RESULTS FOR THE 3 AND 6 MONTHS ENDED JUNE 30, 2020

GALANTAS GOLD CORPORATION

TSXV & AIM: Symbol GAL

 

 

GALANTAS REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

 

August 27, 2020:  Galantas Gold Corporation (the 'Company') is pleased to announce its financial results for the Three and Six Months ended June 30, 2020.

 

Financial Highlights

Highlights of the 2020 second quarter and first six month's results, which are expressed in Canadian Dollars, are summarized below:

 

All figures denominated in Canadian Dollars (CDN$)	Second Quarter Ended June 30         2020                     2019		Six Months Ended                         June 30         2020                           2019
Revenue	$      0	$       0	$       0	$     0
Cost of Sales	$    (31,239)	$      (85,482)	$       (67,075)	$  (155,508)
(Loss)/income before the undernoted	$    (31,239)	$      (85,482)	$        (67,075)	$  (155,508)
Depreciation	$      (84,391)	$      (99,085)	$      (173,118)	$   (186,490)
General administrative expenses	$    (650,727)	$    (646,381)	$    (1,307,495)	$ (1,248,810)
Foreign exchange (gain)/loss	$       (25,784)	$    (60,915)	$       75,232	$    (80,572)
Net Loss for the period	$  ( 792,141)	$     (891,863)	$  (1,472,456)	$ (1,671,380)
Working Capital Deficit	$ (7,700,406)	$ (4,753,840)	$ (7,700,406)	$(4,753,840)
Cash loss from operating activities before changes in non-cash working capital	$ (294,582)	$    (673,444)	$   (643,481)	$ (1,064.481)
Cash at June 30, 2020	$  199,953	$   1,314,113	$  199,953	$ 1,314,113

 

 

The Net Loss for the three months ended June 30, 2020 amounted to $ 792,141 (2019: $ 891,863) and the cash loss from operating activities before changes in non-cash working capital for the second quarter of 2020 amounted to $ 294,582 (2019 Q2: $ 673,444). The Net Loss for the six months ended June 30, 2020 amounted to $ 1,472,656  (2019: $ 1,671,380) and the cash loss from operating activities before changes in non-cash working capital for the first six months of 2020 amounted to $ 643,481 (2019: $ 1,064,481).

 

The Company had cash balances of $ 199,953 at June 30, 2020 compared to $ 1,314,113 at June 30, 2019. The working capital deficit at June 30, 2020 amounted to $ 7,700,406 compared to a working capital deficit of $ 4,753,840 at June 30, 2019.

 

Property, plant and equipment expenditures for six months ended June 30, 2020 amounted to $ 345,669. Expenditures were mainly in connection with Development Assets expenditure at the Omagh mine.

 

Shipments of concentrate had commenced during the second quarter of 2019. However, until the mine commences commercial production, the net proceeds from concentrate sales are being offset against Development Assets. Concentrate sales provisional revenues totaled approximately $ Nil and US$ 186,000 for the three and six months ended June 30, 2020 respectively compared to $ Nil and $460,000 for the three and six months ended June 30, 2019, respectively. Concentrate inventories, on June 30, 2020, which were shipped in the third quarter, amounted to $ 488,128 (subject to final assessment) compared with $ 70,328 on December 31, 2019. 

 

During the second quarter Galantas reported a proposed brokered private placement of common shares, which was completed in July 2020, and amendments to the terms of its loan facility with Ocean Partners UK Ltd. The private placement, which was fully subscribed, included funds raised in both UK and Canadian currency and was for a total of 2,833,132 shares, at an issue price of $ 0.225 (UK£ 0.1328) per share for gross proceeds of  $ 637,454 (UK£ 376,240). The placement has received the approval of the TSX Venture Exchange and insiders of the Company participated in the placement. Galantas reported June 26, 2020 that it had agreed terms, subject to final documentation, for an increase of US$ 200,000 on the outstanding loan with Ocean Partners UK Ltd. As consideration for amending the terms of the loan, Ocean will receive, upon closing of the agreements, 1,700,000 bonus warrants of Galantas which is subject to TSXV approval. Each bonus warrant will be exercisable for one common share of Galantas at an exercise price of $0.33 per bonus share, being 110% of the TSXV closing price the day before the announcement. Subsequent to June 30, 2020 and following the receipt of TSXV approval the documentation on the loan and issuance of the warrants has been completed. Drawdown of the loan increase will take place when required.

 

Production/Mine Development

Certain underground work continued in the first half of 2020. However, ore production remains suspended until finance is available to expand the underground operation (see press release dated May 12, 2020). The processing plant continued to operate on a limited basis with feedstock for the plant being from low grade stock.

 

Underground development of the decline tunnel at the Omagh gold mine, located at the base of the existing open pit, commenced in early 2017 and the mine commenced limited production of gold concentrate during the third quarter of 2018. Underground development of the decline tunnel continued to be progressed during 2018 and 2019 from feed produced in the development of the Kearney vein. The plant had continued limited production of a gold & silver concentrate using a non-toxic, froth-flotation process, run on a batch basis from a stockpile of underground vein material plus additional feed produced from on-vein development operations. Blasting operations had been limited since all blasting must be supervised by the Police Service of Northern Ireland (PSNI) and were not sufficient for the desired level of operations.  The Company had been working with the PSNI during 2019 to increase blasting availability to normal levels for an underground mine. While progress had been made and substantive investment incurred in accordance with recommendations, the Company was still awaiting final approvals from the authorities to be able to implement its increased blasting protocols at the end of the third quarter of 2019. The arrangements, current at that time were not sufficient to allow for the expansion of mine operations as envisaged by the Company's existing mine plan and until changes were agreed, the inefficiencies caused by those arrangements formed an increasing financial burden, which had proved a significant drain on the financial resources of the Company which resulted in the temporary suspension  of blasting at the mine during the fourth quarter of 2019 (see press release dated October 29, 2019) resulting in the numbers employed at the operation were reduced from 46 to 21. During the second quarter of 2020 Galantas reported that confirmation has been received from PSNI, regarding their satisfaction of certain secure storage and handling protocols required for an increase in blasting to a commercial level subject to financial matters being agreed. The Company now understands that these financial matters have now been mutually agreed. However, ore production remains suspended until finance is available to expand the underground operation.

