RESULTS FOR THE 3 AND 6 MONTHS ENDED JUNE 30, 2019

RNS Number : 7025J

Galantas Gold Corporation

21 August 2019

 

GALANTAS GOLD CORPORATION

TSXV & AIM: Symbol GAL

GALANTAS REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019

August 21, 2019:  Galantas Gold Corporation (the 'Company') is pleased to announce its financial results for the Three and Six Months ended June 30, 2019.

Financial Highlights

Highlights of the 2019 second quarter's and first six month's results, which are expressed in Canadian Dollars, are summarized below:

All figures denominated in Canadian Dollars (CDN$)	Second Quarter Ended June 30       2019                     2018		Six Months Ended                         June 30       2019                           2018
Revenue	$      0	$       57,040	$       0	$     57,040
Cost of Sales	$    (85,482)	$      (34,150)	$       (155,508)	$  (58,216)
(Loss)/income before the undernoted	$    (85,482)	$      22,890	$        (155,508)	$  (1,176)
Depreciation	$      (99,085)	$      (77,980)	$      (186,490)	$   (142,229)
General administrative expenses	$    (646,381)	$    (616,153)	$    (1,248,810)	$ (1,025,043)
Unrealized gain on fair value of derivative financial liability	$                0	$                 0	$        0	$     10,000
Foreign exchange loss	$       (60,915)	$    (29,267)	$     (80,572)	$    (66,560)
Net Loss for the period	$  ( 891,863)	$     (700,510)	$  (1,671,380)	$ (1,225,008)
Working Capital Deficit	$ (4,753,840)	$ (5,252,685)	$ (4,753,840)	$(5,252,685)
Cash loss from operating activities before changes in non-cash working capital	$ (673,444)	$    (429,920)	$   (1,064,481)	$  (762,340)
Cash at June 30, 2018	$  1,314,113	$    732,603	$  1,314,113	$ 732,603

The Net Loss for the three months ended June 30, 2019 amounted to CDN$ 891,863 (2018: CDN$ 700,510) and the cash loss from operating activities before changes in non-cash working capital for the second quarter of 2019 amounted to CDN$ 673,444 (2018 Q2: CDN$ 429,920). The Net Loss for the six months ended June 30, 2019 amounted to CDN $ 1,671,380 (2018:CDN$ 1,225,008) and the cash loss from operating activities before changes in non-cash working capital for the first six months of 2019 amounted to CDN$ 1,064,481 (2018: CDN$ 762,340).

Shipments of concentrate commenced during the second quarter of 2019 and provisional sales revenues totalled                 US$ 460,000 approximately. However, until the mine commences commercial production all development expenditures are capitalised with net proceeds from concentrate sales offset against Development assets.

The Company had cash balances of $ 1,314,113 at June 30, 2019 compared to $ 732,603 at June 30, 2018. The working capital deficit at June 30, 2019 amounted to $ 4,753,840 compared to a working capital deficit of $ 5,252,685 at June 30, 2018.

Property, plant and equipment expenditures for the three and six months ended June 30, 2019 amounted to $ 1,441,514 and $ 3,392,566 respectively. Expenditures incurred in both periods were mainly in connection with Development assets expenditure.

There were no financing activities during the first half of 2019. Subsequent to June 30, 2019 Galantas reported a proposed private placement of common shares. The placement is for a maximum of 23,529,412 shares, at an issue price of UK£0.0425 ($0.068) per share for maximum gross proceeds of UK£1,000,000 ($ 1,600,000).

Production/Mine Development

During the second quarter of 2019 the Omagh gold mine continued limited production of gold concentrate from feed produced in the development of the Kearney vein. The plant, which produces a gold & silver concentrate using a non-toxic, froth-flotation process, is running from a stockpile of underground vein material plus additional feed produced from on-vein development operations.

Underground development of the decline tunnel continued to be progressed during the second quarter of 2019 with further cross-cuts allowing access to lower levels of vein development which forms the development necessary to demarcate production panels. On-vein development continued on the 1084 (second) level and the 1072 (third) level. The vein on the 1072 (third) was reached early in the second quarter and on vein development has commenced. Development has continued southwards on the third (1072) level with gold grades within the expected range. The main decline tunnel reached the fourth (1060) level during the second quarter and an access drive to intersect the Kearney vein on this level commenced.

