TIDMGAL

RNS Number : 2966X

Galantas Gold Corporation

26 August 2022

GALANTAS REPORTS FINANCIAL RESULTS FOR THE QUARTER AND SIX MONTHSED JUNE 30, 2022

August 26, 2022: Galantas Gold Corporation (TSX-V & AIM: GAL; OTCQX: GALKF) ("Galantas" or the "Company") is pleased to announce its unaudited financial results for the Quarter and Six Months ended June 30, 2022.

Financial Highlights

Highlights of the second quarter 2022 results, which are expressed in Canadian Dollars, are summarized below:

 
All figures denominated in Canadian Dollars (CDN$) 
                                                                   Quarter Ended                 Six Months Ended 
                                                                      June 30                        June 30 
 
                                                                     2022 2021                      2022 2021 
Revenue                                                      $ 0            $ 0              $ 0           $ 0 
Cost and expenses of operations                           $ (66,995)    $ (61,333)       $ (113,634)       $ (107,481) 
Loss before the undernoted                                $ (66,995)    $ (61,333)       $ (113,634)       $ (107,481) 
Depreciation                                             $ (148,336)    $ (87,088)       $ (278,867)     $ (159,153) 
General administrative expenses                          $(1,412,941)  $ (2,719,055)    $ 2,584,111)    $ (3,224,152) 
Foreign exchange gain / (loss)                             $ 48,104       $ 21,092)      $ (19,368)      $ (37,745) 
Net Loss for the period                                  $ 1,580,168)  $ (2,888,568)    $ (2,995,980)   $ (3,528,531) 
Working Capital (Deficit) / Surplus                      $(3,687,844)   $ 4,505,905     $ (3,687,844)    $ 4,505,905 
Cash (loss) / profit from operating activities before 
 changes in non-cash working capital                     $(1,738,055)    $ 144,806      $ (1,738,055)        $ 144,806 
Cash at June 30, 2022                                     $ 903,435     $ 6,142,477       $ 903,435      $ 6,142,477 
 

Sales revenue for the quarter ended June 30, 2022 amounted to $Nil compared to revenue of $Nil for the quarter ended June 30, 2021. Shipments of concentrate commenced during the third quarter of 2019. Concentrate sales provisional revenues totalled US$Nil for the second quarter of 2022 compared to US$218,000 for the second quarter of 2021. Until the mine commences commercial production, the net proceeds from concentrate sales are being offset against development assets.

The Net Loss for the quarter ended June 30, 2022 amounted to $1,580,568 (2021: $2,888,568) and the cash outflow from operating activities before changes in non-cash working capital for the quarter ended June 30, 2022 amounted to $1,738,055 (2021: $144,806). The main difference in the reduction in net loss is due to a reduction in the value attributed to stock based compensation and a reduction in financing activities from 2021.

The Company had a cash balance of $903,455 at June 30, 2022 compared to $6,142,477 at June 30, 2021. The working capital deficit at June 30, 2022 amounted to $3,687,844 compared to a working capital surplus of $4,505,905 at June 30, 2021.

Exploration

On August 4, 2022, the Company announced results for three holes from its ongoing 4,000-metre drilling program at the Omagh Project, including a hole that intersected 31.8 grams per tonne gold and 39.2 grams per tonne silver over 4.4 metres.

Mine Development

Safety is a high priority and the company continued to invest in safety-related training and infrastructure. The zero lost time accident rate since the start of underground operations continues. Environmental monitoring demonstrates a high level of regulatory compliance.

Ongoing development of the underground decline will facilitate deeper drilling and more precise targeting of dilation zones to the south at Kearney, planned later this year. Drilling is also planned from the 1084 level, with the aim of identifying and delineating new dilation zones to the north at Kearney.

The secondary egress has been commissioned and blasting of the first stope has commenced. The Company is reviewing its mine plan and production guidance for the next 16 months including the timing to advance development to the higher grade Joshua Vein to provide multiple mine headings as well as underground drill platforms to extend the mineralization to depth and test new targets.

The Company is experiencing cost pressures in fuel and energy costs as well as input costs including labor and supplies. The long term impact of macroeconomic cost pressures are difficult to accurately assess at the moment and result from supply chain issues arising from the COVID pandemic and energy cost increases resulting from the war in Ukraine.

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/2966X_1-2022-8-25.pdf

Qualified Person

The financial components of this disclosure has been reviewed by Alan Buckley (Chief Financial Officer) and the production and permitting components by Brendan Morris (COO), 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.

Enquiries

Galantas Gold Corporation

Mario Stifano: Chief Executive Officer

Email: info@galantas.com

Website: www.galantas.com

Telephone: +44(0)28 8224 1100

Grant Thornton UK LLP (AIM Nomad)

Philip Secrett, Harrison Clarke, George Grainger, Samuel Littler

Telephone: +44(0)20 7383 5100

Panmure Gordon & Co (AIM Joint Broker & Corporate Adviser)

Hugh Rich, John Prior

Telephone: +44(0)20 7886 2500

SP Angel Corporate Finance LLP (AIM Joint Broker)

David Hignell, Charlie Bouverat (Corporate Finance)

Grant Barker (Sales & Broking)

Telephone: +44(0)20 3470 0470

GALANTAS GOLD CORPORATION

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

Three and Six Months Ended June 30, 2022

NOTICE TO READER

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

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

 
                                                                  As at          As at 
                                                                June 30,      December 31, 
                                                                  2022            2021 
 ------------------------------------------------------------  -----------    ------------ 
 
ASSETS 
 
Current assets 
 Cash and cash equivalents                                 $       903,435   $   1,069,751 
 Accounts receivable and prepaid expenses (note 4)                 412,521       1,279,935 
 Inventories (note 5)                                               72,856         108,788 
-------------------------------------------------------------  -----------    ------------ 
Total current assets                                             1,388,812       2,458,474 
 
