Galane Gold Limited HY 2013 results

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Galane Gold Limited HY 2013 results

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Galane Gold Limited HY 2013 results

  1. 1. Condensed Consolidated Interim Financial Statements (In U.S. dollars) (Unaudited) GALANE GOLD LTD. For the three and six month periods ended June 30, 2013 Note to Reader: The accompanying unaudited condensed consolidated interim financial statements of Galane Gold Ltd. (the “Company”) have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these financial statements.
  2. 2. GALANE GOLD LTD. Condensed Consolidated Interim Statement of Financial Position (In U.S. dollars) (Unaudited) As at June 30, 2013 and December 31, 2012 June 30, 2013 Notes December 31, 2012 Assets Current assets: Cash Trade and other receivables Inventories $ 6 7 Non-current assets: Mining and exploration properties Plant and equipment Ore stockpiles Deferred tax assets 8 8 7 13 6,324,060 2,193,894 5,966,752 14,484,706 $ 17,862,213 842,076 6,706,411 25,410,700 15,269,405 1,745,871 8,624,896 25,640,172 34,344,680 2,333,496 7,685,644 1,809,000 46,172,820 $ 39,895,406 $ 71,812,992 $ 6,234,687 98,275 6,332,962 $ 5,882,022 2,623,377 8,505,399 Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued liabilities Current portion of interest bearing loans 11 12 Non-current liabilities: Interest-bearing loans and borrowings Restoration and rehabilitation provision Warrants denominated in foreign currency 12 10 14 Shareholders' equity: Share capital Reserves Retained earnings 14 14 2,758,677 5,962,652 8,721,329 1,521,263 5,712,976 999,126 8,233,365 $ 35,132,705 1,142,494 (11,434,084) 24,841,115 $ 33,087,705 3,150,905 18,835,618 55,074,228 $ 39,895,406 $ 71,812,992 Commitments and contingencies (note 16) Approved and authorized by the Board for issue on August 27, 2013: “Ravi Sood ” “Philip Condon ” Director The notes on pages 5 to 16 are an integral part of these consolidated financial statements. 1 Director
  3. 3. GALANE GOLD LTD. Condensed Consolidated Interim Statement of Earnings and Comprehensive Earnings (In U.S. dollars) (Unaudited) Three and six month periods ended June 30, Note Mining Revenue Mining Costs Impairment Earnings from mining operations Expenses: Exploration costs Foreign exchange gain Corporate general and administration Financing income (costs) Other income (expenses) 15 9 Three Months Ended June 30, 2013 Three Months Ended June 30, 2012 $ 14,044,253 (19,988,822) (17,822,593) $(23,767,162) $ 22,450,684 (20,677,297) $ 1,773,387 15 15 15 $ Six Months Ended June 30, 2013 Six Months Ended June 30, 2012 $ 26,211,139 $ 48,386,981 (36,268,244) (35,771,590) (17,822,593) $ (27,879,698) $ 12,615,391 (42,583) (310,256) (84,422) 336,647 317,874 618,595 (551,827) (612,570) (1,151,699) (248,179) (814,800) 545,340 (1,494) 6,145 (510,818) (507,436) $ (1,413,607) $ (581,004) $ (383,317) 214,235 (869,818) 236,026 (5,389) (808,263) (Loss) earnings from comprehensive (loss) earnings for the period before taxation Taxation Net (loss) earnings and comprehensive (loss) earnings for the period 13 Basic (loss) earnings per common share 14 $ (0.51) $ 0.01 $ (0.60) $ 0.25 Fully diluted (loss) earnings per common share 14 $ (0.51) $ 0.01 $ (0.60) $ 0.25 Weighted average number of common shares- basic Weighted average number of common shares- fully diluted 14 50,885,214 47,896,299 50,883,489 46,502,150 14 50,885,214 47,896,299 50,883,489 46,502,150 $ (24,274,598) $ $ (1,809,000) $ 359,780 - $ (28,460,702) $ 11,807,128 $ (1,809,000) $ - $ (26,083,598) $ 359,780 $ (30,269,702) $ 11,807,128 The notes on pages 5 to 16 are an integral part of these consolidated financial statements. 2
  4. 4. GALANE GOLD LTD. Condensed Consolidated Interim Statement of Changes in Equity (In U.S. Dollars) (Unaudited) Six month periods ended June 30, 2013 and 2012 Capital Stock Notes Balance as at December 31, 2011 Issued for: NLE Acquisition Participation in share purchase plan Net earnings for the six months ended June 30, 2012 Balance as at June 30, 2012 Balance as at December 31, 2012 Stock-based compensation for the period Performance shares Participation in share purchase plan Net loss for the six months ended June 30, 2013 Balance as at June 30, 2013 Number 45,108,000 3,125,000 63,130 48,296,130 14 48,381,745 2,500,000 21,045 50,902,790 Reserves $ Amount 30,348,992 Stock based payments $ 587,651 Retained Earnings $ 1,424,547 $ 2,613,975 62,238 33,025,205 $ 587,651 11,807,128 13,231,675 $ 33,087,705 2,045,000 35,132,705 $ 3,150,905 36,589 (2,045,000) 1,142,494 $ 18,835,618 (30,269,702) $ (11,434,084) The notes on pages 5 to 16 are an integral part of these consolidated financial statements. 3 $ Total 32,361,190 $ 2,613,975 62,238 11,807,128 46,844,531 $ 55,074,228 36,589 (30,269,702) 24,841,115
