (3,841) -
------------------------------------------ -------- -------- -------
Financing facility - long term portion $ 25,265 $ 31,122
------------------------------------------ -------- -------- -------
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
June 2018 of GBP 9,383. The financing was secured on the
vehicle.
15. Share Capital and Reserves
a) Authorized share capital
At December 31, 2016, the authorized share capital consisted of
an unlimited number of common and preference shares issuable in
Series.
The common shares do not have a par value. All issued shares are
fully paid.
No preference shares have been issued. The preference shares do
not have a par value.
b) Common shares issued
At December 31, 2016, the issued share capital amounted to
$36,331,577. The change in issued share capital for the years
presented is as follows:
Number of
common
shares Amount
-------------------------------------------- ----------- -----------
Balance, December 31, 2014 76,697,155 $ 31,825,575
Shares issued in private placements (i)(ii) 30,599,999 3,007,062
Warrants issued (i)(ii) - (798,000)
Share issue costs - (74,447)
--------------------------------------------- ----------- -----------
Balance, December 31, 2015 107,297,154 33,960,190
Shares issued in private placement (iii) 18,619,841 1,466,312
Share issue costs - (30,777)
Common shares issued for debt (iv) 11,883,835 935,852
--------------------------------------------- ----------- -----------
Balance, December 31, 2016 137,800,830 $ 36,331,577
--------------------------------------------- ----------- -----------
(i) On February 16, 2015, the Company closed a private placement
of 10,599,999 common shares at GBP 0.03 ($0.05727) per common share
for gross proceeds of GBP 316,667 ($607,062). Commissions of
$36,424 were paid in connection with the placement and was included
in the share issue costs. The agent also received 636,000 broker
warrants. Each broker warrant can be exercised for one common share
at an exercise price of GBP 0.045 for a period of 3 years.
The fair value of the 636,000 broker warrants was estimated at
$32,000 using the Black-Scholes option pricing model with the
following assumptions: expected dividend yield - 0%, expected
volatility - 168.98%, risk-free interest rate -0.43% and an
expected average life of 3 years. As a result of the exercise price
of the broker warrants being denominated in a currency other than
the functional currency, the broker warrants are considered a
derivative financial liability.
(ii) On July 24, 2015, the Company closed a private placement of
20,000,000 units at $0.12 per unit for gross proceeds of
$2,400,000. Each unit consists of one common share and one share
purchase warrant. Each warrant is exercisable into one common share
of the Company for a period of 12 months from closing at an
exercise price of $0.16.
The majority of the placement was taken up by Mr. Ross Beaty,
who acquired 16,000,000 units.
The fair value of the 20,000,000 warrants was estimated at
$766,000 using the Black-Scholes option pricing model with the
following assumptions: expected dividend yield - 0%, expected
volatility - 148.97%, risk-free interest rate -0.41% and an
expected average life of 1 year.
(iii) On June 9, 2016, the Company closed a private placement of
18,619,841 common shares at $0.07875 per common share for gross
proceeds of $1,466,312.
The majority of the placement was taken up by Mr. Ross Beaty,
who acquired 12,825,397 common shares.
(iv) On June 10, 2016, the Company issued 11,883,835 common
shares as settlement of due to related parties of $935,852. Due to
related parties consisted of an amount owing to Roland Phelps
(President and Chief Executive Officer ("CEO").
c) Warrant reserve
The following table shows the continuity of warrants for the
years presented:
Weighted
average
Number of exercise
warrants price
--------------------------- ----------- --------
Balance, December 31, 2014 10,330,000 $ 0.18
Issued (note 15(b)(i)(ii)) 20,636,000 0.16
---------------------------- ----------- --------
Balance, December 31, 2015 30,966,000 0.17
Expired (30,330,000) 0.16
---------------------------- ----------- --------
Balance, December 31, 2016 636,000 $ 0.07
---------------------------- ----------- --------
The following table reflects the actual warrants issued and
outstanding as of December 31, 2016:
Fair value
Grant date December 31,
Number fair value Exercise 2016
Expiry date of warrants ($) price ($)
------------------ ----------- ---------- -------- ------------
February 16, 2018 636,000 32,000 0.045(1) 24,000
------------------ ----------- ---------- -------- ------------
(1) Exercise price is in GBP. As a result of the exercise price
of the warrants being denominated in a currency other than the
functional currency, the warrants are considered a derivative
financial liability. The warrants are revalued at each period end
with any gain or loss in the fair value being record in the
consolidated statements of loss as an unrealized gain or loss on
fair value of derivative financial liability.