Non-current assets 
 Property, plant and equipment (note 6)                         28,490,156      25,688,836 
 Long-term deposit (note 8)                                        470,040         513,960 
 Exploration and evaluation assets (note 7)                      2,090,096       1,574,183 
-------------------------------------------------------------  -----------    ------------ 
Total non-current assets                                        31,050,292      27,776,979 
-------------------------------------------------------------  -----------    ------------ 
Total assets                                               $    32,439,104   $  30,235,453 
---------------------------------------------------------      -----------    ------------ 
 
EQUITY AND LIABILITIES 
 
Current liabilities 
 Accounts payable and other liabilities (notes 9 and 17)   $     3,362,962   $   3,013,999 
 Due to related parties (note 15)                                1,377,697         124,317 
 Leases (note 11)                                                  335,997         416,040 
-------------------------------------------------------------  -----------    ------------ 
Total current liabilities                                        5,076,656       3,554,356 
 
Non-current liabilities 
 Non-current portion of financing facilities (note 10)           4,108,000       4,247,488 
 Due to related parties (note 15)                                2,750,067       2,444,376 
 Decommissioning liability (note 8)                                544,259         600,525 
-------------------------------------------------------------  -----------    ------------ 
Total non-current liabilities                                    7,402,326       7,292,389 
-------------------------------------------------------------  -----------    ------------ 
Total liabilities                                               12,478,982      10,846,745 
-------------------------------------------------------------  -----------    ------------ 
 
Equity 
 Share capital (note 12(a)(b))                                  64,072,069      57,783,570 
 Reserves                                                       12,714,264      15,435,369 
 Deficit                                                       (56,826,211)    (53,830,231) 
-------------------------------------------------------------  -----------    ------------ 
Total equity                                                    19,960,122      19,388,708 
-------------------------------------------------------------  -----------    ------------ 
Total equity and liabilities                               $    32,439,104   $  30,235,453 
---------------------------------------------------------      -----------    ------------ 
 

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

Going concern (note 1)

Incorporation and nature of operations (note 2)

Contingency (note 17)

Events after the reporting period (note 18)

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

 
                                                      Three Months Ended           Six Months Ended 
                                                           June 30,                    June 30, 
                                                      2022          2021          2022          2021 
 ------------------------------------------------  ----------    ----------    ----------    ---------- 
 
Revenues 
 Sales of concentrate (note 14)                $            -   $         -   $         -   $         - 
 
Cost and expenses of operations 
 Cost of sales                                         66,995        61,333       113,634       107,481 
 Depreciation (note 6)                                148,336        87,088       278,867       159,153 
-------------------------------------------------  ----------    ----------    ----------    ---------- 
                                                      215,331       148,421       392,501       266,634 
 ------------------------------------------------  ----------    ----------    ----------    ---------- 
 
Loss before general administrative and other 
 expenses                                            (215,331)     (148,421)     (392,501)     (266,634) 
-------------------------------------------------  ----------    ----------    ----------    ---------- 
 
General administrative expenses 
 Management and administration wages (note 15)        148,105        81,951       265,745       226,034 
 Other operating expenses                             113,170        39,835       191,958        72,415 
 Accounting and corporate                              36,482        73,273       189,461        88,457 
 Legal and audit                                       66,088        31,464       129,728        80,637 
 Stock-based compensation (note 12(d))                645,438     1,230,510       995,977     1,235,141 
 Shareholder communication and investor relations     134,734       116,888       270,521       176,741 
 Transfer agent                                        17,718         9,046        21,733        11,907 
 Director fees (note 15)                               35,000        15,500        70,000        24,000 
 General office                                        14,888         7,770        36,075        11,339 
 Accretion expenses (notes 8, 10 and 15)               93,334        27,856       213,821       132,416 
      Loan interest and bank charges less deposit 
       interest (notes 10 and 15)                     107,984        80,780       199,092       160,883 
 Financing costs                                            -     1,004,182             -     1,004,182 
-------------------------------------------------  ----------    ----------    ----------    ---------- 
                                                    1,412,941     2,719,055     2,584,111     3,224,152 
Other expenses 
 Foreign exchange (gain) loss                         (48,104)       21,092        19,368        37,745 
-------------------------------------------------  ----------    ----------    ----------    ---------- 
                                                      (48,104)       21,092        19,368        37,745 
 ------------------------------------------------  ----------    ----------    ----------    ---------- 
 
Net loss for the period                        $   (1,580,168)  $(2,888,568)  $(2,995,980)  $(3,528,531) 
---------------------------------------------      ----------    ----------    ----------    ---------- 
Basic and diluted net loss per share (note 
 13)                                           $        (0.02)  $     (0.05)  $     (0.04)  $     (0.07) 
---------------------------------------------      ----------    ----------    ----------    ---------- 
   Weighted average number of common shares 
    outstanding - basic and diluted                84,140,878    60,494,975    81,353,664    53,501,436 
-------------------------------------------------  ----------    ----------    ----------    ---------- 
 

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

Condensed Interim Consolidated Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

(Unaudited)

 
                                                      Three Months Ended           Six Months Ended 
                                                           June 30,                    June 30, 
                                                      2022          2021          2022          2021 
 ------------------------------------------------  ----------    ----------    ----------    ---------- 
 
   Net loss for the period                     $   (1,580,168)  $(2,888,568)  $(2,995,980)  $(3,528,531) 
 
   Other comprehensive loss 
   Items that will be reclassified 
   subsequently to profit or loss 
 Exchange differences on translating foreign 
  operations                                       (1,218,739)     (198,369)   (2,089,716)     (295,294) 
-------------------------------------------------  ----------    ----------    ----------    ---------- 
Total comprehensive loss                       $   (2,798,907)  $(3,086,937)  $(5,085,696)  $(3,823,825) 
---------------------------------------------      ----------    ----------    ----------    ---------- 
 

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

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

(Unaudited)

 
                                                                             Six Months Ended 
                                                                                 June 30, 
                                                                            2022          2021 
 ----------------------------------------------------------------------  ----------    ---------- 
 
