3rd Quarter Results

RNS Number : 1686Y

Galantas Gold Corporation

27 November 2014

 



GALANTAS GOLD CORPORATION

TSXV & AIM : Symbol GAL

GALANTAS REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014

November 27, 2014:  Galantas Gold Corporation (the 'Company') is pleased to announce financial results for the three and nine months ended September 30, 2014.

Financial Highlights

Highlights of the 2014 third quarter's and first nine months results, which are expressed in Canadian Dollars, are summarized below:

All figures denominated in Canadian Dollars (CDN$)	Third Quarter Ended September 30       2014                    2013		Nine Months Ended September 30       2014                          2013
Revenue	$        8,376	$    473,668	$         8,376	$  1,362,200
Cost of Sales	$      84,277	$    437,995	$     260,957	$  1,347,416
(Loss) Income  before the undernoted	$    (75,901)	$      35,673	$   (252,581)	$       14,784
Depreciation	$      57,654	$    115,105	$     184,917	$     361,935
General administrative expenses	$    253,291	$    262,189	$     873,000	$     853,969
Loss/(Gain) on sale of property, plant and equipment	$             50	$         (592)	$     (19,810)	$     (65,123)
Unrealized (gain) on fair value of derivative financial liability	$    133,000	$               0	$     (77,000)	$                0
Impairment of property, plant and equipment	$ 2,921,884	$               0	$  2,921,884	$                0
Foreign exchange loss	$      69,157	$      22,715	$     174,068	$       25,964
Net (Loss) for the period	$( 3,510,937)	$  (363,744)	$(4,309,640)	$(1,161,961)
Working Capital (Deficit)	$ (3,388,864)	$ (3,477,309)	$(3,388,864)	$(3,477,309)
Cash (loss) from operating activities before changes in non-cash working capital	$  (641,042)	$  (318,599)	$(1,610,718)	$   (881,526)
Cash at September 30, 2014	$      54,759	$    216,512	$       54,759	$     216,512

The Net Loss for the three months ended September 30, 2014, amounted to CDN$ 3,510,937 (2013 Q3: CDN$ 363,744) and the Net Loss for the nine months ended September 30, 2014, amounted to CDN$ 4,309,640 (2013:CDN$ 1,161,961). Both three and nine months ended September 30, 2014 include an impairment loss on property, plant and equipment which amounted to $ 2,921,884.

Sales revenues for the third quarter and nine months ended September 30, 2014 amounted to CDN$ 8,376 (2013: CDN$ 473,668 and $ 1,362,200 respectively). Following the suspension of production during the fourth quarter of 2013 due primarily to lower concentrate gold grade coupled with falling gold prices, there were no shipments of concentrates sales from the mine during the third quarter and first nine months.

Cost of sales for the third quarter and nine months ended September 30, 2014 amounted to CDN$ 84,277 and $ 260,957 respectively (2013: CDN$ 437,995 and $ 1,347,416).  There was a decrease in all production costs at the Omagh mine during both periods following the suspension of production during 2013. 

There was an impairment of assets during the third quarter and first nine months of 2014 which amounted to $ 2,921,884 compared to $ Nil for the corresponding periods of 2013. This impairment followed a strategic review by the Company of its business, which process involved a revaluation of the Company's assets which resulted in the aforementioned impairment loss.

The Company had cash balances of $ 54,759 at September 30, 2014 compared to $ 216,512 at September 30, 2013. The working capital deficit at September 30, 2014 amounted to $ 3,388,864 compared to a working capital deficit of $ 3,477,309 at September 30, 2013.

During the second quarter Galantas completed a private placement financing for aggregate gross proceeds of approximately UK£ 516,500. Pursuant to the offering, an aggregate of 10,330,000 units were sold at a price of UK£ 0.05/CDN$0.09375 per common share. Each unit is comprised of one common share and one common share purchase warrant. In addition a shares for debt exchange of 15,125,140 common shares for CDN$ 1,389,150/ UK£ 756,157 of the Company's debt was also completed during the second quarter.

The Company's ongoing viability is dependent on obtaining planning consent for the development of an underground mine at Omagh and is actively seeking additional funding to secure sufficient financing to fund ongoing operational activity and the development of the underground mine.

Production

Production at the Omagh mine remains suspended awaiting planning consent to continue operations underground. Due to continued delays in the planning process, management had to make significant redundancies in the workforce, alongside other cost reduction measures.

