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Share Name Share Symbol Market Type Share ISIN Share Description
Galantas Gold Corporation LSE:GAL London Ordinary Share CA36315W2022 COM SHS NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 4.60p 4.50p 4.70p 4.60p 4.60p 4.60p 31,914 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Mining 0.0 -1.7 -0.6 - 8.63

Galantas Gold Corporation RESULTS FOR THE YEAR ENDED DECEMBER 31, 2018

18/04/2019 7:00am

UK Regulatory (RNS & others)


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RNS Number : 5550W

Galantas Gold Corporation

18 April 2019

GALANTAS GOLD CORPORATION

TSXV & AIM : Symbol GAL

GALANTAS REPORTS RESULTS FOR THE YEARED DECEMBER 31, 2018

April 18, 2019: Galantas Gold Corporation (the 'Company') is pleased to announce its audited annual financial results for the year ended December 31, 2018. A copy of the Annual Report and Accounts will be sent to shareholders shortly and are available on the Company's website at https://www.galantas.com/investors/financial-statements.

Financial Highlights

Highlights of the 2018 audited annual results, which are expressed in Canadian Dollars, are summarized below:

 
                                                                              Year Ended December 31 
All in CDN$                                                                   2018                                2017 
Revenue                                                                   $ 71,243                            $ 35,308 
Cost of Operations                                                     $ (185,058)                         $ (225,451) 
Loss before the items below                                            $ (113,815)                         $ (190,143) 
Aggregates levy                                                        $ (352,168)                                   - 
Depreciation                                                           $ (350,999)                         $ (203,431) 
General administrative expenses                                      $ (2,131,872)                       $ (1,714,264) 
Unrealized gain on fair value of derivative financial 
 liability                                                                $ 10,000                        $ 14,000 
Foreign exchange gain                                                     $ 53,417                            $ 15,699 
Net loss for the year                                                $ (2,885,437)                       $ (2,078,139) 
Working Capital (Deficit)                                              $ (272,783)                       $ (3,492,608) 
Cash loss generated from operations before changes in 
 non-cash working capital                                            $ (1,848,019)                       $ (1,357,221) 
Cash at December 31, 2018                                              $ 6,188,554                           $ 779,758 
 

The Net Loss for the year ended December 31, 2018 amounted to $ 2,885,437 (2017: $ 2,078,139) and the cash outflow from operating activities before changes in non-cash working capital for the year ended December 31, 2018 amounted to $ 1,848,019 (2017: $ 1,357,221).

The Company had a cash balance of $ 6,188,554 at December 31, 2018 compared to $ 779,758 at December 31, 2017. The working capital deficit at December 31, 2018 amounted to $ 272,783 compared to a working capital deficit of

$ 3,492,608 at December 31, 2017.

Galantas completed two private placements during 2018. During the third quarter Galantas completed a private placement of shares on a part-brokered basis for aggregate gross proceeds of $ 1,571,771 (approximately UKGBP 929,780). The placement comprised of the issue of 22,137,619 common shares of no par value. United Kingdom placees subscribed for a total of 17,416,667 shares at a price of UKGBP 0.042 per share. Canadian placees subscribed for a total of 5,720,952 shares at a price of $ 0.071 per share. In the fourth quarter Galantas completed an additional private placement of shares on a part-brokered basis in two parts for aggregate gross proceeds of $ 6,900,000 (approximately UKGBP 4,000,000). The placement comprised of the issue of 80,000,000 common shares of no par value. United Kingdom placees subscribed for a total of 75,200,000 shares at a price of UKGBP 0.05 per share. Canadian placees subscribed for a total of 4,800,000 shares at a price of $ 0.08625 per share. The net proceeds raised from both placements are for both working capital purposes and the continued underground development at the Omagh gold mine. In addition under a shares for debt arrangement, Mr. Roland Phelps, President & CEO of Galantas Gold Corporation, following TSXV and shareholder approvals exchanged 10,000,000 common shares for debt owed to him for past management fees, in the amount of GBP500,000 (CAD $862,500) at GBP0.05 (CAD $0.08625) per share. Additional loan advances from G&F Phelps Ltd, a related party, during 2018 totaled $ 883,128 (UKGBP 506,410).

During the second quarter Galantas announced that its operating subsidiary, Flintridge Resources Ltd. had signed a concentrate sales agreement together with a loan facility agreement for US$ 1.6 million (CDN$ 2.012 million) with Ocean Partners UK Ltd. a United Kingdom based company, together with an increased, on-demand loan facility of UKGBP 600,000 with G&F Phelps Ltd. The loans are to be used for further development of the Omagh Mine and working capital. As consideration for the US$ 1.6 million loan facility Ocean Partners received 15,000,000 bonus warrants of Galantas which will be exercisable into one common share of Galantas at an exercise price of $ 0.1575 per bonus warrant. The bonus warrants have a maximum life of two years and the bonus shares will be subject to an initial four month plus one day hold period from the date of issuance of the bonus warrants. No bonus warrants were issued in respect of the G&F Phelps loan facility.

Permitting

During the fourth quarter of 2018, the Company announced that the Court of Appeal has delivered a positive judgement in regard to an appeal against the Company's planning consent. The Court has determined that the appeal has failed and thus the planning consent is confirmed.

Production/Mine Development

The Omagh gold mine commenced limited production of gold concentrate during the third quarter of 2018 from feed produced in the development of the Kearney vein. During the fourth quarter Galantas reported that delivery had been made of the first consignment of concentrate derived from underground feedstock at the mine.

The granting of planning consent in 2015 for an underground operation at the Omagh site permits the continuation and expansion of gold mining. The strategy is to establish the underground mine and look for further expansion of gold resources on the property, which has many undrilled targets.

The phased development arrangement, in terms of mine access dimensions will allow for rapid expansion of production as additional capital becomes available. The main underground decline has been driven at a size to accommodate 30 tonne mine trucks, which would be required to service a larger production rate and minimise haulage costs.

Underground development of a decline tunnel, located at the base of the existing open pit, commenced in the first quarter 2017. After over-coming initial difficulties, tunnelling continued throughout the remainder of 2017 and 2018. A detailed plan is being implemented to accelerate progress in line with the planning consent. The main decline tunnel descends at a slope of 1 in 7, from near the base of the former Kearney open pit. A horizontal west to east access tunnel driven from the decline tunnel intersected the north / south Kearney vein in mid 2018 at approximately a right angle and exposed the vein to be approximately 2.8 metres wide at that point. A horizontal development tunnel was driven on vein, at this level, in both directions during the third quarter, beneath a safety (Crown) pillar which resulted in limited feed to the mill during the third quarter. While the decline continued to be progressed during the fourth quarter the main focus was on the construction and completion of a second means of egress / escapeway. The decline continues to be progressed with further cross-cuts planned to access to lower levels of vein development which will form the development necessary to demarcate production panels. The increased number of development headings is expected to provide an enhanced supply of mill feed. As of March 26, 2019 the company reported that operations have commenced on the third level (1072 level) of the mine.

The underground development, using drill and blast techniques, is being carried out by an in-house crew which is trained in safety and operating procedures. An in-house, mines rescue team has also been trained and equipped.

New drilling equipment has been acquired on a rental basis, with options to purchase, and has led to a marked improvement in advance rates. In addition, a new 3.6t capacity load-haul-dump unit has been acquired on a rental purchase basis which will improve productivity in loading operations from the smaller cross-section vein drives. It is equipped with radio remote control which enhances safety in stope mucking operations. Further equipment purchases are under negotiation.

Environmental monitoring by the regulatory authorities continues to demonstrate compliance with the standards imposed. Safety is a high priority and the zero lost time accident rate, since the start of underground operations, continues.

The mine processing plant commenced operating on limited feed from the development of in-vein drivages of the Kearney gold vein. The processing plant, which was used formerly for open-pit operations, has recently had the benefit of a recent upgrade to some sections and further upgrades are planned. Recent analyses suggest that the product from the plant meets quality criteria and operates at a high efficiency. The plant is expected to operate part-time until the supply of mill feed increases.

Post year-end (26(th) March 2019), the company announced that it expected to add a second milling shift late in the second quarter of 2019 and additional shift in the third quarter to process anticipated increases in the supply of mill feed.