 

A probe drilling campaign was carried out following the suspension of operations using the retained personnel and equipment. The results of this campaign, combined with detailed mapping of the exposed mineralisation underground suggests zones of higher width of mineralisation within the vein, linking adjacent levels. This supports an implication that such zonal mineralisation may continue at depth, with enhanced exploration potential for targeting gold resources particularly to the north and within the Company's license area. Probe drilling does not provide samples suitable for use in mineral resource estimates but can provide strong indications where mineralisation is concentrated and is of significantly less cost than core drilling. During the second quarter, the Company reported that it had filed a short technical report in respect of the probe drilling campaign. The report is available on www.sedar.com and www.galantas.com.

 

Following the suspension of blasting operations at the mine, the processing plant continued to operate on a limited basis. In March 2020 and following UK government guidelines regarding Covid-19, processing operations temporarily ceased until later in May when the Company announced that concentrate processing has recommenced. The company carried out maintenance to the processing plant during the milling suspension, to minimise future maintenance interruptions. The restart follows a review of Northern Ireland / UK government health advice regarding Covid-19, a risk assessment and the introduction of appropriate modifications to working practices. Feedstock for the processing plant is from low grade stock until suitable arrangements are in place to recommence development underground. The number of employees that had been furloughed during the first quarter under a NI/UK government scheme has been recently reduced from seven to three. Concentrate production during the three and six months ended June 30, 2020 totaled 44 tonnes and 92 tonnes of concentrate provisionally assessed as grading 86.4 and 98 grams per tonne (g/t) respectively. Shipments of concentrate under the off-take arrangements had earlier commenced during the second quarter of 2019. For the three and six months ended June 30, 2020 provisional revenues from concentrate sales totaled US$ 186,000. Concentrate inventories on hand at the end of June were shipped during the third quarter. Until the mine reaches the commencement of commercial production, the net proceeds from concentrate sales will be offset against Development assets.

 

The Company is seeking strategic alternatives including reviewing its licenses and operations; and considering the possibility of engaging in a sale, joint venture, partnership, or other options with third parties and alternative financing structures. The Company is actively engaged in that process.

 

Safety is a high priority and the company continued to invest in safety-related training and infra-structure. The zero lost time accident rate since the start of underground operations, continues. Environmental monitoring demonstrates a high level of regulatory compliance.

 

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/2456X_1-2020-8-26.pdf

 

Qualified Person

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

 

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

 

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

Enquiries

Galantas Gold Corporation

Roland Phelps C.Eng - President & CEO
Email: [email protected]
Website: www.galantas.com
Telephone: +44 (0) 2882 241100

 

Grant Thornton UK LLP (Nomad)                  

Philip Secrett, Harrison Clarke.                                                

Telephone: +44(0)20 7383 5100                       

 

Whitman Howard Ltd (Broker & Corporate Adviser) 

Ranald McGregor-Smith, Nick Lovering

Telephone: +44(0)20 7659 1234   

 

 

 

 

GALANTAS GOLD CORPORATION

Condensed Interim Consolidated Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

Three and Six Months Ended June 30, 2020

 

NOTICE TO READER

The accompanying unaudited condensed interim consolidated financial statements of Galantas Gold Corporation (the "Company") have been prepared by and are the responsibility of management. The unaudited condensed interim consolidated financial statements have not been reviewed by the Company's auditors.

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)

(Unaudited)

		As at			As at
		June 30,			December 31,
		2020			2019
ASSETS
Current assets
Cash and cash equivalents	$	199,953		$	1,913,420
Accounts receivable and prepaid expenses (note 4)		382,906			416,699
Inventories (note 5)		488,128			70,328
Total current assets		1,070,987			2,400,447
Non-current assets
Property, plant and equipment (note 6)		20,916,589			21,159,716
Long-term deposit (note 8)		504,960			515,220
Exploration and evaluation assets (note 7)		705,668			661,726
Total non-current assets		22,127,217			22,336,662
Total assets	$	23,198,204		$	24,737,109
EQUITY AND LIABILITIES
Current liabilities
Accounts payable and other liabilities (note 9)	$	1,678,671		$	2,131,715
Current portion of financing facilities (note 10)		444,035			242,280
Due to related parties (note 15)		4,968,568			4,719,058
Convertible debenture (note 11)		1,680,119			1,400,594
Total current liabilities		8,771,393			8,493,647
Non-current liabilities
Non-current portion of financing facilities (note 10)		1,393,877			1,440,185
Decommissioning liability (note 8)		574,062			580,303
Total non-current liabilities		1,967,939			2,020,488
Total liabilities		10,739,332			10,514,135
Equity
Share capital (note 12(a)(b))		50,123,910			50,123,910
Reserves		9,124,766			9,416,412
Deficit		(46,789,804	)		(45,317,348	)
Total equity		12,458,872			14,222,974
Total equity and liabilities	$	23,198,204		$	24,737,109

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

Going concern (note 1)

Contingency (note 17)

Events after the reporting period (note 18)

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Loss

(Expressed in Canadian Dollars)

(Unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Revenues
Jewellery sales (note 14)	$	-		$	-		$	-		$	-
Cost and expenses of operations
Cost of sales		31,239			85,482			67,075			155,508
Depreciation (note 6)		84,391			99,085			173,118			186,490
		115,630			184,567			240,193			341,998
Loss before general administrative and other expenses		(115,630	)		(184,567	)		(240,193	)		(341,998	)
General administrative expenses
Management and administration wages (note 15)		143,114			255,618			284,336			447,306
Other operating expenses		57,360			37,054			151,420			82,280
Accounting and corporate		15,109			14,718			29,253			28,613
Legal and audit		28,834			25,872			70,952			41,446
Stock-based compensation (note 12(d))		12,064			76,723			(4,224	)		212,063
Shareholder communication and investor relations		45,882			62,836			92,958			110,969
Transfer agent		26,738			5,752			54,474			7,653
Director fees (note 15)		8,500			11,250			14,750			17,500
General office		2,776			3,663			5,489			6,262
Accretion expenses (notes 8, 10 and 11)		164,797			61,983			310,918			119,029
Loan interest and bank charges less deposit          interest (notes 10, 11 and 15)		145,553			90,912			297,169			175,689
		650,727			646,381			1,307,495			1,248,810
Other expenses
Foreign exchange loss (gain)		25,784			60,915			(75,232	)		80,572
		25,784			60,915			(75,232	)		80,572
Net loss for the period	$	(792,141	)	$	(891,863	)	$	(1,472,456	)	$	(1,671,380	)
Basic and diluted net loss per share (note 13)	$	(0.02	)	$	(0.03	)	$	(0.05	)	$	(0.06	)
Weighted average number of common shares       outstanding - basic and diluted (i)		32,321,472			29,968,531			32,321,472			29,968,531

(i) Adjusted for 10:1 share consolidation effective April 17, 2020 (note 13).

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

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Comprehensive Loss

(Expressed in Canadian Dollars)

(Unaudited)

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Net loss for the period	$	(792,141	)	$	(891,863	)	$	(1,472,456	)	$	$ (1,671,380	)
Other comprehensive (loss)
Items that will be reclassified subsequently to   profit or loss
Exchange differences on translating foreign      operations		(670,131	)		(590,394	)		(287,422	)		(595,376	)
Total comprehensive loss	$	(1,462,272	)	$	(1,482,257	)	$	(1,759,878	)	$	$ (2,266,756	)

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

Galantas Gold Corporation

Condensed Interim Consolidated Statements of Cash Flows

(Expressed in Canadian Dollars)

(Unaudited)

		Six Months Ended
		June 30,
		2020			2019
Operating activities
Net loss for the period	$	(1,472,456	)	$	(1,671,380	)
Adjustment for:
Depreciation (note 6)		173,118			186,490
Stock-based compensation (note 12(d))		(4,224	)		212,063
Interest expense (notes 10, 11 and 15)		295,889			180,717
Foreign exchange loss (gain)		53,274			(91,400	)
Accretion expenses (notes 8, 10 and 11)		310,918			119,029
Non-cash working capital items:
Accounts receivable and prepaid expenses		26,588			(743,079	)
Inventories		(427,718	)		11,335
Accounts payable and other liabilities		(422,474	)		318,134
Due to related parties		168,784			79,013
Net cash and cash equivalents used in operating activities		(1,298,301	)		(1,399,078	)
Investing activities
Purchase of property, plant and equipment		(345,669	)		(3,392,566	)
Exploration and evaluation assets		(57,119	)		-
Net cash and cash equivalents used in investing activities		(402,788	)		(3,392,566	)
Financing activities
Repayment of financing facilities (note 10)		(8,353	)		(22,569	)
Net cash and cash equivalents used in financing activities		(8,353	)		(22,569	)
Net change in cash and cash equivalents		(1,709,442	)		(4,814,213	)
Effect of exchange rate changes on cash held in foreign currencies		(4,025	)		(60,228	)
Cash and cash equivalents, beginning of period		1,913,420			6,188,554
Cash and cash equivalents, end of period	$	199,953		$	1,314,113
Cash	$	199,953		$	1,314,113
Cash equivalents		-			-
Cash and cash equivalents	$	199,953		$	1,314,113

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						Equity
								share-			Foreign			component
								based			currency			of
		Share			Warrants			payments			translation			convertible
		capital			reserve			reserve			reserve			debenture			Deficit			Total
Balance, December 31, 2018	$	48,628,055		$	786,000		$	7,264,147		$	913,016		$	-		$	(41,752,739	)	$	15,838,479
Stock-based compensation (note 12(d))		-			-			212,063			-			-			-			212,063
Exchange differences on translating     foreign operations		-			-			-			(595,376	)		-			-			(595,376	)
Net loss for the period		-			-			-			-			-			(1,671,380	)		(1,671,380	)
Balance, June 30, 2019	$	48,628,055		$	786,000		$	7,476,210		$	317,640		$	-		$	(43,424,119	)	$	13,783,786
Balance, December 31, 2019	$	50,123,910		$	786,000		$	7,585,580		$	796,754		$	248,078		$	(45,317,348	)	$	14,222,974
Stock-based compensation (note 12(d))		-			-			(4,224	)		-			-			-			(4,224	)
Expiry of warrants		-			(786,000	)		786,000			-			-			-			-
Exchange differences on translating     foreign operations		-			-			-			(287,422	)		-			-			(287,422	)
Net loss for the period		-			-			-			-			-			(1,472,456	)		(1,472,456	)
Balance, June 30, 2020	$	50,123,910		$	-		$	8,367,356		$	509,332		$	248,078		$	(46,789,804	)	$	12,458,872

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

 

