Liquidation Update

RNS Number:3153K
Galahad Gold Plc
19 December 2007

19 December 2007
                                      FINAL

                                Galahad Gold plc

                          ("Galahad" or "the Company")

  Update on proposed return of cash to shareholders and voluntary liquidation



Introduction

Following the announcements made on 14 September and 12 November 2007 relating
to the proposals for the return of cash to shareholders by way of the voluntary
liquidation of the Company, Galahad has been assessing the likely impact on the
proposals of the changes to the taxation of chargeable gains regime announced by
the UK government in the pre-budget announcement in October 2007. Uncertainty
remains with regard to the exact details of the new capital gains tax regime
which would come into effect from 6 April 2008. On 14 December 2007 the
Chancellor of the Exchequer announced that the publication of the draft
legislation would be delayed for a further three weeks until January 2008.

Subject to obtaining HMRC confirmation that the reorganisation outlined in this
announcement will not prejudice the clearance already obtained, the Directors
have now resolved to return cash to shareholders on the basis set out in this
announcement.  The Directors intend to dispatch a circular to shareholders
setting out full details of the proposals around 11 January 2008.

Share Capital Reorganisation

As previously announced, Galahad intends to put proposals to shareholders to
reorganise the Company's share capital to allow shareholders to elect to receive
a majority of their return as a dividend before the liquidation commences.
Shareholders who do not elect to receive the proposed pre-liquidation dividend
will be entitled to receive an equivalent interim distribution in the
liquidation.  The timing of the equivalent interim distribution in liquidation
will be determined by the liquidator.

Shareholders electing to receive the interim distribution in liquidation will be
able to choose to receive such distribution after 5 April 2008, i.e. once the
new capital gains tax regime is expected to have come into effect.  Further
details of the reorganisation of share capital are set out below.

After payment of the pre-liquidation dividend and equivalent interim
distributions in liquidation, all shareholders will be entitled to participate
equally in any subsequent distributions made by the liquidator.

Net asset value per share

As at 30 November 2007, the net assets of the Company were estimated to be
approximately £158.6 million or 18.87 pence per Ordinary Share on the basis of
the fully diluted share capital of Galahad (see Note 1). The Company's assets
comprise cash kept on short term interest bearing deposits. Galahad also has
contingent rights to additional consideration that could become payable under
the contract for the sale of shares in Northern Dynasty Minerals Ltd to QIT-Fer
et Titane Inc, an affiliate of Rio Tinto plc. (Note 2)

Pre-liquidation Dividend and Interim Distribution in Liquidation

The Directors believe that the liquidators will not be able to distribute all
the cash available to the Company immediately. In particular, the Directors
believe that approximately £20.3 million (approximately 2.37 pence per Ordinary
Share on a fully diluted basis) will be reserved as a contingency for unforeseen
liabilities and pending the review by HMRC of final corporation tax returns.

On the basis of the financial information currently available to them, the
Directors propose to return 16.5 pence per Ordinary Share on a fully diluted
basis by way of the pre-liquidation dividend or interim distribution in
liquidation (see Note 3).



The prospective liquidators Tim Walsh and Richard Setchim, both of
PricewaterhouseCoopers LLP, have been consulted on the proposals and have raised
no objection.

Details of the Share Capital Reorganisation

The share capital reorganisation will involve sub-dividing each Existing
Ordinary Share into one New Ordinary Share in the Company and, at the election
of the holder, either:-

one A Share, entitling the holder to receive the pre-liquidation dividend; or

one B Share, entitling the holder to receive the interim distribution in
liquidation equivalent to the pre-liquidation dividend; or

one C Share, entitling the holder to receive the interim distribution in
liquidation equivalent to the pre-liquidation dividend payable after 5 April
2008.

The timing of the equivalent interim distribution in liquidation will be
determined by the liquidator.



On the basis of the information currently available to them, and assuming the
passing of resolutions in a General Meeting necessary to effect the Share
Capital Reorganisation and put the Company into voluntary liquidation, the
Directors expect that:-

cheques in respect of the pre-liquidation dividend payable in relation to the A
Shares will be posted around 15 February 2008,

cheques in respect of the interim distribution in liquidation payable in
relation to the B Shares will be posted around 28 March 2008 and

cheques in respect of the interim distribution in liquidation payable in
relation to the C Shares will be posted around 10 April 2008.

It is expected that the liquidation distributions made in respect of C shares
will be subject to the new capital gains tax regime proposed by the UK
government.

The A Shares, B Shares and C Shares will not be admitted to AIM and will not be
transferable.