On December 31, 2016, the fair value of the warrants,
denominated in a currency other than the functional currency, was
estimated using the Black-Scholes option pricing model with the
following assumptions: expected dividend yield of 0%; expected
volatility of 129%; risk free interest rate of 0.73%; and an
expected life of 1.13 years. As a result, the fair value of the
warrants was calculated to be $24,000 and the Company recorded an
unrealized gain on fair value of derivative financial liability for
the year ended December 31, 2016 of $108,000 (year ended December
31, 2015 -unrealized gain of $268,000).
d) Stock options
The Company has a stock option plan (the "Plan"), the purpose of
which is to attract, retain and compensate qualified persons as
directors, senior officers and employees of, and consultants to the
Company and its affiliates and subsidiaries by providing such
persons with the opportunity, through share options, to acquire an
increased proprietary interest in the Company. The number of shares
reserved for issuance under the Plan cannot be more than a maximum
of 10% of the issued and outstanding shares at the time of any
grant of options. The period for exercising an option shall not
extend beyond a period of five years following the date the option
is granted.
Insiders of the Company are restricted on an individual basis
from holding options which when exercised would entitle them to
receive more than 5% of the total issued and outstanding shares at
the time the option is granted. The exercise price of options
granted in accordance with the Plan must not be lower than the
closing price of the shares on the TSXV immediately preceding the
date on which the option is granted and in no circumstances may it
be less than the permissible discounting in accordance with the
Corporate Finance Policies of the TSXV.
The Company records a charge to the consolidated statements of
loss using the Black-Scholes option pricing model. The valuation is
dependent on a number of inputs and estimates, including the strike
price, exercise price, risk-free interest rate, the level of stock
volatility, together with an estimate of the level of forfeiture.
The level of stock volatility is calculated with reference to the
historic traded daily closing share price at the date of issue.
Option pricing models require the inputs including the expected
price volatility. Changes in the inputs can materially affect the
fair value estimate.
The following table shows the continuity of stock options for
the years presented:
Weighted
average
Number of exercise
options price
--------------------------- --------- --------
Balance, December 31, 2014 940,000 $ 0.50
Granted (i)(ii) 3,700,000 0.11
Expired (200,000) 0.50
---------------------------- --------- --------
Balance, December 31, 2015 4,440,000 0.17
Expired (740,000) 0.50
---------------------------- --------- --------
Balance, December 31, 2016 3,700,000 $ 0.11
---------------------------- --------- --------
(i) On June 1, 2015, 3,550,000 stock options were granted to
directors, officers, consultants and key employees of the Company
to purchase common shares at a price of $0.105 per share until June
1, 2020. The options vested immediately. The fair value attributed
to these options was $324,000 and was expensed in the consolidated
statements of loss and credited to equity settled share-based
payments reserve. During the year ended December 31, 2016, included
in stock-based compensation is $nil (year ended December 31, 2015 -
$324,000) related to the vested portion of these options.
The fair value of the options was estimated using the
Black-Scholes option pricing model with the following assumptions:
dividend yield - 0%; volatility - 134%; risk-free interest rate -
0.90% and an expected life of 5 years.
(ii) On June 13, 2015, 150,000 stock options were granted to a
consultant of the Company to purchase common shares at a price of
$0.105 per share until June 12, 2020. The options vested
immediately. The fair value attributed to these options was $14,000
and was expensed in the consolidated statements of loss and
credited to equity settled share-based payments reserve. During the
year ended December 31, 2016, included in stock-based compensation
is $nil (year ended December 31, 2015 - $14,000) related to the
vested portion of these options.
The fair value of the options was estimated using the
Black-Scholes option pricing model with the following assumptions:
dividend yield - 0%; volatility - 133%; risk-free interest rate -
1.01% and an expected life of 5 years.
The following table reflects the actual stock options issued and
outstanding as of December 31, 2016:
Weighted average Number of
remaining Number of options Number of
Exercise contractual options vested options
Expiry date price ($) life (years) outstanding (exercisable) unvested
-------------- --------- ---------------- ----------- ------------- ---------
June 1, 2020 0.105 3.42 3,550,000 3,550,000 -
June 12, 2020 0.105 3.45 150,000 150,000 -
-------------- --------- ---------------- ----------- ------------- ---------
0.105 3.42 3,700,000 3,700,000 -
-------------- --------- ---------------- ----------- ------------- ---------
16. Net Loss per Common Share
The calculation of basic and diluted loss per share for the year
ended December 31, 2016 was based on the loss attributable to
common shareholders of $1,613,298 (year ended December 31, 2015 -
$1,793,077) and the weighted average number of common shares
outstanding of 124,385,093 (year ended December 31, 2015 -
94,687,024) for basic and diluted loss per share. Diluted loss did
not include the effect of 636,000 warrants (year ended December 31,
2015 - 30,966,000) and 3,700,000 options (year ended December 31,
2015 - 4,440,000) for the year ended December 31, 2016, as they are
anti-dilutive.