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/5550W_1-2019-4-17.pdf

Qualified Person

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

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

Galantas Gold Corporation

Jack Gunter P.Eng - Chairman

Roland Phelps C.Eng - President & CEO

Email: info@galantas.com

Website: www.galantas.com

Telephone: +44 (0) 2882 241100

Grant Thornton UK LLP (Nominated Adviser)

Philip Secrett, Richard Tonthat

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

Consolidated Financial Statements

(Expressed in Canadian Dollars)

Years Ended December 31, 2018 and 2017

 
 
 
 
Galantas Gold Corporation 
Consolidated Statements of Financial Position 
(Expressed in Canadian Dollars) 
 
 
As at December 31,                                           2018           2017 
-------------------------------------------------------   -----------    ----------- 
 
ASSETS 
 
Current assets 
 Cash and cash equivalents                               $  6,188,554   $    779,758 
 Accounts receivable and prepaid expenses (note 8)            287,273        316,410 
 Inventories (note 9)                                          11,335         15,095 
-------------------------------------------------------   -----------    ----------- 
Total current assets                                        6,487,162      1,111,263 
 
Non-current assets 
 Property, plant and equipment (note 10)                   16,487,501      8,166,752 
 Long-term deposit (note 12)                                  523,170        508,830 
 Exploration and evaluation assets (note 11)                  760,023      3,948,452 
-------------------------------------------------------   -----------    ----------- 
Total non-current assets                                   17,770,694     12,624,034 
-------------------------------------------------------   -----------    ----------- 
Total assets                                             $ 24,257,856   $ 13,735,297 
-------------------------------------------------------   -----------    ----------- 
 
EQUITY AND LIABILITIES 
 
Current liabilities 
 Accounts payable and other liabilities (note 13)        $  2,257,329   $  1,216,332 
 Current portion of financing facilities (note 14)            382,974          6,182 
 Due to related parties (note 19)                           4,119,642      3,381,357 
-------------------------------------------------------   -----------    ----------- 
Total current liabilities                                   6,759,945      4,603,871 
 
Non-current liabilities 
 Non-current portion of financing facilities (note 14)      1,081,190         19,689 
 Decommissioning liability (note 12)                          578,242        551,680 
 Derivative financial liability                                     -         10,000 
-------------------------------------------------------   -----------    ----------- 
Total non-current liabilities                               1,659,432        581,369 
-------------------------------------------------------   -----------    ----------- 
Total liabilities                                           8,419,377      5,185,240 
-------------------------------------------------------   -----------    ----------- 
 
Capital and reserves 
 Share capital (note 15(a)(b))                             48,628,055     39,759,172 
 Reserves                                                   8,963,163      7,658,187 
 Deficit                                                  (41,752,739)   (38,867,302) 
-------------------------------------------------------   -----------    ----------- 
Total equity                                               15,838,479      8,550,057 
-------------------------------------------------------   -----------    ----------- 
Total equity and liabilities                             $ 24,257,856   $ 13,735,297 
-------------------------------------------------------   -----------    ----------- 
 

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

Going concern (note 1)

Contingencies (note 21)

Events after the reporting period (note 23)

Approved on behalf of the Board:

 
"Roland Phelps"  , Director  "Lionel J. Gunter"  , Director 
---------------              ------------------ 
 
 
 
Galantas Gold Corporation 
Consolidated Statements of Loss 
(Expressed in Canadian Dollars) 
 
 
                                                                            Year Ended 
                                                                           December 31, 
                                                                       2018           2017 
-----------------------------------------------------------------   -----------    ----------- 
 
Revenues 
 Gold sales                                                        $     71,243   $     35,308 
 
Cost and expenses of operations 
 Cost of sales                                                          185,058        225,451 
 Depreciation (note 10)                                                 350,999        203,431 
 Aggregates levy (note 17)                                              352,168              - 
-----------------------------------------------------------------   -----------    ----------- 
                                                                        888,225        428,882 
-----------------------------------------------------------------   -----------    ----------- 
 
Loss before general administrative and other income                    (816,982)      (393,574) 
-----------------------------------------------------------------   -----------    ----------- 
 
General administrative expenses 
 Management and administration wages (note 19)                          784,545        611,107 
 Other operating expenses                                               198,493        204,294 
 Accounting and corporate                                                68,933         64,875 
 Legal and audit                                                         91,419         80,647 
 Stock-based compensation (note 15(d)(i)(ii))                           225,169        463,869 
 Shareholder communication and investor relations                       194,992        172,930 
 Transfer agent                                                          10,213          9,159 
 Director fees (note 19)                                                 29,250         26,500 
 General office                                                           9,486          7,797 
 Accretion expenses (notes 12 and 14)                                   251,547         10,560 
 Loan interest and bank charges (note 19)                               267,825         62,526 
-----------------------------------------------------------------   -----------    ----------- 
                                                                      2,131,872      1,714,264 
Other (income) expenses 
 Unrealized gain on fair value of derivative financial liability        (10,000)       (14,000) 
 Foreign exchange gain                                                  (53,417)       (15,699) 
-----------------------------------------------------------------   -----------    ----------- 
                                                                        (63,417)       (29,699) 
-----------------------------------------------------------------   -----------    ----------- 
 
Net loss for the year                                              $ (2,885,437)  $ (2,078,139) 
-----------------------------------------------------------------   -----------    ----------- 
Basic and diluted net loss per share (note 16)                     $      (0.01)  $      (0.01) 
-----------------------------------------------------------------   -----------    ----------- 
Weighted average number of common shares outstanding 
 - basic and diluted                                                197,554,017    164,077,122 
-----------------------------------------------------------------   -----------    ----------- 
 

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

 
 
Galantas Gold Corporation 
Consolidated Statements of Comprehensive Loss 
(Expressed in Canadian Dollars) 
 
 
                                                                          Year Ended 
                                                                         December 31, 
                                                                     2018           2017 
---------------------------------------------------------------   -----------    ----------- 
 
 
Net loss for the year                                            $ (2,885,437)  $ (2,078,139) 
 
Other comprehensive income 
Items that will be reclassified subsequently to profit or loss 
 Exchange differences on translating foreign operations               293,807        168,261 
---------------------------------------------------------------   -----------    ----------- 
Total comprehensive loss                                         $ (2,591,630)  $ (1,909,878) 
---------------------------------------------------------------   -----------    ----------- 
 

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

 
 
Galantas Gold Corporation 
Consolidated Statements of Cash Flows 
(Expressed in Canadian Dollars) 
 
 
                                                                              Year Ended 
                                                                             December 31, 
                                                                         2018           2017 
-------------------------------------------------------------------   -----------    ----------- 
 
Operating activities 
Net loss for the year                                                $ (2,885,437)  $ (2,078,139) 
Adjustment for: 
 Depreciation (note 10)                                                   350,999        203,431 
 Stock-based compensation (note 15(d)(i)(ii))                             225,169        463,869 
 Interest expense (note 19)                                               263,744         42,495 
 Foreign exchange gain (loss)                                             (44,041)        14,563 
 Accretion expenses (notes 12 and 14)                                     251,547         10,560 
 Unrealized gain on fair value of derivative financial liability          (10,000)       (14,000) 
Non-cash working capital items: 
 Accounts receivable and prepaid expenses                                  36,586       (202,797) 
 Inventories                                                                4,071          9,110 
 Accounts payable and other liabilities                                   992,086        295,966 
 Due to related parties                                                   348,644        393,353 
-------------------------------------------------------------------   -----------    ----------- 
Net cash and cash equivalents used in operating activities               (466,632)      (861,589) 
-------------------------------------------------------------------   -----------    ----------- 
 
Investing activities 
Purchase of property, plant and equipment                              (4,892,423)      (744,557) 
Exploration and evaluation assets                                        (254,140)    (1,600,652) 
-------------------------------------------------------------------   -----------    ----------- 
Net cash and cash equivalents used in investing activities             (5,146,563)    (2,345,209) 
-------------------------------------------------------------------   -----------    ----------- 
 
Financing activities 
Proceeds of private placement (note 15(b))                              8,471,771      3,612,156 
Share issue costs (note 15(b))                                           (465,388)      (184,561) 
Advances from related parties                                             883,128              - 
Proceeds from financing facilities (note 14)                            2,021,280              - 
Financing charges related to financing liabilities (note 14)              (41,674)             - 
Repayment of financing facilities (note 14)                                (6,357)        (4,350) 
-------------------------------------------------------------------   -----------    ----------- 
Net cash and cash equivalents provided by financing activities         10,862,760      3,423,245 
-------------------------------------------------------------------   -----------    ----------- 
 
Net change in cash and cash equivalents                                 5,249,565        216,447 
 
Effect of exchange rate changes on cash held in foreign currencies        159,231          6,306 
 
Cash and cash equivalents, beginning of year                              779,758        557,005 
-------------------------------------------------------------------   -----------    ----------- 
 
Cash and cash equivalents, end of year                               $  6,188,554   $    779,758 
-------------------------------------------------------------------   -----------    ----------- 
 
Cash                                                                 $  2,700,754   $    779,758 
Cash equivalents                                                        3,487,800              - 
-------------------------------------------------------------------   -----------    ----------- 
Cash and cash equivalents                                            $  6,188,554   $    779,758 
-------------------------------------------------------------------   -----------    ----------- 
 

Supplement schedule of non-cash transactions (note 22).