Galantas Gold Corporation Notes to Condensed Interim Consolidated Financial Statements Three and Six Months Ended June 30, 2020 (Expressed in Canadian Dollars) (Unaudited)

1. Going Concern

These unaudited condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that Galantas Gold Corporation (the "Company") will be able to realize assets and discharge liabilities in the normal course of business. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of uncertainties related to events or conditions that may cast doubt on the Company's ability to continue as a going concern. The Company's future viability depends on the consolidated results of the Company's wholly-owned subsidiary Cavanacaw Corporation ("Cavanacaw"). Cavanacaw has a 100% shareholding in both Flintridge Resources Limited ("Flintridge") who are engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland and Omagh Minerals Limited ("Omagh") who are engaged in the exploration of gold properties, mainly in the Republic of Ireland. The Omagh mine has an open pit mine, which was in production until 2013 when production was suspended and is reported as property, plant and equipment and as an underground mine which having established technical feasibility and commercial viability in December 2018 has resulted in associated exploration and evaluation assets being reclassified as an intangible development asset and reported as property, plant and equipment.

The going concern assumption is dependent upon forecast cash flows being met, negotiations for the extension of the short-term loans being finalized, further financing currently being negotiated being completed and blasting arrangement with the Police Service of Northern Ireland ("PSNI") being resolved. The directors assumptions in relation to future levels of production, gold prices and mine operating costs are crucial to forecast cash flows being achieved. Should production be significantly delayed, revenues fall short of expectations or operating costs and capital costs increase significantly, there may be insufficient cash flows to sustain day to day operations without seeking further finance.

Negotiations with current finance providers to extend short-term loans are progressing satisfactory. The Company is also in advanced negotiations with potential new investors to meet the financial requirements of the Company for the foreseeable future. Based on the five-year period financial projections prepared, the directors believe it's appropriate to prepare the unaudited condensed interim consolidated financial statements on the going concern basis.

On April 17, 2020, the Company completed a share consolidation of its share capital on the basis of ten existing common shares for one new common share consolidation. All common shares, per common share amounts, stock options and warrants in these unaudited condensed interim consolidated financial statements have been retroactively restated to reflect the share consolidation.

As at June 30, 2020, the Company had a deficit of $46,789,804 (December 31, 2019 - $45,317,348). Comprehensive loss for the six months ended June 30, 2020 was $1,759,878 (six months ended June 30, 2019 - $2,266,756). These losses raise material uncertainties which may cast significant doubt as to whether the Company will be able to continue as a going concern. Management is confident that it will continue as a going concern. However, this is subject to a number of factors including market conditions.

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

2. Incorporation and Nature of Operations

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

The Company entered into an agreement on April 17, 2000, approved by shareholders on June 26, 2000, whereby Cavanacaw, a private Ontario corporation, acquired Omagh. Cavanacaw has established an open pit mine to extract the Company's gold deposit near Omagh, Northern Ireland. Cavanacaw also has developed a premium jewellery business founded on the gold produced under the name Galántas Irish Gold Limited ("Galántas"). As at July 1, 2007, the Company's Omagh mine began production and in 2013 production was suspended. On April 1, 2014, Galántas amalgamated its jewelry business with Omagh.

On April 8, 2014, Cavanacaw acquired Flintridge. Following a strategic review of its business by the Company during 2014 certain assets owned by Omagh were acquired by Flintridge.

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

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

In March 2020, the World Health Organization declared coronavirus (COVID-19) a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds.

3. Basis of Preparation

Statement of compliance

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

The policies applied in these unaudited condensed interim consolidated financial statements are based on IFRS issued and outstanding as of August 25, 2020 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, 2019, except as noted below. Any subsequent changes to IFRS that are given effect in the Company's annual consolidated financial statements for the year ending December 31, 2020 could result in restatement of these unaudited condensed interim consolidated financial statements.

New accounting standards adopted

IFRS 3, Business Combinations ("IFRS 3")

Amendments to IFRS 3, issued in October 2018, provide clarification on the definition of a business. The amendments permit a simplified assessment to determine whether a transaction should be accounted for as a business combination or as an asset acquisition.

The amendments are effective for transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020. The adoption of the amendments had no impact on the Company's unaudited condensed interim consolidated financial statements.

IAS 1, Presentation of Financial Statements ("IAS 1")

Amendments to IAS 1, issued in October 2018, provide clarification on the definition of material and how it should be applied. The amendments also align the definition of material across IFRS and other publications.

The amendments are effective for annual periods beginning on or after January 1, 2020 and are required to be applied prospectively. The adoption of the amendments had no impact on the Company's unaudited condensed interim consolidated financial statements.

IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors ("IAS 8")

Amendments to IAS 8, issued in October 2018, provide clarification on the definition of material and how it should be applied. The amendments also align the definition of material across IFRS and other publications.

The amendments are effective for annual periods beginning on or after January 1, 2020 and are required to be applied prospectively. The adoption of the amendments had no impact on the Company's unaudited condensed interim consolidated financial statements.