17. Cost of Sales
Year Ended December 31, 2016 2015
------------------------ -------- --------
Production wages $ 134,953 $ 71,616
Oil and fuel 52,539 53,227
Repairs and servicing 64,905 77,339
Equipment hire 5,489 12,523
Environment monitoring 25,364 20,070
Royalties 17,962 21,738
Other costs 31,092 22,163
------------------------ -------- --------
Production costs 332,304 278,676
Inventory movement 12,753 78,160
------------------------ -------- --------
Cost of sales $ 345,057 $ 356,836
------------------------ -------- --------
18. Taxation
(a) Provision for income taxes
A reconciliation of the expected tax recovery to actual is
provided as follows:
Year Ended December 31, 2016 2015
---------------------------------------------------------------- ----------- -----------
Loss before income taxes $ (1,613,298) $ (1,793,077)
---------------------------------------------------------------- ----------- -----------
Expected tax recovery at statutory rate of 26.5% (2015 - 26.5%) (427,524) (475,165)
Difference resulting from:
Foreign tax rate differential 54,984 55,770
Stock-based compensation - 89,570
Re-evaluation of warrants (28,620) (71,020)
Non-capital losses not recognized 401,160 400,845
---------------------------------------------------------------- ----------- -----------
$ - $ -
---------------------------------------------------------------- ----------- -----------
(b) Deferred tax balances
The tax effects of temporary differences that give rise to
deferred tax assets and deferred tax liabilities that have not been
recognized for financial statement purposes are as follows:
2016 2015
-------------------------------------------------------------- ---------- ----------
Deferred income tax assets (liabilities)
Non-capital losses $ 5,464,152 $ 6,097,840
Share issue costs 20,875 19,552
Property, plant and equipment and deferred development costs (958,425) (1,173,447)
Valuation allowance (impairment) (4,526,602) (4,943,945)
-------------------------------------------------------------- ---------- ----------
$ - $ -
-------------------------------------------------------------- ---------- ----------
(c) Losses carried forward
As at December 31, 2016, the Company had non-capital losses
carried forward of $27,747,149 (2015 - $28,226,015) for income tax
purposes as follows:
Expires 2026 $ 1,064,484
2027 598,595
2029 373,962
2030 440,512
2031 993,770
2032 600,689
2033 1,100,268
2034 906,488
2035 884,524
2036 901,061
Indefinite 19,882,796
-----------
$ 27,747,149
===========
The loss carry-forward amounts have not been recognized for
accounting purposes because it is not probable that future profit
will be available against which the Company can utilize the
benefits therefrom.
19. Related Party Disclosures
Related parties include the Board of Directors, close family
members, other key management individuals and enterprises that are
controlled by these individuals as well as certain persons
performing similar functions.
Related party transactions conducted in the normal course of
operations are measured at the fair value and approved by the Board
of Directors in strict adherence to conflict of interest laws and
regulations.
(a) The Company entered into the following transactions with related parties:
Year Ended
December 31,
Note 2016 2015
-------------------------------- ----- ------- ------
Interest on related party loans (i) $ 63,539 $70,612
--------------------------------- ------ ------- ------
(i) G&F Phelps Limited, a company controlled by a director
of the Company, had amalgamated loans to the Company of $2,183,722
(GBP 1,318,354) (December 31, 2015 - $2,690,365 - GBP 1,318,354)
included with due to related parties bearing interest at 2% above
UK base rates, repayable on demand and secured by a mortgage
debenture on all the Company's assets. Interest accrued on related
party loans is included with due to related parties. As at December
31, 2016, the amount of interest accrued is $318,375 (GBP 192,209)
(December 31, 2015 - $320,053 -GBP 156,835).
(ii) See note 15(b)(ii)(iii)(iv).
(b) Remuneration of key management of the Company was as follows:
Year Ended
December 31,
2016 2015
-------------------------- -------- -------
Salaries and benefits (1) $ 458,120 $491,943
Stock-based compensation - 109,521
-------------------------- -------- -------
$ 458,120 $601,464
-------------------------- -------- -------
(1) Salaries and benefits include director fees. As at December
31, 2016, due to directors for fees amounted to $110,250 (December
31, 2015 - $83,750) and due to key management, mainly for salaries
and benefits accrued amounted to $271,840 (GBP 164,115) (December
31, 2015 - $928,048 - GBP 454,769), and is included with due to
related parties.
(c) As of December 31, 2016, Ross Beaty owns 28,825,397 common
shares of the Company or approximately 20.92% of the outstanding
common shares. Roland Phelps, CEO and director, owns, directly and
indirectly, 33,356,750 common shares of the Company or
approximately 24.21% of the outstanding common shares of the
Company. The remaining 54.87% of the shares are widely held, which
includes various small holdings which are owned by directors of the
Company. These holdings can change at anytime at the discretion of
the owner.