Subsequent to June 30, 2019 the Company reported that the access drive on the fourth (1060) level has intersected the Kearney vein ahead of schedule. The intersection shows strongly developed mineralization. The north and south faces of the vein were channel sampled. The average of the two channels was 8.35 g/t gold over an average true width of 2.65 metres. The vein intersection is expected to allow in-vein development both north and south on the fourth (1060) level. Development on the fourth level is anticipated to produce increased feed tonnage to the processing plant, which produces a concentrate sold under an off-take contract. The Company also reported that a drivage from the 1072 access has been taken northwards, in-vein, for approximately 40 metres. Mineralisation beyond the first 20 metres is currently excluded from the geological model, due to paucity of data. The mineralization was shown to be persistent and has been followed in an in-vein development. Two channel samples taken across the face as the drivage was developed at 24.1m and 27.6m into the third level (1072) north development showed a grade of 6.2g/t gold and 16.3 g/t gold respectively, each with a true width of 3 metres. The vein will continue to be followed northwards on the third (1072) level and increases the potential for additional mineralisation to be added to the resource model if discovered on the adjacent first (1096), second (1084) and fourth (1060) levels, which have not yet accessed this area. To June 30, 2019 approximately 1623 metres of drivage has been completed since underground development commenced. The in-vein portion of the development is designed to form lower and upper access to future stoping blocks for production. Detailed geological information collected during in-vein development allows the geotechnical design of the various blocks to be optimized and the geological model to be refined (See press release July 22, 2019).

The increased number of development headings is expected to provide an enhanced supply of mill feed.  For most of the rest of 2019, the increased quantities of processing feed will be sourced from multiple on-vein development headings.

Milling operations progressed during the second quarter of 2019 on an extended dayshift basis, as feed became available. As expected, a second shift was added early in the second quarter. Additional milling shifts are expected to be added in the fourth quarter, when training of additional personnel is complete. The processing plant, which was used formerly for open-pit operations, has had the benefit of a recent upgrade and further upgrades are planned. Recent analyses suggest that the product from the plant meets quality criteria and operates at a high efficiency. Shipments of concentrate to Ocean Partners UK Ltd commenced in the second quarter. Provisional revenues from concentrate totalled US$ 460,000 approximately for the quarter, representing approximately 154 tonnes of concentrate shipped. However, until the mine reaches the commencement of commercial production all development expenditures are capitalized with net proceeds from concentrate sales offset against Development assets.

Safety is a high priority and the company continues to invest in safety-related training and infra-structure. The zero lost time accident rate since the start of underground operations, continues. Environmental monitoring demonstrates a high level of regulatory compliance. Phased site restoration works continue with thousands of tree saplings planted this year.

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/7025J_1-2019-8-20.pdf

Qualified Person

The financial components of this disclosure has been reviewed by Leo O'Shaughnessy (Chief Financial Officer) and the production, exploration and permitting components by Roland Phelps (President & CEO), qualified persons under the meaning of NI. 43-101. The information is based upon local production and financial data prepared under their supervision.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including anticipated production and development projections, for the Omagh Gold project. Forward-looking statements are based on estimates and assumptions made by Galantas in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Galantas believes are appropriate in the circumstances. Many factors could cause Galantas' actual results,  the performance or achievements to differ materially from those expressed or implied by the forward looking statements or strategy, including: gold price volatility; discrepancies between actual and estimated production,  actual and estimated  metallurgical recoveries and throughputs; mining operational risk, geological uncertainties; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign involvement; speculative nature of gold exploration; dilution; competition; loss of or availability of key employees; additional funding requirements; uncertainties regarding planning and other permitting issues; and defective title to mineral claims or property. These factors and others that could affect Galantas's forward-looking statements are discussed in greater detail in the section entitled "Risk Factors" in Galantas' Management Discussion & Analysis of the financial statements of Galantas and elsewhere in documents filed from time to time with the Canadian provincial securities regulators and other regulatory authorities. These factors should be considered carefully, and persons reviewing this press release should not place undue reliance on forward-looking statements. Galantas has no intention and undertakes no obligation to update or revise any forward-looking statements in this press release, except as required by law.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Enquiries

Galantas Gold Corporation

Roland Phelps C.Eng - President & CEO
Email: [e-mail]
Website: www.galantas.com
Telephone: [phone]