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

 
Galantas Gold Corporation 
Consolidated Statements of Changes in Equity 
(Expressed in Canadian Dollars) 
-------------------------------------------- 
 
 
                                                       Reserves 
                                         ------------------------------------ 
 
                                                      Equity        Foreign 
                                                      settled 
                                                    share-based    currency 
                             Share       Warrants    payments     translation 
                            capital      reserve      reserve       reserve       Deficit         Total 
-----------------------   -----------    --------   -----------   -----------   -----------    ----------- 
Balance, December 31, 
 2016                    $ 36,331,577   $       -  $  6,575,109  $    450,948  $(36,789,163)  $  6,568,471 
 Shares issued in 
  private placements 
  (note 15(b)(i)(ii))       3,612,156           -             -             -             -      3,612,156 
 Share issue costs           (184,561)          -             -             -             -       (184,561) 
 Stock-based 
  compensation (note 
  15(d)(i))                         -           -       463,869             -             -        463,869 
 Exchange differences 
  on translating 
  foreign operations                -           -             -       168,261             -        168,261 
 Net loss for the year              -           -             -             -    (2,078,139)    (2,078,139) 
-----------------------   -----------    --------   -----------   -----------   -----------    ----------- 
Balance, December 31, 
 2017                      39,759,172           -     7,038,978       619,209   (38,867,302)     8,550,057 
 Shares issued in 
  private placements 
  (note 15(b)(iii)(iv))     8,471,771           -             -             -             -      8,471,771 
 Warrants issued (note 
  14(ii))                           -     786,000             -             -             -        786,000 
 Share issue costs           (465,388)          -             -             -             -       (465,388) 
 Common shares issued 
  for debt (note 
  15(b)(v))                   862,500           -             -             -             -        862,500 
 Stock-based 
  compensation (note 
  15(d)(i)(ii))                     -           -       225,169             -             -        225,169 
 Exchange differences 
  on translating 
  foreign operations                -           -             -       293,807             -        293,807 
 Net loss for the year              -           -             -             -    (2,885,437)    (2,885,437) 
-----------------------   -----------    --------   -----------   -----------   -----------    ----------- 
Balance, December 31, 
 2018                    $ 48,628,055   $ 786,000  $  7,264,147  $    913,016  $(41,752,739)  $ 15,838,479 
-----------------------   -----------    --------   -----------   -----------   -----------    ----------- 
 

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

 
Galantas Gold Corporation 
Notes to Consolidated Financial Statements 
Years Ended December 31, 2018 and 2017 
(Expressed in Canadian Dollars) 
------------------------------------------ 
 
   1.       Going Concern 

These 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 at the Omagh mine being met together with the continued support of both Cavanacaw Corporation and Galantas Gold Corporation. 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.

As at December 31, 2018, the Company had a deficit of $41,752,739 (December 31, 2017 - $38,867,302). Comprehensive loss for the year ended December 31, 2018 was $2,591,630 (2017 - $1,909,878). These losses raise material uncertainties which 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 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.

   3.       Basis of Preparation 
   (a)      Statement of compliance 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB") and interpretations issued by the IFRS Interpretations Committee ("IFRIC"). The Board of Directors approved the consolidated financial statements on April 16, 2019.

   (b)      Basis of presentation 

These consolidated financial statements have been prepared on a historical cost basis with the exception of certain financial instruments, which are measured at fair value. In addition, these consolidated financial statements have been prepared using the accrual basis of accounting except for cash flow information.

In the preparation of these consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the year. Actual results could differ from these estimates. Of particular significance are the estimates and assumptions used in the recognition and measurement of items included in note 3(e).

   (c)      Basis of consolidation 

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.

The results of subsidiaries acquired or disposed of during the years presented are included in the consolidated statement of loss from the effective date of control and up to the effective date of disposal or loss of control, as appropriate. An investor controls an investee if the investor has the power over the investee, has the exposure, or rights, to variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the investor's returns. All intercompany transactions, balances, income and expenses are eliminated upon consolidation.

The following wholly owned companies have been consolidated within the consolidated financial statements:

 
Company                                  Registered        Principal activity 
---------------------------------------  ----------------  ------------------ 
Galantas Gold Corporation                Ontario, Canada   Parent company 
Cavanacaw Corporation (1)                Ontario, Canada   Holding company 
Omagh Minerals Limited (2)(3)            Northern Ireland  Operating company 
Galántas Irish Gold Limited (2)(4)  Northern Ireland  Dormant company 
Flintridge Resources Limited (2)(5)      United Kingdom    Operating company 
---------------------------------------  ----------------  ------------------ 
 

(1) 100% owned by Galantas Gold Corporation;

(2) 100% owned by Cavanacaw Corporation;

(3) Referred to as Omagh (as defined herein);

(4) Referred to as Galántas (as defined herein); and

(5) Referred to as Flintridge (as defined herein).

   (d)      Functional and presentation currency 

The consolidated financial statements are presented in Canadian Dollars ("CAD"), which is the parent Company's presentation and functional currency.

Items included in the financial statements of each of the Company's operating subsidiaries are measured using the currency of the primary economic environment in which the entity operates (the "functional currency"). The functional currency of the operating subsidiaries is the U.K. Pound Sterling ("GBP"). The functional currency of the subsidiary Cavanacaw, the holding company, is the CAD.

Assets and liabilities of entities with functional currencies other than CAD are translated at the year-end closing rate of exchange, and the results of their operations are translated at average rates of exchange for the period unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case the results of their operations are translated at the rate prevailing on the dates of the transactions. The resulting translation adjustments are recognized as a separate component of equity.

 
                               Year Ended 
                              December 31, 
                              2018    2017 
--------------------------   ------  ------ 
 
Closing rate (GBP to CAD)    1.7439  1.6961 
Average for the year         1.7299  1.6720 
---------------------------  ------  ------ 
 
   (e)      Use of estimates and judgments 

The preparation of these consolidated financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are applied prospectively. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates

Significant assumptions about the future that management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

 
--  the recoverability of accounts receivable that are included in the consolidated statements 
     of financial position; 
--  the recoverability of property, plant and equipment in the consolidated statements of financial 
     position. The Omagh underground mine and the open pit mine are considered as one Cash generating 
     unit ("CGU") and were tested for impairment at year end. The calculations of the recoverable 
     amount of CGU require the use of methods such as the discounted cash flow method, which uses 
     assumptions to estimate future cash flows. No impairment was noted. 
--  the estimated life of the Omagh underground mine ore body based on the estimated recoverable 
     ounces or pounds mined from proven and probable reserves of the mine development costs which 
     impacts the consolidated statements of financial position and the related depreciation included 
     in the consolidated statements of loss; 
--  the estimated useful lives and residual value of property, plant and equipment which are included 
     in the consolidated statements of financial position and the related depreciation included 
     in the consolidated statements of loss; 
--  stock-based compensation - management is required to make a number of estimates when determining 
     the compensation expense resulting from share-based transactions, including volatility, which 
     is an estimate based on historical price of the Company's share, the forfeiture rate and expected 
     life of the instruments; 
--  warrants - management is required to make a number of estimates when determining the fair 
     value of the warrants, including volatility, the forfeiture rate and expected life of the 
     instruments; 
--  derivative financial liability - management is required to make a number of estimates when 
     determining the fair value of the derivative financial liability, including volatility, the 
     forfeiture rate and expected life of the instruments; 
--  decommissioning liabilities has been created based on the estimated settlement amounts. Assumptions, 
     based on the current economic environment, have been made which management believes are a 
     reasonable basis upon which to estimate the future liability. These estimates take into account 
     any material changes to the assumptions that occur when reviewed regularly by management. 
     Estimates are reviewed quarterly and are based on current regulatory requirements and constructive 
     obligations. Significant changes in estimates of contamination, restoration standards and 
     techniques will result in changes to liability on a quarterly basis. Actual decommissioning 
     costs will ultimately depend on actual future settlement amount for the decommissioning costs 
     which will reflect the market condition at the time the decommissioning costs are actually 
     incurred. The final cost of the currently recognized decommissioning provisions may be higher 
     or lower than currently provided for. 
 

Critical accounting judgments

 
--  functional currency - the functional currency for the parent entity and each of its subsidiaries, 
     is the currency of the primary economic environment in which the entity operates. Determination 
     of functional currency may involve certain judgments to determine the primary economic environment 
     and the parent entity reconsiders the functional currency of its entities if there is a change 
     in events and conditions which determined primary economic environment; 
--  exploration and evaluation assets - the determination of the demonstration of technical feasibility 
     and commercial viability is subject to a significant degree of judgment and assessment of 
     all relevant factors; 
--  Income taxes - measurement of income taxes payable and deferred income tax assets and liabilities 
     requires management to make judgments in the interpretation and application of the relevant 
     tax laws. The actual amount of income taxes only becomes final upon filing and acceptance 
     of the tax return by the relevant authorities, which occurs subsequent to the issuance of 
     the consolidated financial statements; 
--  Going concern assumption - Going concern presentation of the consolidated financial statements 
     which assumes that the Company will continue in operation for the foreseeable future and will 
     be able to realize its assets and discharge its liabilities in the normal course of operations 
     as they come due; and 
--  Whether there are any indicators that the Company's property, plant and equipment assets and 
     exploration and evaluation assets are impaired. Where an indicator of impairment exists for 
     its non-current assets, the Company performs an analysis to estimate the recoverable amount, 
     which includes various key estimates and assumptions as discussed above. 
 
   4.        Significant Accounting Policies 
   (a)      Foreign currency transactions 

Transactions in foreign currencies are translated to the respective functional currencies of the operations at exchange rates at the dates of transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising in retranslation are recognized in the consolidated statements of loss, except for differences arising on the retranslation of available-for-sale equity instruments which are recognised in other comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currency are translated using the exchange rate at the date of the transaction.

   (b)      Cash and cash equivalents 

Cash and cash equivalents comprise cash at banks and on hand, and short-term deposits with an original maturity of three months or less, which are readily convertible into a known amount of cash.