  5. 5. GALANE GOLD LTD. Condensed Consolidated Interim Statement of Cash Flows (In U.S. Dollars) (Unaudited) Six month period ended June 30, Notes Cash flows from operating activities: Net (loss) earnings for the period Items not involving cash: Loss on disposal of equipment Depreciation and amortization Impairment Deferred Tax (derecognised) Share based compensation Accretion Interest expense Financing income Foreign exchange gain (loss) 2013 $ (30,269,702) 2012 $ 11,807,128 257,977 7,538,773 17,822,593 1,809,000 36,590 284,933 89,127 (999,126) 613,924 14 Working capital adjustments: Change in trade and other receivables Change in inventories Change in trade and other payables relating to operating activities Cash flows from operating activities Cash flows from investing activities: Restoration and rehabilitation expenditures Proceeds from sale of equipment Mining assets acquired Cash flows used in investing activities 346,069 3,070,407 (16,270) (485,636) 10 106,471 4,751,011 257,925 115,485 (611,913) (62,373) (335,568) 2,682,112 8 9 13 (1,795,603) 17,984,607 (35,257) 47,051 (6,737,243) (6,725,449) 8 (16,146) (8,789,334) (8,805,480) Cash flow from financing activities: Net proceeds from issuance of shares and warrants Interest paid Repayment of interest bearing loans Capital lease obligations Cash flows from financing activities (89,127) (1,266,667) (29,947) (1,385,741) (Decrease) Increase in cash (8,596,827) 9,180,264 (348,518) (22,234) 15,269,405 6,531,004 Effect of unrealized foreign exchange gain on cash Cash, at January 1 Cash, at June 30 $ 6,324,060 41,945 (115,485) 74,684 1,144 $ The notes on pages 5 to 16 are an integral part of these consolidated financial statements. 4 15,688,011
  6. 6. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 1. Corporate Information Galane Gold Ltd. (the “Company”) operates through its wholly-owned subsidiary, Galane Gold Mines Ltd. (“GGM”) which was incorporated under the Business Corporations Act (Ontario) on November 15, 2010 and whose principal business activities are the exploration for, development of, and operation of gold mining properties. The Company’s registered and head office is located at Suite 1800, 181 Bay St., Toronto, Ontario, Canada. 2. Basis of preparation: (a) Statement of compliance The unaudited condensed consolidated interim financial statements (the “Financial Statements”) of the Company and all of its subsidiaries as at and for the three and six months ended June 30, 2013 have been prepared in accordance with IAS 34, Interim Financial Reporting, and do not include all of the information required for full annual consolidated financial statements. Accordingly certain information and disclosures normally included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) have been omitted or condensed. (b) Significant accounting judgments, estimates and assumptions The preparation of the Financial Statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the Financial Statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. The particular areas of estimation uncertainty and critical judgments are outlined in detail in the annual audited consolidated financial statements for the year ended December 31, 2012 (the “Annual Financial Statements”). As at June 30, 2013, the Company identified that the carrying value of the net assets of the Company exceeded its market capitalization, which is an indicator of potential impairment of the carrying value of its net assets. In addition, prior to the close of the quarter ended June 30, 2013, the gold price declined significantly and has subsequently remained at these lower levels. Upon the identification of these indicators, the Company performed an impairment assessment to determine the recoverable amount of its cash-generating unit (“CGU”), Mupane Gold Mining (Pty) Limited. The results of the assessment, including the significant estimates and assumptions used, are set out in Note 9. 5
