Galiano Gold Inc 6-K, filed Nov 8, 2024
Galiano Gold Inc. (GAU)
About this 6-K
Galiano Gold Inc filed this 6-K on November 8, 2024.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2024
Commission File No. 001-33580
GALIANO GOLD INC.
(Translation of registrant's name into English)
Suite 1640, 1066 West Hastings Street
Vancouver, British Columbia, V6E 3X1, Canada
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F
Form 20-F [ ] Form 40-F [X]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) [ ]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) [ ]
SUBMITTED HEREWITH
Exhibits 99.1 and 99.2 included with this report are hereby incorporated by reference as exhibits to the registrant's registration statement on Form F-10 (File No. 333-268945) (the "Registration Statement"), and to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GALIANO GOLD INC.
/s/ Matthew Freeman
________________________________
Matthew Freeman
Chief Financial Officer
Date: November 7, 2024
GALIANO GOLD INC.
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
UNAUDITED
For the three and nine months ended September 30, 2024 and 2023
TABLE OF CONTENTS
GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
AS AT SEPTEMBER 30, 2024 AND DECEMBER 31, 2023
(In thousands of United States Dollars)
| September 30, 2024 | December 31, 2023 | ||||||
| Note | $ | $ | |||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | 5 | 120,916 | 55,270 | ||||
| Accounts receivable | 6,158 | 1,060 | |||||
| Inventories | 6 | 36,005 | - | ||||
| Value added tax receivables | 11,694 | - | |||||
| Prepaid expenses and other | 6,658 | 764 | |||||
| 181,431 | 57,094 | ||||||
| Non-current assets | |||||||
| Financial assets | 7 | - | 70,165 | ||||
| Investment in joint venture | 8 | - | 85,818 | ||||
| Reclamation deposits | 5,331 | - | |||||
| Mineral properties, plant and equipment | 9 | 317,232 | 225 | ||||
| 322,563 | 156,208 | ||||||
| Total assets | 503,994 | 213,302 | |||||
| Liabilities | |||||||
| Current liabilities | |||||||
| Accounts payable and accrued liabilities | 67,333 | 11,863 | |||||
| Lease liabilities | 10 | 15,414 | 125 | ||||
| Provisions | 11 | 9,244 | - | ||||
| 91,991 | 11,988 | ||||||
| Non-current liabilities | |||||||
| Lease liabilities | 10 | 26,656 | 78 | ||||
| Deferred and contingent consideration | 12 | 67,807 | - | ||||
| Asset retirement provisions | 11(b) | 63,930 | - | ||||
| Other non-current liabilities | 9,555 | 318 | |||||
| 167,948 | 396 | ||||||
| Total liabilities | 259,939 | 12,384 | |||||
| Equity | |||||||
| Common shareholders' equity | |||||||
| Share capital | 13 | 616,070 | 579,619 | ||||
| Equity reserves | 52,736 | 53,112 | |||||
| Accumulated deficit | (426,641 | ) | (431,813 | ) | |||
| Total common shareholders' equity | 242,165 | 200,918 | |||||
| Non-controlling interest | 15 | 1,890 | - | ||||
| Total equity | 244,055 | 200,918 | |||||
| Total liabilities and equity | 503,994 | 213,302 | |||||
| Business combination | 4 | ||||||
| Commitments and contingencies | 23 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements .
|
Approved on behalf of the Board of Directors: |
|
|
"Matt Badylak" |
"Greg Martin" |
|
Director |
Director |
GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(In thousands of United States Dollars, except dollar per share amounts)
| Three months ended | Nine months ended | ||||||||||||
| September 30, | September 30, | September 30, | September 30, | ||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||
| Note | $ | $ | $ | $ | |||||||||
| Revenue | 16 | 71,130 | - | 166,788 | - | ||||||||
| Cost of sales: | |||||||||||||
| Production costs | 17 | (32,044 | ) | - | (84,499 | ) | - | ||||||
| Depreciation and depletion | 9 | (8,341 | ) | - | (16,001 | ) | - | ||||||
| Royalties | 18 | (4,301 | ) | - | (10,066 | ) | - | ||||||
| Total cost of sales | (44,686 | ) | - | (110,566 | ) | - | |||||||
| Income from mine operations | 26,444 | - | 56,222 | - | |||||||||
| General and administrative expenses | 19 | (1,731 | ) | (2,869 | ) | (16,056 | ) | (9,867 | ) | ||||
| Exploration and evaluation expenditures | (1,809 | ) | (81 | ) | (4,458 | ) | (1,966 | ) | |||||
| Share of net income related to joint venture | 8 | - | 9,628 | 2,432 | 29,942 | ||||||||
| Service fee earned as operators of joint venture | 20 | - | 1,448 | 976 | 4,284 | ||||||||
| Gain on derecognition of equity investment in joint venture | 8 | - | - | 1,416 | - | ||||||||
| Income from operations and joint venture | 22,904 | 8,126 | 40,532 | 22,393 | |||||||||
| Transaction costs | 4 | (91 | ) | - | (2,492 | ) | - | ||||||
| Finance income | 21(a) | 1,310 | 3,269 | 5,250 | 9,418 | ||||||||
| Finance expense | 21(b) | (22,623 | ) | (6 | ) | (36,607 | ) | (18 | ) | ||||
| Foreign exchange (loss) gain | (400 | ) | - | (1,511 | ) | 50 | |||||||
| Net income and comprehensive income for the period | 1,100 | 11,389 | 5,172 | 31,843 | |||||||||
| Net income attributable to: | |||||||||||||
| Common shareholders of the Company | 1,100 | 11,389 | 5,172 | 31,843 | |||||||||
| Non-controlling interest | 15 | - | - | - | - | ||||||||
| Net income for the period | 1,100 | 11,389 | 5,172 | 31,843 | |||||||||
| Weighted average number of shares outstanding: | |||||||||||||
| Basic | 22 | 256,912,077 | 224,943,453 | 248,496,497 | 224,943,453 | ||||||||
| Diluted | 22 | 262,052,961 | 225,400,119 | 253,662,962 | 225,083,227 | ||||||||
| Net income per share attributable to common shareholders: | |||||||||||||
| Basic | 0.00 | 0.05 | 0.02 | 0.14 | |||||||||
| Diluted | 0.00 | 0.05 | 0.02 | 0.14 | |||||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements .
GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(In thousands of United States Dollars , except for number of common shares)
| Non- | |||||||||||||||||||
| Number of | Equity | Accumulated | controlling | ||||||||||||||||
| shares | Share capital | reserves | deficit | interest | Total equity | ||||||||||||||
| Note | $ | $ | $ | $ | $ | ||||||||||||||
| Balance as at December 31, 2022 | 224,943,453 | 579,591 | 51,998 | (457,898 | ) | - | 173,691 | ||||||||||||
| Share-based compensation expense | 14(a) | - | - | 802 | - | - | 802 | ||||||||||||
| Net income and comprehensive income for the period | - | - | - | 31,843 | - | 31,843 | |||||||||||||
| Balance as at September 30, 2023 | 224,943,453 | 579,591 | 52,800 | (426,055 | ) | - | 206,336 | ||||||||||||
| Balance as at December 31, 2023 | 224,972,786 | 579,619 | 53,112 | (431,813 | ) | - | 200,918 | ||||||||||||
| Issuance of common shares: | |||||||||||||||||||
| Business combination, net of share issuance costs | 4 | 28,500,000 | 32,449 | - | - | - | 32,449 | ||||||||||||
| Exercise of stock options | 14(a) | 3,466,660 | 4,002 | (1,251 | ) | - | - | 2,751 | |||||||||||
| Non-controlling interest assumed in Acquisition | 4 | - | - | - | - | 1,890 | 1,890 | ||||||||||||
| Share-based compensation expense | 14(a) | - | - | 875 | - | - | 875 | ||||||||||||
| Net income and comprehensive income for the period | - | - | - | 5,172 | - | 5,172 | |||||||||||||
| Balance as at September 30, 2024 | 256,939,446 | 616,070 | 52,736 | (426,641 | ) | 1,890 | 244,055 |
The accompanying notes form an integral part of these condensed consolidated interim financial statements .
GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
(In thousands of United States Dollars )
| Three months ended | Nine months ended | ||||||||||||
| September 30, | September 30, | September 30, | September 30, | ||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||
| Note | $ | $ | $ | $ | |||||||||
| Operating activities: | |||||||||||||
| Net income for the period | 1,100 | 11,389 | 5,172 | 31,843 | |||||||||
| Adjustments for: | |||||||||||||
| Depreciation and depletion | 9,19 | 8,374 | 35 | 16,102 | 107 | ||||||||
| Share-based compensation | 19 | (882 | ) | 602 | 7,242 | 3,092 | |||||||
| Share of net income related to joint venture | 8 | - | (9,628 | ) | (2,432 | ) | (29,942 | ) | |||||
| Gain on derecognition of equity investment in joint venture | 8 | - | - | (1,416 | ) | - | |||||||
| Transaction costs | 4 | 91 | - | 2,492 | - | ||||||||
| Finance income | 21(a) | (1,310 | ) | (3,269 | ) | (5,250 | ) | (9,418 | ) | ||||
| Finance expense | 21(b) | 22,614 | 4 | 36,592 | 13 | ||||||||
| Unrealized foreign exchange loss (gain) | 1,134 | (25 | ) | 1,256 | (28 | ) | |||||||
| Operating cash flow before working capital changes | 31,121 | (892 | ) | 59,758 | (4,333 | ) | |||||||
| Change in non-cash working capital | 24 | (6,672 | ) | 752 | (17,818 | ) | 2,273 | ||||||
| Cash provided by (used in) operating activities | 24,449 | (140 | ) | 41,940 | (2,060 | ) | |||||||
| Investing activities: | |||||||||||||
| Acquisition of 45% interest in joint venture from Gold Fields | 4 | - | - | (65,000 | ) | - | |||||||
| Cash and cash equivalents assumed on acquisition | 4 | - | - | 112,502 | - | ||||||||
| Transaction costs paid | 4 | (91 | ) | - | (2,492 | ) | - | ||||||
| Redemption of preferred s hares in joint venture | 7 | - | - | 25,000 | - | ||||||||
| Expenditures on mineral properties, plant and equipment | 9 | (22,634 | ) | (1 | ) | (42,215 | ) | (35 | ) | ||||
| Interest received | 21(a) | 1,291 | 759 | 3,572 | 2,140 | ||||||||
| Purchase of other assets | (306 | ) | - | (306 | ) | - | |||||||
| Cash (used in) provided by investing activities | (21,740 | ) | 758 | 31,061 | 2,105 | ||||||||
| Financing activities: | |||||||||||||
| Payment of lease liabilities | 10 | (4,327 | ) | (32 | ) | (8,654 | ) | (94 | ) | ||||
| Shares issued for cash on exercise of stock options | 14(a) | 171 | - | 2,751 | - | ||||||||
| Share issuance costs | - | - | (40 | ) | - | ||||||||
| Cash used in financing activities | (4,156 | ) | (32 | ) | (5,943 | ) | (94 | ) | |||||
| Impact of foreign exchange on cash and cash equivalents | (676 | ) | (10 | ) | (1,412 | ) | 17 | ||||||
| (Decrease) increase in cash and cash equivalents during the period | (2,123 | ) | 576 | 65,646 | (32 | ) | |||||||
| Cash and cash equivalents, beginning of period | 123,039 | 55,503 | 55,270 | 56,111 | |||||||||
| Cash and cash equivalents, end of period | 120,916 | 56,079 | 120,916 | 56,079 | |||||||||
| Supplemental cash flow information | 24 | ||||||||||||
The accompanying notes form an integral part of these condensed consolidated interim financial statements .
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
1. Nature of operations
Galiano Gold Inc. ("Galiano" or the "Company") was incorporated on September 23, 1999 under the Business Corporations Act of British Columbia, Canada. The Company's head office and principal address is located at 1640 - 1066 West Hastings Street, Vancouver, British Columbia, V6E 3X1, Canada. The Company's registered and records office is located at Suite 3500, 1133 Melville Street, Vancouver, V6E 4E5. The Company's common shares trade on the Toronto Stock Exchange and NYSE American Exchange under the ticker symbol "GAU".
Until March 4, 2024, the Company's principal business activity was the operation of the Asanko Gold Mine ("AGM") through a joint venture arrangement (the "JV") associated with the Company's then 45% equity interest in the entity that held the AGM mining licenses and gold exploration tenements (see note 8).
On March 4, 2024 (the "Acquisition Date"), the Company acquired Gold Fields Limited's ("Gold Fields") 45% interest in the AGM (the "Acquisition"). As of the Acquisition Date, the Company owns a 90% interest in the AGM with the Government of Ghana continuing to hold a 10% free-carried interest (non-controlling interest). Refer to note 4 for further details on the Acquisition and purchase price accounting.
The AGM consists of four main open-pit mining areas: Abore, Miradani North, Nkran and Esaase, multiple satellite deposits and exploration projects located on the Asankrangwa Gold Belt in the Amansie West District of the Republic of Ghana ("Ghana"), West Africa.
2. Basis of presentation
(a) Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting, using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC"). These condensed consolidated interim financial statements do not include all of the necessary annual disclosures in accordance with IFRS and should be read in conjunction with the Company's audited consolidated annual financial statements for the year ended December 31, 2023.
These condensed consolidated interim financial statements were authorized for issue and approved by the Board of Directors on November 7, 2024.
The accounting policies followed by the Company and the JV in these condensed consolidated interim financial statements are the same as those applied in the Company's audited consolidated annual financial statements for the year ended December 31, 2023, except as described below.
Business combinations
Upon the acquisition of a business, the acquisition method of accounting is applied, whereby the purchase consideration is allocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) acquired on the basis of fair value at the date of acquisition.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
2. Basis of presentation (continued)
Acquisition related costs, other than costs to issue equity securities of the Company, including investment banking fees, legal fees, accounting fees, valuation fees, and other professional or consulting fees are expensed as incurred. The cost to issue equity securities of the Company as consideration for the acquisition are reduced from share capital as share issuance costs.
Non-controlling interests are measured at fair value as at the date of acquisition.
Upon the acquisition of control, any previously held interest is re-measured to fair value at the date control is obtained resulting in a gain or loss upon the acquisition of control.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. These provisional amounts are adjusted during the measurement period (up to 12 months from the acquisition date) to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.
(b) Basis of presentation and consolidation
These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for financial instruments carried at fair value.
All amounts are expressed in thousands of United States dollars, unless otherwise stated, and the United States dollar is the functional currency of the Company and each of its subsidiaries. References to C$ are to Canadian dollars.
These condensed consolidated interim financial statements incorporate the financial information of the Company and its subsidiaries as at September 30, 2024. Subsidiaries are entities controlled by the Company. Control exists when the Company has power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Subsidiaries are included in the consolidated financial statements of the Company from the effective date of acquisition up to the effective date of disposition or loss of control. The results of operations and cash flows of Asanko Gold Ghana Ltd., Adansi Gold Company (GH) Ltd. and Shika Group Finance Limited have been consolidated commencing on March 4, 2024 (refer to note 4).
All significant intercompany amounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
2. Basis of presentation (continued)
The principal subsidiaries to which the Company is a party, as well as their geographic locations, were as follows as at September 30, 2024:
| Affiliate name | Location | Interest | Classification and accounting method |
| Galiano Gold South Africa (PTY) Ltd. | South Africa | 100% | Consolidated |
| Galiano International (Isle of Man) Ltd. | Isle of Man | 100% | Consolidated |
| Galiano Gold (Isle of Man) Ltd. | Isle of Man | 100% | Consolidated |
| Galiano Gold Exploration Mali SARL | Mali | 100% | Consolidated |
| Galiano Gold Exploration Ghana Ltd. | Ghana | 100% | Consolidated |
| BUK West Africa Limited | United Kingdom | 100% | Consolidated |
| Asanko Gold Ghana Ltd.1 | Ghana | 90% | Consolidated |
| Adansi Gold Company (GH) Ltd. 1 | Ghana | 100% | Consolidated |
| Shika Group Finance Limited1 | Isle of Man | 100% | Consolidated |
| Galiano Gold Netherlands B.V.2 | Netherlands | 100% | Consolidated |
1 From January 1, 2024 to March 3, 2024, the Company equity accounted for its 45% interest in Asanko Gold Ghana Ltd. and its 50% interest in each of Adansi Gold Company (GH) Ltd. and Shika Group Finance Limited.
2 Acquired on March 4, 2024 as part of the Acquisition and name changed from GFI Netherlands B.V. to Galiano Gold Netherlands B.V. on April 2, 2024.
(c) Accounting standards adopted during the period
There were no new accounting standards effective January 1, 2024 that impacted these condensed consolidated interim financial statements.
(d) Accounting standards and amendments issued but not yet adopted
The following standards and interpretations, which may be applicable to the Company, have been issued but are not yet effective as of September 30, 2024:
IFRS 18
On April 9, 2024, the IASB issued IFRS 18, Presentation and Disclosure in Financial Statements, a new standard on presentation and disclosure in financial statements with a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to: the structure of the statement of profit or loss; required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity's financial statements; and enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general. IFRS 18 will not impact the recognition or measurement of items in the financial statements, but may change what an entity reports as its 'operating profit or loss'. IFRS 18 will apply for reporting periods beginning on or after January 1, 2027 and also applies to comparative information. The Company is evaluating how IFRS 18 will impact the disclosures in its consolidated financial statements in future periods.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
3. Significant accounting judgements and estimates
The preparation of financial statements, in conformity with IFRS, requires management to make judgements, estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Management believes the estimates and assumptions used in these condensed consolidated interim financial statements are reasonable; however, actual results could differ from those estimates and could impact future results of operations and cash flows and reported amounts of assets and liabilities.
The Company's significant accounting judgements and estimates are unchanged as compared to those presented in note 6 of the Company's audited annual consolidated financial statements for the year ended December 31, 2023, except as follows:
Business combinations
Judgements
The Company has concluded that the AGM constitutes a business and, therefore, the acquisition is accounted for in accordance with IFRS 3, Business Combinations. Acquisitions of businesses are accounted for using the acquisition method of accounting.
Estimates
The measurement of consideration transferred and fair value of assets acquired and liabilities assumed required the Company to make certain judgements and estimates taking into account information available at the time of acquisition about future events, including but not limited to: estimates of mineral reserves and resources acquired, exploration potential, future operating costs and capital expenditures, reclamation and closure costs, timing of development of the Nkran pit, future gold prices, discount rates and tax rates. Changes to any of these estimates, based on information available as of the acquisition date, may impact the fair values disclosed in the preliminary purchase price allocation, which would be adjusted retrospectively until the purchase price allocation is finalized within twelve months of the acquisition date.
4. Acquisition of control of AGM
On March 4, 2024, the Company completed the acquisition of Gold Fields' 45% interest in the Asanko Gold Mine JV. Following the closing of the Acquisition, the Company owns a 90% interest in Asanko Gold Ghana Ltd. ("AGGL"), the entity which holds the AGM's mining concessions and licenses, a 100% interest in Adansi Gold Company (GH) Ltd., an entity which holds exploration licenses in Ghana, and a 100% interest in Shika Group Finance Limited, the former JV entity. The Company also acquired a 100% interest in GFI Netherlands B.V. (subsequently renamed to Galiano Gold Netherlands B.V.) , the entity through which Gold Fields held its former 45% interest in the JV.
The objective of the Acquisition was to consolidate ownership of the AGM and obtain control of the asset.
The Company began consolidating the operating results, cash flows and net assets of the AGM commencing on March 4, 2024.
The total consideration payable to Gold Fields comprised the following:
-
$65.0 million in cash;
-
issuance of 28.5 million common shares of the Company;
-
$55.0 million of deferred consideration comprised of a:
-
$25.0 million cash payment on or before December 31, 2025; and
-
$30.0 million cash payment on or before December 31, 2026 (collectively "Deferred Consideration")
-
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
4. Acquisition of control of AGM (continued)
The Deferred Consideration is to be paid in cash subject to the Company's right to satisfy up to 20% of each payment with common shares of the Company, subject to Gold Fields not owning more than 19.9% of the Company's issued and outstanding common shares at that time; and
- $30.0 million cash payment contingently payable upon production of 100,000 gold ounces from the Nkran deposit ("Contingent Consideration").
