Interim Results

RNS Number : 7543M

Galantas Gold Corporation

29 August 2013

 



GALANTAS GOLD CORPORATION

TSXV & AIM : Symbol GAL

GALANTAS INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013

29th AUGUST 2013 : Galantas Gold Corporation (the Company) is pleased to announce its interim results for the six months ended June 30^th 2013 and second quarter results  for the three months ended 30 June 2013.

Financial Highlights

Highlights of the 2013 second quarter's and first six months results, which are expressed in Canadian Dollars, are:

All figures denominated in Canadian Dollars (CDN$)	Second Quarter Ended  June 30     2013                  2012		Six Months Ended  June 30       2013           2012
Revenue	$    523,856	$ 1,902,980	$    888,532	$ 2,928,126
Cost of Sales	$    511,833	$    993,304	$    909,421	$ 2,013,811
Income(loss) before the undernoted	$      12,023	$    909,676	$  (20,889)	$     914,315
Amortization	$    122,224	$     186,624	$   246,830	$    371,189
General administrative expenses	$    294,721	$     413,004	$   591,780	$  866,960
(Gain) on sale of plant and equipment	$    (64,531)	$    (15,952)	$   (64,531)	$  (14,446)
Gain on debt extinguishment	$                0	$  (190,624)	$                 0	$(190,624)
Foreign exchange/(gain) loss	$       17,272	$    (27,110)	$        3,249	$  (19,109)
Net (Loss) Income for the period	$ ( 357,663)	$     543,734	$  (798,217)	$  (99,655)
Working Capital (Deficit)	$ (3,037,837)	$ (472,142)	$ (3,037,837)	$(472,142)
Cash (loss) generated from operating activities before changes in non-cash working capital	$  (323,010)	$    556,321	$ (562,917)	$ 253,003
Cash at June 30, 2013	$   476,581	$2,976,819	$ 476,581	$2,976,819

The Net Loss for the three months ended June 30, 2013, amounted to CDN$ 357,663 (2012 Q2: Net Income CDN$ 543,734) and the cash loss generated from operating activities before changes in non-cash working capital in the second quarter of 2012 amounted to CDN$ 323,010 (2012 Q2:Cash gain CDN$ 556,321). The cash generated from processing low grade material was positive on a strict operational basis before the inclusion of administration costs and overheads in the second quarter (Q2), following a reduction in costs.

Sales revenues for the six months ended June 30, 2013 amounted to CDN$ 888,532 (2012: CDN$ 2,928,126) with sales revenues for the three months ended June 30, 2013 amounted to CDN$ 523,856 (Q2 2012: CDN$ 1,902,980).  This reduction in sales revenues is due to the lower level of metal produced and shipped during both periods primarily due to the requirement to process from stockpile ore at the Omagh mine as a result of difficulties in accessing ore from the open pits. 

Cost of sales for the six months ended June 30, 2013 amounted to CDN$ 909,421 (2012: CDN$ 2,013,811).  Cost of sales for the three months ended June 30, 2013 amounted to CDN $ 511,833 (Q2 2012: CDN$ 993,304). There was a decrease in various production costs at the Omagh mine during the second quarter, including production wages reflecting the reduced number of personnel arising from the rationalisation programme, Oil and Fuel costs, Repairs and servicing costs and usage of Consumables which reductions were primarily attributable to the reduced level of open pit mining during both periods when compared with 2012. General administrative costs for the six months ended June 30, 2013 amounted to CDN$ 591,780(2012: CDN$ 866,960). General administrative costs for the three months ended June 30, 2013 amounted to CDN$ 294,721(2012: CDN$ 413,004).

The Net Loss for the six months ended June 30, 2013, amounted to CDN$ 798,217 (2012: Net Loss CDN$ 99,655).  The cash loss generated from operating activities before changes in non-cash working capital for the first half of 2013 amounted to CDN$ (562,917) (2012: Cash gain $ 253,003).

The Company had cash balances at June 30, 2013 of CDN$ 476,581compared to CDN$ 2,976,819 at June 30, 2012.  The working capital deficit at June 30, 2013 amounted to CDN$ 3,037,837 which compared to a deficit of CDN$ 472,142 at December 31, 2011. 

