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Galantas Gold Corp

Galantas Gold Corp - 1st Quarter Results

RNS Number : 6209O
Galantas Gold Corporation
29 May 2015
 

GALANTAS GOLD CORPORATION

TSXV & AIM : Symbol GAL

 

GALANTAS REPORTS RESULTS FOR THE QUARTER ENDED MARCH 31, 2015

 

May 29th, 2015:  Galantas Gold Corporation (the 'Company') announces its financial results for the Quarter ended March 31, 2015.

 

Financial Highlights

The Net Loss for the Quarter ended March 31, 2015 amounted to $ 414,099 which compared with a Net Loss of $501,200 for the Quarter ended March 31, 2014. Highlights of the first quarter 2015 results, which are expressed in Canadian Dollars, are:

 


Quarter Ended March 31

All in CDN$

2015

2014

Revenue

$ 1,123

$ 0

Cost of Sales

$ 69,997

$ 77,234

(Loss) before the undernoted

$ (68,874)

          $   (77,234)

Amortization

$ 52,293

$  65,092

General administrative expenses 

$ 261,532

$ 272,181

(Gain) Loss on disposal of property, plant and equipment

$            -

$ (548)

Unrealized gain on fair value of derivative financial liability

$  ( 8,000)


Foreign exchange loss

$  39,400

$ 88,141

Net (Loss) for the Quarter

$ (414,099) 

$ ( 502,100)

Working Capital (Deficit)

$ (3,677,040)

$ (4,468,576)

Cash (loss)generated from operations before changes in non-cash working capital

$ (501,088)

$ (519,533)

Cash at March 31, 2015

$ 380,764

$ 59,616

 

Revenue for the quarter ended March 31, 2015 consisted of jewelry sales and amounted to CDN$ 1,123 (2014: CDN$ Nil). Following the suspension of production during 2013 there have not been any shipments of concentrates from the mine.

 

Cost of sales for the quarter ended March 31, 2015 amounted to CDN$ 69,997 (2014: CDN$ 77,234) and include production costs and inventory movements. Production costs were mainly in connection with the ongoing care and maintenance costs at the Omagh mine.  

 

The Net Loss for the quarter ended March 31, 2015, amounted to CDN$ 414,099 (2014: Net Loss CDN$ 502,100).

 

The Company's cash balances March 31, 2015 amounted to CDN$ 380,764 which compared with CDN$ 59,616 at March 31, 2014. The Company working capital deficit at March 31, 2015 amounted to CDN$ 3,677,040 which compared with a deficit of CDN$ 4,468,576 at March 31, 2014. During the first quarter the Company completed a Private Placement for aggregate gross proceeds of approximately UK£ 316,677 through the issuing of 10,599,999 new shares at a price of UK£ 0.03/CDN$0.05727 per common share. The proceeds are to be used for working capital purposes and to finance the Company's continued commitments in regard to its underground planning application.

 

Production

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

 

During the first half of 2014 the Company carried out pilot tests with regards to the processing of tailing cells filled during the earlier operation of the mine. The results of these tests indicated that it is possible to successfully process the tailing cells. However a subsequent investigation of process economics suggested that the operation may best be carried out in conjunction with processing ore from the underground mine.

 

Exploration

The granting of a further two prospecting licences in the Republic of Ireland (ROI) during 2014 brought the total number of licences held in both Northern Ireland and the Republic of Ireland to eleven covering a total area to 766.5 square kilometres. Exploration work during 2014 which included detailed mapping and sampling, focused on four broad exploration targets which were identified based on the potential for mineralisation with consideration given to land accessibility and suitable exposure. Three of the target areas were within the original ROI licence block (Lough Derg) with the fourth being in the OM4 licence within Northern Ireland. During the first quarter of 2015 fieldwork commenced within three more recently acquired ROI licences. In addition results received from fieldwork on the OM4 licence were evaluated and formed the basis of the DETI licence report submitted later in the quarter.

 

Permitting

During 2012 the planning application for an underground mine together with the Environmental Impact Study in connection with the proposed underground development were submitted to the Planning Services. The Company has been advised that officials at the Northern Ireland Department of Environment (Planning) have now completed consultations, finalised its report and submitted it to the Minister of Environment for determination. The Company understands that the report contains a recommendation to approve the Company's application, though the Minister is not bound by the recommendation. The Company understands a decision is imminent. However it should be noted that the timeline for delivery of the determination is not within the control of the Company.