Gold Fields also received a 1% net smelter return royalty on production from the Nkran deposit beginning upon 100,000 gold ounces being produced, and subject to a maximum of 447,000 gold ounces of production ("Nkran Royalty"). Galiano has a right of first refusal on any full or partial disposition of the Nkran Royalty by Gold Fields.
For accounting purposes, the consideration also includes the fair value of the Company's pre-existing investments in the JV, specifically the preferred shares and equity accounted investment.
The estimated fair value of consideration paid to Gold Fields as of the acquisition date is summarized as follows:
| Fair value | |||
| $ | |||
| Cash | 65,000 | ||
| Common shares (1) | 32,490 | ||
| Deferred consideration(2) | 47,628 | ||
| Contingent consideration(3) | 13,337 | ||
| Nkran royalty(4) | 3,030 | ||
| Fair value of consideration paid for 45% interest in AGM | 161,485 | ||
| Fair value of Galiano's previously held 45% interest | 136,485 | ||
| Fair value of consideration | 297,970 |
(1) The common share consideration fair value is based on a value of $1.14 per share, being the closing price of the Company's common shares on the NYSE American on March 4, 2024.
(2) The Deferred Consideration fair value was estimated using a discounted cash flow model and applying a 6.3% discount rate.
(3) The Contingent Consideration fair value was estimated using a discounted cash flow model and applying a 14.5% discount rate.
(4) The Nkran Royalty fair value was estimated using a discounted cash flow model and applying a forecast long-term gold price of $1,725 per ounce and a discount rate of 14.5%.
The fair value of the Company's previously held 45% interest in the JV is comprised of the fair value of preferred shares amounting to $46.8 million and the fair value of the Company's previous equity investment of $89.7 million.
An allocation of the preliminary purchase price is presented in the table below.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
4. Acquisition of control of AGM (continued)
| Fair Value | |||
| $ | |||
| Assets acquired | |||
| Cash and cash equivalents | 112,502 | ||
| Accounts receivable | 102 | ||
| Inventories | 41,158 | ||
| Value added tax receivables | 7,885 | ||
| Prepaid expenses and other | 5,509 | ||
| Reclamation deposits | 5,308 | ||
| Mineral properties, plant and equipment | 244,584 | ||
| Liabilities assumed | |||
| Accounts payable and accrued liabilities | (44,475 | ) | |
| Lease liabilities | (19,176 | ) | |
| Asset retirement provisions | (53,537 | ) | |
| Net assets acquired | 299,860 | ||
| Non-controlling interest | (1,890 | ) | |
| Net assets attributable to Galiano | 297,970 |
As at September 30, 2024, the allocation of the purchase price has not been finalized. The Company is continuing its review of deferred income taxes. The Company will finalize the allocation of the purchase price no later than twelve months after the acquisition date.
During the three months ended September 30, 2024, adjustments were made to the fair values of non-controlling interest ("NCI") and mineral properties, plant and equipment. NCI was recorded at fair value using a discounted cash flow model based on the AGM's life of mine cash flows, after consideration was given to AGGL's capital structure, and applying a 17.7% discount rate. The fair value of mineral properties, plant and equipment increased by $1.9 million due to a change in the underlying discount rate.
The Company expensed $0.4 million of acquisition-related costs during the year ended December 31, 2023 and another $0.1 million and $2.5 million, respectively, were expensed during the three and nine months ended September 30, 2024 and are presented as transaction costs in the Statement of Operations and Comprehensive Income.
Since the acquisition on March 4, 2024, the assets acquired from the AGM contributed $166.8 million of revenue and $19.1 million of net income. Had the transaction occurred on January 1, 2024, the AGM would have contributed revenue of $200.7 million and net income of $24.8 million for the nine months ended September 30, 2024.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
5. Cash and cash equivalents
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Cash held in banks | 42,704 | 15,827 | ||||
| Short-term investments | 78,212 | 39,443 | ||||
| Cash and cash equivalents | 120,916 | 55,270 |
6. Inventories
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Gold dore on hand | 4,288 | - | ||||
| Gold-in-process | 2,690 | - | ||||
| Ore stockpiles | 9,730 | - | ||||
| Supplies | 19,297 | - | ||||
| Total inventories | 36,005 | - |
7. Financial assets
On closing of the Acquisition, the Company derecognized its preferred share investment in the AGM JV. The following table summarizes the change in the carrying amount of the Company's preferred shares held in the JV for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | ||||||||
| Number of shares | $ | $ | |||||||
| Balance, beginning of period | 132,400,000 | 70,165 | 66,809 | ||||||
| Fair value adjustment for the period | - | 1,654 | 3,356 | ||||||
| Redemption of preferred shares during the period | (25,000,000 | ) | (25,000 | ) | - | ||||
| Derecognition on closing of Acquisition | (107,400,000 | ) | (46,819 | ) | - | ||||
| Balance, end of period | - | - | 70,165 | ||||||
Prior to closing the Acquisition, the Company re-measured the fair value of the preferred shares to $71.8 million and recorded a positive fair value adjustment of $1.7 million in finance income for the nine months ended September 30, 2024 (three and nine months ended September 30, 2023 - positive fair value adjustment of $2.5 million and $7.3 million, respectively).
Prior to closing of the Acquisition, the AGM JV made a $25.0 million preferred share redemption to the Company, which was subsequently used to pay Gold Fields a portion of the cash consideration under the Acquisition.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
8. Asanko Gold Mine joint venture
On March 4, 2024, the Company ceased to apply the equity method of accounting for its previous 45% interest in the AGM JV. For the period from January 1, 2024 to March 3, 2024, the Company recognized its 45% share of the JV net earnings which amounted to $2.4 million (three and nine months ended September 30, 2023 - share of the JV's net earnings of $9.6 million and $29.9 million, respectively).
Prior to closing of the Acquisition, the Company remeasured its equity investment in the AGM JV to fair value and recorded a $1.4 million gain on derecognition of its equity investment in the JV for the nine months ended September 30, 2024.
The following table summarizes the change in the carrying amount of the Company's investment in the AGM JV for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | 85,818 | 54,148 | ||||
| Company's share of the JV's net income for the period | 2,432 | 31,670 | ||||
| Fair value adjustment on derecognition | 1,416 | - | ||||
| Derecognition on closing of Acquisition | (89,666 | ) | - | |||
| Balance, end of period | - | 85,818 |
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
9. Mineral properties, plant and equipment ("MPP&E")
| Exploration | |||||||||||||||||||||
| and | Plant, | ||||||||||||||||||||
| Mineral | evaluation | buildings and | Right-of-use | Assets under | Corporate | ||||||||||||||||
| interests | assets | equipment | assets | construction | assets | Total | |||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | |||||||||||||||
| Cost | |||||||||||||||||||||
| As at December 31, 2022 | - | - | - | 623 | - | 461 | 1,084 | ||||||||||||||
| Additions | - | - | - | - | - | 35 | 35 | ||||||||||||||
| As at December 31, 2023 | - | - | - | 623 | - | 496 | 1,119 | ||||||||||||||
| Acquired under the Acquisition (note 4) | 12,421 | 3,964 | 180,817 | 19,176 | 28,206 | - | 244,584 | ||||||||||||||
| Additions | 45,507 | - | - | 27,816 | 4,767 | 10 | 78,100 | ||||||||||||||
| Change in asset retirement provisions (note 11(b)) | 11,395 | - | - | - | - | - | 11,395 | ||||||||||||||
| Transfers | 17,891 | - | 9,337 | - | (27,228 | ) | - | - | |||||||||||||
| As at September 30, 2024 | 87,214 | 3,964 | 190,154 | 47,615 | 5,745 | 506 | 335,198 | ||||||||||||||
| Accumulated depreciation and depletion | |||||||||||||||||||||
| As at December 31, 2022 | - | - | - | (346 | ) | - | (406 | ) | (752 | ) | |||||||||||
| Depreciation expense | - | - | - | (104 | ) | - | (38 | ) | (142 | ) | |||||||||||
| As at December 31, 2023 | - | - | - | (450 | ) | - | (444 | ) | (894 | ) | |||||||||||
| Depreciation and depletion expense | (5,907 | ) | - | (3,825 | ) | (7,319 | ) | - | (21 | ) | (17,072 | ) | |||||||||
| As at September 30, 2024 | (5,907 | ) | - | (3,825 | ) | (7,769 | ) | - | (465 | ) | (17,966 | ) | |||||||||
| Net book value: | |||||||||||||||||||||
| As at December 31, 2023 | - | - | - | 173 | - | 52 | 225 | ||||||||||||||
| As at September 30, 2024 | 81,307 | 3,964 | 186,329 | 39,846 | 5,745 | 41 | 317,232 |
Additions to mineral interests include capitalized stripping costs at the Abore pit of $25.5 million and $28.2 million for the three and nine months ended September 30, 2024 (three and nine months ended September 30, 2023 - nil for both periods).
Depreciation and depletion expense recognized in the Statement of Operations and Comprehensive Income for the three and nine months ended September 30, 2024 includes a credit of $0.6 million and $1.0 million to depreciation expense, respectively, which were capitalized to inventory.
Refer to note 19 for depreciation expense on corporate fixed assets which is recorded within general and administrative expenses.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
10. Lease liabilities
The following table shows the movement in lease liabilities of the Company for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | 203 | 314 | ||||
| Leases assumed in Acquisition | 19,176 | - | ||||
| Leases entered into during the period | 27,816 | - | ||||
| Lease payments | (8,654 | ) | (127 | ) | ||
| Interest expense | 3,529 | 16 | ||||
| Total lease liabilities, end of period | 42,070 | 203 | ||||
| Less: current portion of lease liabilities | (15,414 | ) | (125 | ) | ||
| Total non-current portion of lease liabilities | 26,656 | 78 |
During the three and nine months ended September 30, 2024, the Company incurred $26.6 million and $49.0 million relating to variable lease payments under mining services and other mining related contracts which have not been included in the measurement of lease liabilities (three and nine months ended September 30, 2023 - nil for both periods).
11. Provisions
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Legal (note 11(a)) | 7,000 | - | ||||
| Current portion of asset retirement provisions (note 11(b)) | 2,244 | - | ||||
| Total provisions | 9,244 | - |
(a) Legal provision
A services provider of the AGM filed a dispute with an arbitration tribunal alleging the AGM breached the terms of a services agreement and claimed approximately $25 million in damages. The arbitrator ruled in favour of the AGM that there had not been a breach of any terms of the contract yet made an award to the counterparty of approximately $13 million plus interest for services rendered. The AGM, consistent with the arbitration ruling, maintains the view that there was no breach of contract, and all contractual amounts were paid as due. The AGM therefore is undertaking an appeals process in the Court of Appeal in Ghana. A provision of $7.0 million has been recorded as of September 30, 2024 (December 31, 2023 - $7.0 million), which represents management's best estimate to settle the claim. While the Company cannot reasonably predict the ultimate outcome of these actions, and inherent uncertainties exist in predicting such outcomes, the Company believes the estimated provision is reasonable based on the information currently available.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
11. Provisions (continued)
(b) Asset retirement provisions
The following table shows the movement in asset retirement provisions of the Company for the nine months ended September 30, 2024:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | - | - | ||||
| Assumed in Acquisition | 53,537 | - | ||||
| Accretion expense (note 21(b)) | 1,489 | - | ||||
| Change in estimate | 11,395 | - | ||||
| Reclamation undertaken during the period | (247 | ) | - | |||
| Total asset retirement provisions, end of period | 66,174 | - | ||||
| Less: current portion of asset retirement provisions | (2,244 | ) | - | |||
| Total non-current portion of asset retirement provisions | 63,930 | - |
The asset retirement provisions consist of reclamation and closure costs for the AGM's mining properties. Reclamation and closure activities include land rehabilitation, dismantling of buildings and mine facilities, ongoing care and maintenance and other costs.
As at September 30, 2024, the AGM's reclamation cost estimates were discounted using a long‐term risk‐free discount rate of 3.7%. $8.4 million of the change in estimate during the period was due to measuring the asset retirement provision in accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets post-acquisition rather than in accordance with IFRS 3, Business Combinations, which requires a market-based discount rate to be applied to estimated reclamation and closure costs in the purchase price accounting.
12. Deferred and contingent consideration
In accordance with the Acquisition agreement, certain consideration payable to Gold Fields is deferred in time or contingent upon certain future events. The Company has recognized the following financial liabilities at fair value as of the acquisition date and were subsequently remeasured in accordance with IFRS 9, Financial Instruments ("IFRS 9").
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Deferred Consideration | 49,350 | - | ||||
| Contingent Consideration | 14,736 | - | ||||
| Nkran Royalty | 3,721 | - | ||||
| Total financial liabilities | 67,807 | - |
(a) Deferred Consideration
$55.0 million of the aggregate consideration payable to Gold Fields is deferred with $25.0 million due on or before December 31, 2025 and $30.0 million due on or before December 31, 2026. The Company estimated the fair value of the Deferred
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
12. Deferred and contingent consideration (continued)
Consideration at initial recognition by discounting the contractual future cash flows at a discount rate of 6.3%, resulting in a fair value of $47.6 million as of March 4, 2024. After initial recognition, the Deferred Consideration is measured at amortized cost.
For the three and nine months ended September 30, 2024, the Company recognized accretion expense of $0.7 million and $1.7 million, respectively, in finance expense in the Statement of Operations and Comprehensive Income.
The following table summarizes the change in the carrying amount of the Deferred Consideration for the nine months ended September 30, 2024:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | - | - | ||||
| Initial recognition at fair value (note 4) | 47,628 | - | ||||
| Accretion expense (note 21(b)) | 1,722 | - | ||||
| Balance, end of period | 49,350 | - |
(b) Contingent Consideration
$30.0 million of the aggregate consideration payable to Gold Fields is contingent upon 100,000 gold ounces being produced from the Nkran deposit. The Company estimated the fair value of the Contingent Consideration by discounting forecast future cash flows based upon the expected payment date from the current life of mine plan at a discount rate of 14.5%, resulting in a fair value of $13.3 million as of March 4, 2024.
In accordance with IFRS 3 and IFRS 9, contingent consideration payable by an acquirer in a business combination shall be subsequently measured at fair value through profit or loss. As such, the Company remeasured the fair value of the Contingent Consideration to $14.7 million as of September 30, 2024 and recognized a $0.5 million and $1.4 million fair value adjustment for the three and nine months ended September 30, 2024, respectively, in finance expense in the Statement of Operations and Comprehensive Income. In determining the fair value at September 30, 2024, the Company applied the same assumptions as of the March 4, 2024 fair value calculation. The Contingent Consideration falls within level 3 of the fair value hierarchy.
The following table summarizes the change in the carrying amount of the Contingent Consideration for the nine months ended September 30, 2024:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | .- | - | ||||
| Initial recognition at fair value (note 4) | 13,337 | - | ||||
| Change in fair value during the period (note 21(b)) | 1,399 | - | ||||
| Balance, end of period | 14,736 | - |
(c) Nkran Royalty
Gold Fields is entitled to a 1% net smelter return royalty on gold revenue generated from the Nkran deposit beginning upon 100,000 gold ounces being produced, and subject to a maximum of 447,000 gold ounces of production. The Company estimated the fair value of the Nkran Royalty by discounting forecast future cash flows at a discount rate of 14.5%, resulting in a fair value of $3.0 million as of March 4, 2024. The gold price assumption applied in estimating future royalty payments was based on long-term consensus prices of $1,725 per ounce as of the Acquisition date.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
12. Deferred and contingent consideration (continued)
In accordance with IFRS 3 and IFRS 9, contingent consideration payable by an acquirer in a business combination shall be subsequently measured at fair value through profit or loss. As such, the Company remeasured the fair value of the Nkran Royalty to $3.7 million as of September 30, 2024 and recognized a $0.4 million and $0.7 million fair value adjustment for the three and nine months ended September 30, 2024, respectively, in finance expense in the Statement of Operations and Comprehensive Income. In determining the fair value at September 30, 2024, the Company updated its long-term gold price assumption to $2,000 per ounce. The Nkran Royalty falls within level 3 of the fair value hierarchy.
The following table summarizes the change in the carrying amount of the Nkran Royalty for the nine months ended September 30, 2024:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | - | - | ||||
| Initial recognition at fair value (note 4) | 3,030 | - | ||||
| Change in fair value during the period (note 21(b)) | 691 | - | ||||
| Balance, end of period | 3,721 | - |
13. Share capital
(a) Authorized:
Unlimited common shares without par value or restrictions.
(b) Issued and outstanding common shares
| Number of shares | Amount | |||||
| $ | $ | |||||
| Balance, January 1, 2023 | 224,943,453 | 579,591 | ||||
| Issued pursuant to exercise of stock options (note 14(a)) | 29,333 | 28 | ||||
| Balance, December 31, 2023 | 224,972,786 | 579,619 | ||||
| Issued on closing of Acquisition (note 4), net of issuance costs | 28,500,000 | 32,449 | ||||
| Issued pursuant to exercise of stock options (note 14(a)) | 3,466,660 | 4,002 | ||||
| Balance, September 30, 2024 | 256,939,446 | 616,070 |
(c) Base shelf prospectus
On December 21, 2022, the Company filed a final short form base shelf prospectus (the "Prospectus") under which the Company may sell from time-to-time common shares, warrants, subscription receipts, units, debt securities and/or share purchase contracts of the Company, up to an aggregate of $300 million. The Prospectus has a term of 25 months from the filing date. As of September 30, 2024, no securities were issued under the Prospectus.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
14. Equity reserves and long-term incentive plan awards
The Company has a stock option plan and a share unit plan under which restricted share units ("RSUs"), performance share units ("PSUs") and deferred share units ("DSUs") may be awarded to directors, officers, employees and other service providers. All awards under the share unit plan may be designated by the Company's Board of Directors to be settled in either cash, shares or a combination thereof at the grant date. As at December 31, 2023, all units previously granted had been determined by the Board to be cash-settled. For awards granted under the share unit plan in 2024, the Board determined that the units would be settled upon vesting in either cash or shares by resolution at that time. Given the Company's historical practice of settling all share units in cash, all units have been treated as cash settled as at September 30, 2024 and are recognized as liabilities at fair value accordingly.
Under the two plans, when combined, the number of shares issuable cannot exceed 9% of the issued and outstanding common shares of the Company. Specifically, shares reserved for issuance under the share unit plan, when designated as equity-settled, may not exceed 5% of the issued and outstanding common shares of the Company. Share units designated as cash settled units at the grant date will not be considered in computing the limits of the share unit plan. Units designated at the time of grant as being settled in either cash or shares, at the Board's discretion, are considered in computing limits under the share unit plan as they may be dilutive upon vesting.
RSUs, PSUs and DSUs are cash-settled awards and therefore represent financial liabilities, which are recorded at fair value at each reporting date and adjusted for the completed proportion of the vesting period, with any changes recorded as shared-based compensation expense in the Statement of Operations and Comprehensive Income. The financial liability associated with these cash-settled awards is recorded in accounts payable and accrued liabilities for amounts expected to be settled within one year, and within other non-current liabilities for amounts to be settled in excess of one year, as of the balance sheet date.
(a) Stock options
Options granted typically vest in one-third increments every twelve months following the grant date for a total vesting period of three years. Stock options have a maximum term of five years following the grant date. The fair value of stock options granted is determined using the Black Scholes option pricing model.
