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or Name
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Galantas Gold Corp (2)
Symbol GAL
Shares Issued 76,697,156
Close 2014-11-26 C$ 0.06
Market Cap C$ 4,601,829
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Galantas Gold loses $3.51-million in Q3

2014-11-27 10:04 ET - News Release

Mr. Jack Gunter reports

GALANTAS REPORTS RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2014

Galantas Gold Corp. has released its financial results for the three and nine months ended Sept. 30, 2014.

Financial highlights

Highlights of results for the 2014 third quarter and first nine months, which are expressed in Canadian dollars, are summarized in an attached table.

                                Third quarter ended          Nine months ended
                                      Sept. 30,                   Sept. 30,
                                 2014          2013          2014          2013

Revenue                  $      8,376   $   473,668   $     8,376   $ 1,362,200
Cost of sales            $     84,277   $   437,995   $   260,957   $ 1,347,416
(Loss)/income before
the undernoted           $    (75,901)  $    35,673   $  (252,581)  $    14,784
Depreciation             $     57,654   $   115,105   $   184,917   $   361,935
General administrative
expenses                 $    253,291   $   262,189   $   873,000   $   853,969
Loss/(gain) on sale of
property, plant and
equipment                $         50   $      (592)  $   (19,810)  $   (65,123)
Unrealized (gain) on
fair value of
derivative financial
liability                $    133,000   $         0   $   (77,000)  $         0
Impairment of property,
plant and equipment      $  2,921,884   $         0   $ 2,921,884   $         0
Foreign exchange loss    $     69,157   $    22,715   $   174,068   $    25,964
Net (loss) for the
period                   $ (3,510,937)  $  (363,744)  $(4,309,640)  $(1,161,961)

The net loss for the three months ended Sept. 30, 2014, amounted to $3,510,937 (2013 third quarter: $363,744), and the net loss for the nine months ended Sept. 30, 2014, amounted to $4,309,640 (2013: $1,161,961). Both three and nine months ended Sept. 30, 2014, include an impairment loss on property, plant and equipment which amounted to $2,921,884.

Sales revenues for the third quarter and nine months ended Sept. 30, 2014, amounted to $8,376 (2013: $473,668 and $1,362,200, respectively). Following the suspension of production during the fourth quarter of 2013 due primarily to lower concentrate gold grade coupled with falling gold prices, there were no shipments of concentrate sales from the mine during the third quarter and first nine months.

Cost of sales for the third quarter and nine months ended Sept. 30, 2014, amounted to $84,277 and $260,957, respectively (2013: $437,995 and $1,347,416). There was a decrease in all production costs at the Omagh mine during both periods following the suspension of production during 2013.

There was an impairment of assets during the third quarter and first nine months of 2014 which amounted to $2,921,884 compared with nil for the corresponding periods of 2013. This impairment followed a strategic review by the company of its business, which process involved a revaluation of the company's assets which resulted in the aforementioned impairment loss.

The company had cash balances of $54,759 at Sept. 30, 2014, compared with $216,512 at Sept. 30, 2013. The working capital deficit at Sept. 30, 2014, amounted to $3,388,864 compared with a working capital deficit of $3,477,309 at Sept. 30, 2013.

During the second quarter, Galantas completed a private placement financing for aggregate gross proceeds of approximately 516,500 British pounds. Pursuant to the offering, an aggregate of 10.33 million units was sold at a price of five pence/9.375 cents per common share. Each unit comprised one common share and one common share purchase warrant. In addition, a shares-for-debt exchange of 15,125,140 common shares for $1,389,150/756,157 British pounds of the company's debt was also completed during the second quarter.

The company's continuing viability is dependent on obtaining planning consent for the development of an underground mine at Omagh, and the company is actively seeking additional finance to secure sufficient financing to finance continuing operational activity and the development of the underground mine.

Production

Production at the Omagh mine remains suspended, awaiting planning consent to continue operations underground. Due to continued delays in the planning process, management had to make significant redundancies in the work force, alongside other cost-reduction measures.