 

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

 

Annual General Meeting

The Annual and Special Meeting of the Company has been called for 11am on Thursday 25th June 2015. It will be held at DSA Corporate Services, Suite 1000, 36 Toronto Street, Toronto, Ontario, Canada.

 

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/6209O_-2015-5-29.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 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

 

Charles Stanley Securities (AIM Nomad & Broker)

Mark Taylor

Telephone +44 (0)20 7149 6000



 

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


 


March 31,



December 31,


 


2015



2014


 


 



 


ASSETS


 



 


 


 



 


Current assets


 



 


       Cash

$

 380,764


$

 20,259


       Accounts receivable and prepaid expenses (note 4)


89,261



102,213


       Inventories (note 5)


115,829



111,137


Total current assets


585,854



233,609


 


 



 


Non-current assets


 



 


       Property, plant and equipment (note 6)


7,324,503



7,087,455


       Long-term deposit (note 8)


565,020



542,130


       Exploration and evaluation assets (note 7)


2,172,688



2,070,772


Total non-current assets


10,062,211



9,700,357


Total assets

$

 10,648,065


$

 9,933,966


 


 



 


EQUITY AND LIABILITIES


 



 


 


 



 


Current liabilities


 



 


       Accounts payable and other liabilities (note 9)

$

 885,236


$

 869,322


       Due to related parties (note 13)


3,377,658



3,095,983


Total current liabilities


4,262,894



3,965,305


 


 



 


Non-current liabilities


 



 


       Decommissioning liability (note 8)


579,889



553,544


       Derivative financial liability (note 10(c))


392,000



368,000


Total non-current liabilities


971,889



921,544


Total liabilities


5,234,783



4,886,849


 


 



 


Capital and reserves


 



 


     Share capital (note 10(a)(b))


32,351,440



31,825,575


     Reserves


6,858,729



6,604,330


     Deficit


(33,796,887

)


(33,382,788

)

Total equity


5,413,282



5,047,117


Total equity and liabilities

$

 10,648,065


$

 9,933,966


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

Going concern (note 1)
Contingent liability (note 15)

Approved on behalf of the Board:

"Ronald Phelps"     , Director

"Lionel J. Gunter"     , Director

 

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

 

 


Three Months


 


Ended


 


March 31,


 


2015



2014


 


 



 


Revenues


 



 


       Gold sales

$

 1,123


$

 -


 


 



 


Cost and expenses of operations


 



 


       Cost of sales (note 12)


69,997



77,234


       Depreciation (note 6)


52,293



65,092


 


122,290



142,326


 


 



 


Loss before the undernoted


(121,167

)


(142,326

)

 


 



 


General administrative expenses


 



 


       Management and administration wages (note 13)


130,619



138,033


       Other operating expenses


33,772



36,904


       Accounting and corporate


15,396



14,627


       Legal and audit


21,810



28,942


       Shareholder communication and investor relations


30,217



25,604


       Transfer agent


1,980



3,076


       Director fees (note 13)


5,000



5,000


       General office


1,981



2,322


       Accretion expenses (note 8)


2,966



2,883


       Loan interest and bank charges (note 13)


17,791



14,790


 


261,532



272,181


Other expenses


 



 


       Gain on disposal of property, plant and equipment


-



(548

)

       Unrealized gain on fair value of derivative financial liability (note 10(c))


(8,000

)


-


       Foreign exchange loss


39,400



88,141


 


31,400



87,593


 


 



 


Net loss for the period

$

 (414,099

)

$

 (502,100

)

Basic and diluted net loss per share (note 11)

$

 (0.01

)

$

 (0.01

)

Weighted average number of common shares outstanding - basic and diluted


81,747,570



51,242,015


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 Loss and Other Comprehensive Income

(Expressed in Canadian Dollars)

(Unaudited)

 

 


Three Months


 


Ended


 


March 31,


 


2015



2014


 


 



 


 


 



 


Net loss for the period

$

 (414,099

)

$

 (502,100

)

 


 



 


Other comprehensive income


 



 


Items that will be reclassified subsequently to profit or loss


 



 


       Foreign currency translation differences


254,399



451,759


Total comprehensive loss

$

 (159,700

)

$

 (50,341

)

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)