The following table is a reconciliation of the movement in stock options for the period:
| Weighted average | ||||||
| exercise price | ||||||
| Number of Options | C$ | |||||
| Balance, January 1, 2023 | 8,497,170 | 1.04 | ||||
| Granted | 4,574,000 | 0.85 | ||||
| Exercised | (29,333 | ) | 0.84 | |||
| Cancelled/Expired/Forfeited | (466,502 | ) | 1.13 | |||
| Balance, December 31, 2023 | 12,575,335 | 0.97 | ||||
| Granted | 3,534,000 | 1.31 | ||||
| Exercised | (3,466,660 | ) | 1.08 | |||
| Expired/Forfeited | (1,146,336 | ) | 0.96 | |||
| Balance, September 30, 2024 | 11,496,339 | 1.04 |
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
14. Equity reserves and long-term incentive plan awards (continued)
For stock options granted during the nine months ended September 30, 2024, the following assumptions were applied in the Black Scholes option pricing model:
| Assumptions | |||
| Expected life of option (years) | 3.7 | ||
| Forfeiture rate | 17.9% | ||
| Dividend yield | 0.0% | ||
| Risk-free rate | 4.3% | ||
| Volatility | 57.6% | ||
| Black Scholes fair value per option (in US dollars) | $ | 0.44 |
The following table summarizes share-based compensation expense recognized on stock options and aggregate gross proceeds received by the Company on stock option exercises for the three and nine months ended September 30, 2024 and 2023:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Share-based compensation expense | 296 | 285 | 875 | 802 | ||||||||
| Gross proceeds from stock option exercises | 171 | - | 2,751 | - | ||||||||
(b) Restricted Share Units
RSUs granted vest in one-third increments every twelve months following the grant date for a total vesting period of three years. The following table is a reconciliation of the movement in the number of RSUs outstanding for the nine months ended September 30, 2024 and year ended December 31, 2023:
| Number of RSUs | ||||||
| September 30, 2024 | December 31, 2023 | |||||
| Balance, beginning of period | 564,237 | 534,508 | ||||
| Assumed in Acquisition | 75,760 | - | ||||
| Granted | 270,000 | 366,200 | ||||
| Settled in cash | (302,046 | ) | (279,069 | ) | ||
| Forfeited | (59,667 | ) | (57,402 | ) | ||
| Balance, end of period | 548,284 | 564,237 | ||||
For all RSUs granted during the nine months ended September 30, 2024, the awards vest in three equal tranches over a service period of three years and had an estimated forfeiture rate of 23.9% (nine months ended September 30, 2023 - forfeiture rate of 24.2%).
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
14. Equity reserves and long-term incentive plan awards (continued)
The following table is a reconciliation of the movement in the RSU liability for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | 265 | 169 | ||||
| Assumed in Acquisition | 30 | - | ||||
| Awards vested and change in fair value, net of forfeited awards | 446 | 265 | ||||
| Settled in cash | (409 | ) | (169 | ) | ||
| Total RSU liability, end of period | 332 | 265 | ||||
| Less: current portion of RSU liability | (249 | ) | (195 | ) | ||
| Total non-current RSU liability, end of period | 83 | 70 |
(c) Performance share units
PSUs granted prior to December 31, 2023 vest in either one-half or one-third increments every twelve months following the grant date for a total vesting period of two or three years. PSUs granted in 2024 have a cliff vesting feature and will vest after a service period of three years.
All PSUs contain a performance criterion applied to the number of units that vest on a yearly basis. The number of units that vest will be determined by the Company's relative share price performance in comparison to a peer group of companies or upon achievement of certain Company strategic objectives. The PSU performance multiplier ranges from 0% to 150%.
The following table is a reconciliation of the movement in the number of PSUs outstanding for the nine months ended September 30, 2024 and year ended December 31, 2023:
| Number of PSUs | ||||||
| September 30, 2024 | December 31, 2023 | |||||
| Balance, beginning of period | 2,501,482 | 1,739,401 | ||||
| Granted | 884,000 | 1,287,200 | ||||
| Settled in cash | (1,709,427 | ) | (908,429 | ) | ||
| Added due to performance condition | 191,383 | 563,857 | ||||
| Forfeited | (390,951 | ) | (180,547 | ) | ||
| Balance, end of period | 1,476,487 | 2,501,482 | ||||
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
14. Equity reserves and long-term incentive plan awards (continued)
The following table is a reconciliation of the movement in the PSU liability for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | 1,497 | 503 | ||||
| Awards vested and change in fair value, net of forfeited awards | 1,745 | 1,577 | ||||
| Settled in cash | (2,479 | ) | (583 | ) | ||
| Total PSU liability, end of period | 763 | 1,497 | ||||
| Less: current portion of PSU liability | (477 | ) | (1,249 | ) | ||
| Total non-current PSU liability, end of period | 286 | 248 |
(d) Deferred share units
DSUs granted vest over a period of one year and will be paid to directors upon their retirement from the Board of Directors of the Company or upon a change of control.
The following table is a reconciliation of the movement in the number of DSUs outstanding for the nine months ended September 30, 2024 and year ended December 31, 2023:
| Number of DSUs | ||||||
| September 30, 2024 | December 31, 2023 | |||||
| Balance, beginning of period | 4,068,275 | 3,132,000 | ||||
| Granted | 1,045,200 | 1,942,400 | ||||
| Settled in cash | (877,900 | ) | (860,875 | ) | ||
| Forfeited | (87,600 | ) | (145,250 | ) | ||
| Balance, end of period | 4,147,975 | 4,068,275 | ||||
The following table is a reconciliation of the movement in the DSU liability for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | 3,778 | 1,664 | ||||
| Awards vested and change in fair value, net of forfeited awards | 3,662 | 2,663 | ||||
| Settled in cash | (1,521 | ) | (549 | ) | ||
| Total DSU liability, end of period | 5,919 | 3,778 |
The financial liability associated with cash-settled DSU awards is recorded in accounts payable and accrued liabilities. During the three months ended September 30, 2024, $1.5 million of DSUs were paid to a former director of the Company.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
14. Equity reserves and long-term incentive plan awards (continued)
(e) Phantom share units
On November 6, 2020, the Company granted 1,000,000 cash-settled phantom share units to the Chair of the Board. The units vested three years from the grant date, but will only become payable upon the Chair's departure from the Board or upon a change of control of the Company, in a cash settlement amount equal to the fair value of 1,000,000 common shares as at the Chair's departure date or date of change of control.
The phantom share units represent a financial liability, as they will be settled in cash, and are marked-to-market at each reporting period end and presented in the Statement of Financial Position within accounts payable and accrued liabilities.
The following table is a reconciliation of the movement in the phantom share unit liability for the nine months ended September 30, 2024 and year ended December 31, 2023:
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | 917 | 381 | ||||
| Awards vested and change in fair value during the period | 513 | 536 | ||||
| Total phantom share unit liability, end of period | 1,430 | 917 |
15. Non-controlling interest
| September 30, 2024 | December 31, 2023 | |||||
| $ | $ | |||||
| Balance, beginning of period | - | - | ||||
| NCI assumed in Acquisition (note 4) | 1,890 | - | ||||
| Net earnings attributable to NCI | - | - | ||||
| Balance, end of period | 1,890 | - |
The AGM is wholly-owned by AGGL with the Government of Ghana retaining a 10% free-carried interest. The Government has a nominee on the board of this subsidiary and is entitled to 10% of declared dividends paid out of the subsidiary; however, the Government does not have to contribute to the subsidiary's capital investment. The Government of Ghana's free-carried interest is considered to be an NCI. As of September 30, 2024, AGGL did not have retained earnings from which dividends may be paid and as such no net earnings were attributable to non-controlling interest for the nine months ended September 30, 2024.
16. Revenue
AGGL has an offtake agreement (the "Offtake Agreement") with a special purpose vehicle of RK Mine Finance Master Fund I Limited ("Red Kite") under which the AGM will sell 100% of future gold production from the AGM up to a maximum of 2.2 million ounces. The realized gold sale price will be a spot price selected by Red Kite during a nine‐day quotational period following shipment of gold from the mine.
During the three and nine months ended September 30, 2024, the AGM sold 29,014 and 88,684 ounces of gold, respectively, to Red Kite under the Offtake Agreement. For the period from March 4, 2024 to September 30, 2024, being the period the Company controlled the AGM and consolidated its financial results, the AGM sold 71,757 ounces of gold. As of September 30, 2024, the AGM has delivered 1,689,952 gold ounces to Red Kite under the Offtake Agreement.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
16. Revenue (continued)
The Company has recognized revenue from the sale of gold to Red Kite for the period from March 4, 2024 to September 30, 2024, which amounted to $166.5 million. Included in revenue of the Company is $0.3 million relating to by-product silver sales for the nine months ended September 30, 2024.
During the three and nine months ended September 30, 2024 and 2023, the AGM sold a portion of its production to the Bank of Ghana under the country's gold buying program. As agreed with Red Kite, gold ounces sold to the Bank of Ghana were considered delivered under the Offtake Agreement, and in consideration the AGM paid to Red Kite a "make whole" payment which was calculated in a similar manner to a nine‐day quotational period. The "make whole" payments made to Red Kite were recognized as a reduction of revenues.
17. Production costs
The following is a summary of production costs by nature recorded by the Company during the three and nine months ended September 30, 2024. Note that production costs of the AGM were consolidated by the Company from March 4, 2024 onwards.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Raw materials and consumables | (12,643 | ) | - | (30,859 | ) | - | ||||||
| Salaries and employee benefits | (5,989 | ) | - | (13,831 | ) | - | ||||||
| Contractors | (6,166 | ) | - | (21,576 | ) | - | ||||||
| Change in stockpile, gold-in-process and gold dore inventories | (1,332 | ) | - | (8,266 | ) | - | ||||||
| Insurance, government fees, permits and other | (5,914 | ) | - | (9,967 | ) | - | ||||||
| Total production costs | (32,044 | ) | - | (84,499 | ) | - | ||||||
For the nine months ended September 30, 2024, change in inventories included the recognition of purchase price adjustments on gold-in-process and gold on hand inventories amounting to an expense of $7.8 million.
18. Royalties
All of the AGM's concessions are subject to a 5% gross revenue royalty payable to the Government of Ghana. In addition, the Nkran deposit is subject to an additional 1% royalty on a portion of production as described in note 12(c) and the Esaase deposit is subject to an additional 0.5% net smelter return royalty payable to the Bonte Liquidation Committee.
On April 3, 2023, the Government of Ghana imposed a special levy, the Growth and Sustainability Levy ("GSL"), on all companies operating in Ghana with an effective date of May 1, 2023. The purpose of the GSL is to support growth and fiscal sustainability of the Ghanaian economy. For mining companies in Ghana, the GSL is levied at a rate of 1% of gold revenues for the fiscal years 2023 to 2025. The Company has presented the 1% GSL within royalties expense in the Statement of Operations and Comprehensive Income.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
19. General and administrative ("G&A") expenses
The following is a summary of G&A expenses incurred during the three and nine months ended September 30, 2024 and 2023. G&A expenses include G&A expenses of the AGM from March 4, 2024 onwards.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Wages, benefits and consulting | (1,963 | ) | (1,579 | ) | (5,874 | ) | (4,523 | ) | ||||
| Office, rent and administration | (252 | ) | (412 | ) | (1,093 | ) | (1,042 | ) | ||||
| Professional and legal | (471 | ) | (73 | ) | (1,120 | ) | (382 | ) | ||||
| Share-based compensation | 882 | (602 | ) | (7,242 | ) | (3,092 | ) | |||||
| Travel, marketing, investor relations and regulatory | 106 | (168 | ) | (626 | ) | (721 | ) | |||||
| Depreciation | (33 | ) | (35 | ) | (101 | ) | (107 | ) | ||||
| Total G&A expense | (1,731 | ) | (2,869 | ) | (16,056 | ) | (9,867 | ) | ||||
20. JV service fee
For the period from January 1, 2024 to March 3, 2024, the Company was the manager and operator of the AGM JV. For this period, the Company earned a gross service fee of $1.2 million less withholding taxes payable in Ghana of $0.2 million, for a net service fee of $1.0 million, which has been recognized in the Statement of Operations and Comprehensive Income for the nine months ended September 30, 2024 (three and nine months ended September 30, 2023 - a gross service fee of $1.8 million less withholding taxes of $0.4 million and a gross service fee of $5.4 million less withholding taxes of $1.1 million, respectively). The service fee earned from the JV was considered a related party transaction given the Company's previous 45% interest in the JV.
All transactions with related parties have occurred in the normal course of operations.
21. Finance income and expense
(a) Finance income
The following is a summary of finance income recorded by the Company during the three and nine months ended September 30, 2024 and 2023. Finance income earned by the AGM has been consolidated by the Company from March 4, 2024 onwards.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Fair value adjustment on preferred shares (note 7) | - | 2,510 | 1,654 | 7,278 | ||||||||
| Interest income | 1,291 | 759 | 3,572 | 2,140 | ||||||||
| Other | 19 | - | 24 | - | ||||||||
| Total finance income | 1,310 | 3,269 | 5,250 | 9,418 | ||||||||
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
21. Finance income and expense (continued)
(b) Finance expense
The following is a summary of finance expense recorded by the Company during the three and nine months ended September 30, 2024 and 2023. Finance expense incurred by the AGM has been consolidated by the Company from March 4, 2024 onwards.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Unrealized losses on gold hedging instruments (note 25(b)) | (16,552 | ) | - | (22,171 | ) | - | ||||||
| Realized losses on gold hedging instruments (note 25(b)) | (2,162 | ) | - | (5,276 | ) | - | ||||||
| Interest on lease liabilities (note 10) | (1,674 | ) | (4 | ) | (3,529 | ) | (13 | ) | ||||
| Accretion expense on asset retirement provisions (note 11(b)) | (588 | ) | - | (1,489 | ) | - | ||||||
| Accretion expense on deferred consideration (note 12(a)) | (748 | ) | - | (1,722 | ) | - | ||||||
| Change in fair value of contingent consideration (notes 12(b) and (c)) | (891 | ) | - | (2,090 | ) | - | ||||||
| Other | (8 | ) | (2 | ) | (330 | ) | (5 | ) | ||||
| Total finance expense | (22,623 | ) | (6 | ) | (36,607 | ) | (18 | ) | ||||
22. Income per share
For the three and nine months ended September 30, 2024 and 2023, the calculation of basic and diluted income per share is based on the following data:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| Net income for the period attributable to common shareholders | 1,100 | 11,389 | 5,172 | 31,843 | ||||||||
| Number of shares | ||||||||||||
| Weighted average number of ordinary shares - basic | 256,912,077 | 224,943,453 | 248,496,497 | 224,943,453 | ||||||||
| Effect of dilutive stock options | 5,140,884 | 456,666 | 5,166,465 | 139,774 | ||||||||
| Weighted average number of ordinary shares - diluted | 262,052,961 | 225,400,119 | 253,662,962 | 225,083,227 | ||||||||
For the three and nine months ended September 30, 2024, excluded from the calculation of diluted weighted average shares were 558,000 stock options that were determined to be anti-dilutive (three and nine months ended September 30, 2023 - 8,328,001 stock options were determined to be anti-dilutive).
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
23. Commitments and contingencies
Commitments
The following table reflects the Company's contractual obligations as they fall due as at September 30, 2024 and December 31, 2023. Note the December 31, 2023 balances exclude the liabilities and commitments of the AGM.
| Over | September 30, | December 31, | |||||||||||||
| Within 1 year | 1 - 5 years | 5 years | 2024 | 2023 | |||||||||||
| Accounts payable, accrued liabilities and payable due to related party | 46,122 | - | - | 46,122 | 5,724 | ||||||||||
| ZCC gold hedges | 13,136 | 9,186 | - | 22,322 | - | ||||||||||
| Long-term incentive plan (cash-settled awards) | 8,075 | 369 | - | 8,444 | 6,457 | ||||||||||
| Mining and other services contracts | 18,861 | 30,447 | - | 49,308 | - | ||||||||||
| Ass et retirement provisions (undiscounted) | 2,263 | 6,989 | 61,756 | 71,008 | - | ||||||||||
| Deferred and contingent consideration (undiscounted) | - | 55,000 | 39,170 | 94,170 | - | ||||||||||
| Corporate office leases | 122 | - | - | 122 | 225 | ||||||||||
| Total | 88,579 | 101,991 | 100,926 | 291,496 | 12,406 |
The ZCC gold hedges commitment represents the mark-to-market fair value of the AGM's current gold hedging program. The settlement amount of these hedges, if any, will be dependent on the price of gold at the settlement date. The portion of the ZCC gold hedge liability that is expected to be settled in greater than one year from the balance sheet date has been presented within other non-current liabilities in the Statement of Financial Position.
Long-term incentive plan commitments in less than one year include all DSU awards to directors of the Company, as they are considered to be current as the timing of those payments is beyond the control of the Company in the event that a director where to retire or there is a change of control. As of September 30, 2024, the only DSU commitments following director resignations that are known to exist within one year are approximately $0.5 million.
The timing of the contingent payments to Gold Fields ($39.2 million) is based upon management's best estimate of when payments would be required to be made based upon the current life of mine plan.
Contingencies
Due to the nature of its business, the Company and its subsidiaries may be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. While the Company cannot reasonably predict the ultimate outcome of these actions, and inherent uncertainties exist in predicting such outcomes, the Company believes that the ultimate resolution of these actions is not reasonably likely to have a material adverse effect on the Company's financial condition or future results of operations. Refer to note 11 for provisions recorded in respect of an outstanding legal claim.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
24. Supplemental cash flow information
The following table discloses non‐cash transactions impacting the Statements of Cash Flow for the periods presented:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Change in asset retirement provisions included in MPP&E | 3,051 | - | 11,395 | - | ||||||||
| Capitalized leases included in MPP&E | - | - | 27,816 | - | ||||||||
The following table summarizes the changes in non-cash working capital for the three and nine months ended September 30, 2024 and 2023:
| Three months ended September 30, |
Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Accounts receivable | 2,909 | (6 | ) | (4,996 | ) | 1,237 | ||||||
| Inventories | (2,057 | ) | - | 6,133 | - | |||||||
| Value added tax receivables | (1,840 | ) | - | (5,624 | ) | - | ||||||
| Prepaid expenses and other | (445 | ) | (520 | ) | (60 | ) | (195 | ) | ||||
| Accounts payable and accrued liabilities | (5,239 | ) | 1,278 | (13,271 | ) | 1,231 | ||||||
| Change in non-cash working capital | (6,672 | ) | 752 | (17,818 | ) | 2,273 | ||||||
25. Financial instruments
(a) Financial assets and liabilities by categories
| Fair value through profit or loss |
Amortized cost | Carrying value | Fair value | |||||||||
| As at September 30, 2024 | $ | $ | $ | $ | ||||||||
| Financial assets: | ||||||||||||
| Cash and cash equivalents | - | 120,916 | 120,916 | 120,916 | ||||||||
| Accounts receivable | - | 6,158 | 6,158 | 6,158 | ||||||||
| Value added tax receivables | - | 11,694 | 11,694 | 11,694 | ||||||||
| Total financial assets | - | 138,768 | 138,768 | 138,768 | ||||||||
| Financial liabilities: | ||||||||||||
| Accounts payable and accrued liabilities 1 | 21,212 | 46,121 | 67,333 | 67,333 | ||||||||
| Lease liabilities | - | 42,070 | 42,070 | 42,070 | ||||||||
| Deferred consideration | - | 49,350 | 49,350 | 49,350 | ||||||||
| Contingent consideration | 14,736 | - | 14,736 | 14,736 | ||||||||
| Nkran royalty | 3,721 | - | 3,721 | 3,721 | ||||||||
| Other non-current liabilities 1 | 9,555 | - | 9,555 | 9,555 | ||||||||
| Total financial liabilities | 49,224 | 137,541 | 186,765 | 186,765 |
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
25. Financial instruments (continued)
1 Accounts payable in the previous table includes the current portion of long-term incentive plan and gold hedge instrument liabilities, which are measured at fair value through profit or loss.
| Fair value through profit or loss |
Amortized cost | Carrying value | Fair value | |||||||||
| As at December 31, 2023 | $ | $ | $ | $ | ||||||||
| Financial assets: | ||||||||||||
| Cash and cash equivalents | - | 55,270 | 55,270 | 55,270 | ||||||||
| Receivables and receivable due from related party | - | 1,060 | 1,060 | 1,060 | ||||||||
| Preferred shares in AGM JV | 70,165 | - | 70,165 | 70,165 | ||||||||
| Total financial assets | 70,165 | 56,330 | 126,495 | 126,495 | ||||||||
| Financial liabilities: | ||||||||||||
| Accounts payable, accrued liabilities and payable due to related party1 | 6,139 | 5,724 | 11,863 | 11,863 | ||||||||
| Long-term incentive plan liabilities | 318 | - | 318 | 318 | ||||||||
| Lease liability | - | 203 | 203 | 203 | ||||||||
| Total financial liabilities | 6,457 | 5,927 | 12,384 | 12,384 |
1 Accounts payable includes the current portion of long-term incentive plan liabilities , which are measured at fair value through profit or loss.