Shareholder General Meetings

The Share Capital Reorganisation will require shareholder approval in a General
Meeting. The Directors intend to despatch a circular to shareholders around 11
January 2008. The circular will include notices convening separate
Extraordinary General Meetings of the Company for the purposes of effecting the
Share Capital Reorganisation and passing the resolution for the voluntary
liquidation of the Company.

It is expected that the general meeting at which resolutions will be proposed to
effect the Share Capital Reorganisation will be held around 8 February 2008.

It is expected that the General Meeting at which resolutions will be proposed
for the voluntary winding up of the Company will be held around 20 February
2008. It is expected that following the passing of this resolution trading in
the Company's shares on AIM will be suspended.

The intended timetable for the return of cash and voluntary liquidation of the
Company is set out in the Appendix 1 to this announcement.



Taxation



A brief summary of the main tax rules relating to dividends paid by UK companies
and of capital distributions paid on the liquidation of a UK company is set out
in Appendix 2 to this announcement. Individual and corporate shareholders should
seek their own professional advice where they are in doubt as regards the tax
consequences relevant to their circumstances, as this will vary depending on the
tax position of the shareholder.



The Company has sought and obtained clearance from Her Majesty's Revenue &
Customs ("HMRC") that the anti-avoidance rules in S703 ICTA 1988 (for companies)
and S684 ITA 2007 (for individuals etc) will not be applied to the
reorganisation of share capital, pre-liquidation dividend or liquidation of the
company.  The Company has further written to HMRC to advise them of the rights
attaching to the two classes of shares entitling the shareholders to the interim
distribution in liquidation. The Company is seeking confirmation that such
reorganisation would not affect the previously granted clearance.

hhttp://www.galahadgold.com/



For further information please contact:

Enquiries to:

GALAHAD GOLD plc
Anna Rebollini                                    Tel: [phone]

PARKGREEN COMMUNICATIONS
Simon Robinson / Louise Goodeve                   Tel: [phone]

DRESDNER KLEINWORT
Chris Treneman                                    Tel: [phone]




NOTE 1

Net assets per Ordinary Share are stated on the basis of the fully diluted share
capital of Galahad, after the exercise of all outstanding rights granted by
Galahad to subscribe for shares, including provisions for payments on
termination of the staff contracts, Liquidators' fees and amounts due from
option-holders on the exercise of the outstanding options. The amounts are
stated exclusive of the tax deductions which could be available if a significant
proportion of the outstanding options granted to employees are exercised before
the end of December 2007.

It is estimated that interest receivable by the Company on its cash deposits
after 30 November 2007 to the expected date of the first interim distribution in
liquidation, potential tax credits on the exercise of employment related options
and expected mitigation of the staff termination payments could amount in
aggregate to an additional 0.48 pence per Ordinary Share on a fully diluted
basis. The amount realised is contingent on interest rates available and also on
the occurrence and timing of certain events in the future.

NOTE 2

QIT-Fer et Titane Inc, an affiliate of Rio Tinto plc, (Rio Tinto) has agreed in
certain circumstances to pay additional consideration to Galahad. If, prior to
31 December 2008, Rio Tinto resells the Northern Dynasty Minerals Ltd (NDM)
shares purchased from Galahad in acceptance of an offer to acquire all
outstanding shares of NDM, it will pay Galahad half of the realised profit. If,
prior to 31 December 2008, Rio Tinto purchases additional shares in NDM at a
price greater than C$10 per share from a third party (other than NDM), Rio Tinto
will pay to Galahad an amount equal to the price per share paid in such a
purchase minus C$10 (to a maximum of C$2 per share) multiplied by the lesser of
the number of shares so purchased from the third party or 9,400,000 shares (up
to a cumulative aggregate of C$18.8m for all such purchases). A further premium
may be payable on the Debenture redeemed by Company in February 2007 in the
event additional consideration becomes payable to Galahad under the provisions
of the contract for the disposal of NDM shares to Rio Tinto.

At present the maximum (after tax) potential value of additional consideration
amounts to approximately 0.66 pence per Ordinary Share on the basis of the fully
diluted share capital. The Directors evaluate the prospects of receiving the
additional consideration as unlikely.



NOTE 3

Based on the financial information currently available to them the Directors
anticipate that the liquidators would be able to make interim distributions in
liquidation in respect of each of B and C shares in the amount equivalent to the
pre-liquidation dividend payable on each A share. However, the shareholders
should be aware that the value of the liquidation distributions will be at the
liquidators' discretion and entirely dependant upon the assets available for
distribution after the settlement of any creditor claims arising. If an
unforeseen creditor claim was to be settled by the liquidator, thus reducing the
assets available for distribution, the interim distributions paid in respect of
each B and C share may not be equal to the dividend paid in respect of each A
share.