   (c)      Financial instruments 

Effective January 1, 2018, the Company adopted IFRS 9 - Financial Instruments ("IFRS 9"). In July 2014, the IASB issued the final publication of the IFRS 9 standard, which supersedes lAS 39 - Financial Instruments: Recognition and Measurement ("lAS 39"). IFRS 9 includes revised guidance on the classification and measurement of financial instruments, new guidance for measuring impairment on financial assets, and new hedge accounting guidance. The Company has adopted IFRS 9 on a retrospective basis, however, this guidance had no impact to the Company's consolidated financial statements.

Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 contains the primary measurement categories for financial assets: measured at amortized cost, fair value through other comprehensive income ("FVTOCI") and fair value through profit and loss ("FVTPL").

The new hedge accounting guidance aligns hedge accounting more closely with an entity's risk management objectives and strategies. IFRS 9 does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness; however, it allows more hedging strategies used for risk management to qualify for hedge accounting and introduces more judgement to assess the effectiveness of a hedging relationship, primarily from a qualitative standpoint. The Company has elected to continue with lAS 39 for hedging. This does not have an effect on our reported results.

Below is a summary showing the classification and measurement bases of our financial instruments as at January 1, 2018 as a result of adopting IFRS 9 (along with comparison to lAS 39).

 
Classification                                             IAS 39                         IFRS 9 
--------------------------------------  --------------------------------------------  -------------- 
Cash and cash equivalents                                  FVTPL                          FVTPL 
Accounts receivable                        Loans and receivables (amortized cost)     Amortized cost 
Long-term deposit                          Loans and receivables (amortized cost)     Amortized cost 
Accounts payable and other liabilities  Other financial liabilities (amortized cost)  Amortized cost 
Financing facilities                    Other financial liabilities (amortized cost)  Amortized cost 
Due to related parties                  Other financial liabilities (amortized cost)  Amortized cost 
Derivative financial liability                             FVTPL                          FVTPL 
--------------------------------------  --------------------------------------------  -------------- 
 

As a result of the adoption of IFRS 9, the accounting policy for financial instruments has been updated as follows:

Financial assets

Financial assets are classified as either financial assets at FVTPL, amortized cost, or FVTOCI. The Company determines the classification of its financial assets at initial recognition.

i. Financial assets recorded at FVTPL

Financial assets are classified as FVTPL if they do not meet the criteria of amortized cost or FVTOCI. Gains or losses on these items are recognized in profit or loss.

The Company's cash and cash equivalents is classified as financial assets measured at FVTPL.

ii. Amortized cost

Financial assets are classified as measured at amortized cost if both of the following criteria are met and the financial assets are not designated as at FVTPL: 1) the object of the Company's business model for these financial assets is to collect their contractual cash flows; and 2) the asset's contractual cash flows represent "solely payments of principal and interest".

The Company's accounts receivable and long-term deposit are classified as financial assets measured at amortized cost.

iii. Financial assets recorded at FVTOCI

Financial assets are recorded at FVTOCI when the change in fair value is attributable to changes in the Company's credit risk.

Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or at amortized cost. The Company determines the classification of its financial liabilities at initial recognition.

i. Amortized cost

Financial liabilities are classified as measured at amortized cost unless they fall into one of the following categories: financial liabilities at FVTPL, financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition, financial guarantee contracts, commitments to provide a loan at a below-market interest rate, or contingent consideration recognized by an acquirer in a business combination.

The Company's accounts payable and other liabilities, financing facilities and due to related parties do not fall into any of the exemptions and are therefore classified as measured at amortized cost.

ii. Financial liabilities recorded FVTPL

Financial liabilities are classified as FVTPL if they fall into one of the five exemptions detailed above.

Transaction costs

Transaction costs associated with financial instruments, carried at FVTPL, are expensed as incurred, while transaction costs associated with all other financial instruments are included in the initial carrying amount of the asset or the liability.

Subsequent measurement

Instruments classified as FVTPL are measured at fair value with unrealized gains and losses recognized in profit or loss. Instruments classified as amortized cost are measured at amortized cost using the effective interest rate method. Instruments classified as FVTOCI are measured at fair value with unrealized gains and losses recognized in other comprehensive income.

Derecognition

The Company derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled, or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.

Expected credit loss impairment model

IFRS 9 introduced a single expected credit loss impairment model, which is based on changes in credit quality since initial application. The adoption of the expected credit loss impairment model had no impact on the Company's consolidated financial statements.

The Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due. The Company considers a financial asset to be in default when the borrower is unlikely to pay its credit obligations to the Company in full or when the financial asset is more than 90 days past due.

The carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off.

   (d)      Impairment of non-financial assets 

When events or circumstances indicate that the carrying value may not be recoverable, the Company reviews the carrying amounts of its non-financial assets to determine whether events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). The estimated recoverable amount is determined on an asset by asset basis, except where such assets do not generate cash flows independent of other assets, in which case the recoverable amount is estimated at the CGU level.

The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in the consolidated statement of comprehensive loss.

If an impairment loss subsequently reverses, the carrying amount of the asset (or CGU) is increased up to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset (or CGU) in prior years.

   (e)      Property, plant and equipment 

Property, plant and equipment are carried at cost, less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment consists of the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for its intended use and an initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located.

Depreciation is recognized based on the cost of an item of property, plant and equipment, less its estimated residual value, over its estimated useful life at the following rates:

 
Detail               Percentage  Method 
-------------------  ----------  ----------------- 
Buildings            20%         Declining balance 
Plant and machinery  20%         Declining balance 
Motor vehicles       25%         Declining balance 
Office equipment     15%         Declining balance 
Development assets               No depreciation 
-------------------  ----------  ----------------- 
 

An asset's residual value, useful life and depreciation method are reviewed, and adjusted if appropriate, on an annual basis.

   (f)      Borrowing Costs 

General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale.

Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Other borrowing costs are expensed in the period in which they are incurred.

   (g)      Exploration and evaluation assets 

These assets relate to the exploration and evaluation expenditures incurred in respect to resource projects that are in the exploration and evaluation stage.

Exploration and evaluation expenditures include costs which are directly attributable to acquisition and evaluation activities, assessing technical feasibility and commercial viability. These expenditures are capitalized using the full cost method until the technical feasibility and commercial viability of extracting the mineral resource of a project are demonstrable. During the exploration period, exploration and evaluation assets are not amortized.

Exploration and evaluation assets are allocated to CGU for the purpose of assessing such assets for impairment. At the end of each reporting period, the asset is reviewed for impairment indicators in accordance with IFRS 6.20:

 
  (i)    the period for which the entity has the right to explore in the specific area has expired 
          during the period or will expire in the near future, and is not expected to be renewed. 
  (ii)   substantive expenditure on further exploration for and evaluation of mineral resources in 
          the specific area is neither budgeted nor planned. 
  (iii)  exploration for and evaluation of mineral resources in the specific area have not led to the 
          discovery of commercially viable quantities of mineral resources and the entity has decided 
          to discontinue such activities in the specific area. 
  (iv)   sufficient data exist to indicate that, although a development in the specific area is likely 
          to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be 
          recovered in full from successful development or by sale. 
 

If such indicators exist, the asset is tested for impairment and the recoverable amount of the asset is estimated. If the recoverable amount of the asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognized immediately in consolidated statements of loss.

Once the technical feasibility and commercial viability of extracting a mineral resource of a project are demonstrable, the relevant exploration and evaluation asset is assessed for impairment, and any impairment loss recognized, prior to the balance being reclassified as a development asset in property, plant and equipment.

The determination of the demonstration of technical feasibility and commercial viability is subject to a significant degree of judgment and assessment of all relevant factors. In general, technical feasibility may be demonstrable once a positive feasibility study is completed. When determining the commercial viability of a project, in addition to the receipt of a feasibility study, the Company also considers factors such as the availability of project financing, the existence of markets and/or long term contracts for the product, and the ability of obtaining the relevant operating permits.

All subsequent expenditures to ready the property for production are capitalized within development assets, other than those costs related to the construction of property, plant and equipment.

Once production has commenced, all costs included in development assets are reclassified to mine development costs.

Exploration and evaluation expenditures incurred prior to the Company obtaining mineral rights related to the property being explored are recorded as expense in the period in which they are incurred.

   (h)      Stripping costs 

Till stripping costs involving the removal of overburden are capitalized where the underlying ore will be extracted in future periods. The Company defers these till stripping costs and amortizes them on a unit-of-production basis as the underlying ore is extracted.

   (i)      Inventories 

Inventories are comprised of finished goods, concentrate inventory and work-in-process amounts.

All inventories are recorded at the lower of production costs on a first-in, first-out basis, and net realizable value. Production costs include costs related to mining, crushing, mill processing, as well as depreciation on production assets and certain allocations of mine-site overhead expenses attributable to the manufacturing process.

Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

   (j)      Revenue recognition 

Revenue from sales of finished goods is recognized at the time of shipment when significant risks and rewards of ownership are considered to be transferred, the terms are fixed or determinable, collection is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement in the goods, and the amount of revenue can be measured reliably.

Revenue from sales of gold concentrate is recognized at the time of shipment when title passes and significant risks and benefits of ownership are considered to be transferred and the amount of revenue to be receivable by the Company is known or could be accurately estimated. The final revenue figure at the end of any given period is subject to adjustment at the date of ultimate settlement as a result of final assay agreement and metal prices changes.