(b) Derivative instruments
The Company's derivatives are comprised of zero cost collar ("ZCC") gold hedging instruments. The losses on derivatives for the three and nine months ended September 30, 2024 and 2023 were comprised of the following:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||
| $ | $ | $ | $ | |||||||||
| Realized loss on ZCC gold hedges | 2,162 | - | 5,276 | - | ||||||||
| Unrealized loss on ZCC gold hedges | 16,552 | - | 22,171 | - | ||||||||
(c) Fair value hierarchy
The categories of the fair value hierarchy that reflect the inputs to valuation techniques used to measure fair value are as follows:
Level 1: fair values based on unadjusted quoted prices in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and
Level 3: fair values based on inputs for the asset or liability based on unobservable market data.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
25. Financial instruments (continued)
Long-term incentive plan liabilities, Contingent Consideration and the Nkran Royalty are recorded at fair value at the reporting date and fall within Level 3 of the fair value hierarchy. The ZCC gold hedging instruments are also recorded at fair value at the reporting date and fall within Level 1 of the fair value hierarchy.
There were no transfers between the fair value levels during the nine months ended September 30, 2024.
Refer to note 12 for a discussion on the valuation technique applied to the Contingent Consideration and Nkran Royalty. Long-term incentive plan liabilities are valued based on the number of outstanding vested awards multiplied by the Company's share price as of the reporting date. ZCC gold hedging instruments are valued using observable market prices.
(d) Financial instrument risks
The Company has exposure to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth and shareholder returns. The principal financial risks to which the Company is exposed are described as follows.
Credit risk
Credit risk is the risk of an unexpected loss if a customer or the issuer of a financial instrument fails to meet its contractual obligations. The Company is subject to credit risk on cash and cash equivalent balances held at banks in Canada, Isle of Man, and Ghana. The Company invests its cash and cash equivalents, which also has credit risk, with the objective of maintaining safety of principal and providing adequate liquidity to meet all current obligations. In making allocation decisions, management attempts to avoid unacceptable concentration of credit risk to any single counterparty. The risk of loss associated with cash investments is considered to be low as the majority of the Company's cash and cash equivalents are held with highly rated banking institutions.
As at September 30, 2024, the Company had a receivable of $5.9 million due from Red Kite relating to gold ounces delivered (December 31, 2023 - nil), and a $11.7 million value added tax receivable due from the Government of Ghana (December 31, 2023 - nil). The credit risk associated with these receivables is considered to be low based on historical collection experience with the counterparties. However, should any of these counterparties not honour its commitments, or should any of them become insolvent, the Company may incur losses. Subsequent to period-end, the receivable owing from Red Kite was repaid and $5.0 million of the Company's value added tax receivable was collected from the Government of Ghana.
Liquidity risk
Liquidity risk encompasses the risk that the Company cannot meet its financial obligations as they fall due. The Company manages liquidity risk through a rigorous planning and budgeting process, which is reviewed and updated on a regular basis, to help determine the funding requirements to support current operations, expansion and development plans, and by managing the Company's capital structure. By managing liquidity risk, the Company aims to ensure that it will have sufficient liquidity to settle obligations and liabilities as they fall due.
Through a combination of the Company's cash balance and interest earned thereon and cash flows generated by the AGM, the Company believes it is in a position to meet all working capital requirements, contractual obligations and commitments as they fall due. The Company's cash flows, however, and its ability to meet working capital requirements and contractual obligations are significantly influenced by the price of gold and the performance of the AGM. The Company aims to manage its liquidity by ensuring that it can manage spending and provide adequate cash flow to meet all commitments.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
25. Financial instruments (continued)
As at September 30, 2024, after consideration of the financial liabilities assumed in the Acquisition, the Company continues to maintain its ability to meet its financial obligations as they come due.
Market Risk
(i) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The average interest rate earned by the Company on its cash and cash equivalents during the nine months ended September 30, 2024 was 5.4% (nine months ended September 30, 2023 - 5.5%).
The Contingent Consideration and Nkran Royalty are financial liabilities measured at fair value through profit or loss with fair value determined by reference to a discounted cash flow model. Changes in interest rates would impact the discount rate applied to forecast future cash flows and accordingly the fair value of these financial liabilities. Any changes in interest rates would therefore impact the Company's earnings, but would not impact cash payments required to be paid under the terms of the Acquisition agreement. The following table highlights the sensitivity of the fair values related to these financial liabilities for a 1% decrease (increase) in the underlying discount rate.
| Change in fair value | ||||||
| 1% increase to | 1% decrease to | |||||
| discount rate | discount rate | |||||
| $ | $ | |||||
| Contingent consideration | (657 | ) | 695 | |||
| Nkran royalty | (222 | ) | 237 | |||
(ii) Foreign currency risk
The Company reports its financial statements in US dollars; however, the Company operates in Canada and Ghana which utilizes the Canadian dollar and Ghanaian Cedi, respectively. As a result, the financial results of the Company's operations as reported in US dollars are subject to changes in the value of the US dollar relative to local currencies. Since the Company's gold sales are denominated in US dollars and a portion of the Company's operating and capital costs are in local currencies, the Company may be negatively impacted by strengthening local currencies relative to the US dollar and positively impacted by the inverse.
(iii) Price risk
Price risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market prices, other than those arising from currency risk or interest rate risk. The Company is exposed to gold price risk as changes in the gold price may affect the Company's earnings or the value of its financial instruments. The Company's revenue is directly dependent on gold prices which have demonstrated significant volatility and are beyond the Company's control.
From time to time, the Company enters into hedging programs to manage its exposure to gold price risk with an objective of margin protection, specifically during periods of forecast elevated capital spend. The Board of Directors continually assess the Company's strategy towards its gold hedging program. Refer to note 25(b) for disclosure of losses recorded on the Company's gold hedging instruments for the period.
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
26. Segmented information
Geographic Information
As at September 30, 2024, the Company has one reportable segment, being the AGM, and has provided segmented information based on geographic location.
Geographic allocation of total assets and liabilities
| September 30, 2024 | Canada | Ghana | Total | ||||||
| $ | $ | $ | |||||||
| Current assets | 94,321 | 87,110 | 181,431 | ||||||
| Mineral properties, plant and equipment | 143 | 317,089 | 317,232 | ||||||
| Other non-current assets | - | 5,331 | 5,331 | ||||||
| Total assets | 94,464 | 409,530 | 503,994 | ||||||
| Current liabilities | 9,609 | 82,382 | 91,991 | ||||||
| Non-current liabilities | 68,176 | 99,772 | 167,948 | ||||||
| Total liabilities | 77,785 | 182,154 | 259,939 |
| December 31, 2023 | Canada | West Africa | Total | ||||||
| $ | $ | $ | |||||||
| Current assets | 57,084 | 10 | 57,094 | ||||||
| Property, plant and equipment and right-of-use assets | 225 | - | 225 | ||||||
| Other non-current assets | - | 155,983 | 155,983 | ||||||
| Total assets | 57,309 | 155,993 | 213,302 | ||||||
| Current liabilities | 8,475 | 3,513 | 11,988 | ||||||
| Non-current liabilities | 396 | - | 396 | ||||||
| Total liabilities | 8,871 | 3,513 | 12,384 |
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
26. Segmented information (continued)
Geographic allocation of the Statements of Operations and Comprehensive Income
For the three months ended September 30, 2024:
| Canada | Ghana | Total | |||||||
| $ | $ | $ | |||||||
| Revenue | - | 71,130 | 71,130 | ||||||
| Cost of sales: | |||||||||
| Production costs | - | (32,044 | ) | (32,044 | ) | ||||
| Depreciation and depletion | - | (8,341 | ) | (8,341 | ) | ||||
| Royalties | - | (4,301 | ) | (4,301 | ) | ||||
| Income from mine operations | - | 26,444 | 26,444 | ||||||
| General and administrative expenses | (1,448 | ) | (283 | ) | (1,731 | ) | |||
| Exploration and evaluation expenditures | - | (1,809 | ) | (1,809 | ) | ||||
| (Loss) income from operations and joint venture | (1,448 | ) | 24,352 | 22,904 | |||||
| Transaction costs | (91 | ) | - | (91 | ) | ||||
| Finance income | 1,224 | 86 | 1,310 | ||||||
| Finance expense | (1,642 | ) | (20,981 | ) | (22,623 | ) | |||
| Foreign exchange gain (loss) | 7 | (407 | ) | (400 | ) | ||||
| Net (loss) income and comprehensive (loss) income for the period | (1,950 | ) | 3,050 | 1,100 | |||||
| For the three months ended September 30, 2023: | |||||||||
| Canada | West Africa | Total | |||||||
| $ | $ | $ | |||||||
| Share of net income related to joint venture | - | 9,628 | 9,628 | ||||||
| Service fee earned as operators of joint venture | 1,448 | - | 1,448 | ||||||
| General and administrative expenses | (2,843 | ) | (26 | ) | (2,869 | ) | |||
| Exploration and evaluation expenditures | - | (81 | ) | (81 | ) | ||||
| (Loss) income from operations and joint venture | (1,395 | ) | 9,521 | 8,126 | |||||
| Finance income | 759 | 2,510 | 3,269 | ||||||
| Finance expense | (5 | ) | (1 | ) | (6 | ) | |||
| Foreign exchange gain | - | - | - | ||||||
| Net (loss) income and comprehensive (loss) income for the period | (641 | ) | 12,030 | 11,389 |
| GALIANO GOLD INC. NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 Expressed in thousands of United States Dollars unless otherwise stated |
26. Segmented information (continued)
For the nine months ended September 30, 2024:
| Canada | Ghana | Total | |||||||
| $ | $ | $ | |||||||
| Revenue | - | 166,788 | 166,788 | ||||||
| Cost of sales: | |||||||||
| Production costs | - | (84,499 | ) | (84,499 | ) | ||||
| Depreciation and depletion | - | (16,001 | ) | (16,001 | ) | ||||
| Royalties | - | (10,066 | ) | (10,066 | ) | ||||
| Income from mine operations | - | 56,222 | 56,222 | ||||||
| General and administrative expenses | (14,771 | ) | (1,285 | ) | (16,056 | ) | |||
| Exploration and evaluation expenditures | - | (4,458 | ) | (4,458 | ) | ||||
| Share of net income related to joint venture | - | 2,432 | 2,432 | ||||||
| Service fee earned as operators of joint venture | 976 | - | 976 | ||||||
| Gain on derecognition of equity investment in joint venture | 1,416 | - | 1,416 | ||||||
| (Loss) income from operations and joint venture | (12,379 | ) | 52,911 | 40,532 | |||||
| Transaction costs | (2,492 | ) | - | (2,492 | ) | ||||
| Finance income | 3,410 | 1,840 | 5,250 | ||||||
| Finance expense | (3,825 | ) | (32,782 | ) | (36,607 | ) | |||
| Foreign exchange loss | (46 | ) | (1,465 | ) | (1,511 | ) | |||
| Net (loss) income and comprehensive (loss) income for the period | (15,332 | ) | 20,504 | 5,172 | |||||
| For the nine months ended September 30, 2023: | |||||||||
| Canada | West Africa | Total | |||||||
| $ | $ | $ | |||||||
| Share of net income related to joint venture | - | 29,942 | 29,942 | ||||||
| Service fee earned as operators of joint venture | 4,284 | - | 4,284 | ||||||
| General and administrative expenses | (9,756 | ) | (111 | ) | (9,867 | ) | |||
| Exploration and evaluation expenditures | - | (1,966 | ) | (1,966 | ) | ||||
| (Loss) income from operations and joint venture | (5,472 | ) | 27,865 | 22,393 | |||||
| Finance income | 2,140 | 7,278 | 9,418 | ||||||
| Finance expense | (17 | ) | (1 | ) | (18 | ) | |||
| Foreign exchange gain (loss) | 52 | (2 | ) | 50 | |||||
| Net (loss) income and comprehensive (loss) income for the period | (3,297 | ) | 35,140 | 31,843 |
GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the three and nine months ended September 30, 2024 and 2023
(Expressed in United States dollars)
TABLE OF CONTENTS
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
This Management's Discussion and Analysis ("MD&A") of Galiano Gold Inc. ("Galiano" or the "Company") has been prepared by management as of November 7, 2024 and should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and the notes thereto for the three and nine months ended September 30, 2024 and 2023, the audited consolidated annual financial statements and the notes thereto for the year ended December 31, 2023 and the related MD&A. The unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting of the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.
Galiano was incorporated on September 23, 1999, under the Business Corporations Act of British Columbia, Canada.
Additional information on the Company, including its most recent Annual Information Form ("AIF"), is available under the Company's SEDAR+ profile at www.sedarplus.ca and the Company's website: www.galianogold.com.
All dollar amounts herein are expressed in United States dollars ("US dollars") unless otherwise stated. References to $ means US dollars and C$ are to Canadian dollars.
This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in sections "12. Risks and uncertainties" and "15. Cautionary statements" at the end of this MD&A.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
1. Third quarter ("Q3") 2024 highlights
1.1 Asanko Gold Mine ("AGM") highlights
The Company completed the acquisition of Gold Fields Limited's ("Gold Fields") 45% interest in the AGM joint venture (the "Acquisition") on March 4, 2024 and as of that date, the operational and financial results of the AGM have been consolidated into the Company's results. To enable an understanding of the operational performance at the mine asset level, year-to-date highlights for the AGM below are presented on a 100% basis for the entire nine months ended September 30, 2024.
-
Safety: There were no lost-time injuries ("LTI") and one total recordable injury ("TRI") recorded during Q3. The 12‐month rolling LTI and TRI frequency rates as of September 30, 2024 were 0.00 and 0.30 per million hours worked, respectively.
-
Mining performance: During the quarter, waste stripping activities at Abore continued with 9.7 million tonnes ("Mt") of waste rock mined, while ore tonnes mined from the Abore deposit totalled 0.7 Mt at an average mined grade of 1.1 grams per tonne ("g/t") gold. Mining rates at Abore increased by 32% during the third quarter compared to the second quarter of 2024 due to lower precipitation levels, improved mining equipment productivity and additional mining equipment mobilized. These advancements resulted in Q3 mining rates averaging 113,000t per day compared to 87,000t per day in the second quarter of 2024, marking an approximate 30% increase.
-
Milling performance: Milled 1.2 Mt of ore at a grade of 0.9 g/t during Q3, with metallurgical recovery averaging 91%. Mill throughput during the quarter was 13% lower than the second quarter of 2024 due to harder material processed and lower mobile crushing circuit availability, which combined, resulted in suboptimal, coarser material delivered to the SAG mill. As harder Abore material is treated, it is expected that mill throughput will be directly linked to mobile crusher circuit performance until the new secondary crusher is commissioned in Q3 2025. Engineering and early earthworks for the secondary crusher continued during the quarter.
-
Production performance: Gold production of 29,784 ounces during Q3 and 86,607 ounces year-to-date. Gold production during the quarter was 13% higher than the second quarter of 2024, resulting from higher mined grades at Abore and an increase in the recovery rate from 82% to 91%. Given mill throughput is anticipated to remain constrained by harder material in the fourth quarter, the Company expects meeting the lower end of full year guidance of between 120,000 to 130,000 ounces.
-
Cost performance: Total cash costs1 of $1,247 per gold ounce ("/oz") and all-in sustaining costs1 ("AISC") of $2,161/oz for the three months ended September 30, 2024. Year-to-date AISC1 of $1,903/oz, tracking in line with revised AISC1 guidance of between $1,975/oz to $2,075/oz. Deducting the initial stripping at Abore would result in Q3 2024 AISC1 of $1,513/oz and $1,466/oz year-to-date.
-
Cash flow generation: Generated positive cash flow from operations of $28.6 million and Free Cash Flow1 of $2.9 million during Q3, despite significant investment in developing the Abore pit.
-
Financial performance: Gold revenue of $71.0 million generated from 29,014 gold ounces sold at an average realized price of $2,446/oz during Q3. Net income of $3.7 million and Adjusted EBITDA1 of $25.6 million during Q3.
1.2 Galiano highlights
-
Robust liquidity: The Company ended the quarter with $120.9 million in cash and cash equivalents and no debt.
-
Earnings: Net income of $1.1 million or $0.00 per common share and adjusted net income1 of $17.7 million or $0.07 per common share during Q3.
-
Advanced the optimized Life of Mine ("LOM") plan: Progressed technical work related to the optimized LOM plan, in parallel with updated Mineral Reserve and Mineral Resource estimates for the AGM. The updated LOM is focused on earlier mining of the Nkran deposit, compared to the previous technical report (see "NI 43-101 Technical Report and Feasibility Study for the Asanko Gold Mine, Ashanti Region, Ghana" with an effective date of December 31, 2022). The optimized LOM plan is expected to be completed early during the first quarter of 2025.
-
Senior management appointment: Appointed Michael Cardinaels as Executive Vice President and Chief Operating Officer ("COO"), effective September 3, 2024. Mr. Cardinaels brings over two decades of mining experience across various commodities, most recently with Perseus Mining Ltd. The appointment of Mr. Cardinaels is part of the Company's commitment to operational improvements and its overarching strategy to drive growth at the AGM.
____________________________________
1 See "8. Non-IFRS measures"
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
2. Business overview
Following the closing of the Acquisition on March 4, 2024, Galiano owns a 90% equity interest in the entity that holds the AGM mining licenses and gold exploration tenements located on the Asankrangwa Gold Belt in the Republic of Ghana ("Ghana"), West Africa. The AGM consists of four main open-pit deposits: Abore, Nkran, Esaase and Miradani North, multiple satellite deposits and a carbon-in-leach ("CIL") processing plant, with a current capacity of 5.8 Mt per annum.
In addition to its interest in the AGM, the Company owns various exploration licenses across the highly prospective and underexplored Asankrangwa Gold Belt.
Galiano is focused on creating a sustainable business capable of value creation for all stakeholders through production, exploration, accretive business acquisitions and disciplined deployment of its financial resources. The Company's shares are listed on the Toronto Stock Exchange and the NYSE American under the symbol "GAU".
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
2.1 Key business developments in 2024
a) Acquisition of Gold Fields' 45% interest in the AGM
The Company completed the Acquisition of Gold Fields' 45% interest in the AGM joint venture ("JV"), increasing Galiano's equity interest in the AGM to 90% on March 4, 2024.
Under the terms of the agreement, total consideration payable to Gold Fields comprised the following:
-
$65.0 million cash payment, equivalent to Gold Fields' effective interest in the cash balance at the JV;
-
the issuance of 28.5 million common shares of the Company, resulting in Gold Fields owning approximately 19.9% of the Company's issued and outstanding common shares;
-
$55.0 million of deferred consideration comprised of a:
-
$25.0 million cash payment on or before December 31, 2025; and
-
$30.0 million cash payment on or before December 31, 2026 (collectively "Deferred Consideration").
-
The Deferred Consideration is to be paid in cash subject to the Company's right to satisfy up to 20% of each payment with common shares, subject to Gold Fields not owning more than 19.9% of the Company's issued and outstanding common shares at that time; and
- $30.0 million cash payment contingent upon production of 100,000 gold ounces from the Nkran deposit.
Gold Fields will also receive a 1% net smelter return royalty (the "Nkran Royalty") on production from the Nkran deposit beginning upon 100,000 gold ounces being produced, and subject to a maximum of 447,000 gold ounces of production. Galiano has a right of first refusal on any full or partial disposition of the Nkran Royalty by Gold Fields.
Galiano also entered into an amended investor rights agreement with Gold Fields, which includes a 12-month standstill period and other customary rights, including a pre-emptive right for Gold Fields to maintain its ownership interest as at closing of the Acquisition.
b) Increase to Abore Mineral Reserves and Resources
As described in the Company's Q2 2024 MD&A, following successful infill drilling programs at Abore in 2023 and 2024, the Abore deposit Measured and Indicated Mineral Resources increased by 181,000 ounces (38%), as a result of improved grade (13%) and tonnage (22%) from 1.16 g/t to 1.31 g/t, and from 12.8 Mt to 15.6 Mt, respectively, when compared to the report titled "NI 43-101 Technical Report and Feasibility Study for the Asanko Gold Mine, Ashanti Region, Ghana" with an effective date of December 31, 2022 (the "2023 Technical Report"). Both estimates were based on an $1,800/oz gold price and an equivalent cut-off grade of 0.45 g/t gold.
Pursuant to the significant increase to Mineral Resources at Abore, the Probable Mineral Reserves increased by 151,000 ounces (45%) to 485,000 ounces, effective June 30, 2024, when compared to the 2023 Technical Report. This increase in Mineral Reserves will extend mining activities at Abore through mid-2026.