4. Accounts Receivable and Prepaid Expenses

 

		As at			As at
		June 30,			December 31,
		2020			2019
Sales tax receivable - Canada	$	3,414		$	$2,682
Valued added tax receivable - Northern Ireland		112,089			93,864
Accounts receivable		234,386			250,533
Prepaid expenses		33,017			69,620
	$	382,906		$	416,699

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

The following is an aged analysis of receivables:

		As at			As at
		June 30,			December 31,
		2020			2019
Less than 3 months	$	115,504		$	235,934
3 to 12 months		231,963			108,674
More than 12 months		2,422			2,471
Total accounts receivable	$	349,889		$	347,079

5. Inventories

		As at			As at
		June 30,			December 31,
		2020			2019
Concentrate inventories	$	488,128		$	70,328

 

6. Property, Plant and Equipment

		Freehold			Plant
		land and			and			Motor			Office			Development
Cost		buildings			machinery			vehicles			equipment			assets (i)			Total
Balance, December 31, 2018	$	2,406,174		$	6,188,611		$	166,362		$	154,396		$	14,696,413		$	23,611,956
Additions		-			1,807,493			30,771			37,092			4,542,274			6,417,630
Disposals		-			(1,036,502	)		(33,968	)		-			-			(1,070,470	)
Foreign exchange adjustment		(36,564	)		(93,527	)		(2,528	)		(2,346	)		(221,783	)		(356,748	)
Balance, December 31, 2019		2,369,610			6,866,075			160,637			189,142			19,016,904			28,602,368
Additions		-			2,693			-			-			342,976			345,669
Foreign exchange adjustment		(47,188	)		(136,055	)		(3,201	)		(3,767	)		(376,681	)		(566,892	)
Balance, June 30, 2020	$	2,322,422		$	6,732,713		$	157,436		$	185,375		$	18,983,199		$	28,381,145
		Freehold			Plant
		land and			and			Motor			Office			Development
Accumulated depreciation		buildings			machinery			vehicles			equipment			assets (i)			Total
Balance, December 31, 2018	$	1,975,045		$	4,936,580		$	111,910		$	100,920		$	-		$	7,124,455
Depreciation		9,742			414,756			19,351			13,285			-			457,134
Disposals		-			(45,590	)		(14,497	)		-			-			(60,087	)
Foreign exchange adjustment		(29,880	)		(46,177	)		(1,439	)		(1,354	)		-			(78,850	)
Balance, December 31, 2019		1,954,907			5,259,569			115,325			112,851			-			7,442,652
Depreciation		3,854			157,228			6,416			5,620			-			173,118
Foreign exchange adjustment		(39,014	)		(107,403	)		(2,431	)		(2,366	)		-			(151,214	)
Balance, June 30, 2020	$	1,919,747		$	5,309,394		$	119,310		$	116,105		$	-		$	7,464,556
		Freehold			Plant
		land and			and			Motor			Office			Development
Carrying value		buildings			machinery			vehicles			equipment			assets (i)			Total
Balance, December 31, 2019	$	414,703		$	1,606,506		$	45,312		$	76,291		$	19,016,904		$	21,159,716
Balance, June 30, 2020	$	402,675		$	1,423,319		$	38,126		$	69,270		$	18,983,199		$	20,916,589

(i) Development assets are expenditures for the underground mining operations in Omagh. The Company had announced in December 2016 that it would commence the first phase of underground development and re-start concentrate shipments at its Omagh mine. Underground development of a decline tunnel, located at the base of the existing open pit, commenced in the first quarter 2017. During 2018 the mine commenced limited production of gold concentrate from feed produced in the development of the Kearney vein and in the fourth quarter Galantas reported that delivery of the first consignment of concentrate derived from underground feedstock at the mine had been made. Underground development of the decline tunnel continued to be progressed during 2019 with further crosscuts allowing access to lower levels of vein development which forms the development necessary to demarcate production panels. By the end of the third quarter of 2019 some two kilometres of underground drivages had been developed, with exposure of the main Kearney vein on four levels with a fifth level is near the point of intersection. The mine is serviced by a decline tunnel of 1 in 6 gradients, of dimensions approximately 4.5m by 4.5m. However, during the fourth quarter Galantas announced a temporary suspension of blasting operations at its Omagh gold mine. Blasting operations had been limited, since all blasting must be supervised by the PSNI. Presently the blasting arrangements are not sufficient for the desired level of operations and are not sufficient to allow for the expansion of mine operations as envisaged by the Company's existing mine plan. Until changes are agreed, the present inefficiencies caused by these blasting arrangements form an increasing financial burden, which has proved a significant drain on the financial resources of the Company. Accordingly, in order to reduce costs, while some mine operations will continue at the Omagh gold mine, consultation with the workforce has resulted in the numbers employed at the operation being reduced from 46 to 21. During the six months ended June 30, 2020, Galantas reported that confirmation had been received from PSNI, in regard to their satisfaction of certain secure storage and handling protocols required for an increase in blasting to a commercial level subject to financial matters being agreed. The Company understands that these financial matters have now been mutually agreed. Ore production is suspended until finance is available to expand the underground operation. The processing plant continues to operate on a limited basis with feedstock for the plant being from low grade stock.

7. Exploration and Evaluation Assets

		Exploration
		and
		evaluation
Cost		assets
Balance, December 31, 2018	$	760,023
Additions		70,836
Impairment		(157,583	)
Foreign exchange adjustment		(11,550	)
Balance, December 31, 2019		661,726
Additions		57,119
Foreign exchange adjustment		(13,177	)
Balance, June 30, 2020	$	705,668
Carrying value
Balance, December 31, 2019	$	661,726
Balance, June 30, 2020	$	705,668

 

8. Decommissioning Liability

The Company's decommissioning liability is a result of mining activities at the Omagh mine in Northern Ireland. The Company estimated its decommissioning liability at June 30, 2020 based on a risk-free discount rate of 1% (December 31, 2019 - 1%) and an inflation rate of 1.50% (December 31, 2019 - 1.50%). The expected undiscounted future obligations allowing for inflation are GBP 330,000 and based on management's best estimate the decommissioning is expected to occur over the next 5 to 10 years. On June 30, 2020, the estimated fair value of the liability is $574,062 (December 31, 2019 - $580,303). Changes in the provision during the six months ended June 30, 2020 are as follows:

		As at			As at
		June 30,			December 31,
		2020			2019
Decommissioning liability, beginning of period	$	580,303		$	578,242
Accretion		5,429			10,702
Foreign exchange		(11,670	)		(8,641	)
Decommissioning liability, end of period	$	574,062		$	580,303

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, 2019 - GBP 300,000), of which GBP 300,000 was funded as of June 30, 2020 (GBP 300,000 was funded as of December 31, 2019) and reported as long-term deposit of $504,960 (December 31, 2019 - $515,220).