Grant Thornton UK LLP (Nomad)                  

Philip Secrett, Richard Tonthat.                                                

Telephone: [phone]                       

Whitman Howard Ltd (Broker & Corporate Adviser) 

Ranald McGregor-Smith, Nick Lovering

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.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

		As at			As at
		June 30,			December 31,
		2019			2018
ASSETS
Current assets
Cash and cash equivalents	$	1,314,113		$	6,188,554
Accounts receivable and prepaid expenses (note 4)		983,474			287,273
Inventories (note 5)		-			11,335
Total current assets		2,297,587			6,487,162
Non-current assets
Property, plant and equipment (note 6)		18,934,776			16,487,501
Long-term deposit (note 8)		498,720			523,170
Exploration and evaluation assets (note 7)		726,914			760,023
Total non-current assets		20,160,410			17,770,694
Total assets	$	22,457,997		$	24,257,856
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 9)	$	2,461,864		$	2,257,329
Current portion of financing facilities (note 10)		398,212			382,974
Due to related parties (note 13)		4,191,351			4,119,642
Total current liabilities		7,051,427			6,759,945
Non-current liabilities
Non-current portion of financing facilities (note 10)		1,066,316			1,081,190
Decommissioning liability (note 8)		556,468			578,242
Total non-current liabilities		1,622,784			1,659,432
Total liabilities		8,674,211			8,419,377
Capital and reserves
Share capital (note 11(a)(b))		48,628,055			48,628,055
Reserves		8,579,850			8,963,163
Deficit		(43,424,119	)		(41,752,739	)
Total equity		13,783,786			15,838,479
Total equity and liabilities	$	22,457,997		$	24,257,856

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

Going concern (note 1)
Contingency (note 15)

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Revenues
Gold sales	$	-		$	57,040		$	-		$	57,040
Cost and expenses of operations
Cost of sales		85,482			34,150			155,508			58,216
Depreciation (note 6)		99,085			77,980			186,490			142,229
		184,567			112,130			341,998			200,445
Loss before general administrative and other expenses (income)		(184,567	)		(55,090	)		(341,998	)		(143,405	)
General administrative expenses
Management and administration wages (note 13)		255,618			216,565			447,306			373,417
Other operating expenses		37,054			57,081			82,280			104,177
Accounting and corporate		14,718			17,107			28,613			30,360
Legal and audit		25,872			17,452			41,446			64,203
Stock-based compensation		76,723			69,772			212,063			145,855
Shareholder communication and investor relations		62,836			66,312			110,969			105,630
Transfer agent		5,752			5,477			7,653			6,127
Director fees (note 13)		11,250			8,250			17,500			13,250
General office		3,663			2,041			6,262			4,422
Accretion expenses (notes 8 and 10)		61,983			77,618			119,029			80,397
Loan interest and bank charges less deposit interest (note 13)		90,912			78,478			175,689			97,205
		646,381			616,153			1,248,810			1,025,043
Other expenses (income)
Unrealized gain on fair value of derivative financial liability		-			-			-			(10,000	)
Foreign exchange loss		60,915			29,267			80,572			66,560
		60,915			29,267			80,572			56,560
Net loss for the period	$	(891,863	)	$	(700,510	)	$	(1,671,380	)	$	(1,225,008	)
Basic and diluted net loss per share (note 12)	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average number of common shares outstanding - basic and diluted		299,686,805			187,549,186			299,686,805			187,549,186

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

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Comprehensive Income (Loss)

(Expressed in Canadian Dollars)

(Unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Net loss for the period	$	(891,863	)	$	(700,510	)	$	(1,671,380	)	$	(1,225,008	)
Other comprehensive (loss) income
Items that will be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations		(590,394	)		(391,688	)		(595,376	)		202,954
Total comprehensive loss	$	(1,482,257	)	$	(1,092,198	)	$	(2,266,756	)	$	(1,022,054	)

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

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

(Unaudited)