Production

Production for comparative quarters is summarised below:

	Three Months to June 30 2013	Three Months to June 30 2012	Six Months to June 30 2013	Six Months to  June 30 2012
Tonnes Milled	12,018	15,036	23,771	24,456
Average Grade g/t gold	1.34	2.36	1.3	2.65
Concentrate Dry Tonnes	145	355	290	623
Gold Grade (concentrate)	94.4	100	90.6	104
Gold Produced (oz)	441	1,152	838.7	2,084
Gold Produced (kg)	13.7	35.8	26.1	64.8
Silver Grade	208.7	294	160	282.0
Silver Produced (oz)	975	3,395	1,495	5,642
Silver Produced (kg)	30.3	105.5	46.5	174.5
Lead Produced tonnes	6.9	23.4	11	48.3
Gold Equivalent (oz)	467	1,245	880	2,251

Concentrate production at the Omagh mine during the three and six months ended June 30, 2013 was significantly below production levels of the corresponding periods of 2012 due primarily to the processing of lower grade ore. 

The main production focus during the second quarter has been on the processing of ore from the low grade stockpile. Earlier in the year there had been some limited open pit mining on the Kerr vein which ceased later in the first quarter when the pit met its planned design limit. From the second half of 2012 mining from the Kearney pit had become totally restricted as a result of the surplus rock stockpile on the site reaching capacity levels. This surplus rock was due to be transported from the site in 2012 with the Omagh mine having completed construction of public road improvements, at its own cost, to comply with the conditions of the planning consent. However, following a judicial review brought by a private individual on the grounds of procedural failings by Planning Service, the planning consent was quashed with the surplus rock remaining on site. This ongoing limitation will result in future production continuing to be from the low grade stockpile. To generate cash from its operations going forward, the Company is continuing to improve efficiencies and cut costs during the second quarter.

During the three and six months ended June 30, 2013  the mill was fed with the lower grade ore and production continued to be hampered by both the ongoing variations in the metallurgy due to the inconsistent grade of ore being milled and the clay content of stocked material. Production was also hampered by some unplanned downtime in the plant.

The reinstatement of a third paste cell was completed during the first quarter. Work, which had commenced in early 2012, on the development of a number of paste cells already permitted, in preparation for their future utilisation when underground mining at the Omagh mine commences was also progressed earlier in 2013 following the cessation of mining on the Kerr vein.

The 2013 production figures and metal contents are provisional and subject to averaging or umpiring provisions under the concentrate off - take agreement detailed in a press release dated October 3, 2007.

Exploration

The major focus of exploration activities in 2012 and the first half of 2013 has been the continuation of the successful drilling program. In total, 16,879 metres have been drilled since the program commenced in March 2011 with significant gold intersects being reported.

The drilling programme began in 2011 with the objective of extending the depth and extent of the Joshua vein and providing data for a potential underground operation based upon the Joshua and Kearney veins.  During 2011 and 2012 ninety five holes were drilled totalling 16,347 metres. Channel sampling was also carried out, during this period, on the Joshua, Kearney and Kerr vein systems. On Joshua, a total strike length of 213 metres was sampled. On Kerr, an increase in average vein width and gold grade was identified within depth over a 30 metre strike length.

The exploration programme had expanded considerably in 2012 with six drills operational during the first half of the year. The second half of the year saw the number of rigs progressively reduce with one rig, owned by the Company, remaining in operation by the end of 2012. The two principal objectives of the drilling programme were to complete the deeper holes on Kearney in order to gain a more accurate picture of the zone of mineralization for the purpose of the underground mine plan and to extend the strike of Joshua to the north and the south, and begin to target deeper sections of the vein. Drilling continued in to the first quarter of 2013 when two further holes targeting north Kearney and central Joshua were completed and a further drill hole commenced in the second quarter. Following the scale back of drilling in 2013, more time was dedicated to logging remaining drill cores, the sealing off of all accessible drill holes, updating databases and progressing towards a resource estimate using the Micromine geological modelling computer program. 