9. Accounts Payable and Other Liabilities

Accounts payable and other liabilities of the Company are principally comprised of amounts outstanding for purchases relating to exploration costs on exploration and evaluation assets, general operating activities and professional fees activities.

		As at			As at
		June 30,			December 31,
		2020			2019
Accounts payable	$	845,899		$	1,084,574
Accrued liabilities		832,772			1,047,141
Total accounts payable and other liabilities	$	1,678,671		$	2,131,715

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

		As at			As at
		June 30,			December 31,
		2020			2019
Less than 3 months	$	772,640		$	1,232,089
3 to 12 months		236,567			221,328
12 to 24 months		11,971			357,073
More than 24 months		657,493			321,225
Total accounts payable and other liabilities	$	1,678,671		$	2,131,715

 

10.  Financing Facilities

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

		As at			As at
		June 30,			December 31,
		2020			2019
Financing facilities, beginning of period (i)(ii)	$	1,440,185		$	1,081,190
Less current portion		(444,035	)		(242,280	)
Repayment of financing facilities		(8,353	)		(56,854	)
Accretion (ii)		155,447			248,238
Interest (ii)		115,990			279,151
Foreign exchange adjustment		134,643			130,740
Financing facilities - long term portion	$	1,393,877		$	1,440,185

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

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

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

As consideration for the loan facility, the United Kingdom based company received 1,500,000 bonus warrants of the Company. Each bonus warrant is exercisable into one common share of the Company and is subject to an initial four months plus one day hold period from the date of issuance of the bonus warrants. The bonus warrants have a maximum life of two years (the "Expiry Time"). On April 19, 2018, the 1,500,000 bonus warrants were granted. In the event that the weighted average closing price per common share of the Company is more than $2.00 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Time to a date that is 30 days from the date on which the Company announces the accelerated Expiry Time by press release.

The fair value of the 1,500,000 bonus warrants was estimated at $786,000 using the Black-Scholes option pricing model with the following assumptions: expected dividend yield - 0%, expected volatility - 113.55%, risk-free interest rate - 1.91% and an expected average life of 2 years.

During the three and six months ended June 30, 2020, the Company recorded accretion expense of $80,705 and $155,447, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2019 - $248,238).

During the three and six months ended June 30, 2020, the Company recorded interest expense of $57,995 and $115,990, respectively in the unaudited condensed interim consolidated statements of loss in regards with this loan facility (year ended December 31, 2019 - $279,151).

Refer to note 18(i).

11.  Convertible Debenture

On December 17, 2019, the Company closed a $1,731,190 (GBP 1,000,000) convertible debenture consisting of 3,000 units.  The convertible debenture is unsecured, is for a term of one year commencing on the date that it is issued, carries a coupon of 15% per annum and is convertible into common shares of the Company. The conversion price is fixed at $0.15, being a 25% discount to the closing price of the common shares of the Company on the issue date.

The convertible debenture has been fully subscribed by Melquart Limited ("Melquart"), an insider and control person of the Company (as defined by the TSXV). Melquart held 7,756,572 common shares equivalent to 24% of the Company at December 31, 2019. Melquart are under no obligation to convert the convertible debenture and should Melquart choose not to convert, the Company will need to raise further funds to repay the convertible debenture within 12 months.

A four month hold period will apply to common shares converted through the convertible debenture. The hold period will expire on April 18, 2020. The share issued pursuant to the convertible debenture will rank pari passu with the existing common shares issued by the Company.

Commission payable to Whitman Howard Ltd. for acting as the broker in relation to the convertible debenture offering total $86,308 (GBP 50,000).

The debentures consist of the liability component and equity component. The fair value of the liability was recorded at $1,467,110, discounted at an effective interest rate of 18%. The residual value of the debentures is allocated to the conversion feature. The value of the conversion feature was $264,080. The Company incurred transaction costs of $104,903 which was allocated pro-rata on the value of the conversion feature and the liability component.

During the three and six months ended June 30, 2020, the Company recorded accretion expense of $60,817 and $129,483, respectively (year ended December 31, 2019 - $12,425) and interest expense of $85,300 and $150,042, respectively (year ended December 31, 2019 - $9,960) as loan interest and bank charges less deposit interest in the unaudited condensed interim consolidated statement of loss. 

Balance, December 31, 2018	$	-
Principal amount		1,731,190
Equity allocation - conversion feature		(264,080	)
Transaction costs		(104,903	)
Transaction costs allocated to equity		16,002
Interest expense		9,960
Accretion expense		12,425
Balance, December 31, 2019		1,400,594
Interest expense		129,483
Accretion expense		150,042
Balance, June 30, 2020	$	1,680,119

 

 

12.  Share Capital and Reserves

a) Authorized share capital

At June 30, 2020, the authorized share capital consisted of an unlimited number of common and preference shares issuable in Series.

On April 17, 2020, the Company completed a share consolidation of its share capital on the basis of ten then existing common shares for one new common share consolidation. All common shares, per common share amounts, stock options and warrants in these unaudited condensed interim consolidated financial statements have been retroactively restated to reflect the share consolidation.

The common shares do not have a par value. All issued shares are fully paid.