The Company is not aware of any arrangements that may at a
subsequent date result in a change in control of the Company.
20. Segment Disclosure
The Company has determined that it has one reportable segment.
The Company's operations are substantially all related to its
investment in Cavanacaw and its subsidiaries, Omagh and Flintridge.
Substantially all of the Company's revenues, costs and assets of
the business that support these operations are derived or located
in Northern Ireland. Segmented information on a geographic basis is
as follows:
December 31, 2016 United Kingdom Canada Total
------------------- -------------- ---------- ----------
Current assets $ 283,773 $ 403,816 $ 687,589
Non-current assets 10,180,747 60,418 10,241,165
------------------- -------------- ---------- ----------
Revenues $ 74,068 $ - $ 74,068
------------------- -------------- ---------- ----------
December 31, 2015 United Kingdom Canada Total
------------------- -------------- ---------- ----------
Current assets $ 447,691 $ 1,364,175 $ 1,811,866
Non-current assets 11,609,887 60,553 11,670,440
------------------- -------------- ---------- ----------
Revenues $ 80,989 $ - $ 80,989
------------------- -------------- ---------- ----------
21. Contingency
During the year ended December 31, 2010, the Company's
subsidiary Omagh received a payment demand from Her Majesty's
Revenue and Customs in the amount of $504,026 (GBP 304,290) in
connection with an aggregate levy arising from the removal of waste
rock from the mine site during 2008 and early 2009. The Company
believes this claim is without merit. An appeal has been lodged and
the Company's subsidiary Omagh intends to vigorously defend itself
against this claim. The hearing started at the beginning of March
2017 but a further two days hearing is to be scheduled but dates
have not yet been determined. No provision has been made for the
claim in the consolidated financial statements.
22. Supplement Schedule of Non-Cash Transactions
Year Ended
December 31,
2016 2015
---------------------------------------------------------------- -------- ----
Shares issued to settle due to related parties (note 15(b)(iv)) $ 935,852 $ -
---------------------------------------------------------------- -------- ----
23. Events After the Reporting Period
(i) On February 27, 2017, the Company completed the first part
of a private placement. It consisted of 27,371,035 common shares of
no par value. United Kingdom placees have subscribed at a price of
GPB 0.045 per common share. Canadian placees have subscribed at a
price of $0.0725 per common share. Receipts attached to the first
part of the placement total $2,021,501. The hold period will expire
for the first closing of the Placing on June 25, 2017.
On March 2, 2017, the Company completed the second part of a
private placement. It consisted of 5,722,222 common shares of no
par value for receipt of $424,798. United Kingdom placees have
subscribed at a price of GPB 0.045 per common share. The hold
period will expire for the second closing of the Placing on July 3,
2017.
Melquart Ltd, ("Melquart") a UK based investment institution,
subscribed for a total of 22,222,222 common shares and Melquart's
staked increased to 13% of the Company's issued common shares.
(i) (continued) Ross Beaty subscribed for 3,326,170 common
shares and after closing of the private placement Ross Beaty owns
32,151,567 common shares of the Company or approximately 18.8% of
the outstanding common shares.
The net proceeds to be raised by the private placement are
intended to be used for working capital purposes and to commence
development of an underground mine on the Omagh property.
(ii) On March 13, 2017, the Company announced that underground
development had commenced on the Omagh mine and that the Company
awaits judgement on the judicial review of the planning permission,
for which no date has yet been advised to the Company (refer to
note 11).
(iii) On March 25, 2017, 4,900,000 stock options were granted to
directors, officers, consultants and key employees of the Company
to purchase common shares at a price of $0.135 per share until
March 25, 2022. The options will vest as to one third on March 25
2017 and one third on each of the following two anniversaries. The
fair value attributed to these options was $645,820. The fair value
of the options was estimated using the Black-Scholes option pricing
model with the following assumptions: dividend yield - 0%;
volatility - 201%; risk-free interest rate - 1.12% and an expected
life of 5 years.
(iv) On April 24, 2017, the Company announced that the
underground development at the Omagh gold mine has been put on hold
following the receipt of notification that the Police Service of
Northern Ireland ("PSNI") will not provide its required
anti-terrorism cover in regard to blasting operations required for
mine development. The Company has been told that, due to PSNI
resource constraints and competing priorities, PSNI is currently
only prepared to provide anti-terrorism cover for a maximum of 2
hours period, 2 days per week, which is insufficient to sustain the
development or operation of the mine. PSNI will also require a cost
recovery agreement. The Company has sought to discuss the issue at
the highest levels of command in PSNI and the Northern Ireland
Office, but the engagement has been denied. The Company has been
given no alternative other than pursuing its legal options, which
may include substantial compensation for the costs of delays.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKODQOBKDBQB
(END) Dow Jones Newswires
April 28, 2017 02:00 ET (06:00 GMT)
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