   (k)      Provisions 

A provision is recognized when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the obligation can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

A provision for onerous contracts is recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract.

   (l)      Share-based compensation transactions Share-based compensation transactions 

Employees (including directors and senior executives) of the Company receive a portion of their remuneration in the form of share-based compensation transactions, whereby employees render services as consideration for equity instruments ("equity-settled transactions").

In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, such as share-based payments to employees, they are measured at fair value of the share-based payment.

Share-based payments to employees of the subsidiaries are recognized as cash settled share-based compensation transactions.

Equity-settled transactions

The costs of equity-settled transactions with employees are measured by reference to the fair value at the date on which they are granted.

The costs of equity-settled transactions are recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award ("the vesting date"). The cumulative expense is recognized for equity-settled transactions at each reporting date until the vesting date reflects the Company's best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and the corresponding amount is represented in "equity settled share-based payments reserve".

No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

The dilutive effect of outstanding options (if any) is reflected as additional dilution in the computation of loss per share.

Cash-settled transactions

The cost of cash-settled transactions is measured initially at fair value. The liability is re-measured to fair value at each reporting date up to, and including the settlement date, with changes in fair value recognised in employee benefits expense.

   (m)      Warrants with an exercise price denominated in a foreign currency 

Warrants with an exercise price denominated in a foreign currency are recorded at fair value and classified as a derivative financial liability. The liability is initially measured at fair value using the Black-Scholes option pricing model with subsequent changes in fair value recorded as a gain or loss in the consolidated statements of loss. As the warrants are exercised, the value of the recorded liability will be included in share capital along with the proceeds from the exercise. If these warrants expire, the related liability is reversed through the consolidated statements of loss.

   (n)      Income taxes 

Income tax on the consolidated statements of loss for the years presented comprises current and deferred tax. Income tax is recognized in the consolidated statements of loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.

Deferred tax is recognized in respect of taxable temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to taxable temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

   (o)      Decommissioning liability 

A legal or constructive obligation to incur restoration, rehabilitation and environmental costs may arise when environmental disturbance is caused by the exploration, development or ongoing production of a mineral property interest. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalized at the start of each project to the carrying amount of the asset, when there is a present obligation, as a result of a past event, it is probable to be settled by a future outflow of resources and a reliable estimate can be made of the obligation. Discount rates using a pretax rate that reflects the risk and the time value of money are used to calculate the net present value. These costs are charged against the consolidated statements of loss over the economic life of the related asset, through amortization using either a unit-of-production or the straight-line method as appropriate. The related liability is adjusted for each period for the unwinding of the discount rate and for changes to the current market-based discount rate, amount or timing of the underlying cash flows needed to settle the obligation. Costs for restoration of subsequent site damage that is created on an ongoing basis during production are provided for at their net present values and charged against profits and/or inventories as extraction progresses.

   (p)      Loss per share 

The Company presents basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the year. Diluted loss per share is computed similarly to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the years. Options and warrants are anti-dilutive and, therefore, have not been taken into account in the per share calculation.

   (q)      Recent accounting pronouncements 

(i) On June 7, 2017, the IASB issued IFRIC 23 - Uncertainty Over Income Tax Treatments. The interpretation provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty over income tax treatments. The interpretation is applicable for annual periods beginning on or after January 1, 2019. Earlier application is permitted. The Company intends to adopt the Interpretation in its consolidated financial statements for the annual period beginning on January 1, 2019. The Company does not expect the interpretation to have a material impact on the consolidated financial statements.

(ii) On January 13, 2016, the IASB issued IFRS 16 - Leases ("IFRS 16"). The new standard is effective for annual periods beginning on or after January 1, 2019. IFRS 16 will replace IAS 17 - Leases ("IAS 17"). This standard introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. IFRS 16 substantially carries forward the lessor accounting requirements of IAS 17, while requiring enhanced disclosures to be provided by lessors. Other areas of the lease accounting model have been impacted, including the definition of a lease. Transitional provisions have been provided. The Company intends to adopt IFRS 16 in its consolidated financial statements for the period beginning on January 1, 2019. The Company is evaluating the impact of adoption and expects to report more detailed information in its consolidated financial statements as the effective date approaches.

   5.        Capital Risk Management 

The Company manages its capital with the following objectives:

-- to ensure sufficient financial flexibility to achieve the ongoing business objectives including funding of future growth opportunities, and pursuit of accretive acquisitions; and

   --      to maximize shareholder return. 

The Company monitors its capital structure and makes adjustments according to market conditions in an effort to meet its objectives given the current outlook of the business and industry in general. The Company may manage its capital structure by issuing new shares, repurchasing outstanding shares, adjusting capital spending, or disposing of assets. The capital structure is reviewed by management and the Board of Directors on an ongoing basis.

The Company considers its capital to be equity, comprising share capital, reserves and deficit which at December 31, 2018 totaled $15,838,479 (December 31, 2017 - $8,550,057). The Company manages capital through its financial and operational forecasting processes. The Company reviews its working capital and forecasts its future cash flows based on future sales revenues, operating expenditures, and other investing and financing activities. The forecast is updated based on its operating and exploration activities. Selected information is provided to the Board of Directors of the Company. The Company's capital management objectives, policies and processes have remained unchanged during the year ended December 31, 2018. The Company is not subject to any capital requirements imposed by a lending institution or regulatory body.

   6.        Financial and Property Risk Management 

Property risk

The Company's significant project is the Omagh mine. Unless the Company acquires or develops additional significant projects, the Company will be solely dependent upon the Omagh mine. If no additional projects are acquired by the Company, any adverse development affecting the Omagh mine would have a material effect on the Company's consolidated financial condition and results of operations.

Financial risk

The Company's activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk, foreign currency risk and commodity and equity price risk). Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management.

(i) Credit risk and sales concentration

Credit risk is the risk of loss associated with a counterparty's inability to fulfill its payment obligations. The Company's credit risk is primarily attributable to cash and cash equivalents, accounts receivable and long-term deposit. Cash and long-term deposit are held with financial institutions and the United Kingdom Crown, respectively, from which management believes the risk of loss to be minimal. All the revenue from sales are from one customer and the accounts receivable consist mainly of a trade account receivable from two customers, value added tax receivable and sales tax receivable. The Company is exposed to concentration of credit and sales risk with one of its customers. Management believes that the credit risk is minimized due to the financial worthiness of this company. Valued added tax receivable is collectable from the Government of Northern Ireland. Sales tax receivable is collectable from government authorities in Canada.

(ii) Liquidity risk

Liquidity risk is the risk that the Company will not have sufficient cash resources to meet its financial obligations as they come due. The Company's liquidity and operating results may be adversely affected if the Company's access to the capital market is hindered, whether as a result of a downturn in stock market conditions generally or matters specific to the Company. The Company manages liquidity risk by monitoring maturities of financial commitments and maintaining adequate cash reserves and available borrowing facilities to meet these commitments as they come due. As at December 31, 2018, the Company had working capital deficit of $272,783 (December 31, 2017 - working capital deficit of $3,492,608). All of the Company's financial liabilities have contractual maturities of less than 30 days other than certain related party loans which are due on demand. As at December 31, 2018, the Company was cash flow negative. Sufficient funding has been secured to fund ongoing operational activity and the development of the underground mine subject to forecast cash flows at the Omagh mine being met together with the continued support of both Cavanacaw Corporation and Galantas Gold Corporation.

(iii) Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rate risk, foreign exchange rate risk and commodity price risk.

(a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market interest rates. The Company has cash balances, significant interest-bearing debt due to related parties and financing facility. The Company is exposed to interest rate risk on both certain related party loans and third party loans which bear interest at variable rates.

(b) Foreign currency risk

Certain of the Company's assets, liabilities are designated in GBP and expenses are incurred in GBP which is the currency of Northern Ireland and the United Kingdom while the Company's primary revenues are received in the currency of United States and are therefore subject to gains and losses due to fluctuations in these currencies against the functional currency. The loan from third party is designated in US dollars.

(c) Commodity price risk

The Company is exposed to price risk with respect to commodity prices. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. The Company closely monitors commodity prices, as it relates to gold to determine the appropriate course of action to be taken by the Company.

Sensitivity analysis

Based on management's knowledge and experience of the financial markets, the Company believes the following movements are reasonably possible over a twelve month period: (i) Certain related party loans and a loan facility with a third party are subject to interest rate risk. As at December 31, 2018, if interest rates had decreased/increased by 1% with all other variables held constant, the net loss for the year ended December 31, 2018, would have been approximately $60,000 lower/higher respectively, as a result of lower/higher interest rates from certain related party loans and a loan facility. Similarly, as at December 31, 2018, shareholders' equity would have been approximately $60,000 higher/lower as a result of a 1% decrease/increase in interest rates from certain related party loans and a loan facility.

(ii) The Company is exposed to foreign currency risk on fluctuations related to cash and cash equivalents, accounts receivable, long-term deposit, accounts payable and other liabilities, financing liability and due to related parties that are denominated in GBP. As at December 31, 2018, had the GBP weakened/strengthened by 5% against the CAD with all other variables held constant, the Company's consolidated other comprehensive loss for the year ended December 31, 2018 would have been approximately $65,000 higher/lower as a result of foreign exchange losses/gains on translation of non-CAD denominated financial instruments. Similarly, as at December 31, 2018, shareholders' equity would have been approximately $65,000 higher/lower had the GBP weakened/strengthened by 5% against the CAD as a result of foreign exchange losses/gains on translation of non-CAD denominated financial instruments.