  7. 7. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 2. Basis of preparation (continued): (c) Basis of consolidation The significant subsidiaries of the Company are accounted for as follows: Country of Incorporation Galane Gold Mines Ltd. Mupane Gold Mines Limited Gallery Gold Pty Ltd. Mupane Gold Mining (Pty) Ltd. The Northern Lights Exploration Company (Pty) Ltd. % equity interest Accounting Method Canada Mauritius Australia Botswana 100% 100% 100% 100% Consolidation Consolidation Consolidation Consolidation Botswana 100% Consolidation The Company’s other subsidiaries are Galane Gold Botswana (Pty) Ltd. (Botswana) (100% owned) and Shashe Mines (Pty) Ltd. (Botswana) (85% owned). (d) Functional and presentation currency The consolidated financial statements are presented in U.S. dollars, which is the functional currency of the Company and each of its subsidiaries. All amounts are in U.S. dollars, except where otherwise indicated. 3. Significant Accounting Policies: These Financial Statements have been prepared following the same accounting policies and methods of computation as the Annual Financial Statements other than as described below due to the adoption of the following accounting standards effective January 1, 2013. IFRS 10- Consolidated financial statements IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. IFRS 10 sets out three elements of control: power over the investee; exposure, or rights, to variable returns from involvement with the investee; and the ability to use power over the investee to affect the amount of the investors’ return; and the requirements on how to apply the control principle. IFRS 10 did not have an effect on our consolidated financial statements for the current period or prior periods presented as the adoption did not result in a change in the consolidation status of any of our subsidiaries or investees. IFRS 12 – Disclosure of Interests in Other Entities IFRS 12 contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities. The adoption of IFRS 12 had no impact on the Company’s interim financial statements. 6
  8. 8. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 3. Significant Accounting Policies (continued): The Company will include additional disclosures about interests in other entities in our annual consolidated financial statements for the year ended December 31, 2013 if required based on our organizational structure at that time. IFRS 13- Fair value measurement IFRS 13 replaces the fair value measurement guidance contained in individual IFRS with a single source of fair value measurement guidance, and defines value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e. an exit price. The Company has included additional disclosures in its interim financial statements as a result of the adoption of IFRS 13. IFRS 13 did not have an impact on our financial results. IFRIC 20 – Stripping costs in the production phase of a surface mine IFRIC 20 provides guidance on the accounting for the costs of stripping activity in the production phase of surface mining when two benefits accrue to the entity from the stripping activity: usable ore that can be used to produce inventory and improved access to further quantities of material that will be mined in future periods. The adoption of IFRIC 20 did not have an impact on the Company’s financial results. 4. Future Accounting Policies: The following new standards and amendments to standards and interpretations which were issued but not yet effective for the six months ended June 30, 2013, have not been applied in preparing these Financial Statements. They are summarized as follows: IFRS 9- Financial Instruments The IASB has issued IFRS 9, Financial Instruments, which is a four-part project proposing to replace IAS 39, Financial Instruments: Recognition and Measurement. IFRS 9 is planned to be effective on January 1, 2015. The Company is in the process of evaluating the requirements of the new standard. IFRIC 21 – Levies IFRIC 21 provides guidance on the accounting for levies in accordance with the requirements of IAS 37 – Provisions, Contingent Liabilities and Contingent Assets. The Company intends to adopt IFRIC 21 in its financial statements for the period beginning January 1, 2014. The Company does not expect the amendments to have a material impact on the financial statements. 7