 

 


Three Months


 


Ended


 


March 31,


 


2015



2014


 


 



 


Operating activities


 



 


Net loss for the period

$

 (414,099

)

$

 (502,100

)

Adjustment for:


 



 


       Depreciation


52,293



65,092


       Foreign exchange


(134,248

)


(84,860

)

       Gain on disposal of property, plant and equipment


-



(548

)

       Accretion expenses (note 8)


2,966



2,883


       Unrealized gain on fair value of derivative financial liability (note 10(c))


(8,000

)


-


Non-cash working capital items:


 



 


       Accounts receivable and prepaid expenses


12,952



151,206


       Inventories


(4,692

)


(15,437

)

       Accounts payable and other liabilities


15,914



(93,851

)

       Due to related parties


236,313



287,561


Net cash used in operating activities


(240,601

)


(190,054

)

 


 



 


Investing activities


 



 


Purchase of property, plant and equipment


-



(33,727

)

Proceeds from sale of property, plant and equipment


-



917


Exploration and evaluation assets


(17,019

)


(9,381

)

Net cash used in investing activities


(17,019

)


(42,191

)

 


 



 


Financing activities


 



 


Proceeds of private placement


607,062



-


Share issue costs


(49,197

)


-


Advances from related parties


45,362



127,792


Net cash provided by financing activities


603,227



127,792


 


 



 


Net change in cash


345,607



(104,453

)

 


 



 


Effect of exchange rate changes on cash held in foreign currencies


14,898



(2,548

)

 


 



 


Cash, beginning of period


20,259



166,617


 


 



 


Cash, end of period

$

 380,764


$

 59,616


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



payments



translation



 



 


 


capital



reserve



reserve



Deficit



Total


Balance, December 31, 2013

$

 29,874,693


$

 5,471,109


$

 782,351


$

 (28,118,061

)

$

 8,010,092


       Net loss and other comprehensive income for the period


-



-



451,759



(502,100

)


(50,341

)

Balance, March 31, 2014

$

 29,874,693


$

 5,471,109


$

 1,234,110


$

 (28,620,161

)

$

 7,959,751


 


 



 



 



 



 


Balance, December 31, 2014

$

 31,825,575


$

 5,471,109


$

 1,133,221


$

 (33,382,788

)

$

 5,047,117


       Shares issued in private placement (note 10(b)(i))


607,062



-



-



-



607,062


       Warrants issued (note 10(b)(i))


(32,000

)


-



-



-



(32,000

)

       Share issue costs


(49,197

)


-



-



-



(49,197

)

       Net loss and other comprehensive income for the period


-



-



254,399



(414,099

)


(159,700

)

Balance, March 31, 2015

$

 32,351,440


$

 5,471,109


$

 1,387,620


$

 (33,796,887

)

$

 5,413,282


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 Months Ended March 31, 2015

(Expressed in Canadian Dollars)

(Unaudited)

1.       Going Concern

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

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


a.

Planning permission for the development of an underground mine in Omagh; and


b.

Securing sufficient financing to fund ongoing operational activity and the development of the underground mine.

Should the Company be unsuccessful in securing the above, there would be significant uncertainty over the Company's ability to continue as a going concern.

As at March 31, 2015, the Company had a deficit of $33,796,887 (December 31, 2014 - $33,382,788). Management is confident that it will be able to secure the required financing to enable the Company to continue as a going concern. However, this is subject to a number of factors including market conditions.

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

2.       Incorporation and Nature of Operations

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

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

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

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

3.       Basis of Preparation

Statement of compliance

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and interpretations issued by the International Financial Reporting Interpretations Committee. 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 May 27, 2015 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, 2014. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2015 could result in restatement of these unaudited condensed interim consolidated financial statements.

Recent accounting pronouncement

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. In July 2014, the IASB issued the final version of IFRS 9. The final amendments made in the new version include guidance for the classification and measurement of financial assets and a third measurement category for financial assets, fair value through other comprehensive income. The standard also contains a new expected loss impairment model for debt instruments measured at amortized cost or fair value through other comprehensive income, lease receivables, contract assets and certain written loan commitments and financial guarantee contracts. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. IFRS 9 will be effective for accounting periods beginning January 1, 2018. The Company is currently assessing the impact of this pronouncement.