Refer to the Company's website (https://galianogold.com/operations/reserves-and-resources/default.aspx) for the Mineral Reserve estimate by deposit as of June 30, 2024, including key assumptions underlying the estimates.
c) Updated Life of Mine plan
The Company is progressing an update to the AGM's consolidated Mineral Reserve estimate. This update will include additional infill and step out drilling results at the AGM's deposits, a resequencing of mining schedules and associated production profile, and an optimized LOM plan. The Company expects to publish the AGM's updated Mineral Reserve estimate in the first quarter of 2025.
d) Appointment of senior management
Galiano has appointed Michael Cardinaels as Executive Vice President and COO, effective September 3, 2024. The appointment of Mr. Cardinaels as the new Executive Vice President and COO is part of the Company's commitment to operational improvements and its overarching strategy to drive growth at the AGM. Mr. Cardinaels brings over two decades of mining sector experience across various commodities, having held progressively senior operational roles throughout his career. Most recently, Mr. Cardinaels has been the General Manager of the Yaoure mine, after a successful five years at the Sissingue Mine, both with Perseus Mining Ltd. Mr. Cardinaels holds a Bachelor of Engineering (Mining) from the University of Queensland.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
2.3 Financial and operating highlights
Below are the Company's highlights for the three and nine months ended September 30, 2024 and 2023, including the operating results, cash flows and net assets of the AGM from March 4, 2024 onwards.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
(All amounts in 000's of US dollars, unless otherwise stated) |
2024 |
2023 |
2024 |
2023 |
|
Galiano Gold Inc. |
|
|
|
|
|
Revenue |
71,130 |
- |
166,788 |
- |
|
Income from mine operations |
26,444 |
- |
56,222 |
- |
|
Net income |
1,100 |
11,389 |
5,172 |
31,843 |
|
Adjusted net income1 |
17,743 |
11,389 |
37,119 |
31,843 |
|
Adjusted EBITDA1 |
29,012 |
10,282 |
50,117 |
26,656 |
|
Cash and cash equivalents |
120,916 |
56,079 |
120,916 |
56,079 |
|
Cash generated from (used in) operating activities |
24,449 |
(140) |
41,940 |
(2,060) |
The Company has also presented the following highlights for the AGM, which are on a 100% basis, for the three and nine months ended September 30, 2024 and 2023, to enable a comparison of the financial and operating performance of the mine with the corresponding period in the prior quarter.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
(All amounts in 000's of US dollars, unless otherwise stated) |
2024 |
2023 |
2024 |
2023 |
|
Asanko Gold Mine (100% basis) |
||||
|
Financial results |
||||
|
Revenue |
71,130 |
67,770 |
200,695 |
197,029 |
|
Income from mine operations |
26,199 |
23,745 |
72,766 |
72,808 |
|
Net income |
3,718 |
21,284 |
32,120 |
66,276 |
|
Adjusted EBITDA1 |
25,621 |
25,475 |
66,413 |
73,879 |
|
Cash generated from operating activities |
28,646 |
39,740 |
63,982 |
76,662 |
|
Free cash flow1 |
2,932 |
24,016 |
4,236 |
46,088 |
|
AISC margin ($ per gold ounce sold)1 |
285 |
457 |
355 |
536 |
|
Operating results |
||||
|
Gold produced (ounces) |
29,784 |
35,779 |
86,607 |
102,130 |
|
Gold sold (ounces) |
29,014 |
35,522 |
88,684 |
103,608 |
|
Average realized gold price ($/oz) |
2,446 |
1,902 |
2,258 |
1,898 |
|
Total cash costs ($ per gold ounce sold)1 |
1,247 |
1,056 |
1,230 |
1,088 |
|
AISC ($ per gold ounce sold)1 |
2,161 |
1,445 |
1,903 |
1,362 |
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
2.4 Environmental, Social and Corporate Governance
Sustainability is at the core of the Company's business strategy. The Company believes that a comprehensive sustainability strategy is integral to meeting its strategic objectives in positively supporting relationships with its internal and external stakeholders, improving its risk management, reducing the AGM's cost of production and benefiting the catchment communities that the Company operates in, beyond the life of the mine.
The Company implements its sustainability program with a focus on four key areas: (1) protecting human rights; (2) maintaining the occupational health and safety of employees and the local catchment communities; (3) advancing the socio-economic welfare and health of local catchment communities; and (4) managing environmental impacts of operations and exploration activities. For further details on the Company's sustainability program, refer to the Company's 2023 Sustainability Report (the "2023 Sustainability Report") published on July 9, 2024, which is available on the Company's website at www.galianogold.com. The disclosures and metrics of the 2023 Sustainability Report align with international reporting standards, including the Global Reporting Initiative and the Metals and Mining Standards of the Sustainability Accounting Standards Board.
2.5 Macroeconomic factors
Gold Price
The price of gold is the largest single factor in determining the Company's profitability and cash flow from operations. Therefore, the financial performance of the Company is expected to be closely linked to the price of gold. Historically, the price of gold has been subject to volatile price movements over short periods of time and affected by numerous macroeconomic factors that are beyond the Company's control. The price of gold may be impacted by currency exchange rate fluctuations and the relative strength of the U.S. dollar, the supply of and demand for gold, geopolitical events and macroeconomic factors, such as interest rates and inflation expectations. During Q3 2024, the price of gold fluctuated between a low of $2,329/oz in July and a high of $2,664/oz in September, with the average price for Q3 2024 based on the London Bullion Market Association ("LBMA") PM benchmark of $2,474/oz, compared to the Q3 2023 average price of $1,928/oz. Gold prices during Q3 2024 were influenced by geopolitical risks, and volatility in interest rates and the U.S. dollar, among other factors.
For the three months ended September 30, 2024, the AGM realized an average gold price of $2,446/oz under the Offtake Agreement (as defined herein) compared to the average LBMA PM benchmark of $2,474/oz. The LBMA PM spot gold price as of November 6, 2024 was approximately $2,660/oz.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
Management continues to implement and evaluate opportunities to hedge its gold price risk, particularly in light of periods where forecast capital expenditures are estimated to be elevated relative to the life of mine average.
Ghana Economy
In October 2023, the International Monetary Fund ("IMF") and the Ghana government reached a staff-level agreement on the first review of its $3 billion financing arrangement over a 3-year period (the "IMF Loan"). The first tranche of the IMF loan totaling $600 million was paid in May 2023 and a second tranche of $600 million was approved in January 2024 following a debt restructuring plan between Ghana and its creditors. In October 2024, the IMF and Ghana reached an agreement on the third review of the country's IMF Loan. Ghana is nearing completion of a debt-restructuring on $13 billion of Eurobonds, following which it is expected that the IMF executive board will approve a third tranche of financing totaling $360 million, bringing total disbursements under the three-year debt program to $1.56 billion.
The fiscal climate in Ghana over recent years has not materially impacted the operations of the AGM, as much of the cost structure is tied to the US dollar, and the government remains supportive of the mining industry given its importance to maintaining foreign currency reserves.
3. Guidance and outlook
3.1 2024 guidance for the AGM
The Company is maintaining its revised 2024 production guidance (revised as of Q2 2024) of between 120,000 to 130,000 ounces and expects production to come in at the lower end of the range.
Revised AISC1 guidance for 2024 is also being maintained at between $1,975/oz and $2,075/oz. Operating costs are estimated to be in line with previous expectations. AISC1 are anticipated to be elevated in 2024 relative to the life of mine average primarily due to waste stripping to access consistent ore feed at Abore, which will benefit future years production.
Sustaining capital expenditure for 2024 is forecast to be approximately $7.0 million (excluding capitalized waste stripping at Abore). Sustaining capital expenditure has been revised downward from the original $10.0 million due to timing of project start dates.
Development capital expenditure for 2024 is forecast to be approximately $15.0 million. Development capital expenditure has been revised downward from the original $20.0 million due to timing of expenditures.
Exploration expenditure in 2024 is expected to be in line with previous years at $15.0 million. The spend is planned to be equally split between generative and near-mine exploration targets.
| Original guidance | Revised guidance | Actuals YTD | ||||||||
| Unit | 2024 | 2024 | 2024 | |||||||
| Gold production | oz | 140,000 - 160,000 | 120,000 - 130,000 | 86,607 | ||||||
| AISC1 | $/oz | 1,600 - 1,750 | 1,975 - 2,075 | 1,903 | ||||||
| Sustaining capital (excluding waste stripping) | $000s | 10,000 | 7,000 | 3,998 | ||||||
| Development capital | $000s | 20,000 | 15,000 | 9,583 | ||||||
| Exploration | $000s | 15,000 | 15,000 | 8,854 |
___________________________
1 See "8. Non-IFRS measures"
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
4. Results of the AGM
All results of the AGM in this section are presented on a 100% basis for the three and nine months ended September 30, 2024 and 2023. For the period from January 1, 2024 to March 3, 2024, the Company's attributable equity interest in the AGM was 45% and was 90% for the remainder of the period.
4.1 Operating performance
The following table and subsequent discussion provide a summary of the operating performance of the AGM (on a 100% basis) for the three and nine months ended September 30, 2024 and 2023.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
Key mine performance data of the AGM (100% basis) |
2024 |
2023 |
2024 |
2023 |
|
Mining |
||||
|
Ore tonnes mined (000 t) |
670 |
- |
1,402 |
- |
|
Waste tonnes mined (000 t) |
9,726 |
- |
22,030 |
- |
|
Total tonnes mined (000 t) |
10,396 |
- |
23,432 |
- |
|
Strip ratio (waste:ore) |
14.5 |
- |
15.7 |
- |
|
Average gold grade mined (g/t) |
1.1 |
- |
1.0 |
- |
|
Mining cost ($/t mined) |
3.52 |
- |
3.29 |
- |
|
Ore transportation |
||||
|
Ore tonnes trucked (000 t) |
665 |
695 |
1,809 |
2,791 |
|
Ore transportation cost ($/t trucked) |
4.56 |
6.63 |
5.38 |
5.88 |
|
Processing |
||||
|
Tonnes milled (000 t) |
1,162 |
1,573 |
3,965 |
4,596 |
|
Average mill head grade (g/t) |
0.9 |
0.8 |
0.8 |
0.9 |
|
Average recovery rate (%) |
91% |
87% |
85% |
82% |
|
Processing cost ($/t milled) |
12.49 |
9.69 |
11.33 |
10.14 |
|
G&A costs ($/t milled) |
5.74 |
4.16 |
5.17 |
4.30 |
|
Gold produced (ounces) |
29,784 |
35,779 |
86,607 |
102,130 |
|
Gold sold (ounces) |
29,014 |
35,522 |
88,684 |
103,608 |
|
Costs |
||||
|
Total cash costs ($ per gold ounce)1 |
1,247 |
1,056 |
1,230 |
1,088 |
|
AISC ($ per gold ounce sold)1 |
2,161 |
1,445 |
1,903 |
1,362 |
|
AISC margin ($ per gold ounce sold)1 |
285 |
457 |
355 |
536 |
a) Health and safety
There were no LTIs and one TRI reported during the quarter. The rolling 12‐month LTI and TRI frequency rates were 0.00 and 0.30, respectively. The Company reports recordable LTI and TRI cases in accordance with the International Council on Mining and Metals' (ICMM) Mining Principles.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
b) Mining
During the quarter, waste stripping activities at Abore continued with 9.7 Mt of waste rock mined at a strip ratio of 14.5:1. Mining cost per tonne for the quarter amounted to $3.52 per tonne ("/t"). The strip ratio is expected to remain elevated for the remainder of 2024 due to an increase in the Abore pit shell resulting from a larger mineral reserve, as described in section 2.1.b.
Ore tonnes mined from the Abore deposit totalled 0.7 Mt at an average mined grade of 1.1 g/t. Ore mining rates at Abore increased by 43% during Q3 compared to the second quarter of 2024, as lower precipitation levels resulted in improved ground conditions and mining equipment productivity rates. Additional mining equipment was also mobilized during the quarter and, as a result, Q3 mining rates averaged 113,000t per day compared to 87,000t per day in the second quarter of 2024.
c) Ore transportation
Ore transportation reflects ore transported from deposits located greater than 5km from the processing plant. Ore transported from closer deposits is considered rehandling, the costs of which are included within mining costs. During the quarter, 0.7 Mt of ore was trucked from Abore to the processing plant, comparable to the 0.7 Mt from Esaase in Q3 2023. Ore transportation costs in Q3 2024 of $4.56/t were lower than the comparative period due to no tonnes being transported from Esaase in Q3 2024, which is a greater distance from the processing plant than Abore.
d) Processing
The AGM produced 29,784 ounces of gold during Q3 2024, as the processing plant milled 1.2 Mt of ore at a grade of 0.9 g/t with metallurgical recovery averaging 91%. Gold production during Q3 was impacted by lower milling rates, as mined ore from Abore and stockpiles of harder Nkran ore both required additional crushing and grinding. Additionally, two mobile crushers at the processing plant experienced considerable mechanical downtime during the quarter resulting in lower throughput.
Despite 13% lower mill throughput, gold production during Q3 was 13% higher than the second quarter of 2024 resulting from higher mined grades at Abore and an increase in the recovery rate from 82% to 91%.
To improve mill throughput, a mobile crushing unit was installed at the Abore pit at the end of October 2024, which is expected to increase Abore ore fragmentation. This will also improve haul truck load volumes before transport to the processing plant.
The Company continues to make progress on installation of a permanent secondary crushing circuit at the AGM processing facility. The objective of the secondary crushing circuit is to maintain plant throughput at design capacity when treating harder ore. This project is expected to be completed in Q3 2025.
Mill feed grades during Q3 2024 were lower than mined grades from Abore due to the blending of existing stockpiled ore with run of mine ore.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
The mill feed over the balance of the year will incorporate ore mined from Abore and blended with existing stockpile balances. The nature of stockpiled ore can result in highly variable grades and metallurgical recoveries; therefore, the current quarter performance may not be indicative of future performance.
Processing cost per tonne for Q3 2024 was $12.49, a 29% increase from Q3 2023, while on an absolute basis processing costs were $0.7 million lower quarter-on-quarter. The increase in processing cost per tonne in Q3 2024 was driven by fewer tonnes milled which increased fixed processing costs on a per unit basis.
e) Total cash costs and AISC
For the three and nine months ended September 30, 2024, total cash costs1 were $1,247/oz and $1,230/oz, respectively, compared to the three and nine months ended September 30, 2023 of $1,056/oz and $1,088/oz, respectively. The increase in total cash costs1 was primarily driven by 18% lower gold sales volumes, which had the effect of increasing fixed costs on a per ounce basis. During Q3 2023, a higher portion of low grade stockpiled ore was processed that had no accounting book value, and, as such, had no mining cost attributed to it, which resulted in lower total cash costs1 in the comparative quarter.
Relative to Q2 2024, total cash costs1 were lower in Q3 2024, decreasing by 2% from $1,271/oz to $1,247/oz. Total cash costs per ounce1 were lower in Q3 2024 due to 4% more gold ounces sold.
For the three and nine months ended September 30, 2024, AlSC1 for the AGM amounted to $2,161/oz and $1,903/oz, respectively, compared to $1,445/oz and $1,362/oz in the comparative periods of 2023. The increase in AlSC1 from Q3 2023 to Q3 2024 was mainly due to the stripping costs at Abore and 18% fewer gold ounces sold, as well as the increase in total cash costs per ounce1 described above. During the three and nine months ended September 30, 2024, AISC included $648/oz and $437/oz of capitalized stripping costs at the Abore pit, respectively, which will benefit future years production.
Relative to Q2 2024, AlSC1 increased by 23% from $1,759/oz to $2,161/oz. The increase in AISC1 was primarily due to higher capitalized stripping costs at Abore ($379/oz increase).
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
For the three and nine months ended September 30, 2024, the AGM incurred non-sustaining capital expenditures and exploration expenditures of $4.9 million and $18.4 million, respectively, compared to $7.3 million and $15.2 million during the comparative periods in 2023, respectively. Non-sustaining capital expenditures and exploration expenditures during Q3 2024 related primarily to Adubiaso site preparations, processing plant enhancements (fabrication of two new CIL tanks and secondary crushing circuit) and work performed on various greenfield exploration targets.
4.2 Exploration update
The Company holds a district-scale land package of 476km2 on the highly prospective and underexplored Asankrangwa Gold Belt. The following exploration programs were undertaken at the AGM during the nine months ended September 30, 2024 to evaluate the current and potential expanded mineralization of several deposits, and to assess the broader potential of these deposits. Additionally, work was undertaken to identify new exploration targets across the wider regional AGM tenements.
-
Gyagyatreso - the Gyagyatreso prospect is located approximately 4km northwest of the AGM processing plant. Following the success of the 2023 drilling program, a follow up exploration program has been completed. Ground mapping, prospecting and a ground magnetics survey were completed ahead of the current second phase of drilling designed to test for along-strike continuations of mineralization identified in the 2023 campaign. Drilling continued through Q3 primarily on the southern strike extensions of known mineralization. A total of 1,421m were drilled during the quarter bringing the completed program total to 5,079m. Not all planned holes were drilled as mineralization appears to narrow to the north and south. A review and interpretation of all results is ongoing.
-
Sky Gold B - the Sky Gold B prospect is located approximately 9km northwest of the Esaase deposit in an area that may be underlain by lithologies and structural settings similar to those that host the known Asankrangwa gold belt deposits. A soil survey conducted in 2023 identified a gold-in-soil anomalous trend (approximately 5km long) that is a priority for follow-up exploration. The drilling program, designed to test the highest priority areas in the Sky Gold B area, consists of 5,760m of combined air core reverse circulation ("RC") and diamond drilling ("DD") and began in August 2024. As of September 30, 2024, a combined 3,037m of drilling has been completed. Several structural shear zones with minor quartz veining have been intercepted across multiple drill fences. Assays for 2,947m have been received and are under quality assurance and quality control review. Drilling is anticipated to be completed in by mid-Q4 2024.
-
Abore North - the Abore North target is located approximately 100m along strike to the north of the Abore pit. Prospecting, mapping and a ground magnetics survey carried out in 2023 and early 2024 indicated the possible presence of mineralized Abore type granitoids and a drill program began at the end of August 2024. As of September 30, 2024, a total of 1,043m of a planned 2,000m of combined RC and DD was completed. Granitoids have been successfully intercepted in several holes to date and the remainder of drilling and final assays are expected to be completed and received in Q4 2024.
In addition to the drill programs above, the Company also initiated geophysical surveys and conducted mapping and prospecting on several regional greenfield targets across the AGM's tenements with an objective of identifying new potential drill targets.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
4.3 Financial results of the AGM
The following table presents excerpts of the financial results of the AGM on a 100% basis for the three and nine months ended September 30, 2024 and 2023, excluding purchase price adjustments which are required under IFRS, so performance can be compared with the comparative period in the prior quarter.
Three months ended September 30, 2024 and 2023
| Three months ended September 30, | ||||||
| 2024 | 2023 | |||||
| (in thousands of US dollars) | $ | $ | ||||
| Revenue | 71,130 | 67,770 | ||||
| Cost of sales: | ||||||
| Production costs | (32,044 | ) | (35,644 | ) | ||
| Depreciation and depletion2 | (8,585 | ) | (4,308 | ) | ||
| Royalties | (4,302 | ) | (4,073 | ) | ||
| Income from mine operations | 26,199 | 23,745 | ||||
| Exploration and evaluation expenditures | (2,007 | ) | (2,163 | ) | ||
| General and administrative expenses | (320 | ) | (527 | ) | ||
| Income from operations | 23,872 | 21,055 | ||||
| Finance expense | (20,979 | ) | (1,418 | ) | ||
| Finance income | 1,205 | 1,224 | ||||
| Foreign exchange (loss) gain | (380 | ) | 423 | |||
| Net income for the period | 3,718 | 21,284 | ||||
| Galiano share of net income related to JV | - | 9,628 | ||||
| Average realized price per gold ounce sold ($/oz) | 2,446 | 1,902 | ||||
| Average London PM fix ($/oz) | 2,474 | 1,928 | ||||
| Gold sold (ounces) | 29,014 | 35,522 | ||||
2 The financial results for the AGM presented above do not include depletion of purchase price allocation accounting adjustments on mineral properties, plant and equipment for the three months ended September 30, 2024.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
Galiano consolidated the financial results of the AGM commencing on March 4, 2024, such that the results for the period from March 4, 2024 to September 30, 2024 have been consolidated into the Income Statement of the Company. The Company reflected the financial results of the AGM for the period from January 1, 2024 to March 3, 2024 through its share of the net income of the JV using the equity accounting method.