		Six Months Ended
		June 30,
		2019			2018
Operating activities
Net loss for the period	$	(1,671,380	)	$	(1,225,008	)
Adjustment for:
Depreciation (note 6)		186,490			142,229
Stock-based compensation		212,063			145,855
Interest expense (note 13)		180,717			93,063
Foreign exchange loss		(91,400	)		11,034
Accretion expenses (notes 8 and 10)		119,029			80,397
Unrealized loss on fair value of derivative financial liability		-			(10,000	)
Non-cash working capital items:
Accounts receivable and prepaid expenses		(743,079	)		54,505
Inventories		11,335			4,070
Accounts payable and other liabilities		318,134			453,412
Due to related parties		79,013			173,908
Net cash and cash equivalents used in operating activities		(1,399,078	)		(76,535	)
Investing activities
Purchase of property, plant and equipment		(3,392,566	)		(602,009	)
Exploration and evaluation assets		-			(1,909,858	)
Net cash and cash equivalents used in investing activities		(3,392,566	)		(2,511,867	)
Financing activities
Advances from related parties		-			549,193
Proceeds from financing facilities (note 10)		-			2,021,280
Financing charges related to financing liabilities (note 10)		-			(41,806	)
Repayment of financing facilities (note 10)		(22,569	)		(3,022	)
Net cash and cash equivalents (used in) provided by financing activities		(22,569	)		2,525,645
Net change in cash and cash equivalents		(4,814,213	)		(62,757	)
Effect of exchange rate changes on cash held in foreign currencies		(60,228	)		15,602
Cash and cash equivalents, beginning of period		6,188,554			779,758
Cash and cash equivalents, end of period	$	1,314,113		$	732,603
Cash	$	1,314,113		$	732,603
Cash equivalents		-			-
Cash and cash equivalents	$	1,314,113		$	732,603

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

Galantas Gold Corporation

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, 2017	$	39,759,172		$	-		$	7,038,978		$	619,209		$	(38,867,302	)	$	8,550,057
Warrants issued (note 10(ii))		-			786,000			-			-			-			786,000
Stock-based compensation		-			-			145,855			-			-			145,855
Exchange differences on translating foreign operations		-			-			-			202,954			-			202,954
Net loss for the period		-			-			-			-			(1,225,008	)		(1,225,008	)
Balance, June 30, 2018	$	39,759,172		$	786,000		$	7,184,833		$	822,163		$	(40,092,310	)	$	8,459,858
Balance, December 31, 2018	$	48,628,055		$	786,000		$	7,264,147		$	913,016		$	(41,752,739	)	$	15,838,479
Stock-based compensation		-			-			212,063			-			-			212,063
Exchange differences on translating foreign operations		-			-			-			(595,376	)		-			(595,376	)
Net loss for the period		-			-			-			-			(1,671,380	)		(1,671,380	)
Balance, June 30, 2019	$	48,628,055		$	786,000		$	7,476,210		$	317,640		$	(43,424,119	)	$	13,783,786

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

Galantas Gold Corporation

Notes to Condensed Interim Consolidated Financial Statements

Three and Six Months Ended June 30, 2019

(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 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 at the Omagh mine being met together with the continued support of both Cavanacaw Corporation and Galantas Gold Corporation. The directors assumptions in relation to future levels of production, gold prices and mine operating 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.

As at June 30, 2019, the Company had a deficit of $43,424,119 (December 31, 2018 - $41,752,739). Comprehensive loss for the six months ended June 30, 2019 was $2,266,756 (six months ended June 30, 2018 - comprehensive loss of $1,022,054). These losses raise material uncertainties which cast significant doubt as to whether the Company will be able to continue as a going concern. 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.

The Company's operations include the consolidated results of Cavanacaw, and its wholly-owned subsidiaries Omagh, Galántas and Flintridge.

The Company's common shares are listed on the TSX Venture Exchange ("TSXV") and London Stock Exchange AIM under the symbol GAL. The primary office is located at The Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, Canada, M5C 1P1.

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 August 20, 2019 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, 2018, except as noted below. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2019 could result in restatement of these unaudited condensed interim consolidated financial statements.

New accounting standards adopted

(i) On June 7, 2017, the IASB issued IFRIC 23 - Uncertainty Over Income Tax Treatments. The interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation is applicable for annual periods beginning on or after January 1, 2019. At January 1, 2019, the Company adopted this standard and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

(ii) On January 13, 2016, the IASB issued IFRS 16 - Leases ("IFRS 16"). The new standard is effective for annual periods beginning on or after January 1, 2019. IFRS 16 will replace IAS 17 - Leases ("IAS 17"). This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures to be provided by lessors. Other areas of the lease accounting model have been impacted, including the definition of a lease. Transitional provisions have been provided. The Company adopted IFRS 16 in its unaudited condensed interim consolidated financial statements for the period beginning on January 1, 2019. As the Company has no material lease contracts that fall under IFRS 16, the adoption of this standard has not resulted in any material changes in the unaudited condensed interim consolidated financial statements.