(iii) Commodity price risk could adversely affect the Company. In particular, the Company's future profitability and viability of development depends upon the world market price of gold. Gold prices have fluctuated widely in recent years. There is no assurance that, even as commercial quantities of gold may be produced in the future, a profitable market will exist for them. A decline in the market price of gold may also require the Company to reduce production of its mineral resources, which could have a material and adverse effect on the Company's value. Management believes that the impact would be immaterial for the year ended December 31, 2018.

   7.        Categories of Financial Instruments 
 
As at December 31,                            2018        2017 
----------------------------------------   ----------   --------- 
Financial assets: 
 FVTPL 
 Cash and cash equivalents                $ 6,188,554  $  779,758 
 Amortized cost 
 Accounts receivable                          271,504     281,743 
 Long-term deposit                            523,170     508,830 
----------------------------------------   ----------   --------- 
Financial liabilities: 
 FVTPL 
 Derivative financing liability                     -      10,000 
 Amortized cost 
 Accounts payable and other liabilities     2,257,329   1,216,332 
 Financing facilities                       1,464,164      25,871 
 Due to related parties                     4,119,642   3,381,357 
----------------------------------------   ----------   --------- 
 

As of December 31, 2018 and 2017, the fair value of all the Company's financial instruments approximates the carrying value.

   8.        Accounts Receivable and Prepaid Expenses 
 
As at December 31,                                  2018       2017 
-----------------------------------------------   --------   -------- 
 
 
Sales tax receivable - Canada                    $   7,629  $   3,600 
Valued added tax receivable - Northern Ireland     153,948    274,963 
Accounts receivable                                109,927      3,180 
Prepaid expenses                                    15,769     34,667 
-----------------------------------------------   --------   -------- 
                                                 $ 287,273  $ 316,410 
-----------------------------------------------   --------   -------- 
 

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 December 31,             2018       2017 
--------------------------   --------   -------- 
 
Less than 3 months          $ 268,995  $ 279,302 
More than 12 months             2,509      2,441 
--------------------------   --------   -------- 
Total accounts receivable   $ 271,504  $ 281,743 
--------------------------   --------   -------- 
 
   9.        Inventories 
 
As at December 31,          2018      2017 
------------------------   -------   ------- 
 
Concentrate inventories   $ 11,335  $ 11,025 
Finished goods                   -     4,070 
------------------------   -------   ------- 
                          $ 11,335  $ 15,095 
------------------------   -------   ------- 
 
   10.      Property, Plant and Equipment 
 
               Freehold      Plant                                Mine 
               land and       and        Motor      Office     development    Development 
Cost          buildings    machinery    vehicles   equipment      costs         assets          Total 
-----------   ----------   ----------   --------   ---------   -----------    -----------    ----------- 
Balance, 
 December 
 31, 2016    $ 2,283,400  $ 4,851,419  $ 109,598  $  102,011  $ 14,783,628   $          -   $ 22,130,056 
Additions          2,092      510,561     29,139           -       202,765              -        744,557 
Foreign 
 exchange 
 adjustment       54,729      115,606      2,627       2,445       354,329              -        529,736 
-----------   ----------   ----------   --------   ---------   -----------    -----------    ----------- 
Balance, 
 December 
 31, 2017      2,340,221    5,477,586    141,364     104,456    15,340,722              -     23,404,349 
Additions              -      557,607     21,014      46,996             -      4,266,806      4,892,423 
Transfer 
 (1)                   -            -          -           -   (15,340,722)    10,468,410     (4,872,312) 
Foreign 
 exchange 
 adjustment       65,953      153,418      3,984       2,944             -        (38,803)       187,496 
-----------   ----------   ----------   --------   ---------   -----------    -----------    ----------- 
Balance, 
 December 
 31, 2018    $ 2,406,174  $ 6,188,611  $ 166,362  $  154,396  $          -   $ 14,696,413   $ 23,611,956 
-----------   ----------   ----------   --------   ---------   -----------    -----------    ----------- 
 
 
                 Freehold      Plant                                Mine 
                 land and       and        Motor      Office     development    Development 
Accumulated     buildings    machinery    vehicles   equipment      costs         assets         Total 
depreciation 
-------------   ----------   ----------   --------   ---------   -----------    -----------   ----------- 
Balance, 
 December 31, 
 2016          $ 1,850,486  $ 4,217,673  $  78,242  $   84,397  $  8,449,267   $          -  $ 14,680,065 
Depreciation        13,684      176,311     10,915       2,521             -              -       203,431 
Foreign 
 exchange 
 adjustment         44,550      102,951      2,032       2,059       202,509              -       354,101 
-------------   ----------   ----------   --------   ---------   -----------    -----------   ----------- 
Balance, 
 December 31, 
 2017            1,908,720    4,496,935     91,189      88,977     8,651,776              -    15,237,597 
Depreciation        12,433      311,201     18,005       9,360             -              -       350,999 
Transfer (1)             -            -          -           -    (8,651,776)             -    (8,651,776) 
Foreign 
 exchange 
 adjustment         53,892      128,444      2,716       2,583             -              -       187,635 
-------------   ----------   ----------   --------   ---------   -----------    -----------   ----------- 
Balance, 
 December 31, 
 2018          $ 1,975,045  $ 4,936,580  $ 111,910  $  100,920  $          -   $          -  $  7,124,455 
-------------   ----------   ----------   --------   ---------   -----------    -----------   ----------- 
 
 
            Freehold      Plant                                Mine 
            land and       and        Motor      Office     development   Development 
Carrying    buildings   machinery    vehicles   equipment      costs        assets         Total 
value 
---------   ---------   ----------   --------   ---------   -----------   -----------   ----------- 
Balance, 
 December 
 31, 2017  $  431,501  $   980,651  $  50,175  $   15,479  $  6,688,946  $          -  $  8,166,752 
---------   ---------   ----------   --------   ---------   -----------   -----------   ----------- 
Balance, 
 December 
 31, 2018  $  431,129  $ 1,252,031  $  54,452  $   53,476  $          -  $ 14,696,413  $ 16,487,501 
---------   ---------   ----------   --------   ---------   -----------   -----------   ----------- 
 

(1) During the year ended December 31, 2018, the Company transferred the cost of its Exploration and evaluation assets (note 11) to Development assets.

   11.      Exploration and Evaluation Assets 

Exploration and evaluation assets are expenditures for the underground mining operations in Omagh. Galantas 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.

The granting of planning consent during the second quarter of 2015 for an underground operation at the Omagh site permits the continuation and expansion of gold mining. This planning consent was appealed by a third party in a judicial review hearing which commenced in September 2016 and was then adjourned to and completed in February 2017. Judgement was received in September 2017 whereby the third party's request for the quashing of the planning consent was denied. However, in November, Galantas reported that it had received notice of an application by the third party to the Court of Appeal in relation to the positive judicial review judgment. This appeal was completed in February 2018. In November 2018, the Company announced that the Court of Appeal has delivered its judgement in regard to an appeal against the Company's planning consent. The Court has determined that the appeal has failed and thus the planning consent is confirmed.

 
                               Exploration 
                                   and 
                               evaluation 
Cost                             assets 
----------------------------   ----------- 
 
Balance, December 31, 2016    $  2,294,254 
Additions                        1,600,652 
Foreign exchange adjustment         53,546 
----------------------------   ----------- 
Balance, December 31, 2017       3,948,452 
Additions                          254,140 
Transfer (i)                    (3,624,624) 
Foreign exchange adjustment        182,055 
----------------------------   ----------- 
Balance, December 31, 2018    $    760,023 
----------------------------   ----------- 
 
 
                              Exploration 
                                  and 
                              evaluation 
Carrying value                  assets 
---------------------------   ----------- 
 
Balance, December 31, 2017   $  3,948,452 
---------------------------   ----------- 
Balance, December 31, 2018   $    760,023 
---------------------------   ----------- 
 

(i) During the year ended December 31, 2018, the Company transferred the cost of its Exploration and evaluation assets (note 10) to Development assets.

   12.      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 December 31, 2018 based on a risk-free discount rate of 1% (December 31, 2017 - 1%) and an inflation rate of 1.50% (December 31, 2017 - 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 December 31, 2018, the estimated fair value of the liability is $578,242 (December 31, 2017 - $551,680). Changes in the provision during the year ended December 31, 2018 are as follows:

 
As at December 31,                                2018       2017 
---------------------------------------------   --------   -------- 
 
Decommissioning liability, beginning of year   $ 551,680  $ 528,305 
Accretion                                         10,925     10,560 
Foreign exchange                                  15,637     12,815 
---------------------------------------------   --------   -------- 
Decommissioning liability, end of year         $ 578,242  $ 551,680 
---------------------------------------------   --------   -------- 
 

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, 2017 - GBP 300,000), of which GBP 300,000 was funded as of December 31, 2018 (GBP 300,000 was funded as of December 31, 2017) and reported as long-term deposit of $523,170 (December 31, 2017 - $508,830).