Nine months ended September 30, 2024 and 2023
|
|
Pre-acquisition |
Post-acquisition |
|
|
|
|
Period from January 1 |
Period from March 4 |
|
|
|
|
to March 3, |
to September 30, |
Nine months ended September 30, |
|
|
|
2024 |
2024 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Revenue |
33,907 |
166,788 |
200,695 |
197,029 |
|
Cost of sales: |
|
|
|
|
|
Production costs 2 |
(20,810) |
(76,668) |
(97,478) |
(103,905) |
|
Depreciation and depletion2 |
(2,463) |
(15,887) |
(18,350) |
(9,263) |
|
Royalties |
(2,034) |
(10,067) |
(12,101) |
(11,053) |
|
Income from mine operations |
8,600 |
64,166 |
72,766 |
72,808 |
|
Exploration and evaluation expenditures |
(2,201) |
(4,617) |
(6,818) |
(5,272) |
|
General and administrative expenses |
(486) |
(1,324) |
(1,810) |
(1,972) |
|
Income from operations |
5,913 |
58,225 |
64,138 |
65,564 |
|
Transaction costs |
(1,180) |
- |
(1,180) |
- |
|
Finance expense |
(261) |
(32,781) |
(33,042) |
(2,363) |
|
Finance income |
984 |
2,804 |
3,788 |
3,221 |
|
Foreign exchange loss |
(150) |
(1,434) |
(1,584) |
(146) |
|
Net income for the period |
5,306 |
26,814 |
32,120 |
66,276 |
|
|
|
|
|
|
| Galiano share of net income related to JV |
2,432 |
- |
2,432 |
29,942 |
|
Average realized price per gold ounce sold ($/oz) |
|
|
2,258 |
1,898 |
|
Average London PM fix ($/oz) |
|
|
2,296 |
1,930 |
|
Gold sold (ounces) |
|
|
88,684 |
103,608 |
2 The financial results for the AGM presented above do not include purchase price allocation accounting adjustments. Specifically, production costs and depreciation expense exclude the realization of purchase price adjustments on gold-in-process and gold on hand inventories totaling $7.8 million and $0.9 million, respectively, for the nine months ended September 30, 2024.
a) Revenue
During Q3 2024, the AGM sold 29,014 ounces of gold at an average realized gold price of $2,446/oz for total revenue of $71.1 million (including $0.2 million of by-product silver revenue). During Q3 2023, the AGM sold 35,522 ounces of gold at an average realized gold price of $1,902/oz for total revenue of $67.8 million (including $0.2 million of by-product silver revenue). Revenue was higher quarter-on-quarter, as a 29% increase in realized gold prices relative to Q3 2023 was partly offset by an 18% reduction in sales volumes.
During the nine months ended September 30, 2024, the AGM sold 88,684 ounces of gold at an average realized gold price of $2,258/oz for total revenue of $200.7 million (including $0.5 million of by-product silver revenue). During the comparative period of 2023, the AGM sold 103,608 ounces of gold at an average realized gold price of $1,898/oz for total revenue of $197.0 million (including $0.4 million of by‐product silver revenue). Revenue was higher period-on-period, as a 19% increase in realized gold prices relative to 2023 was partly offset by a 14% reduction in sales volumes.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
The AGM continues to sell all the gold it produces to a special purpose vehicle of RK Mine Finance Master Fund I Limited ("Red Kite") under an offtake agreement (the "Offtake Agreement"). The terms of the Offtake Agreement require the AGM to sell 100% of its gold production up to a maximum of 2.2 million ounces to Red Kite. As of September 30, 2024, 1,689,952 gold ounces have been delivered to Red Kite under the Offtake Agreement.
During the three and nine months ended September 30, 2024 and 2023, the AGM sold a portion of its production to the Bank of Ghana under the country's gold buying program, as agreed with Red Kite.
b) Production costs
During the three and nine months ended September 30, 2024, the AGM incurred production costs of $32.0 million and $97.5 million, respectively, compared to $35.6 million and $103.9 million in the comparative periods of 2023, respectively. Production costs were lower during the three and nine months ended September 30, 2024 due to fewer gold ounces sold, partly offset by mining costs at the Abore deposit in 2024.
c) Depreciation and depletion
During the three and nine months ended September 30, 2024, depreciation and depletion expense on mineral properties, plant and equipment ("MPP&E") was $8.6 million and $18.4 million, respectively, compared to $4.3 million and $9.3 million in the comparative periods of 2023, respectively. Depreciation and depletion expense was higher during the three and nine months ended September 30, 2024 due to depreciation recorded on right-of-use lease assets associated with mining services and ore transportation contracts, as well as depletion of Abore development costs.
d) Royalties
The Ghanaian government charges a 5% royalty on revenues earned through sales of minerals from the AGM's concessions. The AGM's Esaase concession is also subject to a 0.5% net smelter return royalty payable to the Bonte Liquidation Committee. The Esaase royalty is presented within production costs. Furthermore, the Nkran deposit is subject to an additional 1% royalty, on a portion of production, related to the Acquisition described in section 2.1.a.
The Government of Ghana also imposed a short-term special levy, the Growth and Sustainability Levy ("GSL"), on all companies operating in Ghana which became effective on May 1, 2023. The purpose of the GSL is to support growth and fiscal sustainability of the Ghanaian economy. For mining companies in Ghana, the GSL is levied at a rate of 1% of gold revenues for the fiscal years 2023 to 2025. This is presented as a royalty expense in the Statement of Operations.
Royalties expense was higher during the three and nine months ended September 30, 2024 due to higher recorded revenues and the introduction of the GSL in May 2023.
e) Exploration and evaluation ("E&E") expenditures
During the three and nine months ended September 30, 2024, the AGM recorded E&E expenses of $2.0 million and $6.8 million, respectively (see 4.2 "Exploration update"), compared to $2.2 million and $5.3 million of E&E expenses in the comparative periods of 2023, respectively. E&E expenses during the nine months ended September 30, 2024 were higher due to the Company's focus on advancing greenfield exploration targets, specifically the Akoma, Gyagyatreso and Sky Gold B prospects.
f) Finance expense
Finance expense for the three and nine months ended September 30, 2024, was $21.0 million and $33.0 million, respectively, compared to $1.4 million and $2.4 million during the same periods in 2023, respectively. Finance expense was higher in Q3 2024 due to a $16.6 million unrealized loss on the AGM's zero cost gold collar ("ZCCs") hedges relating to future periods, a $2.2 million realized loss on settled Q3 2024 ZCCs hedges, and $1.7 million of higher interest expense on capitalized leases.
For the nine months ended September 30, 2024, finance expense was higher due to a $21.4 million unrealized loss on ZCCs hedges, a $5.3 million realized loss on settled 2024 ZCCs hedges, and $4.0 million of higher interest expense on capitalized leases.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
4.4 Cash flows of the AGM
The following table provides a summary of cash flows for the AGM on a 100% basis for the three and nine months ended September 30, 2024 and 2023. Galiano consolidated the cash flows from the AGM commencing on March 4, 2024.
Three months ended September 30, 2024 and 2023
|
|
Three months ended September 30, |
|
|
|
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
|
Cash provided by (used in): |
|
|
|
Operating activities |
28,646 |
39,740 |
|
Investing activities |
(21,420) |
(15,413) |
|
Financing activities |
(4,294) |
(377) |
Nine months ended September 30, 2024 and 2023
|
|
Pre-acquisition |
Post-acquisition |
|
|
|
|
Period from January |
Period from March 4 |
|
|
|
|
1 to March 3, |
to September 30, |
Nine months ended September 30, |
|
|
|
2024 |
2024 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Cash provided by (used in): |
|
|
|
|
|
Operating activities |
11,115 |
52,867 |
63,982 |
76,662 |
|
Investing activities |
(11,128) |
(39,403) |
(50,531) |
(29,772) |
|
Financing activities |
(1,020) |
(8,195) |
(9,215) |
(973) |
a) Cash flows from operating activities
The decrease in operating cash flows during the three and nine months ended September 30, 2024, relative to the comparative periods in 2023, was driven by a $17.3 million and $18.0 million increase in working capital tie-up, respectively, mainly due to an increase in receivables and reduction in accounts payable. This was partly offset by higher recorded revenues resulting from higher realized gold prices.
b) Cash used in investing activities
During Q3 2024, the AGM invested $22.6 million in additions to MPP&E and earned $1.2 million of interest on cash balances, compared to $16.6 million and $1.2 million in Q3 2023, respectively. Total cash expenditure on MPP&E during the quarter included $18.8 million of waste stripping costs at the Abore deposit, and development capital expenditures of $3.0 million primarily related to Adubaiso site preparations and fabrication of two new CIL tanks.
During the nine months ended September 30, 2024, the AGM invested $54.3 million in additions to MPP&E and earned $3.8 million of interest on cash balances, compared to $33.0 million and $3.2 million in the comparative periods of 2023, respectively. Total cash expenditure on MPP&E during the current period included $38.7 million of waste stripping costs at the Abore deposit and $4.0 million of sustaining capital, related primarily to raising the height of the TSF. Development and capitalized exploration expenditures were $11.6 million primarily related to Abore and Adubaiso site preparations, processing plant enhancements (fabrication of two new CIL tanks and secondary crushing circuit), Adubiaso infill drilling and Mineral Resource conversion drilling at Abore.
During the three and nine months ended September 30, 2024, the increase in cash flows invested in MPP&E related to waste stripping activities at the Abore deposit, which will benefit future years production, while the prior periods included higher capital costs related to raising the height of the tailings storage facility (“TSF”) and construction of a water treatment facility at the TSF.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
c) Cash used in financing activities
For the three and nine months ended September 30, 2024, cash used in financing activities related to capitalized lease payments on the AGM’s mining and other service contracts due to restarting mining operations at the AGM effective October 1, 2023.
5. Consolidated results of the Company
5.1 Financial performance
The following table is a summary of the Consolidated Statements of Operations and Comprehensive Income of the Company for the three and nine months ended September 30, 2024 and 2023. The financial results of the AGM have been consolidated by the Company commencing on March 4, 2024.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars, except per share amounts) |
$ |
$ |
$ |
$ |
|
Revenue |
71,130 |
- |
166,788 |
- |
|
Cost of sales: |
|
|
|
|
|
Production costs |
(32,044) |
- |
(84,499) |
- |
|
Depreciation and depletion |
(8,341) |
- |
(16,001) |
- |
|
Royalties |
(4,301) |
- |
(10,066) |
- |
|
Total cost of sales |
(44,686) |
- |
(110,566) |
- |
|
Income from mine operations |
26,444 |
- |
56,222 |
- |
|
General and administrative expenses |
(1,731) |
(2,869) |
(16,056) |
(9,867) |
|
Exploration and evaluation expenditures |
(1,809) |
(81) |
(4,458) |
(1,966) |
|
Share of net income related to joint venture |
- |
9,628 |
2,432 |
29,942 |
|
Service fee earned as operators of joint venture |
- |
1,448 |
976 |
4,284 |
|
Gain on derecognition of equity investment in joint venture |
- |
- |
1,416 |
- |
|
Income from operations and joint venture |
22,904 |
8,126 |
40,532 |
22,393 |
|
Transaction costs |
(91) |
- |
(2,492) |
- |
|
Finance income |
1,310 |
3,269 |
5,250 |
9,418 |
|
Finance expense |
(22,623) |
(6) |
(36,607) |
(18) |
|
Foreign exchange (loss) gain |
(400) |
- |
(1,511) |
50 |
|
Net income and comprehensive income for the period |
1,100 |
11,389 |
5,172 |
31,843 |
|
|
|
|
|
|
| Net income attributable to: |
|
|
|
|
|
Common shareholders of the Company |
1,100 |
11,389 |
5,172 |
31,843 |
|
Non-controlling interest |
- |
- |
- |
- |
|
Net income for the period |
1,100 |
11,389 |
5,172 |
31,843 |
|
|
|
|
|
|
| Weighted average number of shares outstanding: |
|
|
|
|
|
Basic |
256,912,077 |
224,943,453 |
248,496,497 |
224,943,453 |
|
Diluted |
262,052,961 |
225,400,119 |
253,662,962 |
225,083,227 |
|
Net income per share attributable to common shareholders: |
|
|
|
|
|
Basic |
0.00 |
0.05 |
0.02 |
0.14 |
|
Diluted |
0.00 |
0.05 |
0.02 |
0.14 |
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
a) Revenue, production costs, depreciation and depletion, and royalties
Following the closing of the Acquisition, the Company began consolidating the financial results of the AGM commencing on March 4, 2024. As revenue, production costs, depreciation and depletion and royalties expense for the three and nine months ended September 30, 2024 relate to the financial results of the AGM, refer to section 4.3 for discussion of the AGM's financial results for the periods presented.
For the period from March 4, 2024 to September 30, 2024, revenue related to 71,757 gold ounces sold at an average realized gold price of $2,320/oz. Additionally, production costs included the realization of purchase price adjustments on gold-in-process and gold on hand inventories totaling $7.8 million, which increased production costs by that amount.
b) G&A expenses
G&A expenses for the three and nine months ended September 30, 2024 and 2023 comprised the following:
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Wages, benefits and consulting |
(1,963) |
(1,579) |
(5,874) |
(4,523) |
|
Office, rent and administration |
(252) |
(412) |
(1,093) |
(1,042) |
|
Professional and legal |
(471) |
(73) |
(1,120) |
(382) |
|
Share-based compensation |
882 |
(602) |
(7,242) |
(3,092) |
|
Travel, marketing, investor relations and regulatory |
106 |
(168) |
(626) |
(721) |
|
Depreciation |
(33) |
(35) |
(101) |
(107) |
|
Total G&A expense |
(1,731) |
(2,869) |
(16,056) |
(9,867) |
G&A expenses in Q3 2024 were $1.1 million lower than Q3 2023 primarily due to a $1.5 million decrease in share-based compensation expense, resulting from a decrease in the fair value of cash‐settled long‐term incentive plan awards linked to the Company's share price. This factor was partly offset by the Company consolidating the financial results of the AGM for the three months ended September 30, 2024, which resulted in a $0.3 million increase to G&A expense relative to the prior quarter.
For the nine months ended September 30, 2024, G&A expenses were $6.2 million higher than the comparative period due to a $4.2 million increase in share-based compensation expense, resulting from an increase in the fair value of cash‐settled long‐term incentive plan awards linked to the Company's share price, as well as vesting of outstanding awards. G&A expenses were also impacted by the consolidation of the AGM's financial results for the period March 4, 2024 to September 30, 2024 ($1.3 million increase) and severance paid to former employees.
c) E&E expenditures
Refer to section 4.3.e for a discussion on the AGM's E&E expenditures for the three and nine months ended September 30, 2024. The increase in E&E expenses in 2024 was due to the consolidation of the AGM's financial results commencing on March 4, 2024.
d) Share of net income related to the AGM JV
For the nine months ended September 30, 2024, the Company recognized its 45% interest in the JV's net earnings, which amounted to $2.4 million for the period prior to closing of the Acquisition (three and nine months ended September 30, 2023 - $9.6 million and $29.9 million, respectively). The reduction in the Company's share of the JV's net earnings in 2024 was due to applying the equity method of accounting for its investment in the JV for only the pre-acquisition period of approximately two months in 2024.
e) Service fee earned as operators of the AGM JV
For the nine months ended September 30, 2024, the Company earned a gross service fee of $1.2 million for being the manager and operator of the JV, less withholding taxes payable in Ghana of $0.2 million (three and nine months ended September 30, 2023 - a gross service fee of $1.8 million less withholding taxes of $0.4 million, and a gross service fee of $5.4 million less withholding taxes of $1.1 million, respectively). The decrease in the gross service fee during 2024 was due to the Company acquiring Gold Fields' 45% interest in the JV effective March 4, 2024, after which the service fee was not recognized.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
f) Gain on derecognition of equity investment
Prior to closing of the Acquisition, the Company remeasured its equity investment in the AGM JV to fair value and recorded a $1.4 million gain on derecognition of its equity investment for the nine months ended September 30, 2024.
g) Transaction costs
During the three and nine months ended September 30, 2024, the Company recognized $0.1 million and $2.5 million, respectively, of costs related to closing the Acquisition. Transaction costs included advisory, regulatory, legal and other support fees.
h) Finance income
Finance income includes changes in the fair value of the Company's previously recognized preferred share investment in the JV and interest earned on cash and cash equivalents. For the nine months ended September 30, 2024, the Company recognized a $1.7 million upward fair value adjustment on the preferred shares (three and nine months ended September 30, 2023 - $2.5 million and $7.3 million upward fair value adjustments, respectively).
Relative to the comparative periods in 2023, interest earned on cash and cash equivalents was $0.5 million and $1.4 million higher during the three and nine months ended September 30, 2024, respectively, due to consolidating the financial results of the AGM from March 4, 2024.
i) Finance expense
Finance expense for the three and nine months ended September 30, 2024 included accretion expense on reclamation provisions, interest expense on capitalized leases, changes in fair value of the Acquisition contingent consideration, realized losses on ZCC gold hedges and unrealized losses on ZCC gold hedges, which have not yet matured. The increase in finance expense relative to the comparative periods in 2023 was due to consolidating the financial results of the AGM from March 4, 2024.
For the three and nine months ended September 30, 2024, the Company recognized a $16.6 million and $22.2 million unrealized loss on ZCCs hedges, respectively, that have not yet matured, and a $2.2 million and $5.3 million realized loss on settled 2024 ZCCs hedges, respectively.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
6. Selected quarterly financial data
The following table provides a summary of unaudited financial data for the last eight quarters. Except for basic and diluted income (loss) per share, the totals in the following table are presented in thousands of US dollars.
| 2024 | 2023 | 2022 | ||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
| $ | $ | $ | $ | $ | $ | $ | $ | |
| Revenue | 71,130 | 63,963 | 31,695 | - | - | - | - | - |
| Cost of sales | (44,686) | (38,831) | (27,049) | - | - | - | - | - |
| Income from mine operations | 26,444 | 25,132 | 4,646 | - | - | - | - | - |
| General and administrative expenses | (1,731) | (6,632) | (7,693) | (5,419) | (2,869) | (3,148) | (3,850) | (2,854) |
| Exploration and evaluation expenditures | (1,809) | (2,040) | (609) | (43) | (81) | (472) | (1,413) | (938) |
| Share of net income related to JV | - | - | 2,432 | 1,728 | 9,628 | 11,007 | 9,307 | 46,517 |
| Service fee earned as operators of JV | - | - | 976 | 1,463 | 1,448 | 1,418 | 1,418 | 1,418 |
| Gain on derecognition of equity investment in JV | - | 118 | 1,298 | - | - | - | - | - |
| Income (loss) from operations and JV | 22,904 | 16,578 | 1,050 | (2,271) | 8,126 | 8,805 | 5,462 | 44,143 |
| Impairment revers al on investment in JV | - | - | - | - | - | - | - | 7,631 |
| Impairment of exploration and evaluation assets | - | - | - | - | - | - | - | (1,628) |
| Transaction costs | (91) | (102) | (2,299) | (378) | - | - | - | - |
| Other (expense) income | (21,713) | (7,645) | (3,510) | (3,109) | 3,263 | 3,156 | 3,031 | (21,646) |
| Net income (loss ) for the period | 1,100 | 8,831 | (4,759) | (5,758) | 11,389 | 11,961 | 8,493 | 28,500 |
| Basic and diluted income (loss) per share attributable to common shareholders | $0.00 | $0.03 | ($0.02) | ($0.03) | $0.05 | $0.05 | $0.04 | $0.13 |
| Adjusted net income (loss) for the period1 | 17,743 | 7,264 | 6,493 | (5,758) | 11,389 | 11,961 | 8,493 | (6,010) |
| Adjusted basic and diluted income (loss) per share1 | $0.07 | $0.03 | $0.03 | ($0.03) | $0.05 | $0.05 | $0.04 | ($0.03) |
| EBITDA1 | 30,787 | 20,368 | 1,476 | (2,554) | 8,161 | 8,870 | 5,519 | 50,205 |
During Q4 2022, as a result of the JV's reinstatement of Mineral Reserves in the 2023 Technical Report, the Company recommenced the recognition of its share of the JV's net earnings and also recognized a $7.6 million impairment reversal on its equity investment in the JV, leading to a significant increase in net income over the prior quarters. Other expense in Q4 2022 includes a $22.2 million negative fair value adjustment on the Company's preferred shares in the JV, resulting from a change in the timing of expected cash distributions and applying a higher discount rate to forecast preferred share redemptions, primarily due to a Ghana country risk premium applied resulting from the economic conditions in the country at that time.