4.        Accounts Receivable and Prepaid Expenses

		As at			As at
		June 30,			December 31,
		2019			2018
Sales tax receivable - Canada	$	5,675		$	7,629
Valued added tax receivable - Northern Ireland		387,369			153,948
Accounts receivable		532,972			109,927
Prepaid expenses		57,458			15,769
	$	983,474		$	287,273

The following is an aged analysis of receivables:

		As at			As at
		June 30,			December 31,
		2019			2018
Less than 3 months	$	917,621		$	268,995
3 to 12 months		6,003			-
More than 12 months		2,392			2,509
Total accounts receivable	$	926,016		$	271,504

5.        Inventories

		As at			As at
		June 30,			December 31,
		2019			2018
Concentrate inventories	$	-		$	11,335

6.        Property, Plant and Equipment

		Freehold			Plant									Mine
		land and			and			Motor			Office			development			Development
Cost		buildings			machinery			vehicles			equipment			costs			assets			Total
Balance, December 31, 2017	$	2,340,221		$	5,477,586		$	141,364		$	104,456		$	15,340,722		$	-		$	23,404,349
Additions		-			557,607			21,014			46,996			-			4,266,806			4,892,423
Transfer (1)		-			-			-			-			(15,340,722	)		10,468,410			(4,872,312	)
Foreign exchange adjustment		65,953			153,418			3,984			2,944			-			(38,803	)		187,496
Balance, December 31, 2018		2,406,174			6,188,611			166,362			154,396			-			14,696,413			23,611,956
Additions		-			626,896			12,920			12,593			-			2,740,157			3,392,566
Foreign exchange adjustment		(112,451	)		(287,641	)		(7,775	)		(7,216	)		-			(682,086	)		(1,097,169	)
Balance, June 30, 2019	$	2,293,723		$	6,527,866		$	171,507		$	159,773		$	-		$	16,754,484		$	25,907,353

		Freehold			Plant									Mine
		land and			and			Motor			Office			development			Development
Accumulated depreciation		buildings			machinery			vehicles			equipment			costs			assets			Total
Balance, December 31, 2017	$	1,908,720		$	4,496,935		$	91,189		$	88,977		$	8,651,776		$	-		$	15,237,597
Depreciation		12,433			311,201			18,005			9,360			-			-			350,999
Transfer (1)		-			-			-			-			(8,651,776	)		-			(8,651,776	)
Foreign exchange adjustment		53,892			128,444			2,716			2,583			-			-			187,635
Balance, December 31, 2018		1,975,045			4,936,580			111,910			100,920			-			-			7,124,455
Depreciation		4,835			169,331			7,494			4,830			-			-			186,490
Foreign exchange adjustment		(92,479	)		(235,492	)		(5,504	)		(4,893	)		-			-			(338,368	)
Balance, June 30, 2019	$	1,887,401		$	4,870,419		$	113,900		$	100,857		$	-		$	-		$	6,972,577

		Freehold			Plant									Mine
		land and			and			Motor			Office			development			Development
Carrying value		buildings			machinery			vehicles			equipment			costs			assets			Total
Balance, December 31, 2018	$	431,129		$	1,252,031		$	54,452		$	53,476		$	-		$	14,696,413		$	16,487,501
Balance, June 30, 2019	$	406,322		$	1,657,447		$	57,607		$	58,916		$	-		$	16,754,484		$	18,934,776

⁽¹⁾ During the year ended December 31, 2018, the Company transferred the cost of its Exploration and evaluation assets (note 7) to Development assets.

7.        Exploration and Evaluation Assets

Exploration and evaluation assets are expenditures for the underground mining operations in Omagh. Galantas had announced in December 2016 that it would commence the first phase of underground development and re-start concentrate shipments at its Omagh mine. Underground development of a decline tunnel, located at the base of the existing open pit, commenced in the first quarter 2017.

