Galantas Reports Results for year end 2017 and awards Employee Stock Options

GALANTAS GOLD CORPORATION

TSXV & AIM : Symbol GAL

 

GALANTAS REPORTS RESULTS FOR THE YEAR ENDED DECEMBER 31, 2017 AND AWARDS INCENTIVE STOCK OPTIONS TO EMPLOYEES AND A CONSULTANT

 

April 20, 2018: Galantas Gold Corporation (the ‘Company’) is pleased to announce its audited annual financial results for the year ended December 31, 2017.

 

Financial Highlights

Highlights of the 2017 audited annual results, which are expressed in Canadian Dollars, are summarized below:

All in CDN$

                                                                                           Year Ended December 31

  2017 2016
Revenue $ 35,308 $ 74,068
Cost of Sales $ (225,451) $ (345,057)
Loss before the items below $ (190,143) $ (270,989)
Amortization $ (203,431) $ (168,736)
General administrative expenses $ (1,714,264) $ (1,199,023)
Gain on disposal of property, plant and equipment $ 0 $ 5,479
Unrealized gain on fair value of derivative financial liability $ 14,000 $ 108,000
Foreign exchange gain / (loss) $ 15,699 $ (88,029)
Net loss for the year $ (2,078,139) $ (1,613,298)
Working Capital Deficit (3,492,608) $ (3,095,124)
Cash loss generated from operations before changes in non-cash working capital $ (1,357,221) $ (1,341,273)
Cash at December 31, 2017 $ 779,758 $ 557,005

 

The Net Loss for the year ended December 31, 2017 amounted to $ 2,078,139 (2016: $ 1,613,298) and the cash outflow from operating activities before changes in non-cash working capital for the year ended December 31, 2017 amounted to $ 1,357,221 (2016: $ 1,341,273).

Sales revenues for the year ended December 31, 2017 consisted mainly of jewelry sales and amounted to $ 35,308 (2016: $ 74,068). Following the suspension of production during the fourth quarter of 2013 there have not been any shipments of concentrates from the mine.

Production and sales of concentrate await the mining of feed from underground.

Cost of sales, which includes production costs and inventory movement, for the year ended December 31, 2017 amounted to $ 225,451 (2016: $ 345,057). Production costs were mainly in connection with ongoing care, maintenance and restoration costs at the Omagh mine site. Costs related to underground mine development were capitalized.

The Company had a cash balance of $ 779,758 at December 31, 2017 compared to $ 557,005 at December 31, 2016. The working capital deficit at December 31, 2017 amounted to $ 3,492,608 compared to a working capital deficit of $ 3,095,124 at December 31, 2016.

Two private placements were completed during 2017. During the first quarter of 2017 Galantas completed a part brokered private placement in two parts for aggregate gross proceeds of $ 2,446,299 (approximately UK£ 1,482,875). The placement comprised of the issue of 33,093,258 common shares of no par value. United Kingdom placees subscribed for a total of 27,087,778 shares at a price of UK£ 0.045 per share. Canadian placees subscribed for a total of 6,005,480 shares at a price of $ 0.0725 per share. During the fourth quarter of 2017 Galantas completed a further private placement of shares on a part-brokered basis for aggregate gross proceeds of $ 1,165,857 (approximately UK£ 682,859). The placement comprised of the issue of 16,655,099 common shares of no par value. United Kingdom placees subscribed for a total of 9,746,343 shares at a price of UK£ 0.041 per share. Canadian placees subscribed for a total of 6,908,756 shares at a price of $ 0.07 per share. The net proceeds raised by both placings were for working capital purposes and to continue underground development at the Omagh gold mine.

Subsequent to December 31, 2017 Galantas announced that its operating subsidiary, Flintridge Resources Ltd. had signed a concentrate pre-payment agreement and a loan facility agreement for US$ 1.6 million (CDN$ 2.012 million) with Ocean Partners UK Ltd. a United Kingdom based company, together with an increased, on-demand loan facility of £600,000 with G&F Phelps Ltd.. The loans are to be used for further development of the Omagh Mine and working capital. As consideration for the US$ 1.6 million loan facility Ocean Partners will receive 15,000,000 bonus warrants of Galantas which will be exercisable into one common share of Galantas at an exercise price of $ 0.1575 per bonus share. The bonus warrants will have a maximum life of two years and the bonus shares will be subject to an initial four month plus one day hold period from the date of issuance of the bonus warrants. No bonus warrants are to be issued in respect of the G&F Phelps loan facility. The bonus warrants are subject to TSXV and regulatory approval. (See press release dated April 12, 2018).