In early 2014, the Company commenced pilot tests with regards to the processing of tailing cells filled during the earlier operation of the mine. The results confirmed pre-existing data that indicated the tailings contain between 0.5g/t gold and 1 g/t gold and would meet European Union standards for definition as inert material. A low energy cost processing solution, based upon a Knelson CD12 centrifugal gravity concentrator, which was already utilised in the gold processing plant in a secondary role, was pilot tested as a prime re-treatment component for flotation tailings. The initial testwork was encouraging. The tailings did not require comminution (crushing and grinding) for re-processing by this method. Extended in-house tests with the Knelson concentrator produced a variation in results in terms of grade and recovery. Consequently, alternative gravity oriented test-work was carried out. The results successfully indicate that it is possible to uprate tailings by a low energy consuming, bulk gravity method from 0.5-1.0 g/t to 2-3 g/t gold. The higher feed grade produced in testing has been tested with froth flotation in the Company's in-house laboratory to simulate production flotation in the company's processing plant, followed by an additional gravity scavenging treatment. The results indicate that a finer grind than was previously required may be necessary toenhance the concentrate grade. An investigation of process economics suggests that the operation may best be carried out in conjunction with processing ore from the underground mine.

Reserves and Resources

During the third quarter Galantas reported on the revised updated estimate of gold resources together with a Preliminary Economic Assessment (PEA) update (see press release dated July 28, 2014). The revised estimate of resources is in compliance with the Pan European Reporting Code (PERC), Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards and Canadian National Instrument (NI) 43-101 and is summarized below.

	RESOURCE ESTIMATE : GALANTAS 2014 CUT-OFF 2 g/t Au			Increase over GAL 2013 report
RESOURCE CATEGORY	TONNES	GRADE (Au g/t)	Au Ozs
MEASURED	138,241	7.24	32,202	55%
INDICATED	679,992	6.78	147,784	21.4%
INFERRED	1,373,879	7.71	341,123	15.4%

Minerals Resources that are not Mineral Reserves do not have demonstrated economic viability.

Overall there has been a 19% increase in resources since the Galantas June 2013 Resource Report and a 60% increase in resources since the July 2012 Resource Report by ACA Howe International Ltd The increases since 2012 largely relate to the Kearney and Joshua veins, since this is where the drilling program has been concentrated. The drilling program was mainly designed to focus on increasing the quantity of Measured and Indicated resources on these two veins, to support potential bank funding opportunities for the financing of production. The resource estimate for each vein is tabulated below.

RESOURCE ESTIMATE BY VEIN  :  GALANTAS 2014
		MEASURED			INDICATED			INFERRED
		Tonnes	Grade Au (g/t)	Contained Au (oz)	Tonnes	Grade Au (g/t)	Contained Au (oz)	Tonnes	Grade Au (g/t)	Contained Au (oz)
KEARNEY		76,936	7.48	18,490	383,220	6.66	82,055	909,277	6.61	193,330
JOSHUA		54,457	7.25	12,693	216,211	7.92	55,046	291,204	10.74	100,588
KERR		6,848	4.63	1,019	12,061	4.34	1,683	23,398	3.2	2,405
ELKINS					68,500	4.24	9,000	20,000	5.84	3,800
GORMLEYS								75,000	8.78	21,000
PRINCES								10,000	38.11	13,000
SAMMY'S								27,000	6.07	5,000
KEARNEY NORTH								18,000	3.47	2,000
TOTAL	138,241		7.25	32,202	679,992	6.78	147,784	1,373,879	7.71	341,123

The resources are calculated at a cut-off grade of 2 g/t gold (Au), numbers are rounded, gold grades are capped at 75 g/t gold and a minimum mining width of 0.9m has been applied.

Measured and Indicated resources on Kearney vein have increased to 100,545 ounces of gold from 69,000 ounces in 2012. Measured and Indicated resources on Joshua vein have increased to 67,739 ounces of gold from 15,800 ounces in 2012. The Kearney and Joshua veins are the early targets of underground mining. Combined Measured and Indicated resource category on these two veins are estimated at 168,284 ounces of gold, with 293,918 ounces of gold in the Inferred resource category. Both vein systems are open at depth.

With regards to the Preliminary Economic Assessment a restricted portion of Inferred resources for two veins - Joshua and Kearney have been included with the Measured and Indicated resources. The Inferred resources (which have lower statistical support than Measured or Indicated Resources) are contiguous with Measured or Indicated resources and / or lie within scheduled mining areas. The use of Inferred resources, in a restricted qualifying manner, is permitted by the PERC code in regard to economic studies but is excluded within NI 43-101, except within a Preliminary Economic Assessment.  PERC is an approved code is respect of NI 43-101. As part of PERC requirements, a comparative Feasibility study will be included in the detailed technical report which will not include Inferred resources and will also include studies on sensitivity to gold price.