The granting of planning consent during the second quarter of 2015 for an underground operation at the Omagh site permits the continuation and expansion of gold mining. This planning consent was appealed by a third party in a judicial review hearing which commenced in September 2016 and was then adjourned to and completed in February 2017. Judgement was received in September 2017 whereby the third party's request for the quashing of the planning consent was denied. However, in November, Galantas reported that it had received notice of an application by the third party to the Court of Appeal in relation to the positive judicial review judgment. This appeal was completed in February 2018. In November 2018, the Company announced that the Court of Appeal has delivered its judgement in regard to an appeal against the Company's planning consent. The Court has determined that the appeal has failed and thus the planning consent is confirmed.

		Exploration
		and
		evaluation
Cost		assets
Balance, December 31, 2017	$	3,948,452
Additions		254,140
Transfer (i)		(3,624,624	)
Foreign exchange adjustment		182,055
Balance, December 31, 2018		760,023
Foreign exchange adjustment		(33,109	)
Balance, June 30, 2019	$	726,914

		Exploration
		and
		evaluation
Carrying value		assets
Balance, December 31, 2018	$	760,023
Balance, June 30, 2019	$	726,914

(i) During the year ended December 31, 2018, the Company transferred the cost of its Exploration and evaluation assets (note 6) to Development assets.

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, 2019 based on a risk-free discount rate of 1% (December 31, 2018 - 1%) and an inflation rate of 1.50% (December 31, 2018 - 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, 2019, the estimated fair value of the liability is $556,468 (December 31, 2018 - $578,242). Changes in the provision during the six months ended June 30, 2019 are as follows:

		As at			As at
		June 30,			December 31,
		2019			2018
Decommissioning liability, beginning of period	$	578,242		$	551,680
Accretion		5,449			10,925
Foreign exchange		(27,223	)		15,637
Decommissioning liability, end of period	$	556,468		$	578,242

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, 2018 - GBP 300,000), of which GBP 300,000 was funded as of June 30, 2019 (GBP 300,000 was funded as of December 31, 2018) and reported as long-term deposit of $498,720 (December 31, 2018 - $523,170).

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,
		2019			2018
Accounts payable	$	1,540,457		$	1,017,939
Accrued liabilities		921,407			1,239,390
Total accounts payable and other liabilities	$	2,461,864		$	2,257,329

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

		As at			As at
		June 30,			December 31,
		2019			2018
Less than 3 months	$	1,573,645		$	1,066,881
3 to 12 months		553,735			775,693
12 to 24 months		-			71,394
More than 24 months		334,484			343,361
Total accounts payable and other liabilities	$	2,461,864		$	2,257,329

10.      Financing Facilities

Amounts payable on the long-term debts are as follow:

		As at			As at
		June 30,			December 31,
		2019			2018
Financing facilities, beginning of period	$	1,081,190		$	19,689
Financing facility received (US$1,600,000) (ii)		-			2,021,280
Less bonus warrants issued (ii)		-			(786,000	)
Less financing costs (ii)		-			(41,674	)
Less current portion		(398,212	)		(382,974	)
Repayment of financing facilities		(22,569	)		(6,357	)
Accretion		113,580			240,621
Foreign exchange adjustment		292,327			16,605
Financing facilities - long term portion	$	1,066,316		$	1,081,190

(i) In June 2015, the Company obtained financing in the amount of GBP 19,900 for the purchase of a vehicle. The financing is for three years at interest of 6.79% per annum with monthly principal and interest payments of GBP 377 together with a final payment in August 2019 of GBP 9,540. The financing was secured on the vehicle.

(ii) In April 2018, the Company signed a concentrate pre-payment agreement and loan facility for US$1.6 million with a United Kingdom based company (the "Lender"), with a maturity date of December 31, 2020. The interest is set at USD 12 month LIBOR + 8.75% and payable monthly. No interest shall be charged for 6 months and repayments shall commence against deliveries in 2019. There was a US$25,000 arrangement fee.

In respect of the loan facility, a fixed and floating security, subordinated to an existing security to G&F Phelps Ltd. ("G&F Phelps"), is being put in place over Flintridge assets. G&F Phelps has a first charge on Flintridge assets in respect of its loan facility and the Lender required an intercreditor agreement between G&F Phelps and the Lender.