Permitting

In 2015 the Company reported that the Minister of Environment, Northern Ireland had granted planning consent for an underground gold mine at the Omagh site which permits the continuation and expansion of gold mining at the Omagh mine. During the first quarter of 2016 Galantas reported that a third party had obtained leave from Belfast High Court to bring a judicial review challenging the actions of the DOENI in granting planning permission for underground mining beneath the existing open pit. The judicial review hearing commenced in September 2016 when it was adjourned to February 2017 and then concluded. In September 2017 Galantas reported a positive outcome to the judicial review into the planning consent for underground development at the Omagh mine with the third party’s request for the quashing of the consent being denied. However, Galantas reported in November 2017 that it had received notice of an application, by a third party, to the Court of Appeal, in relation to the positive judicial review judgment regarding the grant of planning permission which was subsequently heard in February 2018. The Court will deliver its judgement at a later date, currently unknown.

Production/Mine Development

The underground mine, which is now in active development, will utilize the same processing methods as the open pit mine and will be the first underground gold mine, of any scale, in Ireland. The strategy is to expand the continuing development of the underground mine and look for further expansion of gold resources on the property, which has many undrilled targets.

The phased development arrangement, in terms of mine access dimensions, is expected to allow for rapid expansion of production as additional capital becomes available. The mill has now been re-commissioned in anticipation of a restarting of concentrate shipments, subject to suitable financing. A budget of £ 2,000,000 (excluding lease finance) for the first phase of underground mining has been estimated. During the first quarter of 2017 and following the closure of a part-brokered private placement for aggregate gross proceeds of $ 2,446,299 (approximately UK£ 1,482,875) the Company announced that underground development had commenced on the Omagh gold property.

Underground development continued to progress during the remainder of 2017 with underground development totaling over 150 metres at year end. Galantas has a detailed plan to accelerate progress in line with the planning consent. The stringer vein intersected in the third quarter (see press release dated August 1, 2017) has been accessed from the main decline tunnel. Mineralisation is approximately 0.5m wide and will be split-fired (a process where the vein is blasted separately to the surrounding country rock to minimise dilution). A narrow width loader has been acquired to operate short term on the splinter vein. This is expected to cover the delivery period for new specialist vein mining equipment. After sampling, a small stockpile of suitable material has been made underground which will be milled when there is sufficient to operate batch processing in the flotation plant. Tunnel development continues to progress towards accessing the principal target, which are the main Kearney veins.

The underground development is being carried out by an in-house crew which is fully trained in safety and operating procedures. An in-house, mines rescue team has also been trained and equipped. The present drilling and loading equipment, which was purchased for training and early tunnel development purposes, is performing above expectations but has lower productivity than is expected with current technology. New drilling equipment is being acquired on a rental basis with options to purchase, and is expected to improve advance rates by over 40%. The supplier of the equipment has advised of delays in production of the new equipment but has recently commissioned a substitute, used tunnelling drill rig on loan. Whilst the interim unit is not expected to be as efficient compared to that anticipated for the new rig, this has led to a significant improvement in advance rate, the amount of which is too early to fully assess. Infrastructure improvements have been made to support the rig and these are working well. Shotcreting equipment has also been acquired on a rental purchase basis. This has cut shotcreting costs and allowed integration of shotcreting with the mining cycle. The rental purchase arrangements cover equipment to the value of approximately one million pounds sterling (£1,000,000). Included in the rental arrangements are various time-dependent options to purchase, for instance if the purchase option is exercised within one year with a rebate of 92% of rental amounts paid expected to be applied against the final purchase price. Additional personnel have been added to the workforce, which now totals 27 on the Omagh site. Safety and environmental matters remains a high priority for Galantas. The Company is pleased to continue to report zero lost time accidents since the start of underground operations and routine water monitoring continues to be compliant.