Operating activities 
Net loss for the period                                              $   (2,995,980)  $(3,528,531) 
Adjustment for: 
 Depreciation (note 6)                                                      278,867       159,153 
 Stock-based compensation (note 12(d))                                      995,977     1,235,141 
 Accrued interest (notes 10 and 15)                                         375,855       158,239 
 Foreign exchange (gain) loss                                              (573,713)      344,243 
 Accretion expenses (notes 8, 10 and 15)                                    180,939       132,416 
 Financing costs                                                                  -     1,004,182 
Non-cash working capital items: 
 Accounts receivable and prepaid expenses                                   811,072      (168,600) 
 Inventories                                                                 34,717       (64,831) 
 Accounts payable and other liabilities                                     621,711       124,053 
 Due to related parties                                                     (16,255)      (67,781) 
-----------------------------------------------------------------------  ----------    ---------- 
Net cash and cash equivalents used in by operating activities              (286,810)     (672,316) 
-----------------------------------------------------------------------  ----------    ---------- 
 
Investing activities 
Net purchase of property, plant and equipment                            (4,891,767)   (1,194,831) 
Exploration and evaluation assets                                          (650,437)      (87,456) 
Lease payments (note 11)                                                   (339,470)            - 
-----------------------------------------------------------------------  ----------    ---------- 
Net cash and cash equivalents used in investing activities               (5,881,674)   (1,282,287) 
-----------------------------------------------------------------------  ----------    ---------- 
 
Financing activities 
Proceeds of private placements (note 12(b)(i))                                    -     7,998,980 
Share issue costs                                                                 -      (783,262) 
Proceeds from exercise of warrants                                        4,610,133       330,000 
Advances from related parties                                             1,465,792             - 
Repayment of financing facilities                                                 -       (23,802) 
-----------------------------------------------------------------------  ----------    ---------- 
Net cash and cash equivalents provided by financing activities            6,075,925     7,521,916 
-----------------------------------------------------------------------  ----------    ---------- 
 
Net change in cash and cash equivalents                                     (92,559)    5,567,313 
 
Effect of exchange rate changes on cash held in foreign currencies          (73,757)      (36,930) 
 
Cash and cash equivalents, beginning of period                            1,069,751       612,094 
-----------------------------------------------------------------------  ----------    ---------- 
 
Cash and cash equivalents, end of period                             $      903,435   $ 6,142,477 
-------------------------------------------------------------------      ----------    ---------- 
 
Cash                                                                 $      903,435   $ 6,142,477 
Cash equivalents                                                                  -             - 
-------------------------------------------------------------------      ----------    ---------- 
Cash and cash equivalents                                            $      903,435   $ 6,142,477 
-------------------------------------------------------------------      ----------    ---------- 
 

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

Condensed Interim Consolidated Statements of Changes in Equity

(Expressed in Canadian Dollars)

(Unaudited)

 
                                                      Reserves 
                                       --------------------------------------- 
 
                                                       Equity 
                                                       settled       Foreign 
                                                     share-based    currency 
                           Share        Warrants      payments     translation 
                          capital       reserve        reserve       reserve        Deficit        Total 
-------------------      ----------    ----------    -----------   -----------    -----------    ---------- 
Balance, December 
 31, 2020            $   52,933,594   $   340,000   $  8,381,382  $  1,012,739   $(48,545,800)  $14,121,915 
 
 Shares issued in 
  private placement 
  (note 12(b)(i))         7,998,980             -              -             -              -     7,998,980 
 
 Warrants issued (note 
  12(b)(i))              (3,258,578)    3,258,578              -             -              -             - 
 
 Warrants issued (note 
  10(i))                          -       670,000              -             -              -       670,000 
 
 Share issue costs 
  (note 12(b)(i))          (792,045)        8,783              -             -              -      (783,262) 
 
 Warrant extension 
  (note 15(a)(iii))               -       251,000              -             -              -       251,000 
 
 Stock-based 
  compensation (note 
  12(d))                          -             -      1,235,141             -              -     1,235,141 
 
 Exercise of warrants       677,647      (347,647)             -             -              -       330,000 
 
 Exchange differences 
  on translating 
  foreign 
  operations                      -             -              -      (295,294)             -      (295,294) 
 
 Net loss for the 
  period                          -             -              -             -     (3,528,531)   (3,528,531) 
-----------------------  ----------    ----------    -----------   -----------    -----------    ---------- 
Balance, June 30, 
 2021                $   57,559,598   $ 4,180,714   $  9,616,523  $    717,445   $(52,074,331)  $19,999,949 
-------------------      ----------    ----------    -----------   -----------    -----------    ---------- 
 
Balance, December 
 31, 2021            $   57,783,570   $ 4,130,200   $ 10,417,260  $    887,909   $(53,830,231)  $19,388,708 
 
 Warrants issued (note 
  15(a)(iii))                     -        51,000              -             -              -        51,000 
 
 Stock-based 
  compensation (note 
  12(d))                          -             -        995,977             -              -       995,977 
 
 Exercise of warrants     6,288,499    (1,678,366)             -             -              -     4,610,133 
 
 Exchange differences 
  on translating 
  foreign 
  operations                      -             -              -    (2,089,716)             -    (2,089,716) 
 
 Net loss for the 
  period                          -             -              -             -     (2,995,980)   (2,995,980) 
-----------------------  ----------    ----------    -----------   -----------    -----------    ---------- 
Balance, June 30, 
 2022                $   64,072,069   $ 2,502,834   $ 11,413,237  $ (1,201,807)  $(56,826,211)  $19,960,122 
-------------------      ----------    ----------    -----------   -----------    -----------    ---------- 
 

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

1. Going Concern

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

The going concern assumption is dependent upon forecast cash flows being met and further financing currently being negotiated. The management's assumptions in relation to future levels of production, gold prices and mine operating and capital costs are crucial to forecast cash flows being achieved. Should production be significantly delayed, revenues fall short of expectations or operating costs and capital costs increase significantly, there may be insufficient cash flows to sustain day to day operations without seeking further finance.