During Q1 2023 to Q3 2023, improvements in net income and EBITDA1 over prior periods are reflective of the JV's underlying performance and rising gold price environment. The reduction in net earnings during Q4 2023 was primarily due to a $3.9 million downward fair value adjustment on the Company's preferred shares in the JV, resulting from a change in forecast timing of distributions and higher G&A expense due to higher share-based compensation expense.
During Q1 2024, upon closing of the Acquisition, the Company commenced consolidating the financial results of the AGM from March 4, 2024. In connection with the Acquisition, the Company incurred $2.3 million of acquisition-related costs in Q1 2024. Additionally, Q1 2024 includes a gain on derecognition of the Company's previous equity investment in the AGM JV in the amount of $1.3 million.
During the second and third quarters of 2024, income from mine operations was higher due to consolidating a full quarter of the AGM's financial results. Other expense includes unrealized and realized losses on the AGM's ZCC hedges as described in section 5.1.i.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
7. Liquidity and capital resources
A key financial objective of the Company is to actively manage its cash balance and liquidity in order to achieve the Company's strategic vision. The Company aims to achieve positive cash flows from operations to internally fund operating, capital and project development requirements. A summary of the Company's net assets and key financial ratios related to liquidity are presented in the table below.
|
|
September 30, 2024 |
December 31, 2023 |
|
(in thousands of US dollars, except outstanding shares and options) |
$ |
$ |
|
Cash and cash equivalents |
120,916 |
55,270 |
|
Other current assets |
60,515 |
1,824 |
|
Non-current assets |
322,563 |
156,208 |
|
Total assets |
503,994 |
213,302 |
|
Current liabilities |
91,991 |
11,988 |
|
Non-current liabilities |
167,948 |
396 |
|
Total liabilities |
259,939 |
12,384 |
|
Common shareholders' equity |
242,165 |
200,918 |
|
Non-controlling interest |
1,890 |
- |
|
Total equity |
244,055 |
200,918 |
|
Working capital 1 |
89,440 |
45,106 |
|
Total common shares outstanding |
256,939,446 |
224,972,786 |
|
Total stock options outstanding |
11,496,339 |
12,575,335 |
|
Key financial ratios |
||
|
Current ratio1 |
1.97 |
4.76 |
|
Total liabilities-to-common shareholders' equity |
1.07 |
0.06 |
The Company was in a strong net asset position at both September 30, 2024 and December 31, 2023, and had a cash balance of $120.9 million as at September 30, 2024.
Through a combination of the Company's cash balance and cash flows from operations, the Company believes it is in a position to meet all working capital requirements, deferred consideration payments, contractual obligations and other commitments as they fall due during the next 24 months (see "Commitments" below). However, the Company's cash flows and its ability to meet working capital requirements and contractual obligations is significantly influenced by the price of gold. The Company aims to manage its liquidity by ensuring that it can manage spending and provide adequate cash flow to meet all commitments.
The Company has a value added tax ("VAT") receivable balance of $11.7 million as of September 30, 2024. In any given period, the Company expects to have two quarters of VAT receivable outstanding. Subsequent to September 30, 2024, $5.0 million of the VAT receivable was collected from the Ghana Revenue Authority.
In order to maintain or adjust its capital structure, on December 21, 2022, the Company filed a final short form base shelf prospectus (the "Prospectus") under which the Company may sell from time-to-time common shares, warrants, subscription receipts, units, debt securities and/or share purchase contracts of the Company, up to an aggregate of $300 million. The Prospectus has a term of 25-months from the filing date. As of the date of this MD&A, no securities have been issued under the Prospectus.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
Equity
The Company is financially stable with a total liabilities‐to‐common shareholders' equity ratio of 1.07 as at September 30, 2024.
The Government of Ghana ("the Government") has a 10% free carried interest in the AGM in accordance with Ghanaian Law. This was granted through the issuance of 10% of the common shares of the Company's Ghanaian subsidiary, Asanko Gold Ghana Ltd. ("AGGL"), which owns the AGM's mining leases, to the Government. The Government has a nominee on the board of this subsidiary and is entitled to 10% of declared dividends paid out of the subsidiary; however, the Government does not have to contribute to the subsidiary’s capital investment. As of September 30, 2024, AGGL did not have retained earnings from which dividends may be paid and, as such, no net earnings were attributable to non-controlling interest for the nine months ended September 30, 2024, beyond that recognized in the Acquisition purchase price accounting. All results in this MD&A disclose 100% of the AGM’s financial results as being attributable to the Company with non‐controlling interest accounted for as a separate component of equity.
7.1 Commitments
The following table summarizes the Company's contractual obligations as at September 30, 2024 and December 31, 2023.
| Less than | 1-3 | 4-5 | After | September 30, | December 31, | |
| (in thousands of US dollars) | 1 year | years | years | 5 years | 2024 | 2023 |
| Accounts payable, accrued liabilities and payable due to related party |
46,122 | - | - | - | 46,122 | 5,724 |
| ZCC gold hedges | 13,136 | 9,186 | - | - | 22,322 | - |
| Long-term incentive plan (cash-settled awards) |
8,075 | 369 | - | - | 8,444 | 6,457 |
| Mining and other services contracts | 18,861 | 27,333 | 3,114 | - | 49,308 | - |
| Asset retirement provisions (undiscounted) |
2,263 | 2,741 | 4,248 | 61,756 | 71,008 | - |
| Deferred and contingent consideration (undiscounted) |
- | 55,000 | - | 39,170 | 94,170 | - |
| Corporate office lease | 122 | - | - | - | 122 | 225 |
| Total | 88,579 | 94,629 | 7,362 | 100,926 | 291,496 | 12,406 |
The ZCC gold hedges commitment represents the mark-to-market fair value of the AGM's current gold hedging program. The settlement amount of these hedges, if any, will depend on the price of gold at the settlement date.
Long-term incentive plan commitments due within one year include all deferred share unit awards ("DSU") to directors of the Company amounting to $7.4 million. These commitments are considered to be current because the timing of payments could be accelerated if a director retires, or in the event of a change of control. As of September 30, 2024, the only DSU commitments following director resignations that are known to exist within one year are approximately $0.5 million.
The timing of the contingent payments to Gold Fields ($39.2 million) is based upon management's best estimate of when such payments will be required, according to the current LOM plan.
The Company intends to utilize cash on hand and cash flow generated from operations to settle the above noted commitments when required to do so.
The Company has no off‐balance sheet arrangements.
7.2 Contingencies
A former services provider of the AGM filed a dispute with an arbitration tribunal alleging the AGM breached the terms of a services agreement and claimed approximately $25 million in damages. The arbitrator ruled in favour of the AGM that there had not been a breach of any terms of the contract, yet made an award to the counterparty of approximately $13 million plus interest for services rendered. The AGM, consistent with the arbitration ruling, maintains the view that there was no breach of contract, and all contractual amounts were paid as due. The AGM therefore is undertaking an appeals process in the Court of Appeal in Ghana. A provision of $7.0 million has been recorded as of September 30, 2024 as management's best estimate to settle the claim (December 31, 2023 - $7.0 million). While the Company cannot reasonably predict the ultimate outcome of these actions, and inherent uncertainties exist in predicting such outcomes, the Company believes the estimated provision is reasonable based on the information currently available.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
Due to the nature of its business, the Company may from time to time be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. While the Company cannot reasonably predict the ultimate outcome of any such actions, and inherent uncertainties exist in predicting such outcomes, the Company believes that the ultimate resolution of these actions is not reasonably likely to have a material adverse effect on the Company's financial condition or future results of operations.
7.3 Gold price hedging
The Company periodically enters into gold hedging arrangements to mitigate gold price risk during periods of planned elevated capital investment.
As of the date of this MD&A, the AGM has entered into ZCCs for 5,000 gold ounces per month for the remaining three months of 2024 with put strikes of $2,000/oz and call strikes between $2,374/oz to $2,435/oz. For the nine months ended September 30, 2024, the Company realized a $5.3 million loss on its gold hedging arrangements.
The AGM has also entered into ZCCs for 5,000 gold ounces per month for all of 2025 and 2026 (total of 60,000 gold ounces per annum). The 2025 ZCCs have a put strike of $2,000/oz and call strikes ranging between $2,515/oz to $2,645/oz, while the 2026 ZCCs have a put strike of $2,300/oz and call strikes ranging between $2,962/oz to $3,162/oz. At the current gold spot price, the 2026 ZCC call options are out-of-the-money and would result in no settlement payment to the counterparty.
7.4 Cash flows
The following table provides a summary of the Company's cash flows for the three and nine months ended September 30, 2024 and 2023:
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Cash provided by (used in): |
|
|
|
|
|
Operating activities |
24,449 |
(140) |
41,940 |
(2,060) |
|
Investing activities |
(21,740) |
758 |
31,061 |
2,105 |
|
Financing activities |
(4,156) |
(32) |
(5,943) |
(94) |
|
Impact of foreign exchange on cash and cash equivalents |
(676) |
(10) |
(1,412) |
17 |
|
(Decrease) increase in cash and cash equivalents during the period |
(2,123) |
576 |
65,646 |
(32) |
|
Cash and cash equivalents, beginning of period |
123,039 |
55,503 |
55,270 |
56,111 |
|
Cash and cash equivalents, end of period |
120,916 |
56,079 |
120,916 |
56,079 |
a) Cash provided by (used in) operating activities
The increase in cash generated from operating activities during both periods was driven by the Company consolidating the cash flows of the AGM from March 4, 2024.
b) Cash provided by investing activities
The Company primarily invests in MPP&E, offset by interest earned on cash and cash equivalents. The increase in cash used in investing activities during the three months ended September 30, 2024 was driven by the Company consolidating the cash flows of the AGM from March 4, 2024.
During the nine months ended September 30, 2024, the Company generated $31.1 million in cash flows from investing activities. Despite paying Gold Fields $65.0 million in cash in accordance with the Acquisition agreement, the Company acquired $112.5 million in cash from the JV entities and received a $25.0 million preferred share distribution prior to closing of the Acquisition. The net impact of these transactions was a $72.5 million increase to the Company's consolidated cash balance. Partly offsetting these factors was $2.4 million in acquisition-related costs and $42.2 million of expenditures on MPP&E, which primarily related to site establishment and waste stripping at Abore, raising the height of the TSF, enhancements to the processing plant (two new CIL tanks and secondary crushing circuit) and mineral resource conversion drilling at tenements with defined mineral reserves. The increase in cash provided by investing activities during 2024 was due to closing the Acquisition effective March 4, 2024.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
c) Cash used in financing activities
During the three and nine months ended September 30, 2024, cash used in financing activities totalled $4.2 million and $5.9 million, respectively, and related primarily to mining and other service contractors lease payments. The Company also received $0.2 million and $2.8 million in proceeds from stock option exercises during the three and nine months ended September 30, 2024, respectively.
The increase in cash used in financing activities was due to consolidating the cash flows of the AGM from March 4, 2024, partly offset by proceeds received on stock option exercises during 2024.
8. Non-IFRS measures
The Company has included certain non-IFRS performance measures throughout this MD&A. These performance measures are employed by management to assess the Company's operating and financial performance and to assist in business decision-making. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors and other stakeholders use this information to evaluate the Company's operating and financial performance; however, as explained elsewhere herein, these non-IFRS performance measures do not have any standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Accordingly, these performance measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
8.1 Operating cash costs and total cash costs per gold ounce
The Company has included the non-IFRS performance measures of operating cash costs and total cash costs per gold ounce sold on a by-product basis throughout this MD&A. The Company follows the recommendations of the Gold Institute Production Cost Standard (the "Gold Institute"). The Gold Institute, which ceased operations in 2002, was a non-regulatory body and represented a global group of suppliers of gold and gold products. The production cost standard developed by the Gold Institute remains the generally accepted standard of reporting cash costs of production by many gold mining companies. Management uses operating cash costs and total cash costs per gold ounce sold to monitor the operating performance of the AGM. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate the Company's performance and ability to generate cash flow. Other companies may calculate operating cash costs and total cash costs per gold ounce sold differently.
The following table provides a reconciliation of operating and total cash costs per gold ounce sold of the AGM to production costs of the Company (the nearest IFRS measure) as presented in the unaudited condensed consolidated interim financial statements of the Company for the three and nine months ended September 30, 2024 and 2023.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
|
Three months ended September 30, |
Nine months ended September 30, |
|||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars, except per ounce amounts) |
$ |
$ |
$ |
$ |
|
Production costs as reported by the Company |
32,044 |
35,644 |
84,499 |
103,905 |
|
Other adjustments 3 |
- |
(2,000) |
- |
(2,000) |
|
Purchase price allocation adjustments |
- |
- |
(7,831) |
- |
|
Unconsolidated production costs |
- |
- |
20,810 |
- |
|
Adjusted production costs of the AGM (100% basis) |
32,044 |
33,644 |
97,478 |
101,905 |
|
Share-based compensation expense included in production costs |
- |
- |
- |
142 |
|
By-product silver revenue |
(167) |
(214) |
(461) |
(408) |
|
Total operating cash costs |
31,877 |
33,430 |
97,017 |
101,639 |
|
Royalties |
4,302 |
4,073 |
12,101 |
11,053 |
|
Total cash costs |
36,179 |
37,503 |
109,118 |
112,692 |
|
Gold ounces sold |
29,014 |
35,522 |
88,684 |
103,608 |
|
Operating cash costs per gold ounce sold ($/oz) |
1,099 |
941 |
1,094 |
981 |
|
Total cash costs per gold ounce sold ($/oz) |
1,247 |
1,056 |
1,230 |
1,088 |
3 Production costs for the three and nine months ended September 30, 2023 were adjusted for a $2.0 million legal provision attributable to prior period mining costs.
Unconsolidated production costs presented in the table above relate to periods when the Company accounted for its interest in the AGM JV using the equity method. Refer to section 4.3 for production costs of the AGM JV for the periods presented.
8.2 AISC per gold ounce
In June 2013, the World Gold Council, a non-regulatory association of many of the world's leading gold mining companies established to promote the use of gold to industry, provided guidance for the calculation of "AISC per gold ounce" in an effort to encourage improved understanding and comparability of the total costs associated with mining an ounce of gold. The Company has adopted the reporting of "AISC gold ounce", which is a non-IFRS performance measure. The Company believes that the AISC per gold ounce measure provides additional insight into the costs of producing gold by capturing all of the expenditures required for the discovery, development and sustaining of gold production and allows the Company to assess its ability to support capital expenditures to sustain future production from the generation of operating cash flows. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate the AGM's performance and ability to generate cash flow. Other companies may calculate AISC per gold ounce sold differently.
AISC adjusts total cash costs for G&A expenses, reclamation cost accretion, sustaining capitalized stripping costs, sustaining capital expenditures and lease payments and interest expense on the AGM's mining and service lease agreements. Sustaining capital expenditures, capitalized stripping costs, reclamation cost accretion and lease payments and interest expense on lease agreements are not line items on the AGM's financial statements. Sustaining capital expenditures are defined as those capital expenditures which do not materially benefit annual or life of mine gold ounce production at a mine site. A material benefit to a mine site is considered to be at least a 10% increase in annual or life of mine production, net present value, or reserves compared to the remaining life of mine of the operation. As such, sustaining costs exclude all expenditures at the AGM's new projects and certain expenditures at the AGM's operating sites which are deemed expansionary in nature. Capitalized stripping costs represent costs incurred at steady-state operations during the period; these costs are generally not considered expansionary in nature as the stripping phase is expected to take less than 12 months and resulting ore production is of a short-term duration. Reclamation cost accretion represents the growth in the AGM's decommissioning provision due to the passage of time. This amount does not reflect cash outflows, but it is considered to be representative of the periodic costs of reclamation and remediation. Lease payments on mining and service lease agreements represent cash outflows while interest expense represents the financing component inherent in the lease. Reclamation cost accretion and lease interest are included in finance expense in the Company's results, as disclosed in the notes to the unaudited condensed consolidated interim financial statements of the Company for the three and nine months ended September 30, 2024 and 2023.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
All-in sustaining margin per ounce is calculated as the difference between the average realized gold price for the period and AISC per gold ounce sold. All-in sustaining margin is calculated as all-in sustaining margin per ounce multiplied by the number of gold ounces sold during the period.
The following table provides a reconciliation of AISC of the AGM to production costs and various operating expenses of the AGM (the nearest IFRS measures) on a 100% basis, as presented in sections 4.3 and 4.4.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars except per ounce amounts) |
$ |
$ |
$ |
$ |
|
Total cash costs (as reconciled above) |
36,179 |
37,503 |
109,118 |
112,692 |
|
General and administrative expenses 4 |
319 |
518 |
1,752 |
1,953 |
|
Sustaining capital expenditures (see table below) |
846 |
11,496 |
22,580 |
23,060 |
|
Sustaining capitalized stripping costs |
18,812 |
- |
20,117 |
- |
|
Reclamation cost accretion for the AGM |
588 |
703 |
1,932 |
1,820 |
|
Sustaining lease payments (see table below) |
4,294 |
311 |
9,215 |
802 |
|
Interest on lease liabilities for the AGM |
1,671 |
781 |
4,031 |
793 |
|
All-in sustaining cost |
62,709 |
51,312 |
168,745 |
141,120 |
|
Gold ounces sold |
29,014 |
35,522 |
88,684 |
103,608 |
|
All-in sustaining cost per gold ounce sold ($/oz) |
2,161 |
1,445 |
1,903 |
1,362 |
|
Average realized price per gold ounce sold ($/oz) |
2,446 |
1,902 |
2,258 |
1,898 |
|
All-in sustaining margin ($/oz) |
285 |
457 |
355 |
536 |
|
All-in sustaining margin |
8,269 |
16,234 |
31,483 |
55,534 |
4Excluded from G&A costs of the AGM are $1 and $58 of share-based compensation expense for the three and nine months ended September 30, 2024, respectively (three and nine months ended September 30, 2023 - excludes $9 and $19 of share-based compensation expense, respectively).
For the nine months ended September 30, 2024, sustaining capital expenditures in the table above include $18.6 million of pre-stripping costs incurred at the Abore pit.
For the three and nine months ended September 30, 2024, the Company incurred corporate G&A expenses (excluding G&A of the AGM), net of the JV service fee, of $2.3 million and $6.0 million, respectively, which excludes share-based compensation expense, depreciation and severance payments totaling a credit of $0.5 million and an expense of $10.1 million, respectively (three and nine months ended September 30, 2023 - G&A expenses, net of the JV service fee, of $0.8 million and $2.4 million, respectively, which excludes share‐based compensation expense and depreciation expense totaling $0.6 million and $3.2 million, respectively).
The Company's attributable gold ounces sold for the three and nine months ended September 30, 2024 were 29,014 and 80,220, respectively (three and nine months ended September 30, 2023 - 15,985 and 46,623 gold ounces, respectively), resulting in additional AISC for the Company of $78/oz and $74/oz for the periods presented, respectively, in addition to the AGM's AISC presented in the above table (three and nine months ended September 30, 2023 - $49/oz and $51/oz, respectively).
The following table reconciles sustaining capital expenditures to cash flows used in investing activities of the AGM (the nearest IFRS measure) on a 100% basis, as presented in section 4.4.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Cash used in investing activities - AGM |
21,420 |
15,413 |
50,531 |
29,772 |
|
Less: |
|
|
|
|
|
Sustaining capitalized stripping costs |
(18,812) |
- |
(20,117) |
- |
|
Non-sustaining capital expenditures |
(2,967) |
(5,138) |
(11,607) |
(9,924) |
|
Change in AP related to capital expenditures not |
(1) |
(1) |
(10) |
- |
|
Interest earned on cash balances |
1,206 |
1,222 |
3,783 |
3,212 |
|
Total sustaining capital expenditures |
846 |
11,496 |
22,580 |
23,060 |
Refer to section "4.1(e) Total cash costs and AISC" for a discussion on non-sustaining capital expenditures.