Assay results released to date from both the drilling and channel sampling programme have been encouraging with significant gold intersections being identified. The updated resource estimate (Technical Report July 2013) contains all material data related to the program (with the exception of one hole detailed in a disclosure dated 27^th August 2013). Results to date have been positive, in particular the assays from the ten drill holes on Joshua released in January 2013 with thirteen significant mineral intersects. Once additional funding becomes available this drilling programme will continue using the company's own core drilling rig manned by in-house drillers. Up to a further 1,000 metres of drilling are planned, following up the recently reported gold intersects on the Joshua vein. One hole has been completed in the program, with a positive result (press release 27^th August 2013).

During 2012 the Company ACA Howe International Ltd (Howe UK) completed an Interim Resource Estimate to Canadian National Instrument NI 43-101 compliant mineral resource estimate and a Preliminary Economic Assessment for the Omagh Gold Project (see press release dated July 3, 2012) This report, which was based on drilling results and analyses received to June 8, 2012, identified all resources discovered at that date. The Company subsequently filed a complete Technical Report on SEDAR in August 2012. An updated resource estimate was prepared by the Company during the second quarter based on drilling results received to May 5, 2013 (see press release dated June 12, 2013). The drilling program, subsequent to June 2012, was targeted to increase the amount of measured and indicated resources related to the potential development of an underground mine. There has been an 50% increase in resources classified as measured and indicated from a total of 95,300 troy ounces gold (2012) to 142,533 troy ounces gold  and a 28% increase in Resources classified as inferred, from 231,000 troy ounces gold (2012) to 295,599 troy ounces gold (2013). The overall increase is 34%. Subsequent to June 30, 2013 Galantas filed an updated Technical Report on SEDAR in July 2013.

Limited exploration outside the mine licence area continued during the first half of 2013. With regards to the four licences held in the Republic of Ireland, geochemical soil sampling and geophysical data generated by the Tellus Border Project, a cross border initiative funded by the EU regional development fund, was released earlier in the year. The data revealed the continuation of a trend established on licence OM4 with anomalously high concentrations of gold pathfinder elements. This data has assisted in the design of a summer field programme. In addition, following a detailed review of this data, application was made for three new prospecting licences in the Republic of Ireland which were granted during the second quarter. These licences join and extend our existing licences to the southwest. During the second quarter Omagh Minerals were awarded a grant to complete a project which will determine the prospectivity potential of the Tellus border zone as a whole. This research is supported by the EU INTERREG IVA-funded Tellus Border project, a cross border initiative financed by the EU regional development fund. It is based around the new Tellus Border data and the associated fieldwork has progressed over the summer months.

Planning

Discussions continued with the planning services in Northern Ireland during the second quarter of 2013 with regards to the planning application for an underground mine plan and accompanying Environmental Statement which were submitted to the Planning Services in 2012. Consultations with statutory consultees continue to progress, with a number now confirming that they are satisfied. Consultations with the remainder are well advanced and the Company believes it can address outstanding matters raised by the consultees.

Roland Phelps, President & CEO, Galantas Gold Corporation, commented, "The Company continues to work with Planning Service and consultees to achieve underground planning consent.  The time-line for this is undefined because it is the hands of other parties. The company has a reasonable expectation that it will be achieved before the end of the year but this remains uncertain. Meanwhile, there is a supply of low grade material available for milling. Further efficiency changes and reductions in manpower have continued to reduce costs and further cost reductions are planned. We look forward to updating shareholders in due course."

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. Some of the production and metal figures are provisional and subject to averaging or umpiring provisions under the concentrate off-take contract with Xstrata Corporation (now Glencore Canada Corporation) detailed in a press release dated 3rd October 2007.

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

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including revenues and cost estimates, for the Omagh Gold project. Forward-looking statements are based on estimates and assumptions made by Galantas in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Galantas believes are appropriate in the circumstances. Many factors could cause Galantas' actual results,  the performance or achievements to differ materially from those expressed or implied by the forward looking statements or strategy, including: gold price volatility; discrepancies between actual and estimated production,  actual and estimated metallurgical recoveries; mining operational risk; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign involvement; speculative nature of gold exploration; dilution; competition; loss of key employees; additional funding requirements; 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.

Galantas Gold Corporation Issued and Outstanding Shares total 256,210,395.

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.