Negotiations with current finance providers to extend short-term loans have progressed positively and the maturity dates for both the G&F Phelps Ltd. ("G&F Phelps") and Ocean Partners UK Ltd. ("Ocean Partners") loans have now been extended to December 31, 2023 (see notes 10 and 15). During the year ended December 31, 2021, the Company raised gross proceeds of $8M through the issuance of shares to new and current investors to meet the financial requirements of the Company for the foreseeable future. During the six months ended June 30, 2022, the Company raised gross proceeds of $4.6M through the exercise of warrants. Based on the financial projections prepared, the directors believe it's appropriate to prepare the unaudited condensed interim consolidated financial statements on the going concern basis.

As at June 30, 2022, the Company had a deficit of $56,826,211 (December 31, 2021 - $53,830,231). Comprehensive loss for the six months ended June 30, 2022 was $5,085,696 (six months ended June 30, 2021 - $3,823,825). These conditions raise material uncertainties which may cast significant doubt as to whether the Company will be able to continue as a going concern. However, management is confident that it will continue as a going concern. However, this is subject to a number of factors including market conditions.

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

2. Incorporation and Nature of Operations

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

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

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

On April 17, 2020, the Company completed a share consolidation of its share capital on the basis of ten existing common shares for one new common share consolidation.

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. On September 1, 2021, the Company's common shares started trading under the symbol GALKF on the OTCQX in the United States. The primary office is located at The Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

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

3. Basis of Preparation

Statement of compliance

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

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRS issued and outstanding as of August 25, 2022 the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim consolidated financial statements as compared with the most recent annual consolidated financial statements as at and for the year ended December 31, 2021. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2022 could result in restatement of these unaudited condensed interim consolidated financial statements.

4. Accounts Receivable and Prepaid Expenses

 
                                                      As at        As at 
                                                     June 30,   December 31, 
                                                       2022         2021 
 --------------------------------------------------  --------   ------------ 
 
Sales tax receivable - Canada                    $     12,588  $       4,471 
Valued added tax receivable - Northern Ireland        240,526        239,774 
Accounts receivable                                    50,529        594,071 
Prepaid expenses                                      108,878        281,207 
Other debtors                                               -        160,412 
---------------------------------------------------  --------   ------------ 
 $                                                    412,521  $   1,279,935 
 --------------------------------------------------  --------   ------------ 
 

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        As at 
                                June 30,   December 31, 
                                  2022         2021 
 -----------------------------  --------   ------------ 
 
Less than 3 months          $    253,114  $     884,550 
3 to 12 months                    42,617        105,526 
More than 12 months                7,912          8,652 
------------------------------  --------   ------------ 
Total accounts receivable   $    303,643  $     998,728 
--------------------------      --------   ------------ 
 

5. Inventories

 
                               As at        As at 
                              June 30,   December 31, 
                                2022         2021 
 ---------------------------  --------   ------------ 
 
Concentrate inventories   $     72,856  $     108,788 
------------------------      --------   ------------ 
 

6. Property, Plant and Equipment

 
               Freehold       Plant 
               land and        and        Motor       Office      Development    Assets under 
                            machinery 
Cost           buildings       (i)       vehicles    equipment    assets (ii)    construction      Total 
------------   ---------    ---------    --------    ---------    -----------    ------------    ---------- 
Balance, 
 December 
 31, 2020     $2,398,171   $6,951,208   $ 162,571   $  191,422   $ 19,345,676   $           -   $29,049,048 
Additions              -    1,263,168      38,975       27,973      4,898,703         556,273     6,785,092 
Disposals              -       (6,289)          -            -              -               -        (6,289) 
Cash 
 receipts 
 from 
 concentrate 
 sales                 -            -           -            -     (1,412,329)              -    (1,412,329) 
Foreign 
 exchange 
 adjustment      (34,357)     (99,099)     (2,329)      (2,742)      (270,376)              -      (408,903) 
------------   ---------    ---------    --------    ---------    -----------    ------------    ---------- 
Balance, 
 December 
 31, 2021      2,363,814    8,108,988     199,217      216,653     22,561,674         556,273    34,006,619 
Additions              -      969,503      15,037        9,233      4,704,518               -     5,698,291 
Disposals              -            -           -            -              -        (535,784)     (535,784) 
Foreign 
 exchange 
 adjustment     (201,998)    (690,057)    (17,024)     (18,514)    (1,856,288)        (20,489)   (2,804,370) 
------------   ---------    ---------    --------    ---------    -----------    ------------    ---------- 
Balance, 
 June 30, 
 2022         $2,161,816   $8,388,434   $ 197,230   $  207,372   $ 25,409,904   $           -   $36,364,756 
------------   ---------    ---------    --------    ---------    -----------    ------------    ---------- 
 
 
                Freehold    Plant 
                land and              and        Motor       Office      Development   Assets under 
Accumulated 
depreciation    buildings          machinery    vehicles    equipment      assets      construction     Total 
-------------   ---------   -----  ---------    --------    ---------    -----------   ------------   --------- 
Balance, 
 December 31, 
 2020          $1,986,461   $      5,648,586   $ 130,107   $  125,791   $          -  $           -  $7,890,945 
Depreciation        6,347            507,731      19,776       13,992              -              -     547,846 
Disposals               -             (4,801)          -            -              -              -      (4,801) 
Foreign 
 exchange 
 adjustment       (28,499)           (83,818)     (1,995)      (1,895)             -              -    (116,207) 
-------------   ---------   -----  ---------    --------    ---------    -----------   ------------   --------- 
Balance, 
 December 31, 
 2021           1,964,309          6,067,698     147,888      137,888              -              -   8,317,783 
Depreciation        2,368            262,644       7,863        5,992              -              -     278,867 
Foreign 
 exchange 
 adjustment      (167,977)          (528,952)    (13,035)     (12,086)             -              -    (722,050) 
-------------   ---------   -----  ---------    --------    ---------    -----------   ------------   --------- 
Balance, June 
 30, 2022      $1,798,700   $      5,801,390   $ 142,716   $  131,794   $          -  $           -  $7,874,600 
-------------   ---------   -----  ---------    --------    ---------    -----------   ------------   --------- 
 
 
 
            Freehold      Plant 
            land and       and       Motor      Office     Development   Assets under 
Carrying 
value       buildings   machinery   vehicles   equipment     assets      construction     Total 
---------   ---------   ---------   --------   ---------   -----------   ------------   ---------- 
Balance, 
 December 
 31, 2021  $  399,505  $2,041,290  $  51,329  $   78,765  $ 22,561,674  $     556,273  $25,688,836 
---------   ---------   ---------   --------   ---------   -----------   ------------   ---------- 
Balance, 
 June 30, 
 2022      $  363,116  $2,587,044  $  54,514  $   75,578  $ 25,409,904  $           -  $28,490,156 
---------   ---------   ---------   --------   ---------   -----------   ------------   ---------- 
 

(i) Right-of-use assets of $680,520 is included in additions of the plant and machinery for the year ended December 31, 2021. Right-of-use assets of $270,740 is included in additions of the plant and machinery for the six months ended June 30, 2022.