Roland Phelps, President and CEO of Galantas Gold Corporation, commented, “I look forward to seeing the improved advanced rate expected with the interim tunnelling rig. At anticipated advance rates, we expect to reach the Kearney vein system, after approximately 160 metres of further development, in around 10 weeks.”

Exploration

Two 155 m deep water monitoring holes were drilled at the beginning of 2017; these were located according to planning specifications, not with the aim of mineral recovery. However, the PQ drill core provided insight to key lithological changes with depth, north and south of the site. This information was incorporated into the site mapping project instigated last summer.

Key structural measurements are recorded by geologists as the underground development advances. This data is used to assist tunnel support design considerations. Towards the end of 2017 mapping of the decline, now progressing northward, indicates improved rock mass ratings due to the presence of thick competent units with tighter joints and fewer faults.

Regional exploration data for PL 3162, in the Republic Of Ireland, was reviewed towards the end of the second quarter and two high priority target areas were selected. In target one, stream sediment samples that OML geologists had collected as part of the Tellus funded project (2013) showed elevated Au, Ag, Sb, Pb and Cu downstream of a major NE trending fault, separating Carboniferous and Slishwood Division lithologies. The contacts were examined for surface exposures and boulders during the third quarter. Sulphide rich serpentinite float rocks with fuchsite and talc were identified and sampled along with boulders of quartz breccia, along the margin of Ox Mountain fault. Stream sediments and heavy mineral concentrates were also collected from first order streams draining the northern side of Benbo mountain. Target area two is associated with a wealth of historic exploration data and references to small scale base metal mining within the Ballyshannon Limestone. Several hundred metres of drill core, a remnant of exploration in the 1990’s, had been stored by a local farmer. Sections of core previously analysed for base metals, and found to contain appreciable concentrations of Zn (up to 3.2%), were sub-sampled. The site of an old mine shaft was also investigated and large dolomitic rocks rich in galena and pyrite were collected around the margins.

All prospecting samples were sent to ALS laboratories for geochemical analysis at the end of 2017, results were summarised in a press release on 18th January. The float rocks identified in Target one returned multi-element anomalies including Cu (up to 5.66 %). In Target two, as expected, high levels of Pb, Zn and moderate Ag were found in float rock and historic drill core in the vicinity of Twigspark. A shallow drill intersect (7-7.8 m) contained 1.57 % Zn, 70.8 g/t Pb and 511 g/t Cu; the deeper intersect (42.9-43.9 m) indicates higher Zn (12.85 %) and Pb (5720 g/t) with less Cu (250 g/t). No trace of Au is reported for any of the pyrite/galena rich samples in this batch; however, a float rock containing 0.96 g/t Au was found in the Pollboy area, upstream of the anomalous samples previously collected as part of the Tellus Border project, referred to above. Exploration along strike of the Pollboy and Twigspark areas, into neighbouring licence 1469, will continue during the first quarter of 2018.

The Exploration and Mining Division (EMD) confirmed renewal of Republic Of Ireland licences: 4034, 3134 and 3234, at the end of the year. Plans for further exploration in licences: 2315, 3039, 3040 and 3235 have been drafted. Fieldwork commenced in early January 2018.

Stock Options

Effective 19th April 2018, Employee Stock Options (the Options) were granted on a total of one million shares in the Company to 3 employees and one consultant. The Options are exercisable at a price of CDN$0.11until 19th April 2023 and are issued under the approved Company Stock Option Plan. The Options vest in three annual tranches commencing 19th April 2018 for the first tranche. The 3 employees and consultant are actively engaged in operations at the mine and the options form part of an incentive remuneration package.

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.

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 and AIM rules. The information is based upon local production and financial data prepared under their supervision.

 

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

 

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

Enquiries

Galantas Gold Corporation
Jack Gunter P.Eng – Chairman
Roland Phelps C.Eng – President & CEO
Email: info@galantas.com
Website: www.galantas.com
Telephone: +44 (0) 2882 241100

 

Grant Thornton UK LLP (Nomad)

Philip Secrett, Richard Tonthat

Telephone: +44(0)20 7383 5100

 

Whitman Howard Ltd (Broker & Corporate Adviser)

Ranald McGregor-Smith, Nick Lovering

Telephone: +44(0)20 7659 1234