 

4.       Accounts Receivable and Prepaid Expenses

 

 


As at



As at


 


March 31,



December 31,


 


2015



2014


 


 



 


 


 



 


Sales tax receivable - Canada

$

 4,493


$

 1,469


Valued added tax receivable - Northern Ireland


12,820



14,894


Accounts receivable


38,871



35,999


Prepaid expenses


33,077



49,851


 

$

 89,261


$

 102,213


The following is an aged analysis of accounts receivable:

 


As at



As at


 


March 31,



December 31,


 


2015



2014


 


 



 


Less than 3 months

$

 17,313


$

 16,363


3 to 12 months


13,146



11,316


More than 12 months


25,725



24,683


Total accounts receivable

$

 56,184


$

 52,362


5.       Inventories

 

 


As at



As at


 


March 31,



December 31,


 


2015



2014


 


 



 


 


 



 


Concentrate inventories

$

 12,242


$

 11,746


Finished goods


103,587



99,391


 

$

 115,829


$

 111,137


 



 

6.       Property, Plant and Equipment

 

 


Freehold



Plant



 



 



 



Mine



 


 


land and



and



Motor



Office



 



development



 


Cost


buildings



machinery



vehicles



equipment



Moulds



costs



Total


Balance, December 31, 2013

$

 2,949,209


$

 5,161,722


$

 79,723


$

 114,845


$

 64,115


$

 13,878,530


$

 22,248,144


Additions


2,087



-



-



2,091



-



129,840



134,018


Disposals


-



(131,705

)


-



(4,724

)


(64,115

)


-



(200,544

)

Transfer


(585,067

)


-



-



-



-



585,067



-


Foreign exchange adjustment


74,286



129,311



2,009



(920

)


-



349,581



554,267


Balance, December 31, 2014


2,440,515



5,159,328



81,732



111,292



-



14,943,018



22,735,885


Foreign exchange adjustment


103,044



216,658



3,450



4,699



-



630,928



958,779


Balance, March 31, 2015

$

 2,543,559


$

 5,375,986


$

 85,182


$

 115,991


$

 -


$

 15,573,946


$

 23,694,664


 

 


Freehold



Plant



 



 



 



Mine



 


 


land and



and



Motor



Office



 



development



 


Accumulated depreciation


buildings



machinery



vehicles



equipment



Moulds



costs



Total


Balance, December 31, 2013

$

 1,364,975


$

 4,029,181


$

 57,034


$

 59,054


$

 64,115


$

 6,573,466


$

 12,147,825


Depreciation


14,465



211,554



4,520



7,274



-



-



237,813


Disposals


-



(118,069

)


-



(3,663

)


(64,115

)


-



(185,847

)

Impairment


558,982



78,812



12,926



24,213



-



2,495,269



3,170,202


Foreign exchange adjustment


30,630



98,907



1,323



(1,675

)


-



149,252



278,437


Balance, December 31, 2014


1,969,052



4,300,385



75,803



85,203



-



9,217,987



15,648,430


Depreciation


6,245



44,647



385



1,016



-



-



52,293


Foreign exchange adjustment


92,892



180,541



3,201



3,600



-



389,204



669,438


Balance, March 31, 2015

$

 2,068,189


$

 4,525,573


$

 79,389


$

 89,819


$

 -


$

 9,607,191


$

 16,370,161


 

 


Freehold



Plant



 



 



 



Mine



 


 


land and



and



Motor



Office



 



development



 


Carrying value


buildings



machinery



vehicles



equipment



Moulds



costs



Total


Balance, December 31, 2014

$

 471,463


$

 858,943


$

 5,929


$

 26,089


$

 -


$

 5,725,031


$

 7,087,455


Balance, March 31, 2015

$

 475,370


$

 850,413


$

 5,793


$

 26,172


$

 -


$

 5,966,755


$

 7,324,503




 

7.       Exploration and Evaluation Assets

Exploration and evaluation assets are expenditures for the underground mining operations in Omagh. The proposed underground mine is dependent on the ability of the Company to obtain the necessary planning permission.