Click on, or paste the following link into your web browser, to view the associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/7543M_-2013-8-29.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 (Nominated Adviser) Mark Taylor Telephone [phone]

Condensed Consolidated Interim Financial Statements
(Expressed in Canadian Dollars)

(Unaudited)
Three and Six Months Ended June 30, 2013

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited)
		As at			As at
		June 30,			December 31,
		2013			2012
ASSETS
Current assets
Cash (note 5)	$	476,581		$	1,164,868
Accounts receivable and advances (note 6)		413,014			673,054
Inventory (note 7)		319,714			326,249
Total current assets		1,209,309			2,164,171
Non-current assets
Property, plant and equipment (note 8)		3,174,595			3,566,778
Long-term deposit (note 5)		423,656			428,717
Deferred development and exploration costs (note 9)		8,101,103			7,859,445
Total assets	$	12,908,663		$	14,019,111
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 10)	$	1,266,495		$	1,670,729
Due to related parties (note 15)		2,980,651			2,802,749
Total current liabilities		4,247,146			4,473,478
Non-current liabilities
Asset retirement obligation (note 9)		399,675			404,450
Total liabilities		4,646,821			4,877,928
Capital and reserves
Share capital (note 12)		29,874,693			29,874,693
Reserves		5,359,072			5,440,196
Deficit		(26,971,923	)		(26,173,706	)
Total equity		8,261,842			9,141,183
Total equity and liabilities		12,908,663			14,019,111

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

Going concern (note 1)
Contingent liability (note 17)
Subsequent event (note 18)

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Income (Loss)
(Expressed in Canadian Dollars)
(Unaudited)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2013			2012			2013			2012
Revenues
Gold sales	$	523,856		$	1,902,980		$	888,532		$	2,928,126
Cost and expenses of operations
Cost of sales (note 14)		511,833			993,304			909,421			2,013,811
Amortization and depreciation		122,224			186,624			246,830			371,189
		634,057			1,179,928			1,156,251			2,385,000
Income (loss) before the undernoted		(110,201	)		723,052			(267,719	)		543,126
General administrative expenses
Management and administration wages (note 15)		126,523			149,280			252,171			301,511
Other operating expenses		34,627			64,597			105,005			134,831
Accounting and corporate		17,241			14,779			27,971			27,946
Legal and audit		16,640			27,886			43,553			52,517
Stock-based compensation (note 12(d))		13,089			45,445			26,179			93,011
Shareholder communication and investor relations		53,683			67,797			83,433			126,586
Transfer agent		11,642			10,442			13,659			13,129
Director fees (note 15)		8,250			8,750			13,250			16,100
General office		1,778			1,952			3,891			4,399
Accretion expenses (note 11)		-			-			-			45,529
Loan interest and bank charges		11,248			22,076			22,668			51,401
		294,721			413,004			591,780			866,960
Other expenses
Gain on disposal of property, plant and equipment		(64,531	)		(15,952	)		(64,531	)		(14,446	)
Gain on debt extinguishment (note 11)		-			(190,624	)		-			(190,624	)
Foreign exchange loss (gain)		17,272			(27,110	)		3,249			(19,109	)
		(47,259	)		(233,686	)		(61,282	)		(224,179	)
Net income (loss) for the period	$	(357,663	)	$	543,734		$	(798,217	)	$	(99,655	)
Basic net income (loss) per share (note 13)	$	(0.00	)	$	0.00		$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding - basic		256,210,395			240,661,994			256,210,395			238,145,655
Diluted net income (loss) per share (note 13)	$	(0.00	)	$	0.00		$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding - diluted		256,210,395			240,661,994			256,210,395			238,145,655

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Comprehensive Income (Loss)
(Expressed in Canadian Dollars)
(Unaudited)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2013			2012			2013			2012
Net income (loss) for the period	$	(357,663	)	$	543,734		$	(798,217	)	$	(99,655	)
Items that will not be reclassified subsequently to loss
Foreign currency translation differences		323,508			13,553			(107,303	)		90,558
Total comprehensive income (loss)	$	(34,155	)	$	557,287		$	(905,520	)	$	(9,097	)