(ii) Development assets are expenditures for the underground mining operations in Omagh.

7. Exploration and Evaluation Assets

 
                               Exploration 
                                   and 
                               evaluation 
Cost                             assets 
----------------------------   ----------- 
 
Balance, December 31, 2020    $    750,741 
Additions                          834,193 
Foreign exchange adjustment        (10,751) 
----------------------------   ----------- 
Balance, December 31, 2021       1,574,183 
Additions                          650,437 
Foreign exchange adjustment       (134,524) 
----------------------------   ----------- 
Balance, June 30, 2022        $  2,090,096 
----------------------------   ----------- 
 
Carrying value 
----------------------------   ----------- 
 
Balance, December 31, 2021    $  1,574,183 
----------------------------   ----------- 
Balance, June 30, 2022        $  2,090,096 
----------------------------   ----------- 
 

8. Decommissioning Liability

The Company's decommissioning liability is a result of mining activities at the Omagh mine in Northern Ireland. The Company estimated its decommissioning liability at June 30, 2022 based on a risk-free discount rate of 1% (December 31, 2021 - 1%) and an inflation rate of 1.50% (December 31, 2021 - 1.50%). The expected undiscounted future obligations allowing for inflation are GBP 330,000 and based on management's best estimate the decommissioning is expected to occur over the next 5 to 10 years. On June 30, 2022, the estimated fair value of the liability is $544,259 (December 31, 2021 - $600,525). Changes in the provision during the six months ended June 30, 2022 are as follows:

 
                                                      As at         As at 
                                                     June 30,    December 31, 
                                                       2022          2021 
 --------------------------------------------------  --------    ------------ 
 
Decommissioning liability, beginning of period   $    600,525   $     598,275 
Accretion                                               5,211          10,892 
Foreign exchange                                      (61,477)         (8,642) 
---------------------------------------------------  --------    ------------ 
Decommissioning liability, end of period         $    544,259   $     600,525 
-----------------------------------------------      --------    ------------ 
 

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, 2021 - GBP 300,000), of which GBP 300,000 was funded as of June 30, 2022 (GBP 300,000 was funded as of December 31, 2021) and reported as long-term deposit of $470,040 (December 31, 2021 - $513,960).

9. Accounts Payable and Other Liabilities

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

 
                                                     As at        As at 
                                                   June 30,    December 31, 
                                                     2022          2021 
 ------------------------------------------------  ---------   ------------ 
 
Accounts payable                               $   2,168,056  $   1,463,316 
Accrued liabilities                                1,194,906      1,550,683 
-------------------------------------------------  ---------   ------------ 
Total accounts payable and other liabilities   $   3,362,962  $   3,013,999 
---------------------------------------------      ---------   ------------ 
 

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

 
                                                     As at        As at 
                                                   June 30,    December 31, 
                                                     2022          2021 
 ------------------------------------------------  ---------   ------------ 
 
Less than 3 months                             $   2,518,766  $   2,246,440 
3 to 12 months                                       227,225         98,415 
12 to 24 months                                        5,001              - 
More than 24 months                                  603,747        669,144 
-------------------------------------------------  ---------   ------------ 
Total accounts payable and other liabilities   $   3,362,962  $   3,013,999 
---------------------------------------------      ---------   ------------ 
 

10. Financing Facilities

Amounts payable on the Company's financial facilities are as follow:

 
                                                                   As at         As at 
                                                                 June 30,     December 31, 
                                                                   2022           2021 
 --------------------------------------------------------------  ---------    ------------ 
 
Ocean Partners 
Financing facilities, beginning of period                    $           -   $   2,186,272 
Repayment of financing facilities                                        -         (23,802) 
Accretion                                                                -         126,949 
Interest                                                                 -          86,820 
Foreign exchange adjustment                                              -         200,898 
Financing facility reallocated to due to related parties                 -      (2,577,137) 
---------------------------------------------------------------  ---------    ------------ 
                                                                         -               - 
-----------------------------------------------------------      ---------    ------------ 
G&F Phelps 
Financing facility, beginning of period                          4,247,488               - 
Financing facility reallocated from due to related parties               -       4,578,039 
Less bonus warrants issued (i)                                           -        (670,000) 
Accretion                                                          129,678         151,290 
Interest                                                           194,973         164,197 
Foreign exchange adjustment                                       (464,135)         23,962 
---------------------------------------------------------------  ---------    ------------ 
                                                                 4,108,004       4,247,488 
 --------------------------------------------------------------  ---------    ------------ 
Financing facilities - non-current portion                   $   4,108,004   $   4,247,488 
-----------------------------------------------------------      ---------    ------------ 
 

(i) During the six months ended June 30, 2021, the maturity date of the G&F Phelps loan was extended to December 31, 2023. Interest may be deferred and added to the balance outstanding until March 31, 2022, at which point interest will be paid monthly. In consideration for extending the G&F loan and deferring interest, G&F Phelps received 1,700,000 warrants exercisable into one common share at an exercise price of $0.33, with said warrants expiring on December 31, 2023.

The fair value of the 1,700,000 warrants was estimated at $670,000 using the following Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 123.98% to 144.48%, risk-free interest rate - 0.32% and an expected average life of 2.63 years.