The total of scheduled Measured and Indicated ounces utilised within the mining study is 104,627 ounces. The Inferred resources scheduled in the economic study are estimated at 60,635 ounces. Total Inferred resource estimated on the Joshua and Kearney orebodies is 293,918 ounces of gold. The amount of Inferred resources included in the PEA amounts to 20.6% of the total Inferred resources estimated on these veins. Were Inferred resources excluded within the mining plan, approximately 1 year would be removed from the estimate of mine life and annual output would be reduced.

At a gold price of UK£750 ( US$ 1,260 oz at $1.68/UK£), the pre-tax operating surplus after capital expenditure estimates an Internal Rate of Return of 72% and, at an 8% discount rate, a net present value of approximately UK£ 14.5m (CDN$ 26.6m) and a cash cost of production of UK£394 per ounce (USD$ 662 at $1.68/UK£). The study scheduled approximately 36% of the combined resources identified on the Kearney and Joshua veins. The Company notes recent falls in the value of UK£, which are project enhancing and offset recent gold price weakness.

The Company filed the complete Technical Report on SEDAR during the third quarter, as required by NI 43-101.

Exploration

Following the receipt of two new licences in the Republic of Ireland earlier in 2014, Omagh Minerals Limited now holds a total of 11 exploration licenses with a total coverage of 766.5 km². Exploration during 2014 has been restricted to conserve cash funds. Exploration reports and publications relating to the geology and known mineralisation of the two new licences referred to above were reviewed earlier in 2014. Following this, some reconnaissance fieldwork was carried out in order to identify the areas which will be prioritised for exploration over the summer. Four broad exploration targets were established, based on the potential for mineralisation with consideration given to land accessibility and suitable exposure. During the third quarter exploration work, which included detailed mapping and sampling, focused on these target areas.

In addition detailed sampling took place in an area close to the mine site where, thirty years ago, initial exploration carried out by RioFinex uncovered visible vein outcrops ('Discovery' and 'Sharkey') in the banks of a neighbouring burn. Attention and resources were subsequently diverted towards drilling the Kearney vein, following its discovery in the late 1980's. However, recent resource modelling and underground mine planning activities prompted a re-investigation of the burn veins during the third quarter, when water levels were unusually low. Two in-situ quartz veins were identified 18 m west and 35 m west of the Rio 'Discovery' vein, grab samples of quartz containing pyrite and galena measured 13.5 g/t and 0.4 g/t gold, respectively. A completely isolated zone of sulphide rich clay gouge was also uncovered 70 m east of 'Discovery', two samples were collected and analysed, yielding 23.6 and 9 g/t gold. In addition to these outcrops, several high grade boulders (float) were discovered over 40 metres from the Rio 'Sharkey vein', including those analysed at 30.4 g/t, 34.4 g/t, 39.4g/t and 44.3 g/t gold (see press release dated October 6, 2014). These boulders are comparatively large in size and are likely to be derived from a local source (see press release dated October 6, 2014). The presence of these strong gold anomalies found near to the southern boundary of the recently operating Omagh Gold Mine site has instigated a detailed investigation of new and a re-evaluation of existing targets.

Permitting

Discussions continued with the planning services in Northern Ireland during  2014 with regards to the planning application for an underground mine plan and accompanying Environmental Statement which were submitted to the Planning Services in 2012. The Company understands the Planning Officer's report is well advanced  and it has been advised that a determination is possible within the fourth quarter of 2014. It should be noted that the timeline for delivery of the determination is not within the control of the Company. Shareholders may see progress on the public planning portal at :-

http://epicpublic.planningni.gov.uk/PublicAccess/zd/zdApplication/application_detailview.aspx?caseno=M6QQVVSV30000

Roland Phelps, President & CEO, Galantas Gold Corporation, commented, "The robust results of the recent economic study, with the upcoming planning determination, which we expect to be positive, lead us to be confident about the establishment of a sound business based on the Omagh gold property. "

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.

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.

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.

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

http://www.rns-pdf.londonstockexchange.com/rns/1686Y_-2014-11-27.pdf

Enquiries

Galantas Gold Corporation
Jack Gunter P.Eng - Chairman
Roland Phelps C.Eng - President & CEO
Email: [e-mail]
Website: www.galantas.com
Telephone: [phone]

Charles Stanley Securities (AIM Nomad & Broker)

Mark Taylor

Telephone [phone]

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.