No preference shares have been issued. The preference shares do not have a par value.

b)  Common shares issued

At June 30, 2020, the issued share capital amounted to $50,123,910. The change in issued share capital for the periods presented is as follows:

		Number of
		common
		shares			Amount
Balance, December 31, 2018 and June 30, 2019		29,968,531		$	48,628,055
Balance, December 31, 2019 and June 30, 2020		32,321,472		$	50,123,910

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, 2018 and June 30, 2019		1,500,000		$	1.58
Balance, December 31, 2019		1,500,000		$	1.58
Expired		(1,500,000	)		1.58
Balance, June 30, 2020		-		$	-

There are no warrants outstanding as at June 30, 2020.

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, 2018		885,000		$	1.20
Granted (i)(ii)		540,000			0.90
Expired		(13,333	)		0.90
Balance, June 30, 2019		1,411,667		$	0.90
Balance, December 31, 2019		1,395,000		$	0.92
Expired		(285,000	)		1.05
Cancelled (i)(ii)(iii)		(515,000	)		1.01
Balance, June 30, 2020		595,000		$	1.15

(i) On February 13, 2019, 320,000 stock options were granted to directors, officers, consultants and employees of the Company to purchase common shares at a price of $0.90 per share until February 13, 2024. The options will vest as to one third on February 13, 2019 and one third on each of the following two anniversaries. The fair value attributed to these options was $247,360 and was expensed in the unaudited condensed interim consolidated statements of loss and credited to equity settled share-based payments reserve. During the three and six months ended June 30, 2020, included in stock-based compensation is $4,818 and $21,813, respectively (three and six months ended June 30, 2019 - $27,934 and $125,974, respectively) related to the vested portion of these options. During the three and six months ended June 30, 2020, nil and 150,000 stock options, respectively were cancelled and therefore, $nil and $21,813, respectively of stock-based compensation was reversed related to the unvested portion of the options cancelled.

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

(ii) On June 27, 2019, 220,000 stock options were granted to directors and employees of the Company to purchase common shares at a price of $0.90 per share until June 27, 2024. The options will vest as to one third on June 27, 2019 and one third on each of the following two anniversaries. The fair value attributed to these options was $128,040 and was expensed in the unaudited condensed interim consolidated statements of loss and credited to equity settled share-based payments reserve. During the three and six months ended June 30, 2020, included in stock-based compensation is $7,042 and $25,180, respectively (three and six months ended June 30, 2019 - $43,206) related to the vested portion of these options.  During the three and six months ended June 30, 2020, nil and 150,000 stock options, respectively were cancelled and therefore, $nil and $33,246, respectively of stock-based compensation was reversed related to the unvested portion of the options cancelled.

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

(iii) The portion of the estimated fair value of options granted in the prior years and vested during the three and six months ended June 30, 2020, amounted to $204 and $4,334, respectively (three and six months ended June 30, 2019 - $37,300). In addition, during the three and six months ended June 30, 2020, nil and 215,000 options granted in the prior years were cancelled and therefore, $nil and $2,451, respectively of stock-based compensation was reversed related to the unvested portion of the options cancelled.

The following table reflects the actual stock options issued and outstanding as of June 30, 2020:

					Weighted average						Number of
					remaining			Number of			options			Number of
		Exercise			contractual			options			vested			options
Expiry date		price ($)			life (years)			outstanding			(exercisable)			unvested
March 25, 2022		1.35			1.73			320,000			320,000			-
April 19, 2023		1.10			2.80			25,000			25,000			-
February 13, 2024		0.90			3.62			150,000			100,000			50,000
June 27, 2024		0.90			3.99			100,000			66,667			33,333
		1.15			2.64			595,000			511,667			83,333

13.  Net Loss per Common Share

The calculation of basic and diluted loss per share for the three and six months ended June 30, 2020 was based on the loss attributable to common shareholders of $792,141 and $1,472,456, respectively (three and six months ended June 30, 2019 - $891,863 and $1,671,380, respectively) and the weighted average number of common shares outstanding of 32,321,472 (three and six months ended June 30, 2019 - 29,968,531) for basic and diluted loss per share. Diluted loss did not include the effect of nil warrants (three and six months ended June 30, 2019 - 1,500,000) and 595,000 options (three and six months ended June 30, 2019 - 1,411,667) for the three and six months ended June 30, 2020, as they are anti-dilutive. The calculation of basic and diluted loss per share is adjusted for 10:1 share consolidation effective April 17, 2020.

14. Revenues

Shipments of concentrate under the off-take arrangements commenced during the second quarter of 2019. Concentrate sales provisional revenues during the three and six months ended June 30, 2020 totaled approximately US$nil and US$186,000, respectively (three and six months ended June 30, 2019 - US$460,000). However, until the mine reaches the commencement of commercial production, the net proceeds from concentrate sales will be offset against Development assets.

 

15.  Related Party Disclosures

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

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

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

			Three Months Ended						Six Months Ended
			June 30,						June 30,
	Note		2020			2019			2020			2019
Interest on related party loans	(i)	$	79,872		$	90,553		$	166,405		$	180,717

(i) G&F Phelps, a company controlled by a director of the Company, had amalgamated loans to the Company of $3,071,442 (GBP 1,824,764) (December 31, 2019 - $3,133,850 - GBP 1,824,764) included with due to related parties bearing interest at 2% above UK base rates, repayable on demand and secured by a mortgage debenture on all the Company's assets. In April 2018, the interest increased to 6.75% + US$ 12 month LIBOR. Interest accrued on related party loans is included with due to related parties. As at June 30, 2020, the amount of interest accrued is $1,145,347 (GBP 680,458) (December 31, 2019 - $1,002,388 - GBP 583,666).  Refer to note 18(i).

(ii) See note 11.