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
		Six Months Ended
		June 30,
		2013			2012
Operating activities
Net loss for the period	$	(798,217	)	$	(99,655	)
Adjustment for:
Amortization and depreciation		246,830			371,189
Stock-based compensation (note 12(d))		26,179			93,011
Foreign exchange		26,812			47,999
Gain on disposal of property, plant and equipment		(64,531	)		(14,446	)
Accretion expenses (note 11)		-			45,529
Gain on debt extinguishment (note 11)		-			(190,624	)
Non-cash working capital items:
Accounts receivable and advances		260,040			(60,710	)
Inventory		6,535			(7,533	)
Accounts payable and other liabilities		(404,234	)		638,701
Net cash (used in) provided by operating activities		(700,586	)		823,461
Investing activities
Purchase of property, plant and equipment		(166	)		(539,284	)
Proceeds from sale of property, plant and equipment		207,014			77,537
Deferred development and exploration costs		(377,643	)		(1,672,323	)
Long-term deposit		-			(31,968	)
Net cash used in investing activities		(170,795	)		(2,166,038	)
Financing activities
Warrants exercised		-			2,056,034
Net advances from related parties		177,902			81,883
Repayment of convertible debenture		-			(2,056,034	)
Net cash provided by financing activities		177,902			81,883
Net change in cash		(693,479	)		(1,260,694	)
Effect of exchange rate changes on cash held in foreign currencies		5,192			(2,568	)
		1,164,868			4,240,081
Cash, beginning of period
Cash, end of period	$	476,581		$	2,976,819

				Reserves
				Equity settled						Foreign			Equity
				share-based						currency			portion of
		Share		payments			Warrant			translation			convertible
		capital		reserve			reserve			reserve			debenture						Deficit						Total
Balance, December 31, 2011	$	27,808,316		4,320,247			976,414			(206,713	)		168,082						(25,571,040		)				7,495,306
Stock-based compensation (note 12(d))		-		93,011			-			-			-						-						93,011
Shares issued for exercise of warrants		2,056,034		-			-			-			-						-						2,056,034
Fair value of warrants exercised		403,143		-			(403,143	)		-			-						-						-
Warrants expired		-		8,621			(8,621	)		-			-						-						-
Loss on debt extinguishment (note 11)		-		-			-			-			(168,082		)				(8,800		)				(176,882		)
Net loss and comprehensive income for the period		-		-			-			90,558			-						(99,655		)				(9,097		)
Balance, June 30, 2012	$	30,267,493		4,421,879			564,650			(116,155	)		-						(25,679,495		)				9,458,372
Balance, December 31, 2012	$	29,874,693		4,477,699			957,450			5,047			-						(26,173,706		)				9,141,183
Stock-based compensation (note 12(d))		-		26,179			-			-			-						-						26,179
Net loss and comprehensive loss for the period		-		-			-			(107,303	)		-						(798,217		)				(905,520		)
Balance, June 30, 2013	$	29,874,693		4,503,878			957,450			(102,256	)		-						(26,971,923		)				8,261,842

Galantas Gold Corporation

Notes to Condensed Consolidated Interim Financial Statements

June 30, 2013

(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"), the ability of the Company to obtain future financing and to recover its investment in Omagh Minerals Limited ("Omagh"). Cavanacaw has a 100% shareholding in Omagh which is engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland.

As at December 31, 2001, studies performed on Omagh's mineral property confirmed the existence of economically recoverable reserves. As at July 1, 2007, the mineral property was in the production stage and the directors believe that the capitalized development expenditures will be fully recovered by the future operation of the mine. The recoverability of Omagh's capitalized development costs is thus dependent on the ability to secure financing, future profitable production or proceeds from the disposition of the mineral property. While the Company is expending its best efforts in this regard, the outcome of these matters can not be predicted at this time.

As at June 30, 2013, the Company had a deficit of $26,971,923 (December 31, 2012 - $26,173,706). 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. Such adjustments could be material.

2.	Incorporation and Nature of Operations

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

The Company entered into an agreement on April 17, 2000, approved by shareholders on June 26, 2000, whereby Cavanacaw, a private Ontario corporation, acquired Omagh. Cavanacaw has established an open pit mine to extract the Company's gold deposit near Omagh. Cavanacaw also has developed a premium jewellery business founded on the gold produced under the name Galántas Irish Gold Limited ("Galántas").

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

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

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
(a)	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 IASB. 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 27, 2013, 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, 2012. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2013 could result in restatement of these unaudited condensed interim consolidated financial statements.