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

		As at			As at
		September 30,			December 31,
		2014			2013
ASSETS
Current assets
Cash	$	54,759		$	166,617
Accounts receivable and prepaid expenses (note 5)		98,250			405,124
Inventories (note 6)		111,795			338,865
Total current assets		264,804			910,606
Non-current assets
Property, plant and equipment (note 7)		7,402,993			10,100,319
Long-term deposit (note 9)		545,340			467,116
Exploration and evaluation assets (note 8)		2,068,330			1,875,771
Total non-current assets		10,016,663			12,443,206
Total assets	$	10,281,467		$	13,353,812
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 10)	$	808,253		$	1,217,360
Due to related parties (note 14)		2,845,415			3,597,550
Total current liabilities		3,653,668			4,814,910
Non-current liabilities
Decommissioning liability (note 9)		553,951			528,810
Derivative financial liability (note 11(c))		429,000			-
Total liabilities		4,636,619			5,343,720
Capital and reserves
Share capital (note 11(a)(b))		31,702,575			29,874,693
Reserves		6,369,974			6,253,460
Deficit		(32,427,701	)		(28,118,061	)
Total equity		5,644,848			8,010,092
Total equity and liabilities	$	10,281,467		$	13,353,812

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

Going concern (note 1)
Contingent liability (note 16)

Approved on behalf of the Board:

"Roland Phelps"

,   Director

"Lionel J. Gunter"

,   Director

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

		Three Months						Nine Months
		Ended						Ended
		September 30,						September 30,
		2014			2013			2014			2013
Revenues
Gold sales	$	8,376		$	473,668		$	8,376		$	1,362,200
Cost and expenses of operations
Cost of sales (note 13)		84,277			437,995			260,957			1,347,416
Depreciation		57,654			115,105			184,917			361,935
		141,931			553,100			445,874			1,709,351
Loss before the undernoted		(133,555	)		(79,432	)		(437,498	)		(347,151	)
General administrative expenses
Management and administration wages (note 14)		134,361			130,022			403,065			382,193
Other operating expenses		18,416			37,722			82,797			142,727
Accounting and corporate		15,186			14,764			45,682			42,735
Legal and audit		31,152			27,649			112,505			71,202
Stock-based compensation (note 11(d))		-			9,781			-			35,960
Shareholder communication and investor relations		26,406			21,593			119,059			105,026
Transfer agent		1,700			2,062			29,303			15,721
Director fees (note 14)		6,750			7,750			21,000			21,000
General office		2,254			2,171			7,038			6,062
Accretion expenses (note 9)		2,869			-			8,650			-
Loan interest and bank charges		14,197			8,675			43,901			31,343
		253,291			262,189			873,000			853,969
Other expenses
Loss (gain) on disposal of property, plant and equipment		50			(592	)		(19,810	)		(65,123	)
Unrealized loss (gain) on fair value of derivative              financial liability (note 11(c))		133,000			-			(77,000	)		-
Impairment of property, plant and equipment (note 7)		2,921,884			-			2,921,884			-
Foreign exchange loss		69,157			22,715			174,068			25,964
		3,124,091			22,123			2,999,142			(39,159	)
Net loss for the period	$	(3,510,937	)	$	(363,744	)	$	(4,309,640	)	$	(1,161,961	)
Basic and diluted net loss per share (note 12)	$	(0.05	)	$	(0.01	)	$	(0.07	)	$	(0.02	)
Weighted average number of common shares         outstanding - basic and diluted		76,697,156			51,242,016			63,569,819			51,242,016

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						Nine Months
		Ended						Ended
		September 30,						September 30,
		2014			2013			2014			2013
Net loss for the period	$	(3,510,937	)	$	(363,744	)	$	(4,309,640	)	$	(1,161,961	)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Foreign currency translation differences		(245,734	)		354,915			116,514			247,612
Total comprehensive loss	$	(3,756,671	)	$	(8,829	)	$	(4,193,126	)	$	(914,349	)

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)

		Nine Months
		Ended
		September 30,
		2014			2013
Operating activities
Net loss for the period	$	(4,309,640	)	$	(1,161,961	)
Adjustment for:
Depreciation		184,917			361,935
Stock-based compensation (note 11(d))		-			35,960
Foreign exchange		(319,719	)		(52,337	)
Gain on disposal of property, plant and equipment		(19,810	)		(65,123	)
Accretion expenses (note 9)		8,650			-
Unrealized gain on fair value of derivative financial liability (note 11(c))		(77,000	)		-
Impairment of property, plant and equipment (note 7)		2,921,884			-
Non-cash working capital items:
Accounts receivable and prepaid expenses		306,874			135,088
Inventories		227,070			(24,029	)
Accounts payable and other liabilities		(368,440	)		(294,277	)
Due to related parties		468,556			-
Net cash used in operating activities		(976,658	)		(1,064,744	)
Investing activities
Purchase of property, plant and equipment		(107,137	)		(173	)
Proceeds from sale of property, plant and equipment		33,720			213,416
Exploration and evaluation assets		(135,721	)		(493,797	)
Net cash used in investing activities		(209,138	)		(280,554	)
Financing activities
Proceeds of private placement		968,438			-
Share issue costs		(23,706	)		-
Advances from related parties		127,792			402,864
Net cash provided by financing activities		1,072,524			402,864
Net change in cash		(113,272	)		(942,434	)
Effect of exchange rate changes on cash held in foreign currencies		1,414			(5,922	)
Cash, beginning of period		166,617			1,164,868
Cash, end of period	$	54,759		$	216,512
Supplemental information
Shares issued to settle accounts payable and other liabilities	$	40,667		$	-
Shares issued to settle due to related parties	$	1,348,483		$	-