As consideration for the loan facility, the United Kingdom based company received 15,000,000 bonus warrants of Galantas. Each bonus warrant is exercisable into one common share of Galantas and is subject to an initial four months plus one day hold period from the date of issuance of the bonus warrants. The bonus warrants have a maximum life of two years (the "Expiry Time"). On April 19, 2018, the 15,000,000 bonus warrants were granted. In the event that the weighted average closing price per common share of the Company is more than $0.20 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Time to a date that is 30 days from the date on which the Company announces the accelerated Expiry Time by press release.

The fair value of the 15,000,000 bonus warrants was estimated at $786,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 113.55%, risk-free interest rate - 1.91% and an expected average life of 2 years.

During the three and six months ended June 30, 2019, the Company recorded accretion expense of $59,268 and $113,580, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2018 - $240,621).

During the three and six months ended June 30, 2019, the Company recorded a repayment of $19,131 (GBP 11,508) in regards with this loan facility (year ended December 31, 2018 - $nil).

11.      Share Capital and Reserves

a)         Authorized share capital

At June 30, 2019, 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, 2019, the issued share capital amounted to $48,628,055. The change in issued share capital for the periods presented is as follows:

		Number of
		common
		shares			Amount
Balance, December 31, 2017 and June 30, 2018		187,549,186		$	39,759,172
Balance, December 31, 2018 and June 30, 2019		299,686,805		$	48,628,055

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, 2017		636,000		$	0.07
Issued (note 10(ii))		15,000,000			0.16
Expired		(636,000	)		0.07
Balance, June 30, 2018		15,000,000		$	0.16
Balance, December 31, 2018 and June 30, 2019		15,000,000		$	0.16

The following table reflects the actual warrants issued and outstanding as of June 30, 2019:

		Grant date	Exercise
	Number	fair value	price
Expiry date	of warrants	($)	($)
April 19, 2020	15,000,000	786,000	0.1575

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, 2017		8,600,000		$	0.12
Granted (i)		1,000,000			0.11
Expired		(750,000	)		0.14
Balance, June 30, 2018		8,850,000		$	0.12
Balance, December 31, 2018		8,850,000		$	0.12
Granted (ii)(iii)		5,400,000			0.09
Expired		(133,333	)		0.09
Balance, June 30, 2019		14,116,667		$	0.09

(i) On April 19, 2018, 1,000,000 stock options were granted to key employees and consultants of the Company to purchase common shares at a price of $0.11 per share until April 19, 2023. The options will vest as to one third on April 19, 2018 and one third on each of the following two anniversaries. The fair value attributed to these options was $99,400 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, 2019, included in stock-based compensation is $5,855 and $18,110, respectively (three and six months ended June 30, 2018 - $42,937) related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 172%; risk-free interest rate - 2.16% and an expected life of 5 years.

(ii) On February 13, 2019, 3,200,000 stock options were granted to directors, officers, consultants and employees of the Company to purchase common shares at a price of $0.09 per share until February 13, 2024. The options will vest as to one third on February 13, 2019 and one third on each of the following two anniversaries. The fair value attributed to these options was $247,360 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, 2019, included in stock-based compensation is $27,934 and $125,974, respectively related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 129%; risk-free interest rate - 1.84% and an expected life of 5 years.

(iii) On June 27, 2019, 2,200,000 stock options were granted to directors and employees of the Company to purchase common shares at a price of $0.09 per share until June 27, 2024. The options will vest as to one third on June 27, 2019 and one third on each of the following two anniversaries. The fair value attributed to these options was $128,040 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, 2019, included in stock-based compensation is $43,206 related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 128%; risk-free interest rate - 1.37% and an expected life of 5 years.

The following table reflects the actual stock options issued and outstanding as of June 30, 2019:

		Weighted average		Number of
		remaining	Number of	options	Number of
	Exercise	contractual	options	vested	options
Expiry date	price ($)	life (years)	outstanding	(exercisable)	unvested
June 1, 2020	0.105	0.92	3,550,000	3,550,000	-
June 12, 2020	0.105	0.96	150,000	150,000	-
March 25, 2022	0.135	2.74	4,150,000	4,150,000	-
April 19, 2023	0.110	3.81	1,000,000	1,000,000	-
February 13, 2024	0.090	4.63	3,066,667	1,066,667	2,000,000
June 27, 2024	0.090	5.00	2,200,000	733,333	1,466,667
	0.095	2.32	14,116,667	10,650,000	3,466,667

12.      Net Loss per Common Share

The calculation of basic and diluted loss per share for the three and six months ended June 30, 2019 was based on the loss attributable to common shareholders of $891,863 and $1,671,380, respectively (three and six months ended June 30, 2018 - $700,510 and $1,225,008, respectively) and the weighted average number of common shares outstanding of 299,686,805 (three and six months ended June 30, 2018 - 187,549,186) for basic and diluted loss per share. Diluted loss did not include the effect of 15,000,000 warrants (three and six months ended June 30, 2018 - 15,000,000) and 14,116,667 options (three and six months ended June 30, 2018 - 8,850,000) for the three and six months ended June 30, 2019, as they are anti-dilutive.