  9. 9. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 5. Financial instruments: The following table presents the carrying and estimated fair values of the Company’s financial instruments. Carrying and Fair value June 30, December 31, 2013 2012 Financial Assets Cash (level 1 of fair value hierarchy (5)) Trade and other receivables (1) $ $ 6,324,060 2,193,894 8,517,954 $ 15,269,405 1,745,871 17,015,276 6,234,687 2,856,952 $ Financial Liabilities Accounts payable and accrued liabilities (2) Loans and borrowings (3) Warrants denominated in foreign currency (4) (level 2 of fair value hierarchy(5)) $ $ (1) (2) (3) (4) (5) 6. 9,091,639 5,882,022 4,114,640 999,126 11,025,788 The fair value of trade and other receivables approximates the carrying amount given the short maturity period. The fair value of accounts payable and accrued liabilities approximates the carrying amount given the short maturity period. Refer to the liquidity risk section below. The fair value of loans and borrowings approximates the carrying amount given the short maturity period, and the fair market value rate of interest that it carries. Warrants denominated in foreign currency are measured at fair value. The level of the fair value hierarchy are defined as follows: 1. Level 1- there are quoted prices in active markets for identical assets or liabilities. 2. Level 2- there are inputs other than quoted prices that are either directly or indirectly observable for the asset or liability. 3. Level 3- these are inputs that are not based on observable market data. Trade and other receivables Trade receivables Other receivables Taxes recoverable Prepaid expenses $ $ 8 June 30, 2013 1,841,230 352,664 2,193,894 December 31, 2012 $ 62,500 1,268,702 414,669 $ 1,745,871
  10. 10. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 7. Inventories The amount of inventories recognized as an expense during the period is included in mining costs in the condensed consolidated interim statement of earnings and comprehensive earnings. The carrying values at the end of the respective periods are: $ 8. 6,706,411 $ 7,685,644 $ Ore Stockpiles (1) (1) December 31, 2012 $ 3,184,498 5,440,398 $ 8,624,896 $ Gold in process Supplies June 30, 2013 1,822,421 4,144,331 5,966,752 As at June 30, 2013 an impairment charge of $955,264 (December 31, 2012 - $nil) was recorded within earnings from mining operations to reduce the carrying value of inventory to its net realisable value. See Note 9 b). Mining assets The continuity of mining assets for the six months ended June 30, 2013 is as follows: Construction in Progress Cost at December 31, 2012 Additions: Additions in the period Transfers in the period Disposals in the period Cost at June 30, 2013 $ 22,682 Mining and Exploration Properties 100,803 $ Accumulated depreciation and amortization at December 31, 2012 $ Amortization charge for the period Impairment (Note 9) Disposals in the period 41,728,849 $ 5,556,836 $ 47,308,367 6,222,827 - $ Plant and Equipment 533,432 (345,823) 6,857,063 (345,823) Total 123,486 $ 47,951,676 $ 5,774,446 $ 53,819,607 - $ (6,961,079) $ (3,669,113) $ (10,630,192) (6,261,055) (16,867,329) - (1,397,537) 40,795 (7,658,592) (16,867,329) 40,795 $ (5,025,856) $ (35,115,319) $ $ 18,704,289 - Accumulated depreciation and amortization at June 30, 2013 $ - $ (30,089,463) Net book value, June 30, 2013 $ 123,486 $ 17,862,213 9 718,590
  11. 11. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 9. Impairment Three months ended June 30, 2013 Mining and Exploration Properties Inventory $ $ 16,867,329 955,264 17,822,593 Six months ended June 30, 2013 Three months ended June 30, 2012 $ $ $ 16,867,329 955,264 17,822,593 $ - Six months ended June 30, 2012 $ $ a) Mining and Exploration Properties As at June 30, 2013, the carrying value of the net assets of the Company exceeded its market capitalization, which is an indicator of potential impairment of the carrying value of its net assets. In addition, prior to the close of the quarter ended June 30, 2013, the gold price declined significantly and has subsequently remained at these lower levels. As a result the Company assessed the recoverable amount of its cash-generating unit (“CGU”), Mupane Gold Mining (Pty) Limited. Key assumptions The key assumptions used in determining the recoverable amount (fair value less costs to sell) for the CGU are commodity prices, discount rates, cash costs of production, capital expenditures, foreign exchange rates, and the value of in-situ ounces. The fair value of mining and exploration properties is determined primarily using an income approach based on unobservable inputs, and as a result, is classified within Level 3 of the fair value hierarchy. The Company’s estimates of future metal prices are determined based on current prices, forward prices and forecasts of future prices prepared by industry analysts. For the June 30, 2013 impairment