In early 2014, the company commenced pilot tests with regard to the processing of tailing cells filled during the earlier operation of the mine. The results confirmed pre-existing data that indicated the tailings contain between 0.5 gram per tonne gold and one g/t gold, and would meet European Union standards for definition as inert material. A low-energy-cost processing solution, based upon a Knelson CD12 centrifugal gravity concentrator, which was already utilized in the gold processing plant in a secondary role, was pilot tested as a prime retreatment component for flotation tailings. The initial testwork was encouraging. The tailings did not require comminution (crushing and grinding) for reprocessing by this method. Extended in-house tests with the Knelson concentrator produced a variation in results in terms of grade and recovery. Consequently, alternative gravity-oriented testwork was carried out. The results successfully indicate that it is possible to uprate tailings by a low-energy-consuming bulk gravity method from 0.5 to 1.0 g/t, to two to three g/t gold. The higher feed grade produced in testing has been tested with froth flotation in the company's in-house laboratory to simulate production flotation in the company's processing plant, followed by an additional gravity scavenging treatment. The results indicate that a finer grind than was previously required may be necessary to enhance the concentrate grade. An investigation of process economics suggests that the operation may best be carried out in conjunction with processing ore from the underground mine.

Reserves and resources

During the third quarter, Galantas reported on the revised updated estimate of gold resources together with a preliminary economic assessment (PEA) update (see press release dated July 28, 2014). The revised estimate of resources is in compliance with the Pan European Reporting Code (PERC), Canadian Institute of Mining, Metallurgy and Petroleum (CIM) standards, and Canadian National Instrument (NI) 43-101, and is summarized in an attached table.

                     RESOURCE ESTIMATE: GALANTAS, 2014
                           Cut-off: two g/t Au
                                                                   Increase
                                                                       over
Resource                                Grade                      GAL 2013
category                Tonnes        (Au g/t)         Au oz         report

Measured               138,241           7.24         32,202            55%
Indicated              679,992           6.78        147,784          21.4%
Inferred             1,373,879           7.71        341,123          15.4%

Minerals resources that are not mineral reserves do not have demonstrated
economic viability.

Over all, there has been a 19-per-cent increase in resources since the June, 2013, Galantas resource report and a 60-per-cent increase in resources since the July, 2012, resource report by ACA Howe International Ltd. The increases since 2012 largely relate to the Kearney and Joshua veins, since these are where the drilling program has been concentrated. The drilling program was mainly designed to focus on increasing the quantity of measured and indicated resources on these two veins, to support potential bank financing opportunities for the financing of production. The resource estimate for each vein is set out in an attached table.

                          RESOURCE ESTIMATE BY VEIN: GALANTAS, 2014

                       Measured                 Indicated                    Inferred
                                  Con-                       Con-                         Con-
                        Grade   tained            Grade    tained              Grade    tained
                           Au       Au               Au        Au                 Au        Au
                Tonnes   (g/t)     (oz)   Tonnes   (g/t)      (oz)     Tonnes   (g/t)      (oz)

Kearney         76,936   7.48   18,490   383,220   6.66    82,055     909,277   6.61   193,330
Joshua          54,457   7.25   12,693   216,211   7.92    55,046     291,204  10.74   100,588
Kerr             6,848   4.63    1,019    12,061   4.34     1,683      23,398    3.2     2,405
Elkins                                    68,500   4.24     9,000      20,000   5.84     3,800
Gormleys                                                               75,000   8.78    21,000
Princes                                                                10,000  38.11    13,000
Sammy's                                                                27,000   6.07     5,000
Kearney North                                                          18,000   3.47     2,000
Total          138,241   7.25   32,202   679,992   6.78   147,784   1,373,879   7.71   341,123

The resources are calculated at a cut-off grade of two grams per tonne gold, numbers are rounded, gold grades are capped at 75 g/t gold, and a minimum mining width of 0.9 metre has been applied.

Measured and indicated resources on Kearney vein have increased to 100,545 ounces of gold from 69,000 ounces in 2012. Measured and indicated resources on Joshua vein have increased to 67,739 ounces of gold from 15,800 ounces in 2012. The Kearney and Joshua veins are the early targets of underground mining. Combined measured and indicated resources on these two veins are estimated at 168,284 ounces of gold, with 293,918 ounces of gold in the inferred resource category. Both vein systems are open at depth.

With regard to the preliminary economic assessment, a restricted portion of inferred resources for two veins -- Joshua and Kearney -- has been included with the measured and indicated resources. The inferred resources (which have lower statistical support than measured or indicated resources) are contiguous with measured or indicated resources, and/or lie within scheduled mining areas. The use of inferred resources, in a restricted qualifying manner, is permitted by the PERC in regard to economic studies but is excluded within NI 43-101, except within a preliminary economic assessment. PERC is an approved code is respect of NI 43-101. As part of PERC requirements, a comparative feasibility study will be included in the detailed technical report which will not include inferred resources and will also include studies on sensitivity to gold price.