4.	Significant Accounting Policies

Change in accounting policies 

(i) IFRS 10 - Consolidated Financial Statements ("IFRS 10") was issued by the IASB in May 2011. IFRS 10 is a new standard which identifies the concept of control as the determining factor in assessing whether an entity should be included in the consolidated financial statements of the parent company. Control is comprised of three elements: power over an investee; exposure to variable returns from an investee; and the ability to use power to affect the reporting entity's returns. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

(ii) IFRS 11 - Joint Arrangements ("IFRS 11") was issued by the IASB in May 2011. IFRS 11 is a new standard which focuses on classifying joint arrangements by their rights and obligations rather than their legal form. Entities are classified into two groups: parties having rights to the assets and obligations for the liabilities of an arrangement, and rights to the net assets of an arrangement. Entities in the former case account for assets, liabilities, revenues and expenses in accordance with the arrangement, whereas entities in the latter case account for the arrangement using the equity method. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

(iii) IFRS 12 - Disclosure of Interests in Other Entities ("IFRS 12") was issued by the IASB in May 2011. IFRS 12 is a new standard which provides disclosure requirements for entities reporting interests in other entities, including joint arrangements, special purpose vehicles, and off balance sheet vehicles. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

(iv) IFRS 13 - Fair Value Measurement is effective for the Company beginning on January 1, 2013, provides the guidance on the measurement of fair value and related disclosures through a fair value hierarchy. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements given the existing asset and liability mix of the Company to which fair value accounting applies.

Change in accounting policies (continued)

(v) IAS 1 - Presentation of Financial Statements ("IAS 1") was amended by the IASB in June 2011 in order to align the presentation of items in other comprehensive income with United States Generally Accepted Accounting Principles. Items in other comprehensive income will be required to be presented in two categories: items that will be reclassified into profit or loss and those that will not be reclassified. The flexibility to present a statement of comprehensive income as one statement or two separate statements of profit and loss and other comprehensive income remains unchanged. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

(vi) IAS 27 - Separate Financial Statements ("IAS 27") was effective for annual periods beginning on or after January 1, 2013, as a result of the issue of the new consolidation suite of standards, IAS 27 has been reissued, as the consolidation guidance will now be included in IFRS 10. IAS 27 will now only prescribe the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

(vii) IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine ("IFRIC 20"). On 19 October 2011, the IASB issued IFRIC 20. The interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. At January 1, 2013, the Company adopted this pronouncement and there was no material impact on the Company's unaudited condensed interim consolidated financial statements.

Recent accounting pronouncements 

(i) IFRS 9 - Financial Instruments ("IFRS 9") was issued by the IASB in October 2010 and will replace IAS 39 - Financial Instruments: Recognition and Measurement ("IAS 39"). IFRS 9 uses 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. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2015. Earlier adoption is permitted. The Company is presently assessing the impact of this pronouncement.

(ii) 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. Earlier adoption is permitted. The Company is presently assessing the impact of this pronouncement.

5.	Cash Position

		As at			As at
		June 30,			December 31,
		2013			2012
Cash	$	476,581		$	1,164,868
Long-term deposit		423,656			428,717
Total cash position	$	900,237		$	1,593,585

6.	Accounts Receivable and Advances

		As at			As at
		June 30,			December 31,
		2013			2012
Sales tax receivable - Canada	$	15,193		$	21,705
Valued added tax receivable - Northern Ireland		31,717			147,987
Accounts receivable		168,335			258,504
Prepaid expenses		197,769			244,858
	$	413,014		$	673,054

7.

Inventory

		As at			As at
		June 30,			December 31,
		2013			2012
Concentrate inventory	$	11,391		$	10,246
Finished goods		308,323			316,003
	$	319,714		$	326,249

8.	Property, Plant and Equipment

		June 30, 2013
					Accumulated
		Cost			amortization			Net
Freehold land and buildings	$	2,674,817		$	1,231,586		$	1,443,231
Plant and machinery		5,403,372			3,753,383			1,649,989
Motor vehicles		83,177			57,102			26,075
Office equipment		104,318			49,018			55,300
Moulds		58,150			58,150			-
	$	8,323,834		$	5,149,239		$	3,174,595