analysis, the Company has estimated a gold price of $1,400 per ounce. The Company’s estimates of future cash costs of production and capital expenditures are based on the life of mine plan. Costs incurred in currencies other than the U.S. dollar are translated to U.S. dollar equivalents based on long-term forecasts of foreign exchange rates, on a currency by currency basis, obtained from independent sources of economic data. The discount rate applied to present value the net future cash flows is based on a real weighted average cost of capital. For the June 30, 2013 impairment analysis, a discount rate of 6.25% was used. The Company valued the potential of in-situ ounces declared in its latest mineral resource statement but not included in the life of mine plan. They were valued based on a review of the current market value of in-situ ounces recognised by the industry. b) Inventory As at June 30, 2013 an impairment charge of $955,264 (December 31, 2012 - $nil) was recorded within earnings from mining operations to reduce the carrying value of inventory to its net realizable value. 10 -
  12. 12. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 10. Restoration and rehabilitation provision Restoration and rehabilitation provision $ 5,712,976 At December 31, 2012 Accretion during the six month period ended June 30, 2013 Expenditures in the period At June 30, 2013 11. 284,933 (35,257) 5,962,652 $ Trade accounts payable and accrued liabilities: June 30, 2013 Trade accounts payable Accrued liabilities December 31, 2012 5,375,003 $ 4,072,936 859,684 1,809,086 $ 6,234,687 $ 5,882,022 Trade accounts payable and accrued liabilities are non-interest bearing and are normally settled on 30 day terms after date of receipt of invoice. 12. $ Interest-bearing loans and borrowings: June 30, 2013 Current Unsecured note (1) Capital lease obligation (2) $ $ Non-Current Unsecured note (1) Capital lease obligation (2) $ $ (1) December 31, 2012 98,275 98,275 $ 2,533,333 225,344 2,758,677 $ $ $ 2,533,334 90,043 2,623,377 1,266,666 254,597 1,521,263 The Company issued an unsecured note to IAMGOLD Corporation (“IAMGOLD”) as part of the consideration paid for the purchase of the shares of Gallery Gold Pty Ltd. on August 30, 2011. The terms of the unsecured note were amended on July 18, 2013. Details are as follows:  Initial principal amount - $3,800,000  Interest rate - fixed rate of 6% per annum, payable on principal repayment dates  Principal repayment - $1,266,667 on August 30, 2014 and February 28, 2015 (2) The Company acquired seven vehicles for use at the mine for total cost of $405,448 and financed the purchase through capital lease obligations. The capital leases are for a term of 36 months, with average monthly payments per vehicle of $1,070 per month principal and interest and a final payment of $11,889. 11
  13. 13. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 13. Income and Mining Taxes: The Company estimates the effective tax rate expected to be applicable for the full fiscal year and uses that rate to provide for income taxes in interim reporting periods. The Company also recognizes the tax impact on certain discrete (unusual or infrequently occurring) items, including changes in judgment concerning the probable realization of losses and effects of changes in tax laws or rates, in the interim period in which they occur. As a result of the effect of utilization of loss carry forwards available to the Company, the Company reported no income tax expense for the three and six months ended June 30, 2013 (three and six months ended June 30, 2012 - $nil). The effective income tax rates vary from the combined Canadian federal and provincial statutory income tax rate of 26.50% for the six months ended June 30, 2013 (six months ended June 30, 2012 – 26.50%) due to the geographical distribution of earnings, which are subject to different tax rates, fluctuations in exchange rates and other nondeductible expenses. The carrying amount of deferred income tax assets is reviewed at each date of the consolidated statement of financial position and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognized deferred income tax assets are reassessed at each date of the consolidated statement of financial position and are recognized to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered. Due to the significant decline in the gold price prior to the close of June 30, 2013, the Company has reassessed the carrying value of the deferred tax asset. It is now considered that it is no longer probable, given the revised life of mine plan, that there will be sufficient taxable profits to utilize all or part of the deferred tax asset. As a result the Company has derecognised $1,809,000 of deferred tax asset. 