                                   APPENDIX 1

                  PROPOSED TIMETABLE TO VOLUNTARY LIQUIDATION


Event                                                                                   Expected Date

Despatch of Circular to shareholders                                                    11 January 2008
Last date for Receipt of Forms of Election in respect of the  Share Capital             5 February 2008
Reorganisation and Record Date for the Reorganisation of Share Capital
Share Capital Reorganisation Meeting                                                    8 February 2008
Expected date for declaration of Pre-Liquidation Divided and dispatch of cheques in     15 February 2008
respect of the Pre-Liquidation Dividend


Liquidation Meeting                                                                     20 February 2008
Expected date for dispatch of cheques in respect of Fixed Capital Return on B Shares    28 March 2008 *


Expected date for dispatch of cheques in respect of Fixed Capital Return on C Shares    10 April 2008 *



* As anticipated by the Directors. Shareholders should note that any decision as
 to the quantum and timing of the distributions in liquidation will be for the
                                  liquidators.


                                   APPENDIX 2


The following is a brief summary of the main tax rules relating to dividends
paid by UK companies and of capital distributions paid on the liquidation of a
UK company. Individual and corporate shareholders should seek their own
professional advice where they are in doubt as regards the tax consequences
relevant to their circumstances, as this will vary depending on the tax position
of the shareholder.


a) Taxation treatment of dividends paid by a UK resident company

(1) Dividends from UK companies received by UK resident individuals and trustees
are charged to income tax.

A UK resident individual shareholder who receives a dividend from a UK resident
company is entitled to a tax credit of 1/9 of the amount or value of the
dividend. This tax credit is treated as satisfying any UK tax liability at the
basic rate so that only shareholders liable to tax at the higher UK rate
(currently 40%) will have any additional tax liability. Where the amount of
dividend is not wholly charged to tax (e.g. because personal allowances or other
reliefs are set against it) then any excess tax credit cannot be reclaimed.

Trustees of settlements who receive dividends are taxed at the dividend ordinary
rate of 10% except in the case of discretionary and accumulation trusts where a
'dividend trust rate' of 32.5% applies. A deduction is given for the associated
tax credit so the tax effect is comparable to that on higher rate individuals.

UK resident shareholders who are not liable to UK tax for example, exempt
pension funds and charities, will not be liable to pay tax on the dividend but
the tax credit cannot be reclaimed from the UK tax authorities.


(2) Dividends paid by a UK resident company to another UK resident company are
not charged to UK corporation tax.



(3) Dividends paid by a UK company to a non-UK resident corporate shareholder
are not liable to UK tax and the dividend is paid without a deduction of
withholding tax.


 b) Taxation treatment of capital distributions made on liquidation

Capital distributions paid by a liquidator on liquidation of a UK company are
treated as received in respect of the disposal of the shares in the liquidated
company and taxable only under the UK capital gains tax rules. For both
individual and corporate shareholders the amount of any tax payable will depend
upon the individual circumstances of the shareholder.

(1) For UK resident individuals any amount chargeable to capital gains tax (CGT)
which is in excess of the annual exempt amount (£9,200) is added to income
liable to income tax and is charged to CGT at 10% on amounts below the starting
rate limit for income tax (£2,230), at 20% on amounts between the starting rate
and basic rate limits (£2,231 to £34,600) and at 40% on amounts above the basic
rate limit (£34,601 and above). Taper relief is available but it is less
generous to shareholders of investment companies (which would include Galahad)
as opposed to the trading companies so shareholders should take professional
advice where necessary, as regards any entitlement to taper relief.

In his Pre-Budget Report of 9 October 2007 the Chancellor of the Exchequer
announced a major reform of capital gains tax (CGT) that is expected to apply
from April 2008. These changes affect the rate of CGT applying to individuals,
trustees and personal representatives and the following comments assume that the
proposals announced by the Chancellor will be enacted in legislation although
the full details will not be known for some time. For instance, it has been
proposed that for disposals (including capital distributions) made on or after 6
April 2008, a flat rate of CGT of 18% will replace the current rates of CGT. It
is also proposed that the system of taper relief will be abolished.  No plans
have been announced to reform the capital gains rules applying to corporate
shareholders.

(2) Where a capital distribution is paid to a UK resident company the amount of
any corporation tax payable will depend on the extent to which the capital
distribution gives rise to a chargeable gain and the tax position of the company
receiving the capital distribution. Companies that are approved Investment
trusts or Venture capital trusts are exempt from corporation tax in respect of
chargeable gains.




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