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			payments			Warrant			translation
		capital			reserve			reserve			reserve			Deficit			Total
Balance, December 31, 2012	$	29,874,693		$	4,477,699		$	957,450		$	5,047		$	(26,173,706	)	$	9,141,183
Stock-based compensation (note 11(d))		-			35,960			-			-			-			35,960
Warrants expired		-			957,450			(957,450	)		-			-			-
Net loss and other comprehensive income              for the period		-			-			-			247,612			(1,161,961	)		(914,349	)
Balance, September 30, 2013	$	29,874,693		$	5,471,109		$	-		$	252,659		$	(27,335,667	)	$	8,262,794
Balance, December 31, 2013	$	29,874,693		$	5,471,109		$	-		$	782,351		$	(28,118,061	)	$	8,010,092
Units issued in private placement              (note 11(b)(i))		968,438			-			-			-			-			968,438
Warrants issued (note 11(b)(i))		(506,000	)		-			-			-			-			(506,000	)
Share issue costs (note 11(b)(i))		(23,706	)		-			-			-			-			(23,706	)
Common shares issued for debt              (note 11(b)(ii))		1,389,150			-			-			-			-			1,389,150
Net loss and other comprehensive income              for the period		-			-			-			116,514			(4,309,640	)		(4,193,126	)
Balance, September 30, 2014	$	31,702,575		$	5,471,109		$	-		$	898,865		$	(32,427,701	)	$	5,644,848

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

Notes to Condensed Interim Consolidated Financial Statements

Three and Nine Months Ended September 30, 2014

(Expressed in Canadian Dollars)

(Unaudited)

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 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 Omagh Minerals Limited ("Omagh") which is engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland. Omagh has an open pit mine, which is in production and reported as property, plant and equipment and an underground mine which is in the exploration stage and reported as exploration and evaluation assets. The production at the open pit mine was suspended later in 2013 due to falling grades and gold prices.

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

	a.	Planning permission for the development of an underground mine in Omagh; and
	b.	Securing sufficient financing to fund ongoing operational activity and the development of the underground mine.

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.

As at September 30, 2014, the Company had a deficit of $32,427,701 (December 31, 2013 - $28,118,061). Management is confident that it will be able to secure the required financing to enable the Company to continue as a going concern. However, this is subject to a number of factors including market conditions.

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

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"). On April 1, 2014, Galántas amalgamated with Omagh.

As at July 1, 2007, the Company's Omagh mine began production.

On April 8, 2014, Cavanacaw acquired Flintridge Resources Limited ("Flintridge"), a dormant UK company.

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 and London Stock Exchange AIM under the symbol GAL. The primary office is located at 36 Toronto Street, Suite 1000, Toronto, Ontario, Canada, M5C 2C5.

3.        Basis of Preparation

Statement of compliance

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

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRSs issued and outstanding as of November 24, 2014 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, 2013. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2014 could result in restatement of these unaudited condensed interim consolidated financial statements.

4.        Significant Accounting Policies

Change in accounting policies

IAS 32 - Financial Instruments, Presentation ("IAS 32") was effective for annual periods beginning on or after January 1, 2014. IAS 32 was amended to clarify that the right of offset must be available on the current date and cannot be contingent on a future date. At January 1, 2014, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

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 estimated fair value with subsequent changes in fair value recorded as a gain or loss in the unaudited condensed interim 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 unaudited condensed interim consolidated statements of loss.

Recent accounting pronouncements

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 a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules 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. 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.