		December 31, 2012
					Accumulated
		Cost			amortization			Net
Freehold land and buildings	$	2,706,776		$	1,240,146		$	1,466,630
Plant and machinery		5,996,937			3,987,043			2,009,894
Motor vehicles		84,171			54,149			30,022
Office equipment		105,396			45,164			60,232
Moulds		58,844			58,844			-
	$	8,952,124		$	5,385,346		$	3,566,778

9.	Deferred Development and Exploration Costs

		June 30, 2013
					Accumulated
		Cost			amortization			Net
Deferred development and exploration costs	$	14,041,331		$	5,940,228		$	8,101,103

		December 31, 2012
					Accumulated
		Cost			amortization			Net
Deferred development and exploration costs	$	13,825,983		$	5,966,538		$	7,859,445

As at June 30, 2013, the Company has recorded an asset retirement obligation in the amount to $399,675 (GBP 250,000) (December 31, 2012 - $404,450 (GBP 250,000)). This is the amount of the bond that is required by the Crown in Northern Ireland. The Company has paid a deposit against this obligation.

10.	Accounts Payable and Other Liabilities

		As at			As at
		June 30,			December 31,
		2013			2012
Falling due within the year
Trade payables	$	1,266,495		$	1,670,729

11.	Convertible Debenture

					Equity
					portion of
		Convertible			convertible
		debenture			debenture
Balance, December 31, 2011	$	1,979,603		$	168,082
Accretion charges - effective interest rate		45,529			-
Accretion charges - financing charges		1,924			-
Interest expenses		6,075			-
Foreign exchange		22,903			-
Debt extinguishment (i)		(2,056,034	)		(168,082	)
Balance, June 30, 2012	$	-		$	-
Balance, December 31, 2012 and June 30, 2013	$	-		$	-

(i) On June 8, 2012, the Company extinguished, in its entirety, the principal and interest obligations outstanding under the loan agreement using the proceeds from the warrants exercised. As a result of this extinguishment, a gain on debt extinguishment of $190,624 on the convertible debenture was recorded in the unaudited condensed interim consolidated statement of (loss) income and a loss on debt extinguishment of $8,800 on the equity portion of convertible debenture was recorded in equity.

12.	Share Capital and Reserves
a)	Authorized share capital

At June 30, 2013, the authorized share capital consisted of 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.

b)	Common shares issued

At June 30, 2013, the issued share capital amounted to $29,874,693. The change in issued share capital for the periods presented:

		Number of
		common
		shares			Amount
Balance, December 31, 2011		235,650,055		$	27,808,316
Shares issued for exercise of warrants		20,560,340			2,056,034
Fair value of warrants exercised		-			403,143
Balance, June 30, 2012		256,210,395		$	30,267,493
Balance, December 31, 2012 and June 30, 2013		256,210,395		$	29,874,693

c)	Warrant reserve

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

					Weighted
		Number of			average
		warrants			price
Balance, December 31, 2011		45,550,000		$	0.10
Exercised		(20,560,340	)		0.10
Expired		(439,660	)		0.10
Balance, June 30, 2012		24,550,000		$	0.10
Balance, December 31, 2012 and June 30, 2013		24,550,000		$	0.10

As at June 30, 2013, the following warrants were outstanding:

		Number			Fair			Exercise
Expiry date		of warrants			value ($)			price ($)
July 22, 2013		24,550,000			957,450			0.10

(d)	Stock options

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

					Weighted
		Number of			average
		options			price
Balance, December 31, 2011		15,750,000		$	0.12
Cancelled		(1,000,000	)		0.19
Balance, June 30, 2012		14,750,000		$	0.11
Balance, December 31, 2012		9,950,000		$	0.10
Expired		(500,000	)		0.10
Balance, June 30, 2013		9,450,000		$	0.10

Stock-based compensation includes $13,089 and $26,179, respectively (three and six months ended June 30, 2012 - $45,445 and $93,011, respectively) relating to stock options granted in previous years that vested during the three and six months ended June 30, 2013.