14. Share Capital (a) Authorized share capital: As at June 30, 2013, the authorized share capital of the Company consisted of an unlimited number of common shares. All issued shares are fully paid. (b) Issued share capital: During the six month period ended June 30, 2013 the Company had the following share transactions: On March 22, 2013, the Company issued an aggregate of 2,500,000 common shares to the Chairman and CEO of the Company pursuant to the terms of performance share agreements dated August 30, 2011. The associated compensation amount was recognized in 2012. During the six month period ended June 30, 2012 the Company had the following share transactions: On June 15, 2012, in accordance with the Company’s share purchase plan, certain directors and officers subscribed for 63,130 common shares of the Company, at a price of CDN$0.99 per share, for gross proceeds of CDN$62,500 ($62,238). (c) Stock Options: The Company has a stock option plan whereby options may be granted to directors, officers, employees and consultants. As at June 30, 2013, a maximum of 5,090,279 options to purchase common shares were issuable under the Company’s stock option plan, of which 1,605,279 remained available for issuance. 12
  14. 14. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 14. Share Capital (continued): (d) Warrants: The following is a summary of warrants outstanding as at June 30, 2013 and December 31, 2012 and changes during the period ended June 30, 2013: Number of Warrants Balance, December 31, 2012 Warrants expired unexercised Balance, June 30, 2013 Weighted Average Exercise Price (CDN$) 13,426,983 (13,426,983) - 1.06 1.06 - (e) Earnings (loss) per share: The calculation of earnings (loss) per share is based on the following data: Earnings (loss) Weighted average number of common shares outstanding for purposes of basic earnings per share Dilutive warrants Dilutive options Weighted average number of common shares outstanding for the purpose of diluted earnings per share Earnings (loss) per share Basic Diluted Three months ended June 30, 2013 $ (26,083,598) Six months ended June 30, 2013 $ (30,269,702) Three months ended June 30, 2012 $ 359,780 Six months ended June 30, 2012 $ 11,807,128 50,885,214 50,883,489 47,896,299 46,502,150 - - - - 50,885,214 50,883,489 47,896,299 46,502,150 $ $ (0.51) (0.51) $ $ (0.60) (0.60) $ $ 0.01 0.01 $ $ Basic earnings (loss) per share is computed by dividing the earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution of outstanding warrants and stock options in the weighted average number of common shares outstanding during the period, if dilutive. For the three and six months ended June 30, 2013, all instruments were considered anti-dilutive due to the net loss in the period. 13 0.25 0.25
  15. 15. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 15. Breakdown of earnings and comprehensive earnings items: The following is a breakdown of certain items in the Condensed Consolidated Interim Statement of Earnings and Comprehensive Earnings: (a) Mining costs Mining and production Administrative Total Depreciation and amortization Three months ended June 30, 2013 $ 14,279,351 1,443,939 $ 15,723,290 4,265,532 $ 19,988,822 Six months ended June 30, 2013 $ 25,809,370 2,920,101 $ 28,729,471 7,538,773 $ 36,268,244 (b) Corporate general and administration Three months ended June 30, 2013 Ongoing Professional fees $ 134,634 Stock based compensation 40,717 Corporate administration 376,476 $ 551,827 (c) Three months ended June 30, 2012 $ 16,056,636 1,699,292 $ 17,755,928 2,921,269 $ 20,677,297 Six months ended June 30, 2013 $ 255,503 82,063 814,133 $ 1,151,699 Three months ended June 30, 2012 $ 307,502 305,068 $ 612,570 Six months ended June 30, 2012 $ 27,907,158 3,113,421 $ 31,020,579 4,751,011 $ 35,771,590 Six months ended June 30, 2012 $ 542,254 327,564 $ 869,818 Financing costs Interest on long term debt Movement in value of warrants denominated in foreign currency Accretion on restoration and rehabilitation provision Three months ended June 30, 2013 $ 38,937 Six months ended June 30, 2013 $ 89,127 - 248,179 Six months ended June 30, 2012 $ 115,485 (984,402) $ 626,765 (609,436) 349,935 209,242 $ Three months ended June 30, 2012 $ 57,467 130,568 257,925 (545,340) $ 814,800 $ (236,026) (d) Other expenses Other expenses (income) Gain on disposal of equipment Staff retrenchment costs Three months ended June 30, 2013 $ 1,494 $ 1,494 Six months ended June 30, 2013 $ 55,211 $ 14 (17,667) 473,274 510,818 Three months ended June 30, 2012 $ (6,145) Six months ended June 30, 2012 $ 5,389 (6,145) 5,389 $ $