11. Leases

 
Balance, December 31, 2020   $          - 
Addition (i)                      680,520 
Interest expense                   36,706 
Lease payments                   (297,450) 
Foreign exchange                   (3,736) 
-------------------------------  -------- 
Balance, December 31, 2021        416,040 
Addition (ii)                     270,740 
Interest expense                   18,133 
Lease payments                   (339,470) 
Foreign exchange                  (29,446) 
-------------------------------  -------- 
Balance, June 30, 2022       $    335,997 
---------------------------      -------- 
 

(i) During the year ended 2021, the Company entered into lease agreements in respect to rent of equipments which will expire between February 2022 to July 2022.

(ii) During the six months ended June 30, 2022, the Company entered into lease agreements in respect to rent of equipments, all of which will expire July 2022 with the exception of a Scissors lift which will continue for a further 12 months.

12. Share Capital and Reserves

a) Authorized share capital

At June 30, 2022, 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 June 30, 2022, the issued share capital amounted to $64,072,069. The continuity of issued share capital for the periods presented is as follows:

 
                                          Number of 
                                            common 
                                            shares       Amount 
---------------------------------------   ----------   ---------- 
 
Balance, December 31, 2020                46,565,537  $52,933,594 
Shares issued in private placement (i)    26,663,264    7,998,980 
Warrants issued (i)                                -   (3,258,578) 
Share issue costs (i)                         41,667     (792,045) 
Exercise of warrants                       1,000,000      677,647 
----------------------------------------  ----------   ---------- 
Balance, June 30, 2021                    74,270,468  $57,559,598 
----------------------------------------  ----------   ---------- 
 
 
Balance, December 31, 2021                74,683,801  $57,783,570 
Exercise of warrants                      11,686,333    6,288,499 
----------------------------------------  ----------   ---------- 
Balance, June 30, 2022                    86,370,134  $64,072,069 
----------------------------------------  ----------   ---------- 
 

(i) On May 14, 2021, Galantas completed a private placement of 26,663,264 units at a price of $0.30 per unit for aggregate gross proceeds of $7,998,980. Each unit comprises one common share and one common share purchase warrant. Each warrant will be exercisable into one additional common share at an exercise price of $0.40 for 24 months from the closing date of the private placement. There is a four-month and one day hold period on the trading of securities issued in connection with this private placement.

The fair value of the 26,663,264 warrants was estimated at $3,258,578 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 155.08%, risk-free interest rate - 0.32% and an expected average life of 2 years.

Ocean Partners acquired 1,666,667 units of the private placement, for consideration of $500,000 and the Company paid a finder's fee of 41,667 units to Ocean Partners resulting in the issuance of 1,708,334 common shares or 2.3% of the Company's issued and outstanding common shares on a non-diluted basis.

The 41,667 units paid as a finder's fee were valued at $20,417. The fair value of the 41,667 warrants was estimated at $8,783 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 155.08%, risk-free interest rate - 0.32% and an expected average life of 2 years.

Roland Phelps, the Company's retired President and Chief Executive Officer, acquired 166,667 units for consideration of $50,000, increasing his holding to 5,100,484 common shares or 6.9% of the Company's issued and outstanding common shares on a non-diluted basis.

In respect of an under-writing by Ocean Partners, the Company paid a commitment fee of $112,500 in cash.

c) Warrant reserve

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

 
                                                                Weighted 
                                                                average 
                                                  Number of     exercise 
                                                  warrants       price 
----------------------------------------------   -----------    -------- 
 
Balance, December 31, 2020                         1,700,000   $    0.33 
Issued (notes 10(i), 12(b)(i) and 15(a)(iii))     28,404,931        0.40 
Expired                                           (1,000,000)       0.33 
-----------------------------------------------  -----------    -------- 
Balance, June 30, 2021                            29,104,931   $    0.39 
-----------------------------------------------  -----------    -------- 
 
 
Balance, December 31, 2021                        28,691,598   $    0.39 
Issued (notes 15(a)(iii))                            250,000        0.50 
Exercised                                        (11,686,333)       0.39 
-----------------------------------------------  -----------    -------- 
Balance, June 30, 2022                            17,255,265   $    0.40 
-----------------------------------------------  -----------    -------- 
 

The following table reflects the actual warrants issued and outstanding as of June 30, 2022:

 
                                                   Grant date  Exercise 
                                        Number     fair value   price 
Expiry date                           of warrants     ($)        ($) 
-----------------------------------   -----------  ----------  -------- 
 
February 3, 2023                          250,000      51,000      0.50 
May 14, 2023 (notes 15(a)(iii)(1))     15,525,265   1,901,069      0.40 
December 31, 2023                       1,480,000     550,765      0.33 
------------------------------------  -----------  ----------  -------- 
                                       17,255,265   2,502,834      0.40 
 -----------------------------------  -----------  ----------  -------- 
 

d) Stock options

The following table shows the continuity of stock options for the periods presented:

 
                                          Weighted 
                                          average 
                              Number of   exercise 
                               options     price 
---------------------------   ---------   -------- 
 
Balance, December 31, 2020      570,000  $    1.16 
Granted (i)(ii)               4,340,000       0.85 
----------------------------  ---------   -------- 
Balance, June 30, 2021        4,910,000  $    0.88 
----------------------------  ---------   -------- 
 
 
                                           Weighted 
                                           average 
                              Number of    exercise 
                               options      price 
---------------------------   ---------    -------- 
 
Balance, December 31, 2021    4,885,000   $    0.88 
Granted (iii)                 1,742,500        0.60 
Expired                        (255,000)       1.35 
Cancelled                      (205,000)       0.96 
----------------------------  ---------    -------- 
Balance, June 30, 2022        6,167,500   $    0.85 
----------------------------  ---------    -------- 
 

(i) On May 19, 2021, the Company granted 3,915,000 stock options to directors, employees and consultants of the Company to purchase common shares at $0.86 per share until May 19, 2026. The options will vest as to one third immediately and one third on each of May 19, 2022 and May 19, 2023. The fair value attributed to these options was $2,907,000 and was expensed in the unaudited condensed interim consolidated statements of loss and credited to equity settled share-based payments reserve. During the three and six months ended June 30, 2022, included in stock-based compensation is $241,587 and $557,975, respectively related to the vested portion of these options.