   13.      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 December 31,                                 2018         2017 
---------------------------------------------   ----------   ---------- 
 
Accounts payable                               $ 1,017,939  $   641,608 
Accrued liabilities                              1,239,390      574,724 
---------------------------------------------   ----------   ---------- 
Total accounts payable and other liabilities   $ 2,257,329  $ 1,216,332 
---------------------------------------------   ----------   ---------- 
 

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

 
As at December 31,                                 2018         2017 
---------------------------------------------   ----------   ---------- 
 
Less than 3 months                             $ 1,066,881  $   568,981 
3 to 12 months                                     775,693      288,435 
12 to 24 months                                     71,394       49,877 
More than 24 months                                343,361      309,039 
---------------------------------------------   ----------   ---------- 
Total accounts payable and other liabilities   $ 2,257,329  $ 1,216,332 
---------------------------------------------   ----------   ---------- 
 
   14.      Financing Facilities 

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

 
As at December 31,                                    2018        2017 
------------------------------------------------   ----------    ------- 
 
Financing facilities, beginning of period (i)     $    19,689   $ 25,265 
Financing facility received (US$1,600,000) (ii)     2,021,280          - 
Less bonus warrants issued (ii)                      (786,000)         - 
Less financing costs (ii)                             (41,674)         - 
Less current portion                                 (382,974)    (6,182) 
Repayment of financing facilities                      (6,357)    (4,350) 
Accretion                                             240,621          - 
Foreign exchange adjustment                            16,605      4,956 
------------------------------------------------   ----------    ------- 
Financing facilities - long term portion          $ 1,081,190   $ 19,689 
------------------------------------------------   ----------    ------- 
 

(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 USD 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 15,000,000 bonus warrants of Galantas. Each bonus warrant is exercisable into one common share of Galantas 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 15,000,000 bonus warrants were granted. In the event that the weighted average closing price per common share of the Company is more than $0.20 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 15,000,000 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 year ended December 31, 2018, the Company recorded accretion expense of $240,621 in the consolidated statements of loss in regards with this loan facility.

   15.    Share Capital and Reserves 
   a)      Authorized share capital 

At December 31, 2018, the authorized share capital consisted of an unlimited number of common and preference shares issuable in Series.

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

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

   b)      Common shares issued 

At December 31, 2018, the issued share capital amounted to $48,628,055. The change in issued share capital for the years presented is as follows:

 
                                                  Number of 
                                                   common 
                                                   shares        Amount 
----------------------------------------------   -----------   ----------- 
 
Balance, December 31, 2016                       137,800,830  $ 36,331,577 
Shares issued in private placements (i)(ii)       49,748,356     3,612,156 
Share issue costs                                          -      (184,561) 
-----------------------------------------------  -----------   ----------- 
Balance, December 31, 2017                       187,549,186    39,759,172 
Shares issued in private placements (iii)(iv)    102,137,619     8,471,771 
Share issue costs                                          -      (465,388) 
Common shares issued for debt (v)                 10,000,000       862,500 
-----------------------------------------------  -----------   ----------- 
Balance, December 31, 2018                       299,686,805  $ 48,628,055 
-----------------------------------------------  -----------   ----------- 
 

(i) On February 27, 2017, the Company completed the first part of a private placement. It consisted of 27,371,035 common shares of no par value. United Kingdom placees have subscribed at a price of GBP 0.045 per common share. Canadian placees have subscribed at a price of $0.0725 per common share. Receipts attached to the first part of the placement total $2,021,501.

On March 2, 2017, the Company completed the second part of a private placement. It consisted of 5,722,222 common shares of no par value for receipt of $424,798. United Kingdom placees have subscribed at a price of GBP 0.045 per common share.

Melquart Ltd, ("Melquart") a UK based investment institution, subscribed for a total of 22,222,222 common shares and Melquart's staked increased to 13% of the Company's issued common shares.

Ross Beaty subscribed for 3,326,170 common shares and after closing of the private placement Ross Beaty owns 32,151,567 common shares of the Company or approximately 18.8% of the outstanding common shares.

ii) On November 30, 2017, the Company closed a private placement of 16,655,099 common shares for gross proceeds of $1,165,857. United Kingdom placees have subscribed at a price of GBP 0.041 per common share. Canadian placees have subscribed at a price of $0.07 per common share. The hold period will expire for the second closing of the placing on March 31, 2018.

Melquart subscribed for a total of 6,097,561 common shares and Melquart's staked increased to 15.1% of the Company's issued common shares.

Ross Beaty subscribed for 2,914,959 common shares, which, in addition to the shares he already holds, give rise to an 18.7% holding.

Roland Phelps (President and Chief Executive Officer ("CEO")) subscribed for 1,219,512 common shares, which, in addition to the shares he already holds, give rise to an 18.4% holding.

(iii) On September 25, 2018, the Company closed a private placement of 22,137,619 common shares for gross proceeds of $1,571,771. United Kingdom placees have subscribed at a price of GBP 0.042 per common share. Canadian placees have subscribed at a price of $0.071 per common share. The hold period will expire on January 26, 2019.

Melquart subscribed for a total of 11,904,762 common shares and Melquart's staked increased to 19.2% of the Company's issued common shares.

Ross Beaty subscribed for 2,380,952 common shares, which, in addition to the shares he already holds, give rise to an 17.9% holding.

Roland Phelps (President and Chief Executive Officer) subscribed for 4,761,905 common shares, which, in addition to the shares he already holds, give rise to an 18.7% holding.

(iv) On December 12, 2018, the Company completed the first part of a private placement. It consisted of 57,435,065 common shares of no par value. United Kingdom placees have subscribed at a price of GBP 0.05 per common share. Canadian placees have subscribed at a price of $0.08625 per common share. Receipts attached to the first part of the placement total $4,953,774. The hold period will expire for the first part of the placing on April 13, 2019.

On December 21, 2018, the Company completed the second part of a private placement. It consisted of 22,564,935 common shares of no par value for receipt of $1,946,226. United Kingdom placees have subscribed at a price of GBP 0.05 per common share. The hold period will expire for the second closing of the placing on April 22, 2019.

Miton Assets Management Limited ("Miton"), a UK based investment institution, subscribed for a total of 50,000,000 common shares, representing 16.68% of the Company's issued common shares.

Melquart subscribed for a total of 22,000,000 common shares and Melquart's staked increased to 20.76% of the Company's issued common shares.

Roisin Ann Magee, a director of the Company, subscribed for 500,000 common shares.

(v) On December 12, 2018, the Company issued 10,000,000 common shares as settlement of due to related parties of $862,500. Due to related parties consisted of an amount owing to Roland Phelps (President and CEO).

c) Warrant reserve

The following table shows the continuity of warrants for the years presented:

 
                                                                  Weighted 
                                                                  average 
                                                    Number of     exercise 
                                                     warrants      price 
-------------------------------------------------   ----------    -------- 
 
Balance, December 31, 2016 and December 31, 2017       636,000   $    0.07 
Issued (note 14(ii))                                15,000,000        0.16 
Expired                                               (636,000)       0.07 
--------------------------------------------------  ----------    -------- 
Balance, December 31, 2018                          15,000,000   $    0.16 
--------------------------------------------------  ----------    -------- 
 

The following table reflects the actual warrants issued and outstanding as of December 31, 2018:

 
                               Grant date 
                    Number     fair value  Exercise 
Expiry date       of warrants     ($)       price 
---------------   -----------  ----------  -------- 
 
April 19, 2020     15,000,000     786,000    0.1575 
----------------  -----------  ----------  -------- 
 
   d)      Stock options 

The Company has a stock option plan (the "Plan"), the purpose of which is to attract, retain and compensate qualified persons as directors, senior officers and employees of, and consultants to the Company and its affiliates and subsidiaries by providing such persons with the opportunity, through share options, to acquire an increased proprietary interest in the Company. The number of shares reserved for issuance under the Plan cannot be more than a maximum of 10% of the issued and outstanding shares at the time of any grant of options. The period for exercising an option shall not extend beyond a period of five years following the date the option is granted.

Insiders of the Company are restricted on an individual basis from holding options which when exercised would entitle them to receive more than 5% of the total issued and outstanding shares at the time the option is granted. The exercise price of options granted in accordance with the Plan must not be lower than the closing price of the shares on the TSXV immediately preceding the date on which the option is granted and in no circumstances may it be less than the permissible discounting in accordance with the Corporate Finance Policies of the TSXV.

The Company records a charge to the consolidated statements of loss using the Black-Scholes option pricing model. The valuation is dependent on a number of inputs and estimates, including the strike price, exercise price, risk-free interest rate, the level of stock volatility, together with an estimate of the level of forfeiture. The level of stock volatility is calculated with reference to the historic traded daily closing share price at the date of issue.

Option pricing models require the inputs including the expected price volatility. Changes in the inputs can materially affect the fair value estimate.