 


Exploration


 


and


 


evaluation


Cost


assets


 


 


Balance, December 31, 2013

$

 1,875,771


Additions


92,872


Foreign exchange adjustment


102,129


Balance, December 31, 2014


2,070,772


Additions


17,019


Foreign exchange adjustment


84,897


Balance, March 31, 2015

$

 2,172,688


 

 


Exploration


 


and


 


evaluation


Carrying value


assets


 


 


Balance, December 31, 2014

$

 2,070,772


Balance, March 31, 2015

$

 2,172,688


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 March 31, 2015 based on a risk-free discount rate of 1% (December 31, 2014 - 1%) and an inflation rate of 1.50% (December 31, 2014 - 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 March 31, 2015, the estimated fair value of the liability is $579,889 (December 31, 2014 - $553,544). Changes in the provision during the three months ended March 31, 2015 are as follows:

 


As at



As at


 


March 31,



December 31,


 


2015



2014


 


 



 


Decommissioning liability, beginning of period

$

 553,544


$

 528,810


Accretion


2,966



11,489


Foreign exchange


23,379



13,245


Decommissioning liability, end of period

$

 579,889


$

 553,544


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, 2014 - GBP 300,000), of which GBP 300,000 was funded as of March 31, 2015 (GBP 300,000 was funded as of December 31, 2014) and reported as long-term deposit of $565,020 (December 31, 2014 - $542,130).



 

 

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, amounts payable for financing activities and professional fees activities.

 


As at



As at


 


March 31,



December 31,


 


2015



2014


 


 



 


Accounts payable

$

 279,247


$

 306,359


Accrued liabilities


605,989



562,963


Total accounts payable and other liabilities

$

 885,236


$

 869,322


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

 


As at



As at


 


March 31,



December 31,


 


2015



2014


 


 



 


Less than 3 months

$

 209,801


$

 240,145


3 to 12 months


169,372



183,164


12 to 24 months


145,974



120,987


More than 24 months


360,089



325,026


Total accounts payable and other liabilities

$

 885,236


$

 869,322


10.     Share Capital and Reserves

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

a)       Authorized share capital

At March 31, 2015, 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 March 31, 2015, the issued share capital amounted to $32,351,440. The change in issued share capital for the periods presented is as follows:

 


Number of



 


 


common



 


 


shares



Amount


 


 



 


Balance, December 31, 2013 and March 31, 2014


51,242,015


$

 29,874,693


 


 



 


Balance, December 31, 2014


76,697,155


$

 31,825,575


Shares issued in private placement (i)


10,599,999



607,062


Warrants issued (i)


-



(32,000

)

Share issue costs


-



(49,197

)

Balance, March 31, 2015


87,297,154


$

 32,351,440


(i) On February 16, 2015, the Company closed a private placement of 10,599,999 common shares at GBP 0.03 ($0.05727) per common share for gross proceeds of GBP 316,667 ($607,062). The common share issued are subject to a four month hold period. Commissions of $36,424 were paid in connection with the placement. The agent also received 636,000 broker warrants. Each broker warrant can be exercised for one common share at an exercise price of GBP 0.045 for a period of 3 years. A four month hold period applies from date of issue of the broker warrant, expiring June 17, 2015.

The fair value of the 636,000 broker warrants was estimated at $32,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 168.98%, risk-free interest rate -0.43% and an expected average life of 3 years. As a result of the exercise price of the broker warrants being denominated in a currency other than the functional currency, the broker warrants are considered a derivative financial liability.

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, 2013 and March 31, 2014


-


$

 -


 


 



 


 


 



 


 


 



 


Balance, December 31, 2014


10,330,000


$

 0.18


Issued (Note 10(b)(i))


636,000



0.08


Balance, March 31, 2015


10,966,000


$

 0.18




 



 

The following table reflects the actual warrants issued and outstanding as of March 31, 2015:

 


 



Grant date



Exercise



Fair value


 


Number



fair value



price



March 31, 2015


Expiry date


of warrants



($)



(GBP)



($)


 


 



 



 



 


May 7, 2016


10,330,000



383,000



0.10



330,000


February 16, 2018


636,000



32,000



0.045



62,000


 


10,966,000



415,000



0.10



392,000


As a result of the exercise price of the warrants being denominated in a currency other than the functional currency, the warrants are considered a derivative financial liability. The warrants are revalued at each period end with any gain or loss in the fair value being record in the unaudited condensed interim consolidated statements of loss as an unrealized gain or loss on fair value of derivative financial liability.