5.        Accounts Receivable and Prepaid Expenses

		As at			As at
		September 30,			December 31,
		2014			2013
Sales tax receivable - Canada	$	4,935		$	21,866
Valued added tax receivable - Northern Ireland		2,576			10,752
Accounts receivable		48,466			202,205
Prepaid expenses		42,273			170,301
	$	98,250		$	405,124

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

The following is an aged analysis of accounts receivable:

		As at			As at
		September 30,			December 31,
		2014			2013
Less than 3 months	$	9,147		$	138,839
3 to 12 months		11,928			59,177
More than 12 months		34,902			36,807
Total accounts receivable	$	55,977		$	234,823

6.        Inventories

		As at			As at
		September 30,			December 31,
		2014			2013
Concentrate inventories	$	11,816		$	11,458
Finished goods		99,979			327,407
	$	111,795		$	338,865

7.        Property, Plant and Equipment

								Plant												Mine
		Freehold						and			Motor			Office						development
Cost		land			Buildings			machinery			vehicles			equipment			Moulds			costs			Total
Balance, December 31, 2012	$	2,315,212		$	391,563		$	5,996,937		$	84,171		$	105,396		$	58,844		$	12,422,216		$	21,374,339
Additions		-			-			-			-			-			-			343,588			343,588
Disposals		-			-			(1,369,832	)		(11,986	)		-			-			-			(1,381,818	)
Foreign exchange adjustment		207,365			35,069			534,617			7,538			9,449			5,271			1,112,726			1,912,035
Balance, December 31, 2013		2,522,577			426,632			5,161,722			79,723			114,845			64,115			13,878,530			22,248,144
Additions		-			-			-			-			-			-			107,137			107,137
Disposals		-			-			(128,611	)		-			-			-			-			(128,611	)
Foreign exchange adjustment		78,853			13,337			160,474			2,492			3,590			2,004			433,828			694,578
Balance, September 30, 2014	$	2,601,430		$	439,969		$	5,193,585		$	82,215		$	118,435		$	66,119		$	14,419,495		$	22,921,248

								Plant												Mine
		Freehold						and			Motor			Office						development
Accumulated depreciation		land			Buildings			machinery			vehicles			equipment			Moulds			costs			Total
Balance, December 31, 2012	$	911,702		$	328,444		$	3,987,043		$	54,149		$	45,164		$	58,844		$	5,962,024		$	11,347,370
Depreciation		-			12,573			400,922			7,475			8,993			-			70,793			500,756
Disposals		-			-			(750,631	)		(10,143	)		-			-			-			(760,774	)
Foreign exchange adjustment		81,657			30,599			391,847			5,553			4,897			5,271			540,649			1,060,473
Balance, December 31, 2013		993,359			371,616			4,029,181			57,034			59,054			64,115			6,573,466			12,147,825
Depreciation		-			8,129			166,451			4,138			6,199			-			-			184,917
Disposals		-			-			(114,701	)		-			-			-			-			(114,701	)
Impairment		348,171			(78,603	)		78,563			12,917			24,022			-			2,536,814			2,921,884
Foreign exchange adjustment		31,049			11,582			124,559			1,764			1,893			2,004			205,479			378,330
Balance, September 30, 2014	$	1,372,579		$	312,724		$	4,284,053		$	75,853		$	91,168		$	66,119		$	9,315,759		$	15,518,255

								Plant												Mine
		Freehold						and			Motor			Office						development
Carrying value		land			Buildings			machinery			vehicles			equipment			Moulds			costs			Total
Balance, December 31, 2013	$	1,529,218		$	55,016		$	1,132,541		$	22,689		$	55,791		$	-		$	7,305,064		$	10,100,319
Balance, September 30, 2014	$	1,228,851		$	127,245		$	909,532		$	6,362		$	27,267		$	-		$	5,103,736		$	7,402,993

8.        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.

		Exploration
		and
		evaluation
Cost		assets
Balance, December 31, 2012	$	1,399,254
Additions		357,061
Foreign exchange adjustment		119,456
Balance, December 31, 2013		1,875,771
Additions		135,721
Foreign exchange adjustment		56,838
Balance, September 30, 2014	$	2,068,330

		Exploration
		and
		evaluation
Carrying value		assets
Balance, December 31, 2013	$	1,875,771
Balance, September 30, 2014	$	2,068,330

9.        Decommissioning Liability

The Company's decommissioning liability is a result of mining activities at the Omagh mine in Northern Ireland. The Company estimated its decommissioning liability at September 30, 2014 based on a risk-free discount rate of 1% (December 31, 2013 - 1%) and an inflation rate of 1.50% (December 31, 2013 - 1.50%) . The expected undiscounted future obligations allowing for inflation are GBP 330,000 and based on management's best estimate the decommissioning is expected to occur over the next 5 to 10 years. On September 30, 2014, the estimated fair value of the liability is $553,951 (December 31, 2013 - $528,810). Changes in the provision during the period ended September 30, 2014 are as follows:

		As at			As at
		September 30,			December 31,
		2014			2013
Decommissioning liability, beginning of period	$	528,810		$	404,450
Revision due to change in estimate		-			109,680
Accretion		8,650			14,680
Foreign exchange		16,491			-
Decommissioning liability, end of period	$	553,951		$	528,810

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 304,737 (December 31, 2013 - GBP 300,000), of which GBP 300,000 was funded as of September 30, 2014 and reported as long-term deposit of $545,340 (December 31, 2013 - $467,116).

