Mr. Roland Phelps reports
GALANTAS REPORTS RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014
Galantas Gold Corp. has released financial results for the three and six months ended June 30, 2014.
Financial highlights
Highlights of the results for the second quarter and first six months of 2014 are summarized in the attached table.
Second quarter ended Six months ended
June 30 June 30
2014 2013 2014 2013
Revenue $ 0 $ 532,856 $ 0 $ 888,532
Cost of sales $ 99,446 $ 511,833 $ 176,680 $ 909,421
Income (loss) before
the undernoted $ (99,446) $ 12,023 $ (176,680) $ (20,889)
Depreciation $ 62,171 $ 122,224 $ 127,263 $ 246,830
General
administrative
expenses $ 347,528 $ 294,721 $ 619,709 $ 591,780
(Gain) on sale of
property, plant and
equipment $ (19,312) $ (64,531) $ (19,860) $ (64,531)
Unrealized (gain) on
fair value of
derivative
financial liability $ (210,000) $ 0 $ (210,000) $ 0
Foreign exchange
loss $ 16,770 $ 17,272 $ 104,911 $ 3,249
Net (loss) for the
period $ (296,603) $ (357,663) $ (798,703) $ (798,217)
Working capital
(deficit) $ (2,607,058) $ (3,037,837) $ (2,607,058) $ (3,037,837)
Cash (loss) from
operating
activities before
changes in non-cash
working capital $ (450,143) $ (323,010) $ (969,676) $ (562,927)
Cash at June 30,
2014 $ 458,849 $ 476,581 $ 458,849 $ 476,581
Net loss for the three months ended June 30, 2014, amounted to $296,603 (2013 second quarter: $357,663) and cash loss from operating activities before changes in non-cash working capital in the second quarter of 2014 amounted to $450,143 (2013 second quarter: $323,010). Net loss for the six months ended June 30, 2014, amounted to $798,703 (2013: $798,217) and cash loss from operating activities before changes in non-cash working capital for the first six months of 2014 amounted to $969,676 (2013: $562,927).
Sales revenues for the second quarter and six months ended June 30, 2014, amounted to nil (2013: $532,856 and $888,532, 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 second quarter and first six months. The company continues to review the economics of continuing production through the processing of tailings cells.
Cost of sales for the second quarter and six months ended June 30, 2014, amounted to $99,446 and $176,680, respectively (2013: $511,833 and $909,421). There was a decrease in all production costs at the Omagh mine during both periods following the suspension of production during 2013.
The company had cash balances of $458,849 at June 30, 2014, compared with $476,581 at June 30, 2013. The working capital deficit at June 30, 2014, amounted to $2,607,058 compared with a working capital deficit of $3,307,837 at June 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 were sold at a price of five British pence/9.375 cents per common share. Each unit comprises 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 completed during the second quarter.
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.
During the first quarter of 2014, the company commenced pilot tests with regard to the processing of tailing cells filled during the earlier operation of the mine. The results confirm pre-existing data that indicated the tailings contain between 0.5 gram per tonne gold and one gram per tonne gold, and 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 successfully pilot tested as a prime retreatment component for flotation tailings. The tailings do 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 one gram per tonne gold to two to three grams per tonne 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. The existing Knelson concentrator, whilst large enough to test the process, is not large enough to satisfactorily operate the process at the scale required for robust economics at present gold prices. The economics of acquiring a larger concentrator unit and ancillary equipment are subject to satisfactory recoveries being confirmed. The testwork is continuing.
Reserves and resources
Work continued during the first half of 2014 on updating the resource estimate to incorporate results from later drill holes not included previously. Also, the main veins were restrung to incorporate the new drill data, and accommodate the revised cut-off grade and minimum mining width parameters. Importantly, the Joshua and Kearney drill intersects were strung to individual historic channels; this time-consuming process has incorporated all of the available assay data in order to make a more informed assessment of grade continuity and vein geometry. The improved statistical assessment is expected to allow some category upgrading in that portion of the resource affected. Based upon the updated technical analysis, work is also well advanced on finalizing a revised National Instrument 43-101 report. The work includes the delineation of mining reserves, the completion of a detailed mining plan, mining schedule and comprehensive cost estimates, based upon underground working of the Joshua and Kearney veins.
Subsequent to June 30, 2014, 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 NI 43-101, and is summarized in the attached table.
RESOURCE ESTIMATE: GALANTAS 2014
(cut-off at two g/t Au)
Increase over
Resource Grade Au Galantas 2013
category Tonnes (Au g/t) (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%
Note:
Mineral 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 Galantas June, 2013, 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 this is 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, and to support potential bank funding opportunities for the financing of production. The resource estimate for each vein is tabulated.
RESOURCE ESTIMATE BY VEIN: GALANTAS 2014
Measured Indicated
Au grade Contained Au grade Contained
Tonnes (g/t) Au (oz) Tonnes (g/t) Au (oz)
Kearney 76,936 7.48 18,490 383,220 6.66 82,055
Joshua 54,457 7.25 12,693 216,211 7.92 55,046
Kerr 6,848 4.63 1,019 12,061 4.34 1,683
Elkins 68,500 4.24 9,000
Gormleys
Princes
Sammy's
Kearney North
Total 138,241 7.25 32,202 679,992 6.78 147,784
Inferred
Au grade Contained
Tonnes (g/t) Au (oz)
Kearney 909,277 6.61 193,330
Joshua 291,204 10.74 100,588
Kerr 23,398 3.2 2,405
Elkins 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 1,373,879 7.71 341,123
The resources are calculated at a cut-off grade of two grams per tonne, the numbers are rounded, gold grades are capped at 75 grams per tonne gold and a minimum mining width of 0.9 metre has been applied.
Measured and indicated resources on the Kearney vein have increased to 100,545 ounces of gold from 69,000 ounces in 2012. Measured and indicated resources on the 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 resource category 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 -- have 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 code in regard to economic studies, but is excluded within NI 43-101, except within a preliminary economic assessment. PERC is an approved code in 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, 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 (U.S.) per British pound). The study scheduled approximately 36 per cent of the combined resources identified on the Kearney and Joshua veins.
The company will file 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 the second quarter was restricted to conserve cash funds, and exploration reports and publications relating to the geology and known mineralization of the two new licences referred to above were reviewed. 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 have been established, based on the potential for mineralization with consideration given to land accessibility and suitable exposure.
Permitting
Discussions continued with the Planning Services in Northern Ireland during the first half of 2014, with regard to the planning application for an underground mine plan and accompanying environmental statement which were submitted to Planning Services in 2012. The company has been advised that the final consultation response has been received and is positive. The company understands a timeline in the fourth quarter of 2014 is possible for a final determination. However, 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 on 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."
The detailed results, and management discussion and analysis are available on SEDAR and the company 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.
Qualified persons
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, qualified persons under the meaning of NI 43-101. The information is based upon local production and financial data prepared under their supervision.
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