  16. 16. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 16. Commitments and Contingencies (a) Royalty expenses Production from the Company’s Mupane operation is subject to third party royalties (included in mining costs) of 5% of revenues based on market prices at the date of shipment. For the six month period ended June 30, 2013, the Company paid $1,329,823 in royalties (2012 - $2,442,134). (b) Operating contractual obligations The Company has operating lease obligations which relate to obligations in 2013 for land operating lease agreements as follows:    Incurred during the six month period ended June 30, 2013 To be incurred in the remainder of 2013 To be incurred 2014-2017 $226,629 $195,087 $628,431 (c) Claims The Company has received a demand letter from a mining contractor that was terminated for failure to perform. Management, with the assistance of outside legal advisors, has reviewed the demand and has at this time concluded that the demand has no merit. Although management, with the assistance of outside legal advisors, has also reviewed the possibility of litigation and does not believe at this time that any litigation would be successful, it is not possible to predict the final outcome of any future litigation. The Company is also subject to two known employment-related litigation actions, and management with the assistance of outside legal advisors has assessed the potential outcome of the litigation. At this time it has been determined that any potential payment will not be material. The Company is also subject to the possibility of revised tax assessments for some years. The Company does not believe that, should unfavourable decisions arise from any review of its tax filings, that any amount it might be required to pay will be material. No amounts have been provided for in the Financial Statements. 15
  17. 17. GALANE GOLD LTD. Notes to the Unaudited Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2013 and 2012 17. Related party transactions During the six months ended June 30, 2013, the following related party transactions occurred:  Philip Condon, the Company’s CEO and Miniera Group Limited (a consulting company owned by Philip Condon): o Management fees of $240,000 were paid in cash to Miniera Group Limited under its contract for the provision of the CEO services of Philip Condon;  Charles Byron, a director of the Company: o The Company paid salary in cash to Mr. Byron totalling $130,000 under his contract as Chief Geologist of the Company; o The Company paid rent of $11,602 for office premises to Great African Services (Pty) Ltd., a company owned by a consortium of individuals that includes Charles Byron;  IAMGOLD, a shareholder with significant influence, by holding in excess of 20% of the common shares of the Company: o The Company paid $1,266,667 in cash representing the initial payment on the interest bearing note to IAMGOLD; o The Company paid $89,127 in cash representing the interest payable on the interest bearing note to IAMGOLD. The remuneration of directors and other members of key management personnel during the six months ended June 30, 2013 are as follows: Six months ended June 30, 2013 (1) (2) 18. $ 328,000 390,000 116,863 82,063 130,000 294,985 - $ Salaries Management fees(1) Directors fees Share-based compensation(2) Six months ended June 30, 2012 916,926 424,985 Management fees represent compensation paid to officers of the Company pursuant to contracts for services. Share-based compensation is the fair value of options granted and vested with key management personnel. Segmented information The Company operates in one reportable segment, being the exploration, development and operation of gold mining properties. All of the Company’s equipment and mining assets are located in the Republic of Botswana and all revenues of the Company are earned in the Republic of Botswana. A breakdown of the total assets by geographic segment is as follows: Canada Cash All other assets Balance, June 30, 2013 $ $ 16 222,164 95,277 317,441 Botswana $ 6,101,896 33,476,070 $ 39,577,966 Total $ 6,324,060 33,571,347 $ 39,895,407

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