10.      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			As at
		September 30,			December 31,
		2014			2013
Accounts payable	$	271,601		$	545,557
Accrued liabilities		536,652			671,803
Total accounts payable and other liabilities	$	808,253		$	1,217,360

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

		As at			As at
		September 30,			December 31,
		2014			2013
Less than 3 months	$	286,905		$	376,400
3 to 12 months		113,593			361,376
12 to 24 months		201,942			122,183
More than 24 months		205,813			357,401
Total accounts payable and other liabilities	$	808,253		$	1,217,360

11.      Share Capital and Reserves

On April 14, 2014, the Company completed the consolidation of its issued and outstanding common shares on the basis of one post-consolidated common shares for five pre-consolidated common shares. As part of the share consolidation all applicable references to the number of shares, warrants and stock options and their exercise price and per share information has been restated.

a)        Authorized share capital

At September 30, 2014, 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 September 30, 2014, the issued share capital amounted to $31,702,575. The change in issued share capital for the periods presented is as follows:

		Number of
		common
		shares			Amount
Balance, December 31, 2012 and September 30, 2013		51,242,015		$	29,874,693
Balance, December 31, 2013		51,242,015		$	29,874,693
Units issued in private placement (i)		10,330,000			968,438
Warrants issued (i)		-			(506,000	)
Share issue costs (i)		-			(23,706	)
Common shares issued for debt (ii)		15,125,140			1,389,150
Balance, September 30, 2014		76,697,155		$	31,702,575

(i) On May 7, 2014, the Company completed a private placement of 10,330,000 units at GBP 0.05 ($0.09375) per unit for gross proceeds of GBP 516,500 ($968,438). Each unit is comprised of 1 common share and 1 warrant. Each warrant entitles the holder to purchase 1 further common share at GBP 0.10 per share for a period of two years. The common share issued were subject to a four month hold period. Commissions of $8,156 were paid in connection with the placement.

The fair value of the 10,330,000 warrants was estimated at $506,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 168.92%, risk-free interest rate - 1.07% and an expected average life of 2 years. 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.

(ii) On May 30, 2014, the Company issued 15,125,140 common shares as settlement of accounts payable and other liabilities of GBP 21,976 ($40,667) and due to related parties of GBP 718,256 ($1,319,054) and GBP 16,025 ($29,429).

Due to related parties consisted of amounts owing to Roland Phelps (President & Chief Executive Officer) for a loan of GBP 718,256 settled for 14,365,120 common shares and Leo O'Shaughnessy (Chief Financial Officer) for a loan of GBP 16,025 settled for 320,500 common shares.

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, 2012		4,910,000		$	0.50
Expired		(4,910,000	)		0.50
Balance, September 30, 2013		-		$	-
Balance, December 31, 2013		-		$	-
Issued (Note 11(b)(i))		10,330,000			0.18
Balance, September 30, 2014		10,330,000		$	0.18

The following table reflects the actual warrants issued and outstanding as of September 30, 2014:

		Grant date	Exercise	Fair value
	Number	fair value	price	September 30, 2014
Expiry date	of warrants	($)	(GBP)	($)
May 7, 2016	10,330,000	506,000	0.10	429,000

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 unaudited condensed interim consolidated statements of loss as an unrealized gain or loss on fair value of derivative financial liability.

On September 30, 2014, the fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 207.78%; risk free interest rate of 1.12%; and an expected life of 1.60 years. As a result, the fair value of the warrants was calculated to be $429,000 and the Company recorded an unrealized gain (loss) on fair value of derivative financial liability for the three and nine months ended September 30, 2014 of $(133,000) and $77,000, respectively.

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 Exchange 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 Exchange.

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 periods presented:

					Weighted
					average
		Number of			exercise
		options			price
Balance, December 31, 2012		1,990,000		$	0.50
Expired		(100,000	)		0.50
Forfeited		(650,000	)		0.50
Balance, September 30, 2013		1,240,000		$	0.50
Balance, December 31, 2013 and September 30, 2014		940,000		$	0.50

Stock-based compensation includes $nil (three and nine months ended September 30, 2013 - $9,781 and $35,960, respectively) relating to stock options granted in previous years that vested during the periods.