The following table reflects the actual stock options issued and outstanding as of June 30, 2013 :

					Weighted average						Number of
					remaining			Number of			options			Number of
		Exercise			contractual			options			vested			options
Expiry date		price ($)			life (years)			outstanding			(exercisable)			unvested
October 2, 2013		0.10			0.26			1,500,000			1,500,000			-
November 23, 2015		0.10			2.40			3,500,000			3,500,000			-
January 28, 2016		0.10			2.58			250,000			250,000			-
September 6, 2016		0.10			3.19			4,200,000			2,800,000			1,400,000
		0.10			2.42			9,450,000			8,050,000			1,400,000

13.	Net (Loss) per Common Share

The calculation of basic and diluted loss per share for the three and six months ended June 30, 2013 was based on the loss attributable to common shareholders of $357,663 and $798,217, respectively (three and six months ended June 30, 2012 - income of $543,734 and loss of $99,655, respectively) and the weighted average number of common shares outstanding of 256,210,395 (June 30, 2012 - 240,661,994 and 238,145,655, respectively) for basic loss per share and 256,210,395 (June 30, 2012 - 240,661,994 and 238,145,655, respectively) for diluted loss per share. Diluted loss did not include the effect of warrants and options for the three and six months ended June 30, 2013 and 2012, as they are anti-dilutive.

14.	Cost of Sales

		Three months ended						Six months ended
		June 30,						June 30,
		2013			2012			2013			2012
Production wages	$	161,696		$	325,576		$	313,282		$	686,474
Oil and fuel		183,828			319,925			357,673			689,249
Repairs and servicing		39,703			104,559			85,378			242,212
Equipment hire		3,553			73,026			18,585			162,669
Consumable		48,004			54,955			80,102			106,466
Royalties		14,197			39,295			22,706			60,530
Carriage		5,296			17,559			11,354			28,727
Other costs		22,170			21,333			13,806			45,017
Production costs		478,447			956,228			902,886			2,021,344
Inventory movement		33,386			37,076			6,535			(7,533	)
Cost of sales	$	511,833		$	993,304		$	909,421		$	2,013,811

15.	Related Party Balances and Transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

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

Related party transactions conducted in the normal course of operations are measured at the exchange value (the amount established and agreed to by the related parties).

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

					Three Months Ended						Six Months Ended
					June 30,						June 30,
		Notes			2013			2012			2013			2012
Interests on related party loans		(i)		$	9,944		$	9,965		$	19,732		$	20,295

(i) G&F Phelps Limited ("G&F Phelps"), a company controlled by a director of the Company, had amalgamated loans to the Company of $1,641,149 (GBP 1,026,552) (December 31, 2012 - $1,660,756 - GBP 1,026,552) 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 June 30, 2013, the amount of interest accrued is $105,131 (GBP 65,760) (December 31, 2012 - $86,023 - GBP 53,173).

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

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2013			2012			2013			2012
Salaries and benefits (1)	$	103,400		$	96,035		$	202,905		$	190,855
Stock-based compensation		7,792			28,103			15,497			53,884
	$	111,192		$	124,138		$	218,402		$	244,739

⁽¹⁾ Salaries and benefits include director fees. As at June 30, 2013, due to directors for fees amounted to $13,250 (December 31, 2012 - $nil) and due to directors and key management, mainly for salaries and benefits accrued amounted to $1,221,121 (GBP 763,821) (December 31, 2012 - $1,055,970 - GBP 652,720), and is included with due to related parties.

16.	Segment Disclosure

The Company, after reviewing its reporting systems, 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 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:

June 30, 2013		United Kingdom			Canada			Total
Current assets	$	777,751		$	431,558		$	1,209,309
Non-current assets		11,637,835			61,519			11,699,354
Revenues	$	888,532		$	-		$	888,532

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 $532,609 (GBP 333,151) 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.	Subsequent Event

(i) On July 22, 2013, 24,550,000 warrants with an exercise price of $0.10 expired unexercised.

(ii) On August 9, 2013, the Company announced that the Board of Directors has determined to undertake a strategic review of its business and opportunities, including a possible sale or joint venture of all or part of its Northern Ireland properties.

To enable this objective, the Board has established a Special Committee comprised of three of the independent directors to supervise and engage in the strategic review. Further announcements regarding the review will be made when the Board of Directors approves a course of action or as the Board of Directors deems appropriate. In the meantime, senior management and employees will continue to focus on day to day operations and building its business for the future.

 

END

 

 

IR SESFSUFDSEDA