The total of scheduled measured and indicated ounces utilized within the mining study is 104,627 ounces. The inferred resources scheduled in the economic study are estimated at 60,635 ounces. Total inferred resource estimated on the Joshua and Kearney orebodies is 293,918 ounces of gold. The amount of inferred resources included in the PEA amounts to 20.6 per cent of the total inferred resources estimated on these veins. Were inferred resources excluded within the mining plan, approximately one year would be removed from the estimate of mine life, and annual output would be reduced.

At a gold price of 750 British pounds ($1,260 (U.S.) per ounce at $1.68/one British pound), the pretax operating surplus after capital expenditure estimates an internal rate of return of 72 per cent, and, at an 8-per-cent discount rate, a net present value of approximately 14.5 million British pounds ($26.6-million) and a cash cost of production of 394 British pounds per ounce ($662 (U.S.) at $1.68/one British pound). The study scheduled approximately 36 per cent of the combined resources identified on the Kearney and Joshua veins. The company notes recent falls in the value of the British pound, which are project enhancing and offset recent gold price weakness.

The company filed the complete technical report on SEDAR during the third quarter, as required by NI 43-101.

Exploration

Following the receipt of two new licences in the Republic of Ireland earlier in 2014, Omagh Minerals Ltd. now holds a total of 11 exploration licences with a total coverage of 766.5 square kilometres. Exploration during 2014 has been restricted to conserve cash funds. Exploration reports and publications relating to the geology and known mineralization of the two new licences referred to above were reviewed earlier in 2014. Following this, some reconnaissance fieldwork was carried out in order to identify the areas which will be prioritized for exploration over the summer. Four broad exploration targets were established, based on the potential for mineralization, with consideration given to land accessibility and suitable exposure. During the third quarter, exploration work, which included detailed mapping and sampling, focused on these target areas.

In addition, detailed sampling took place in an area close to the mine site where, 30 years ago, initial exploration carried out by RioFinex uncovered visible vein outcrops (Discovery and Sharkey) in the banks of a neighbouring burn. Attention and resources were subsequently diverted toward drilling the Kearney vein, following its discovery in the late 1980s. However, recent resource modelling and underground mine planning activities prompted a reinvestigation of the burn veins during the third quarter, when water levels were unusually low. Two in situ quartz veins were identified 18 metres west and 35 m west of the Rio Discovery vein; grab samples of quartz containing pyrite and galena measured 13.5 g/t and 0.4 g/t gold, respectively. A completely isolated zone of sulphide-rich clay gouge was also uncovered 70 m east of Discovery; two samples were collected and analyzed, yielding 23.6 and nine g/t gold. In addition to these outcrops, several high-grade boulders (float) were discovered over 40 metres from the Rio Sharkey vein, including those analyzed at 30.4 g/t, 34.4 g/t, 39.4 g/t and 44.3 g/t gold (see press release dated Oct. 6, 2014). These boulders are comparatively large in size and are likely to be derived from a local source (see press release dated Oct. 6, 2014). The presence of these strong gold anomalies found near to the southern boundary of the recently operating Omagh gold mine site has instigated a detailed investigation of new targets and a re-evaluation of existing targets.

Permitting

Discussions continued with the Planning Services in Northern Ireland during 2014 with regard to the planning application for an underground mine plan and accompanying environmental statement which were submitted to the Planning Services in 2012. The company understands the planning officer's report is well advanced, and it has been advised that a determination is possible within the fourth quarter of 2014. It should be noted that the timeline for delivery of the determination is not within the control of the company. Shareholders may see progress on the public planning portal at the Planning Services website.

Roland Phelps, president and chief executive officer, Galantas Gold, 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."

Qualified person

The financial components of this disclosure have been reviewed by Leo O'Shaughnessy (chief financial officer), and the production, exploration and permitting components by Mr. Phelps (president and CEO), qualified persons under the meaning of NI 43-101. The information is based upon local production and financial data prepared under their supervision.

The detailed results, and management discussion and analysis (MD&A) are available on SEDAR and the Galantas website, 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.

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