The following table reflects the actual stock options issued and outstanding as of September 30, 2014:

		Weighted average		Number of
		remaining	Number of	options	Number of
	Exercise	contractual	options	vested	options
Expiry date	price ($)	life (years)	outstanding	(exercisable)	unvested
November 23, 2015	0.50	1.15	200,000	200,000	-
January 28, 2016	0.50	1.33	50,000	50,000	-
September 6, 2016	0.50	1.94	690,000	690,000	-
	0.50	1.74	940,000	940,000	-

12.      Net Loss per Common Share

The calculation of basic and diluted loss per share for the three and nine months ended September 30, 2014 was based on the loss attributable to common shareholders of $3,510,937 and $4,309,640, respectively (three and nine months ended September 30, 2013 - $363,744 and $1,161,961, respectively) and the weighted average number of common shares outstanding of 76,697,156 and 63,569,819, respectively (three and nine months ended September 30, 2013 - 51,242,016) for basic and diluted loss per share. Diluted loss did not include the effect of warrants and options for the three and nine months ended September 30, 2014 and 2013, as they are anti-dilutive.

13.      Cost of Sales

		Three Months						Nine Months
		Ended						Ended
		September 30,						September 30,
		2014			2013			2014			2013
Production wages	$	42,917		$	146,086		$	130,281		$	459,368
Oil and fuel		7,587			168,677			33,726			526,350
Repairs and servicing		2,075			47,769			11,927			133,147
Equipment hire		6,966			9,659			15,808			28,244
Consumable		-			50,909			8,055			131,011
Royalties		9,129			10,019			29,791			32,725
Carriage		-			6,120			-			17,474
Other costs		15,603			29,320			31,369			43,126
Production costs		84,277			468,559			260,957			1,371,445
Inventory movement		-			(30,564	)		-			(24,029	)
Cost of sales	$	84,277		$	437,995		$	260,957		$	1,347,416

14.      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 (the amount established and agreed to by the related parties) 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						Nine Months
					Ended						Ended
					September 30,						September 30,
		Notes			2014			2013			2014			2013
Interest on related party loans		(i)		$	13,752		$	10,162		$	41,237		$	29,894

(i) G&F Phelps Limited ("G&F Phelps"), a company controlled by a director of the Company, had amalgamated loans to the Company of $2,207,296 (GBP 1,214,268) (December 31, 2013 - $2,017,000 - GBP 1,144,268) 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 September 30, 2014, the amount of interest accrued is $205,168 (GBP 112,866) (December 31, 2013 - $159,144 - GBP 90,284).

(ii) See Note 11(b)(ii).

(b) Remuneration of key management of the Company was as follows:

		Three Months						Nine Months
		Ended						Ended
		September 30,						September 30,
		2014			2013			2014			2013
Salaries and benefits  (1)	$	115,621		$	104,964		$	349,769		$	307,869
Stock-based compensation		-			5,821			-			21,318
	$	115,621		$	110,785		$	349,769		$	329,187

⁽¹⁾ Salaries and benefits include director fees. As at September 30, 2014, due to directors for fees amounted to $48,750 (December 31, 2013 - $27,750) and due to key management, mainly for salaries and benefits accrued amounted to $384,201 (GBP 211,355) (December 31, 2013 - $1,393,656 - GBP 790,637), and is included with due to related parties.

(c) As of September 30, 2014, Kenglo One Limited ("Kenglo") owns 13,222,068 common shares of the Company or approximately 17.2% of the outstanding common shares of the Company. Roland Phelps, Chief Executive Officer and director, owns, directly and indirectly, 21,472,915 common shares of the Company or approximately 28.0% of the outstanding common shares of the Company. The remaining 54.8% 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.

15.      Segment Disclosure

The Company has determined that it has two reportable segments. The Company's operations are substantially all related to its investment in Cavanacaw and its subsidiaries, Omagh and Galántas. Substantially all of the Company's revenues, costs and assets of the business that support these operations are derived or located in Northern Ireland. Segmented information on a geographic basis is as follow:

September 30, 2014		United Kingdom			Canada			Total
Current assets	$	212,630		$	52,174		$	264,804
Non-current assets		9,955,887			60,776			10,016,663
Revenues	$	8,376		$	-		$	8,376

16.      Contingent Liability

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 $553,138 (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. No provision has been made for the claim in the unaudited condensed interim consolidated financial statements.

17.      Comparative Figures

Certain of the prior period's numbers have been reclassified and item descriptions changed to conform to the current period's presentation.

 

END

 

 

QRTMMMZMLNMGDZG