The following table shows the continuity of stock options for the years presented:

 
                                           Weighted 
                                           average 
                              Number of    exercise 
                               options      price 
---------------------------   ---------    -------- 
 
Balance, December 31, 2016    3,700,000   $    0.11 
Granted (i)                   4,900,000        0.14 
----------------------------  ---------    -------- 
Balance, December 31, 2017    8,600,000        0.12 
Granted (ii)                  1,000,000        0.11 
Expired                        (750,000)       0.14 
----------------------------  ---------    -------- 
Balance, December 31, 2018    8,850,000   $    0.12 
----------------------------  ---------    -------- 
 

(i) On March 25, 2017, 4,900,000 stock options were granted to directors, officers, consultants and key employees of the Company to purchase common shares at a price of $0.135 per share until March 25, 2022. The options will vest as to one third on March 25, 2017 and one third on each of the following two anniversaries. The fair value attributed to these options was $645,820 and was expensed in the consolidated statements of loss and credited to equity settled share-based payments reserve. During the year ended December 31, 2018, included in stock-based compensation is $157,178 (year ended December 31, 2017 - $463,869) related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 201%; risk-free interest rate - 1.12% and an expected life of 5 years.

(ii) On April 19, 2018, 1,000,000 stock options were granted to key employees and consultants of the Company to purchase common shares at a price of $0.11 per share until April 19, 2023. The options will vest as to one third on April 19, 2018 and one third on each of the following two anniversaries. The fair value attributed to these options was $99,400 and was expensed in the consolidated statements of loss and credited to equity settled share-based payments reserve. During the year ended December 31, 2018, included in stock-based compensation is $67,991 (year ended December 31, 2017 - $nil) related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 172%; risk-free interest rate - 2.16% and an expected life of 5 years.

The following table reflects the actual stock options issued and outstanding as of December 31, 2018:

 
                            Weighted average                 Number of 
                               remaining       Number of      options     Number of 
                 Exercise     contractual       options       vested       options 
Expiry date      price ($)    life (years)    outstanding  (exercisable)   unvested 
---------------  ---------  ----------------  -----------  -------------  ---------- 
June 1, 2020       0.105          1.42          3,550,000      3,550,000           - 
June 12, 2020      0.105          1.45            150,000        150,000           - 
March 25, 2022     0.135          3.23          4,150,000      2,766,667   1,383,333 
April 19, 2023     0.110          4.30          1,000,000        333,333     666,667 
---------------  ---------  ----------------  -----------  -------------  ---------- 
                   0.120          2.60          8,850,000      6,800,000   2,050,000 
---------------  ---------  ----------------  -----------  -------------  ---------- 
 
   16.    Net Loss per Common Share 

The calculation of basic and diluted loss per share for the year ended December 31, 2018 was based on the loss attributable to common shareholders of $2,885,437 (year ended December 31, 2017 - $2,078,139) and the weighted average number of common shares outstanding of 197,554,017 (year ended December 31, 2017 - 164,077,122) for basic and diluted loss per share. Diluted loss did not include the effect of 15,000,000 warrants (year ended December 31, 2017 - 636,000) and 8,850,000 options (year ended December 31, 2017 - 8,600,000) for the year ended December 31, 2018, as they are anti-dilutive.

   17.    Aggregate Levy Provision 

The Company's subsidiary Omagh Minerals Limited was unsuccessful in respect of its aggregates levy appeal. As a result Omagh Minerals will now have to pay an aggregates levy plus interest and a penalty which has been accounted for as an aggregate levy in the current year consolidated financial statements.

   18.    Taxation 
   (a)      Provision for income taxes 

A reconciliation of the expected tax recovery to actual is provided as follows:

 
Year Ended December 31,                                               2018           2017 
----------------------------------------------------------------   -----------    ----------- 
 
Loss before income taxes                                          $ (2,885,437)  $ (2,078,139) 
----------------------------------------------------------------   -----------    ----------- 
Expected tax recovery at statutory rate of 26.5% (2017 - 26.5%)       (764,641)      (550,707) 
Difference resulting from: 
 Foreign tax rate differential                                         127,463         68,928 
 Stock-based compensation                                               59,670        122,925 
 Permanent differences and other                                       (67,716)             - 
 Tax benefit not recognized                                            645,224        358,854 
----------------------------------------------------------------   -----------    ----------- 
                                                                  $          -   $          - 
----------------------------------------------------------------   -----------    ----------- 
 
   (b)      Deferred tax balances 

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities that have not been recognized for financial statement purposes are as follows:

 
                                               2018          2017 
-----------------------------------------   ----------    ---------- 
 
Deferred income tax assets (liabilities) 
 Non-capital losses                        $ 7,417,236   $ 6,149,294 
 Share issue costs and other                   137,564        53,169 
 Non-current assets                         (1,924,488)   (1,217,375) 
 Valuation allowance (impairment)           (5,630,312)   (4,985,088) 
-----------------------------------------   ----------    ---------- 
                                           $         -   $         - 
-----------------------------------------   ----------    ---------- 
 
   (c)      Losses carried forward 

As at December 31, 2018, the Company had non-capital losses carried forward of $35,276,845 (2017 - $31,354,136) for income tax purposes as follows:

 
Expires      2026   $  1,064,484 
       2027              598,595 
       2029              373,962 
       2030              440,512 
       2031              993,770 
       2032              600,689 
       2033            1,100,268 
       2034              906,488 
       2035              884,526 
       2036              901,063 
       2037              772,787 
       2038              891,330 
Indefinite            25,748,371 
                     ----------- 
                    $ 35,276,845 
                     =========== 
 

The loss carry-forward amounts have not been recognized for accounting purposes because it is not probable that future profit will be available against which the Company can utilize the benefits therefrom.

   19.    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: 
 
                                                Year Ended 
                                               December 31, 
                                  Note         2018      2017 
--------------------------------  -----      --------   ------ 
Interest on related party loans     (i)     $ 261,627  $56,952 
--------------------------------  --------   --------   ------ 
 

(i) G&F Phelps, a company controlled by a director of the Company, had amalgamated loans to the Company of $3,182,205 (GBP 1,824,764) (December 31, 2017 - $2,236,060 - GBP 1,318,354) 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% + USD 12 month LIBOR. Interest accrued on related party loans is included with due to related parties. As at December 31, 2018, the amount of interest accrued is $658,338 (GBP 377,509) (December 31, 2017 - $383,778 - GBP 226,271).

(ii) See note 15(b).

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

 
                                 Year Ended 
                                December 31, 
                               2018      2017 
--------------------------   --------   ------- 
Salaries and benefits (1)   $ 451,618  $435,700 
Stock-based compensation       38,493   113,601 
--------------------------   --------   ------- 
                            $ 490,111  $549,301 
--------------------------   --------   ------- 
 

(1) Salaries and benefits include director fees. As at December 31, 2018, due to directors for fees amounted to $166,000 (December 31, 2017 - $136,750) and due to officers, mainly for salaries and benefits accrued amounted to $113,099 (GBP 64,854) (December 31, 2017 - $624,769 - GBP 368,356), and is included with due to related parties.

(c) As of December 31, 2018, Ross Beaty owns 37,447,478 common shares of the Company or approximately 12.50% of the outstanding common shares. Roland Phelps, CEO and director, owns, directly and indirectly, 49,338,167 common shares of the Company or approximately 16.46% of the outstanding common shares of the Company. Miton owns 50,000,000 common shares of the Company or approximately 16.68% . Melquart owns, directly and indirectly, 62,224,545 common shares of the Company or approximately 20.76% of the outstanding common shares of the Company. The remaining 33.60% 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.

   20.    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:

 
December 31, 2018     United Kingdom     Canada       Total 
-------------------   --------------   ----------   ---------- 
 
Current assets       $       794,772  $ 5,692,390  $ 6,487,162 
Non-current assets        17,706,643       64,051   17,770,694 
-------------------   --------------   ----------   ---------- 
Revenues             $        71,243  $         -  $    71,243 
-------------------   --------------   ----------   ---------- 
 
 
December 31, 2017     United Kingdom    Canada      Total 
-------------------   --------------   --------   ---------- 
 
Current assets       $       410,064  $ 701,199  $ 1,111,263 
Non-current assets        12,558,310     65,724   12,624,034 
-------------------   --------------   --------   ---------- 
Revenues             $        33,308  $       -  $    33,308 
-------------------   --------------   --------   ---------- 
 
   21.    Contingency 

During the year ended December 31, 2010, the Company's subsidiary Omagh Minerals Limited received a payment demand from Her Majesty's Revenue and Customs in the amount of $530,651 (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. Subsequent to December 31, 2018, 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 consolidated financial statements in respect of the Aggregates Levy plus interest and penalty and been accounted for as aggregates levy expense in the consolidated statement of loss.

There is a contingent liability in respect of potential additional interest and penalty which may be applied in respect of an Aggregates Levy dispute. Omagh Minerals Limited is unable to make a reliable estimate of the amount of the potential additional penalty and interest that mat be applied by HMRC.

   22.    Supplement Schedule of Non-Cash Transactions 
 
                                                                    Year Ended 
                                                                   December 31, 
                                                                    2018     2017 
---------------------------------------------------------------   --------   ---- 
Shares issued to settle due to related parties (note 15(b)(v))   $ 862,500  $   - 
---------------------------------------------------------------   --------   ---- 
 
   23.    Events After the Reporting Period 

(i) On February 13, 2019, 3,200,000 stock options were granted to directors, officers, consultants and employees of the Company to purchase common shares at a price of $0.09 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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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April 18, 2019 02:00 ET (06:00 GMT)

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