(ii) On June 21, 2021, the Company granted 425,000 stock options to consultants and officers of the Company to purchase common shares at $0.73 per share until June 21, 2026. The options will vest as to one third immediately and one third on each of June 21, 2022 and June 21, 2023. The fair value attributed to these options was $266,000 and was expensed in the unaudited condensed interim consolidated statements of loss and credited to equity settled share-based payments reserve. During the three and six months ended June 30, 2022, included in stock-based compensation is $30,973 and $63,768, respectively related to the vested portion of these options.

(iii) On May 3, 2022, the Company granted 1,742,500 stock options to directors, officers, employees and consultants of the Company to purchase common shares at $0.60 per share until May 3, 2027. The options will vest as to one third immediately and one third on each of May 3, 2023 and May 3, 2024. The fair value attributed to these options was $900,000 and was expensed in the unaudited condensed interim consolidated statements of loss and credited to equity settled share-based payments reserve. During the three and six months ended June 30, 2022, included in stock-based compensation is $371,507 related to the vested portion of these options.

The portion of the estimated fair value of options granted in the prior years and vested during the three and six months ended June 30, 2022, amounted to $1,371 and $22,727, respectively (three and six months ended June 30, 2021 - $1,230,510 and $1,235,141, respectively).

The following table reflects the actual stock options issued and outstanding as of June 30, 2022:

 
                               Weighted average                 Number of 
                                  remaining       Number of      options     Number of 
                    Exercise     contractual       options       vested       options 
Expiry date         price ($)    life (years)    outstanding  (exercisable)  unvested 
------------------  ---------  ----------------  -----------  -------------  --------- 
April 19, 2023        1.10           0.80             25,000         25,000          - 
February 13, 2024     0.90           1.62             85,000         85,000          - 
June 27, 2024         0.90           1.99            100,000        100,000          - 
May 19, 2026          0.86           3.89          3,770,000      2,513,333  1,256,667 
June 21, 2026         0.73           3.98            425,000        283,333    141,667 
August 27, 2026       0.86           4.16             20,000          6,667     13,333 
May 3, 2023           0.60           4.84          1,742,500        580,833  1,161,667 
------------------  ---------  ----------------  -----------  -------------  --------- 
                      0.78           4.09          6,167,500      3,594,166  2,573,334 
------------------  ---------  ----------------  -----------  -------------  --------- 
 

13. Net Loss per Common Share

The calculation of basic and diluted loss per share for the three and six months ended June 30, 2022 was based on the loss attributable to common shareholders of $1,580,168 and $2,995,980, respectively (three and six months ended June 30, 2021 - $2,888,568 and $3,528,531, respectively) and the weighted average number of common shares outstanding of 84,140,878 and 81,353,664, respectively (three and six months ended June 30, 2021 - 60,494,975 and 53,501,436, respectively) for basic and diluted loss per share. Diluted loss did not include the effect of 17,255,265 warrants (three and six months ended June 30, 2021 - 29,104,931) and 6,167,500 options (three and six months ended June 30, 2021 - 4,910,000) for the three and six months ended June 30, 2022, as they are anti-dilutive.

14. Revenues

Shipments of concentrate under the off-take arrangements commenced during the second quarter of 2019. Concentrate sales provisional revenues during the three and six months ended June 30, 2022 totaled approximately US$nil and US$219,000, respectively (three and six months ended June 30, 2021 - US$218,000 and US$785,000, respectively). However, until the mine reaches the commencement of commercial production, the net proceeds from concentrate sales will be offset against Development assets.

15. 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 exchange amount 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:

 
                                             Three Months Ended     Six Months Ended 
                                                  June 30,              June 30, 
                                              2022        2021       2022      2021 
  ----------------------------------------  ---------   --------   --------   ------- 
Interest on related party loans   (i)   $      88,054  $  39,660  $ 162,749  $118,536 
--------------------------------  ----      ---------   --------   --------   ------- 
 

(i) Refer to note 10(i).

(ii) Refer to note 12(b)(i).

(iii) On February 3, 2022, the Company announced the closing of the loan agreement for US$1.06 million with Ocean Partners. Ocean Partners and the Company have a common director. Terms of the loan agreement are:

   --      The loan matures on July 31, 2022 (the "Maturity Date"). 

-- The loan will bear interest at an annual rate of 10% compounded monthly payable upon repayment of the loan.

   --      US$20,000 structuring fee has been paid to Ocean Partners. 

-- US$40,000 consulting fee will be paid to Ocean Partners, to be invoiced separately by Ocean Partners.

-- 250,000 warrants have been granted to Ocean Partners, which will be exercisable for a period of 12 months at an exercise price of $0.50. The bonus warrants are subject to a hold period under applicable securities laws and the rules of the TSXV, expiring on June 4, 2022. The fair value of the 250,000 warrants was valued at $51,000 using the following Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 107%, risk-free interest rate - 1.22% and an expected average life of 1 year.

-- US$40,000 extension fee will be paid to Ocean Partners if the Company elects to extend the loan for a further six months from the Maturity Date.

Proceeds from the loan will be used for further development of the Omagh mine in Northern Ireland and working capital.

As at June 30, 2022, financial liabilities due to the Lender and recorded as due to related parties on the unaudited condensed interim consolidated statement of financial position is $4,029,998 (December 31, 2021 - $2,444,376).