13.      Related Party Disclosures

Related parties include the Board of Directors, close family members, other key management individuals and enterprises that are controlled by these individuals as well as certain persons performing similar functions.

Related party transactions conducted in the normal course of operations are measured at the fair value and approved by the Board of Directors in strict adherence to conflict of interest laws and regulations.

(a) The Company entered into the following transactions with related parties:

					Three Months Ended						Six Months Ended
					June 30,						June 30,
		Note			2019			2018			2019			2018
Interest on related party loans		(i)		$	90,553		$	76,934		$	180,717		$	94,269

(i) G&F Phelps, a company controlled by a director of the Company, had amalgamated loans to the Company of $3,033,492 (GBP 1,824,764) (December 31, 2018 - $3,182,205 - GBP 1,824,764) 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. In April 2018, the interest increased to 6.75% + USD 12 month LIBOR. Interest accrued on related party loans is included with due to related parties. As at June 30, 2019, the amount of interest accrued is $801,669 (GBP 482,236) (December 31, 2018 - $658,338 - GBP 377,509).

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

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2019			2018			2019			2018
Salaries and benefits (1)	$	116,176		$	115,996		$	227,875		$	228,106
Stock-based compensation		17,616			6,572			57,383			25,205
	$	133,792		$	122,568		$	285,258		$	253,311

⁽¹⁾ Salaries and benefits include director fees. As at June 30, 2019, due to directors for fees amounted to $100,500 (December 31, 2018 - $166,000) and due to officers, mainly for salaries and benefits accrued amounted to $255,690 (GBP 153,808) (December 31, 2018 - $113,099 - GBP 64,854), and is included with due to related parties.

(c) As of June 30, 2019, Ross Beaty owns 37,447,478 common shares of the Company or approximately 12.50% of the outstanding common shares. Roland Phelps, CEO and director, owns, directly and indirectly, 49,338,167 common shares of the Company or approximately 16.46% of the outstanding common shares of the Company. Miton owns 50,000,000 common shares of the Company or approximately 16.68%. Melquart owns, directly and indirectly, 62,224,545 common shares of the Company or approximately 20.76% of the outstanding common shares of the Company. The remaining 33.60% 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.

14.      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, 2019		United Kingdom			Canada			Total
Current assets	$	1,373,101		$	924,486		$	2,297,587
Non-current assets		20,102,562			57,848			20,160,410

December 31, 2018		United Kingdom			Canada			Total
Current assets	$	794,772		$	5,692,390		$	6,487,162
Non-current assets		17,706,643			64,051			17,770,694

15.      Contingency

During the year ended December 31, 2010, the Company's subsidiary Omagh Minerals Limited received a payment demand from Her Majesty's Revenue and Customs ("HMRC") in the amount of $505,852 (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 Minerals 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 six months ended June 30, 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 Minerals Limited is unable to make a reliable estimate of the amount of the potential additional interest that may be applied by HMRC.

16.      Event After the Reporting Period

On August 5, 2019, the Company announced a proposed private placement of common shares (the "Private Placement"). The net proceeds to be realised by the Private Placement are intended to be used to implement recently identified optimisation initiatives at the Omagh gold mine, including increased mechanisation and improved underground infrastructure, as well as for general working capital of the Company.

The Private Placement is expected to include funds raised in both the UK and Canadian currency and is for a maximum of 23,529,412 shares, at an issue price of $0.068 (GBP 0.0425) per share for maximum gross proceeds of $1,600,000 (GBP 1,000,000). A four month plus one day hold period will apply to the shares and the shares will rank pari passu with the existing shares in issue of the Company. The Private Placement will be part brokered. Insiders are expected to participate in the placing.

 

END

 

 

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