On March 31, 2015, the fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%; expected volatility of 157.47% to 165.40%; risk free interest rate of 0.50%; and an expected life of 1.10 years to 2.88 years. As a result, the fair value of the warrants was calculated to be $392,000 and the Company recorded an unrealized gain on fair value of derivative financial liability for the three months ended March 31, 2015 of $8,000.

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, 2013 and March 31, 2014


940,000


$

 0.50


 


 



 


Balance, December 31, 2014 and March 31, 2015


940,000


$

 0.50


There were no stock-based compensation for the three months ended March 31, 2015 and 2014.

The following table reflects the actual stock options issued and outstanding as of March 31, 2015:

 


 



Weighted average



 



Number of



 


 


 



remaining



Number of



options



Number of


 


Exercise



contractual



options



vested



options


Expiry date


price ($)



life (years)



outstanding



(exercisable)



unvested


 


 



 



 



 



 


November 23, 2015


0.50



0.65



200,000



200,000



-


January 28, 2016


0.50



0.83



50,000



50,000



-


September 6, 2016


0.50



1.43



690,000



690,000



-


 


 



 



 



 



 


 


0.50



1.24



940,000



940,000



-


 



 

11.     Net Loss per Common Share

The calculation of basic and diluted loss per share for the three months ended March 31, 2015 was based on the loss attributable to common shareholders of $414,099 (three months ended March 31, 2014 - $502,100) and the weighted average number of common shares outstanding of 81,747,570 (three months ended March 31, 2014 - 51,242,015) for basic and diluted loss per share. Diluted loss did not include the effect of warrants and options for the three months ended March 31, 2015 and 2014, as they are anti-dilutive.

12.     Cost of Sales

 

 


Three Months


 


March 31,


 


2015



2014


Production wages

$

 24,532


$

 40,463


Oil and fuel


8,799



11,558


Repairs and servicing


15,167



6,324


Equipment hire


2,113



319


Royalties


9,236



8,978


Other costs


10,150



9,592


Cost of sales

$

 69,997


$

 77,234


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


 

 


March 31,


 

Note


2015



2014


Interest on related party loans

(i)

$

 16,610


$

13,592


(i) G&F Phelps Limited ("G&F Phelps"), a company controlled by a director of the Company, had amalgamated loans to the Company of $2,482,988 (GBP 1,318,354) (December 31, 2014 - $2,338,872 - GBP 1,294,268) included with due to related parties bearing interest at 2% above UK base rates, repayable on demand and secured by a mortgage debenture on all the Company's assets. Interest accrued on related party loans is included with due to related parties. As at March 31, 2015, the amount of interest accrued is $243,979 (GBP 129,542) (December 31, 2014 - $218,113 -GBP 120,698).

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

 


Three Months


 


March 31,


 


2015



2014


                                                     


 



 


Salaries and benefits (1)

$

 116,288  


$

114,798


(1) Salaries and benefits include director fees. As at March 31, 2015, due to directors for fees amounted to $60,000 (December 31, 2014 - $55,000) and due to key management, mainly for salaries and benefits accrued amounted to $590,691 (GBP 313,630) (December 31, 2014 - $483,998 - GBP 267,831), and is included with due to related parties.

(c) As of March 31, 2015, Kenglo One Limited ("Kenglo") owns 13,222,068 common shares of the Company or approximately 15.15% of the outstanding common shares of the Company. Roland Phelps, Chief Executive Officer and director, owns, directly and indirectly, 21,472,915 common shares of the Company or approximately 24.60% of the outstanding common shares of the Company. The remaining 60.25% 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 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 follows:

March 31, 2015


United Kingdom



Canada



Total


 


 



 



 


Current assets

$

 412,229


$

 173,625


$

 585,854


Non-current assets


10,001,535



60,676



10,062,211


Revenues

$

 1,123


$

 -


$

 1,123


 

December 31, 2014


United Kingdom



Canada



Total




 



 



 


Current assets

$

 208,066


$

 25,543


$

 233,609


Non-current assets


9,639,643



60,714



9,700,357


 

15.     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 $573,100 (GBP 304,290) in connection with an aggregate levy arising from the removal of waste rock from the mine site during 2008 and early 2009. The Company believes this claim is without merit. An appeal has been lodged and the Company's subsidiary Omagh intends to vigorously defend itself against this claim. A hearing date for the appeal has not yet been determined. No provision has been made for the claim in the unaudited condensed interim consolidated financial statements.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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