 
                                                                June 30,     December 31, 
                                                                  2022           2021 
 ------------------------------------------------------------  ----------    ------------ 
Balance, beginning of period                               $    2,444,376   $           - 
Financing facility reallocated to due to related parties                -       2,577,137 
Loan received                                                   1,380,477               - 
Less bonus warrants (1)                                           (51,000)       (251,000) 
Repayment                                                          (5,979)              - 
Accretion                                                          48,580          57,338 
Interest                                                          162,749          27,506 
Foreign exchange adjustment                                        50,795          33,395 
-------------------------------------------------------------  ----------    ------------ 
Balance, end of period                                          4,029,998       2,444,376 
Less current balance                                           (1,279,932)              - 
-------------------------------------------------------------  ----------    ------------ 
Due to related parties - non-current balance               $    2,750,066   $   2,444,376 
---------------------------------------------------------      ----------    ------------ 
 

(1) During the six months ended June 30, 2022, the 1,700,000 Bonus Warrants issued have been extended. The Company recorded the incremental difference of $251,000 as financing costs based on the fair value of these warrants immediately prior to and after the modification. The fair value of the 1,700,000 Bonus Warrants was valued immediately prior to the subsequent extension using the following Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 123.98% to 144.48%, risk-free interest rate - 0.32% and an expected average life of 0.63 to 2.63 years.

(b) Remuneration of officer and directors of the Company was as follows:

 
                                 Three Months Ended     Six Months Ended 
                                      June 30,              June 30, 
                                  2022        2021       2022      2021 
 -----------------------------  ---------   --------   --------   ------- 
Salaries and benefits (1)   $     145,551  $  50,380  $ 253,134  $167,986 
Stock-based compensation          383,377    828,180    633,687   830,438 
------------------------------  ---------   --------   --------   ------- 
 $                                528,928  $ 878,560  $ 886,821  $998,424 
 -----------------------------  ---------   --------   --------   ------- 
 

(1) Salaries and benefits include director fees. As at June 30, 2022, due to directors for fees amounted to $70,000 (December 31, 2021 - $102,917) and due to officers, mainly for salaries and benefits accrued amounted to $27,766 (December 31, 2021 - $21,400), and is included with due to related parties.

(c) As at June 30, 2022, Ross Beaty owns 3,744,747 common shares of the Company or approximately 4.3% of the outstanding common shares. Premier Miton owns 4,848,243 common shares of the Company or approximately 5.6%. Melquart owns, directly and indirectly, 24,473,528 common shares of the Company or approximately 29.5% of the outstanding common shares of the Company. G&F Phelps owns 5,354,484 common shares of the Company or approximately 6.2%. Eric Sprott owns 8,833,333 common shares of the Company or approximately 10.2%. Mike Gentile owns 6,100,000 common shares of the Company or approximately 7.1%. The remaining 37.1% 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.

16. 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:

 
June 30, 2022         United Kingdom   Canada      Total 
-------------------   --------------   -------   ---------- 
 
Current assets       $       880,194  $508,618  $ 1,388,812 
Non-current assets   $    30,921,720  $128,572  $31,050,292 
Revenues             $             -  $      -  $         - 
-------------------   --------------   -------   ---------- 
 
 
December 31, 2021     United Kingdom    Canada       Total 
-------------------   --------------   ---------   ---------- 
 
Current assets       $     1,379,742  $1,078,732  $ 2,458,474 
Non-current assets   $    27,714,667  $   62,312  $27,776,979 
Revenues             $             -  $        -  $         - 
-------------------   --------------   ---------   ---------- 
 

17. Contingency

During the year ended December 31, 2010, the Company's subsidiary Omagh received a payment demand from Her Majesty's Revenue and Customs ("HMRC") in the amount of $476,762 (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. Omagh believed this claim to be without merit. An appeal was lodged with the Tax Tribunals Service and the hearing started at the beginning of March 2017 and following a number of adjournments was completed in August 2018. During the year ended December 31, 2019, the Tax Tribunals Service issued their judgement dismissing the appeal by Omagh in respect of the assessments. A provision has now been included in the unaudited condensed interim consolidated financial statements in respect of the aggregates levy plus interest and penalty.

There is a contingent liability in respect of potential additional interest which may be applied in respect of the aggregates levy dispute. Omagh is unable to make a reliable estimate of the amount of the potential additional interest that may be applied by HMRC.

18. Events After the Reporting Period

(i) On July 11, 2022, the Company announced the appointment of SP Angel Corporate Finance LLP as its Joint Broker to support its position as an AIM-quoted company.

(ii) On August 3, 2022, the Company announced the closing of the loan agreement for US$530,000 with Ocean Partners. Terms of the loan agreement are:

-- The loan matures on January 31, 2023.

-- The loan will bear interest at an annual rate of 12% compounded monthly and repayable in full on the maturity date.

-- US$10,000 commitment fee has been paid to Ocean Partners.

-- 125,000 warrants have been granted to Ocean Partners, which will be exercisable for a period of 12 months at an exercise price of $0.48. The warrants are subject to a hold period under applicable securities laws and the rules of the TSXV, expiring on July 25, 2023.

-- US$20,000 extension fee will be paid to Ocean Partners if the Company elects to extend the loan for a further six months from the maturity date.

(iii) On August 8, 2022, the Company announced that it entered into an agreement with Canaccord Genuity Corp., on behalf of itself and and a syndicate of agents including Cormark Securities Inc. and Research Capital Corporation (together, the "Agents"), in connection with a proposed private placement of up to 8,888,890 units of the Company at a price of $0.45 per unit for aggregate gross proceeds of up to approximately $4 million. Each unit will be comprised of one common share in the capital of the Company and one_half of one common share purchase warrant of the Company. Each warrant will entitle the holder thereof to purchase one common share in the capital of the Company at a price of $0.55 per warrant share for a period of 30 months following the closing of the offering.

(iv) On August 11, 2022, the Company announced that it entered into an amending agreement with the Agents, to increase the size of the Company's previously announced proposed private placement of up to 13,333,340 units of the Company.

The Company also granted the Agents an option, exercisable, in whole or in part, at any time up to 48 hours prior to closing of the offering, which will allow the Agents to sell up to an additional 2,000,001 units at the offering price.

The upsized offering is expected to close on or about August 30, 2022, or such other date as the Company and the Agents may agree, and is subject to certain closing conditions including, but not limited to, the receipt of all necessary approvals, including the conditional acceptance of the TSXV.

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IR FLFLATIIEFIF

(END) Dow Jones Newswires

August 26, 2022 02:00 ET (06:00 GMT)

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