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

		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2020			2019			2020			2019
Salaries and benefits (1)	$	117,228		$	116,176		$	231,727		$	227,875
Stock-based compensation		6,412			17,616			15,726			57,383
	$	123,640		$	133,792		$	247,453		$	285,258

⁽¹⁾ Salaries and benefits include director fees. As at June 30, 2020, due to directors for fees amounted to $133,250 (December 31, 2019 - $118,500) and due to officers, mainly for salaries and benefits accrued amounted to $618,529 (GBP 367,472) (December 31, 2019 - $464,320 - GBP 270,362), and is included with due to related parties.

(c) As of June 30, 2020, Ross Beaty owns 3,744,749 common shares of the Company or approximately 11.59% of the outstanding common shares. Roland Phelps, Chief Executive Officer and director, owns, directly and indirectly, 4,933,817 common shares of the Company or approximately 15.26% of the outstanding common shares of the Company. Miton Assets Management Limited owns 4,357,135 common shares of the Company or approximately 13.48%. Melquart owns, directly and indirectly, 7,756,572 common shares of the Company or approximately 24.00% of the outstanding common shares of the Company. The remaining 35.67% 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. Refer to note 18(ii).

16.  Segment Disclosure

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

June 30, 2020		United Kingdom			Canada			Total
Current assets	$	942,713		$	128,274		$	1,070,987
Non-current assets		22,068,556			58,661			22,127,217
Revenues	$	-		$	-		$	-
December 31, 2019		United Kingdom			Canada			Total
Current assets	$	891,210		$	1,509,237		$	2,400,447
Non-current assets		22,286,304			50,358			22,336,662
Revenues	$	5,788		$	-		$	5,788

17. Contingency

During the year ended December 31, 2010, the Company's subsidiary Omagh received a payment demand from Her Majesty's Revenue and Customs ("HMRC") in the amount of $512,181 (GBP 304,290) in connection with an aggregate levy arising from the removal of waste rock from the mine site during 2008 and early 2009. Omagh Minerals believed this claim to be without merit. An appeal was lodged with the Tax Tribunals Service and the hearing started at the beginning of March 2017 and following a number of adjournments was completed in August 2018. During the year ended December 31, 2019, the Tax Tribunals Service issued their judgement dismissing the appeal by Omagh in respect of the assessments. A provision has now been included in the unaudited condensed interim consolidated financial statements in respect of the aggregates levy plus interest and penalty.

There is a contingent liability in respect of potential additional interest which may be applied in respect of the aggregates levy dispute. Omagh is unable to make a reliable estimate of the amount of the potential additional interest that may be applied by HMRC.

18. Events After the Reporting Period

(i) On July 9, 2020, the Company amended the terms of its loan facility (refer to note 10(ii)) of an increase in the outstanding loan facility. The amount of the loan facility increased by US$200,000 to a total of US$1.8 million. The interest rate applicable on the loan facility increased from US$ 12 month LIBOR + 8.75% to US$ 12 month LIBOR + 9.9% and the maturity date was extended from December 30, 2020 to December 31, 2021. Interest may be rolled into the loan facility until December 31, 2020, at the Company's option. The existing second charge debenture over mine assets will remain in place. Galantas entered into the loan facility through a concentrate pre-payment agreement/loan agreement signed by its subsidiary Flintridge and the Lender on April 11, 2018.

As consideration for amending the terms of the loan facility, the Lender received on August 14, 2020, 1,700,000 bonus warrants of Galantas ("Bonus Warrants"). Each Bonus Warrant will be exercisable for one common share of Galantas (a "Bonus Share") at an exercise price of $0.33 per Bonus Share. The Bonus Warrants will expire on December 31, 2021 (the "Expiry Date") and the Bonus Shares will be subject to an initial four month plus one day hold period from the date of their issuance. In the event that the weighted average closing price per common share of the Company is more than $0.4125 per share for more than five consecutive trading days, the Company shall be entitled to accelerate the Expiry Date to a date that is 30 days from the date on which the Company announces the accelerated Expiry Date by press release.

Following the completion of the private placement and the loan facility, G&F Phelps will enter into an arrangement in respect of its loans with the Company (the "G&F Phelps Loans") which will provide that G&F Phelps will not call for repayment of the G&F Phelps Loans (which are repayable on demand), until June 30, 2021 at the earliest, unless certain events occur including inter alia a sale or insolvency of the Company, a material liquidity event, change of control or breach of the terms of the G&F Phelps Loans. G&F Phelps is a company owned by Roland Phelps, Chief Executive Officer of Galantas.

(ii) On July 17, 2020, the Company completed a private placement for 2,833,132 common shares at an issue price of $0.225 (UK£0.1328) per share for gross proceeds of $637,454 (GBP 376,240). The net proceeds to be raised by the private placement are intended to be used to support mine operations and provide general working capital of the Company.

The private placement included a subscription by LF Miton UK Smaller Companies Fund, which has subscribed for 527,108 common shares in the private placement and is managed by Premier Fund Managers Ltd ("Premier Miton"). Post-closing, this fund holds 3,222,330 shares, equivalent to 9.17% of the Company's common shares. The total number of shares controlled by Premier Miton post completion of the private Placement is 4,884,243, representing 13.89% of the Company's enlarged issued and outstanding common shares.

The private placement also included a subscription from Melquart, for 1,506,024 common shares, which gives rise to an enlarged holding of 9,262,595 common shares post completion of the private placement, or 26.35% of the Company's enlarged issued and outstanding common shares.

A four month hold period will apply to the common shares of the private placement. The hold period will expire on November 18, 2020. The shares issued pursuant to the private placement will rank pari passu with the existing common shares in issue of the Company.

Commission payable to brokers in Canada and the United Kingdom in relation to the private placement totals $33,673 (GBP 19,874).