The following table reconciles sustaining lease payments to cash flows used in financing activities of the AGM (the nearest IFRS measure) on a 100% basis, as presented in section 4.4.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Cash used in financing activities - AGM |
4,294 |
377 |
9,215 |
973 |
|
Less: |
|
|
|
|
|
Fees paid on revolving credit facility |
- |
(66) |
- |
(171) |
|
Total sustaining lease payments |
4,294 |
311 |
9,215 |
802 |
8.3 Free Cash Flow of the AGM
The Company uses the financial measure Free Cash Flow, which is a non-IFRS financial measure, to supplement information in its consolidated annual financial statements ("Free Cash Flow"). Free Cash Flow does not have any standardized meaning prescribed under IFRS, and therefore it may not be comparable to similar measures employed by other companies. The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use this information to evaluate the AGM's performance with respect to its operating cash flow capacity to meet non-discretionary outflows of cash. Free Cash Flow is calculated as cash flows from operating activities of the AGM adjusted for cash flows associated with sustaining and non-sustaining capital expenditures and payments made to mining and services contractors for leases capitalized under IFRS 16.
The following table provides a reconciliation of Free Cash Flow of the AGM to its cash flows from operating activities (the nearest IFRS measure) on a 100% basis, as presented in section 4.4.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars ) |
$ |
$ |
$ |
$ |
|
Cash flows from operating activities for the AGM |
28,646 |
39,740 |
63,982 |
76,662 |
|
Cash flows used in investing activities for the AGM |
(21,420) |
(15,413) |
(50,531) |
(29,772) |
|
Lease payments (capitalized leases) for the AGM |
(4,294) |
(311) |
(9,215) |
(802) |
|
AGM Free Cash Flow for the period |
2,932 |
24,016 |
4,236 |
46,088 |
8.4 EBITDA and Adjusted EBITDA
Earnings before interest, taxes, depreciation and amortization ("EBITDA") provides an indication of the Company's continuing capacity to generate income from operations before considering the Company's financing decisions and costs of amortizing capital assets. Accordingly, EBITDA comprises net (loss) income excluding interest expense, interest income, amortization and depletion and income taxes. Adjusted EBITDA adjusts EBITDA to exclude non-recurring items and non-cash items and includes the calculated Adjusted EBITDA of the JV ("Adjusted EBITDA") for periods prior to the consolidation of its ownership. Other companies may calculate EBITDA and Adjusted EBITDA differently.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
The following table provides a reconciliation of EBITDA and Adjusted EBITDA attributable to the Company based on its economic interest in the AGM to net income (the nearest IFRS measure) of the Company per the unaudited condensed consolidated interim financial statements of the Company for the three and nine months ended September 30, 2024 and 2023.
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars ) |
$ |
$ |
$ |
$ |
|
Net income for the period |
1,100 |
11,389 |
5,172 |
31,843 |
|
Add back (deduct): |
|
|
|
|
|
Depreciation and depletion expense |
8,374 |
35 |
16,102 |
107 |
|
Finance income |
(1,310) |
(3,269) |
(5,250) |
(9,418) |
|
Finance expense |
22,623 |
6 |
36,607 |
18 |
|
EBITDA for the period |
30,787 |
8,161 |
52,631 |
22,550 |
|
Add back (deduct): |
|
|
|
|
|
Adjustment for non-cash long-term incentive plan compensation |
296 |
285 |
875 |
802 |
|
Realized loss on gold hedges |
(2,162) |
- |
(5,276) |
- |
|
Share of net income related to joint venture |
- |
(9,628) |
(2,432) |
(29,942) |
|
Gain on derecognition of equity investment in joint venture |
- |
- |
(1,416) |
- |
|
Transaction costs |
91 |
- |
2,492 |
- |
|
Galiano's attributable interest in JV Adjusted EBITDA (below) |
- |
11,464 |
3,243 |
33,246 |
|
Adjusted EBITDA for the period |
29,012 |
10,282 |
50,117 |
26,656 |
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
The following table reconciles the AGM's EBITDA and Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 to the financial results of the AGM as disclosed in section 4.3. For the pre-acquisition period ended March 3, 2024, the Company's equity interest in the AGM was 45%.
Three months ended September 30, 2024 and 2023
| Three months ended September 30, | ||
| 2024 | 2023 | |
| (in thousands of US dollars) | $ | $ |
| Net income for the period - AGM | 3,718 | 21,284 |
| Add back (deduct): | ||
| Depreciation and depletion expense | 8,585 | 4,308 |
| Finance income | (1,205) | (1,224) |
| Finance expense | 20,979 | 1,418 |
| EBITDA for the period | 32,077 | 25,786 |
| Add back (deduct): | ||
| Realized loss on gold hedges | (2,162) | - |
| Lease payments (capitalized leases) | (4,294) | (311) |
| Adjusted EBITDA for the period | 25,621 | 25,475 |
| Galiano's attributable interest in the AGM's Adjusted EBITDA for the period | - | 11,464 |
Nine months ended September 30, 2024 and 2023
|
|
Pre-acquisition |
Post-acquisition |
|
|
|
|
Period from January |
Period from March 4 |
|
|
|
|
1 to March 3, |
to September 30, |
Nine months ended September 30, |
|
|
|
2024 |
2024 |
2024 |
2023 |
|
(in thousands of US dollars) |
$ |
$ |
$ |
$ |
|
Net income for the period - AGM |
5,306 |
26,814 |
32,120 |
66,276 |
|
Add back (deduct): |
|
|
|
|
|
Depreciation and depletion expense |
2,463 |
15,887 |
18,350 |
9,263 |
|
Finance income |
(984) |
(2,804) |
(3,788) |
(3,221) |
|
Finance expense |
261 |
32,781 |
33,042 |
2,363 |
|
EBITDA for the period |
7,046 |
72,678 |
79,724 |
74,681 |
|
Add back (deduct): |
|
|
|
|
|
Transaction costs |
1,180 |
- |
1,180 |
- |
|
Realized loss on gold hedges |
- |
(5,276) |
(5,276) |
- |
|
Lease payments (capitalized leases) |
(1,020) |
(8,195) |
(9,215) |
(802) |
|
Adjusted EBITDA for the period |
7,206 |
59,207 |
66,413 |
73,879 |
|
Galiano's attributable interest in the AGM's Adjusted EBITDA for the period |
3,243 |
- |
3,243 |
33,246 |
8.5 Adjusted net income
The Company has included the non-IFRS performance measures of adjusted net income and adjusted net income per share throughout this MD&A. Neither adjusted net income nor adjusted net income per share have any standardized meaning and are therefore unlikely to be comparable to other measures presented by other issuers. Adjusted net income excludes certain non-cash items from net (loss) income to provide a measure which helps the Company and investors to evaluate the results of the underlying core operations of the Company and its ability to generate cash flows. The Company believes that the presentation of adjusted net income is appropriate to provide additional information to investors regarding items that we do not expect to continue at the same level in the future or that management does not believe to reflect the Company's ongoing operating performance. The Company further believes that its presentation of this non-IFRS financial measure provides information that is useful to investors because it is an important indicator of the strength of operations and the performance of the Company's core business. The following table provides a reconciliation of adjusted net income to net income (the nearest IFRS measure) of the Company per the unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023. All adjustments are shown net of estimated tax.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
|
2024 |
2023 |
2024 |
2023 |
|
(in thousands of US dollars, except per share amounts) |
$ |
$ |
$ |
$ |
|
Net income for the period |
1,100 |
11,389 |
5,172 |
31,843 |
|
Realized purchase price adjustment on inventories |
- |
- |
8,700 |
- |
|
Gain on derecognition of equity investment in joint venture |
- |
- |
(1,416) |
- |
|
Transaction costs |
91 |
- |
2,492 |
- |
|
Unrealized losses on ZCC hedges |
16,552 |
- |
22,171 |
- |
|
Adjusted net income for the period |
17,743 |
11,389 |
37,119 |
31,843 |
|
Basic weighted average common shares outstanding |
256,912,077 |
224,943,453 |
248,496,497 |
224,943,453 |
|
Diluted weighted average common shares outstanding |
262,052,961 |
225,400,119 |
253,662,962 |
225,083,227 |
|
Adjusted net income per share - basic and diluted |
$0.07 |
$0.05 |
$0.15 |
$0.14 |
9. Summary of outstanding share data
As of the date of this MD&A, there were 257,077,946 common shares of the Company issued and outstanding and 11,357,839 stock options outstanding (with exercise prices ranging between C$0.53 and C$2.37 per share). The fully diluted outstanding share count at the date of this MD&A is 268,435,785.
10. Related party transactions
As at September 30, 2024, the Company's related parties are its subsidiaries and key management personnel (being directors and executive officers of the Company). During the normal course of operations, the Company enters into transactions with its related parties. During the three and nine months ended September 30, 2024, all related party transactions were in the normal course of business including compensation payments to key management personnel.
During the nine months ended September 30, 2024, other than compensation paid to key management personnel, the only related party transactions were with the AGM in respect of the Company's service fee earned for being the operator of the AGM JV until March 3, 2024. For the nine months ended September 30, 2024, the JV service fee was comprised of a gross service fee of $1.2 million, less withholding taxes payable in Ghana of $0.2 million (three and nine months ended September 30, 2023 - gross service fee of $1.8 million and $5.4 million, respectively, less withholding taxes of $0.4 million and $1.1 million, respectively).
11. Critical accounting policies and estimates
11.1 Estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Management believes the estimates and assumptions made in preparing the unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023 are reasonable; however, actual results could differ from those estimates and assumptions and could impact future results of operations and cash flows. The Company's significant accounting judgements and estimates were presented in note 6 of the audited consolidated annual financial statements for the years ended December 31, 2023 and 2022.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
Refer to note 3 of the unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023 for disclosure of the significant judgements and estimates made by the Company with respect to the accounting for the Acquisition.
11.2 Changes in Accounting Policies including Initial Adoption
(a) Accounting standards adopted during the year
There were no new accounting standards effective January 1, 2024 that impacted the condensed consolidated interim financial statements.
(b) Accounting standards and amendments issued but not yet adopted
The following standards and interpretations, which may be applicable to the Company, have been issued but are not yet effective as of September 30, 2024:
IFRS 18
On April 9, 2024, the IASB issued IFRS 18, Presentation and Disclosure in Financial Statements, a new standard on presentation and disclosure in financial statements with a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to: the structure of the statement of profit or loss; required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity's financial statements; and enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general. IFRS 18 will not impact the recognition or measurement of items in the financial statements, but may change what an entity reports as its 'operating profit or loss'. IFRS 18 will apply for reporting periods beginning on or after January 1, 2027 and also applies to comparative information. The Company is evaluating how IFRS 18 will impact the disclosures in its consolidated financial statements in future periods.
12. Risks and uncertainties
12.1 Financial instruments and risk
The Company's business, operations and future prospects are subject to significant risks. For details of these risks, refer to the risk factors set forth in the Company's most recently filed AIF for the year ended December 31, 2023, which can be found under the Company's SEDAR+ profile at www.sedarplus.ca, and the Company's most recently filed Form 40-F Annual Report for the year ended December 31, 2023, which can be found on EDGAR at www.sec.gov.
Management is not aware of any significant changes to the risks identified in the Company's most recently filed AIF, nor has the Company's mitigation of those risks changed significantly during the nine months ended September 30, 2024. Additional risks and uncertainties not presently known to the Company, or that the Company currently considers immaterial, may also impair the business, operations, prospects and share price of the Company. If any of the risks occur, the business of the Company may be harmed, and its financial condition and results of operations may suffer significantly.
a) Financial instruments
As at September 30, 2024, the Company's financial instruments consist of cash and cash equivalents, accounts and VAT receivables, accounts payable and accrued liabilities, financial liabilities, long-term incentive plan liabilities, deferred and contingent consideration payable to Gold Fields and the Nkran Royalty. The Company classifies cash and cash equivalents and accounts and VAT receivables as financial assets measured at amortized cost, while accounts payable and accrued liabilities and deferred consideration are classified as other financial liabilities and measured at amortized cost. Long-term incentive plan liabilities, contingent consideration and the Nkran Royalty are financial liabilities measured at fair value through profit or loss, and all fall within Level 3 of the fair value hierarchy. The ZCC gold hedging instruments are also recorded at fair value at the reporting date and fall within Level 2 of the fair value hierarchy. Refer to note 12 of the Company's unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023 for discussion on the significant assumptions made in determining the fair value of the deferred and contingent consideration and Nkran Royalty.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
The credit risk, liquidity risk and market risk associated with the Company's financial instruments are disclosed in note 26(d) of the Company's unaudited condensed consolidated interim financial statements for the three and nine months ended September 30, 2024 and 2023.
As at September 30, 2024, the carrying and fair values of the Company's financial instruments by category are as follows:
| Fair value through profit or loss |
Amortized cost | Carrying value | Fair value | |||||||||
| As at September 30, 2024 | $ | $ | $ | $ | ||||||||
| Financial assets | ||||||||||||
| Cash and cash equivalents | - | 120,916 | 120,916 | 120,916 | ||||||||
| Accounts receivable | - | 6,158 | 6,158 | 6,158 | ||||||||
| Value added tax receivables | - | 11,694 | 11,694 | 11,694 | ||||||||
| Total financial assets | - | 138,768 | 138,768 | 138,768 | ||||||||
| Financial liabilities | ||||||||||||
| Accounts payable and accrued liabilities 4 | 21,212 | 46,121 | 67,333 | 67,333 | ||||||||
| Lease liabilities | - | 42,070 | 42,070 | 42,070 | ||||||||
| Deferred consideration | - | 49,350 | 49,350 | 49,350 | ||||||||
| Contingent consideration | 14,736 | - | 14,736 | 14,736 | ||||||||
| Nkran royalty | 3,721 | - | 3,721 | 3,721 | ||||||||
| Other non-current liabilities 4 | 9,555 | - | 9,555 | 9,555 | ||||||||
| Total financial liabilities | 49,224 | 137,541 | 186,765 | 186,765 | ||||||||
13. Internal control
13.1 Internal Control over Financial Reporting
Management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), have evaluated the Company's internal controls over financial reporting to determine whether any changes occurred during the period that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.
During the nine months ended September 30, 2024, there have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
13.2 Limitations of controls and procedures
The Company's management, including the CEO and CFO, believes that any disclosure controls and procedures or internal control over financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been prevented or detected. These inherent limitations include the realities that judgements in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by unauthorized override of the control. The design of any control system also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
14. Qualified Persons
The exploration information in this MD&A has been reviewed and approved by Mr. Chris Pettman, P.Geo, Vice President Exploration of Galiano. For further information regarding the exploration information in this MD&A, including the Quality Control and Quality Assurance and data verification measures taken with respect to such exploration information, refer to the Company's news release dated March 11, 2024 and filed on the Company's SEDAR+ profile at www.sedarplus.ca. All other scientific and technical information contained in this MD&A has been approved by Mr. Richard Miller, P.Eng., Vice President Technical Services of Galiano. Mr. Pettman and Mr. Miller are "Qualified Persons" as defined by National Instrument 43-101, Standards of Disclosure for Mineral Projects.
15. Cautionary statements
15.1 Cautionary statement on forward-looking information
The Company cautions readers regarding forward-looking statements found in this MD&A and in any other statement made by, or on behalf of the Company. Generally, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects", "estimates", "anticipates", or variations of such words and phrases or statements that certain actions, events or results "may", "could", or "might" occur. Forward-looking statements are made based on management's beliefs, estimates and opinions and are given only as of the date of this MD&A. Such statements may constitute "forward-looking information" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation.
Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward-looking statements reflect the Company's current views with respect to expectations, beliefs, assumptions, estimates and forecasts about the business of the Company and the industry and markets in which the Company operates. Forward-looking statements include, but are not limited to, statements with respect to:
- the future price of gold;
- the Company's operating plans for the AGM;
- the estimation of Mineral Reserves and Mineral Resources;
- the Company's plans to update a consolidated AGM Mineral Reserve Estimate and LOM plan and timing thereof;
- the timing and amount of estimated future production from the AGM, including production rates and gold recovery;
- operating costs with respect to the operation of the AGM;
- the cost performance with respect to the operation of the AGM;
- capital expenditures that are required to sustain and expand mining activities;
- the meeting of working capital requirements, contractual obligations and other financial commitments as they fall due;
- the timing, costs and project economics associated with the Company's development plans for the AGM;
- estimates regarding the AGM's consumption of key reagents and consumables;
- any additional work programs to be undertaken by the Company;
- performance of stockpiled ore above management's forecast;
- performance of a mobile crushing unit installed at the Abore pit;
- timing of installation of a permanent secondary crushing circuit;
- timing of delivery of higher grade ore from the Abore pit;
- the Company's planned and future drilling programs, including at Gyagyatreso, Sky Gold B, and Abore North and timing thereof;
- the ability of the AGM to maintain current inventory levels;
- the timing of the development of new deposits;
- success of exploration activities;
- permitting timelines;
- renewal of exploration licenses;
- hedging practices;
- currency exchange rate fluctuations;
- central bank interest rate forecast;
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
- use of the IMF Loan, including the approval of a third tranche;
- estimate of a legal provision;
- requirements for additional capital;
- timing of expected cash distributions;
- operating cash flows;
- government regulation of mining operations;
- regulatory investigations, claims, lawsuits and other proceedings;
- environmental risks and remediation measures;
- advancement and implementation of the Company's sustainability program;
- climate-related and sustainability disclosure standards and obligations;
- changes to the Company's Board of Directors;
- changes in accounting policies, including the implementation and evaluation of IFRS 18, and the resulting impact on disclosures; and
- usefulness of certain non-IFRS measures.
Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions, which are difficult to predict. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of the Company. The Company's actual future results or performance are subject to certain risks and uncertainties, including but not limited to:
- Mineral Reserve and Mineral Resource estimates may change and may prove to be inaccurate;
- metallurgical recoveries may not be economically viable;
- LOM estimates are based on a number of factors and assumptions and may prove to be incorrect;
- risks related to the expected benefits of the Acquisition;
- actual production, costs, returns and other economic and financial performance may vary from the Company's estimates in response to a variety of factors, many of which are not within the Company's control;
- inflationary pressures and the effects thereof;
- the AGM has a limited operating history and is subject to risks associated with establishing new mining operations;
- sustained increases in costs, or decreases in the availability, of commodities consumed or otherwise used by the Company may adversely affect the Company;
- adverse geotechnical and geological conditions (including geotechnical failures) may result in operating delays and lower throughput or recovery, closures or damage to mine infrastructure;
- the ability of the Company to treat the number of tonnes planned, recover valuable materials, remove deleterious materials and process ore, concentrate and tailings as planned is dependent on a number of factors and assumptions which may not be present or occur as expected;
- risks related to artisanal and illegal mining activities at or near the AGM;
- the Company's mineral properties may experience a loss of ore due to illegal mining activities;
- the Company's operations may encounter delays in or losses of production due to equipment delays or the availability of equipment;
- outbreaks of infectious diseases may have a negative impact on global financial conditions, demand for commodities and supply chains and could adversely affect the Company's business, financial condition and results of operations and the market price of its common shares;
- the Company's operations are subject to continuously evolving legislation, compliance with which may be difficult, uneconomic or require significant expenditures;
- the Government of Ghana may increase the GSL, increasing the Company's expenditures;
- the Company may be unsuccessful in attracting and retaining key personnel;
- labour disruptions could adversely affect the Company's operations;
- local community disruptions could adversely affect the Company's operations or planned development;
- recoveries may be lower in the future and have a negative impact on the Company's financial results;
- the lower recoveries may persist and be detrimental to the AGM and the Company;
- the Company's business is subject to risks associated with operating in a foreign country;
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
- risks related to the Government of Ghana defaulting on local and international bonds;
- risks related to the Company's use of contractors;
- current, ongoing and future legal disputes and appeals from third parties may be successful, and the Company may be required to pay settlement costs or damages, including the appeal undertaken by AGM in the Court of Appeal in Ghana in connection with the arbitration tribunal ruling;
- the hazards and risks normally encountered in the exploration, development and production of gold;
- the Company's operations are subject to environmental hazards and compliance with applicable environmental laws and regulations;
- the effects of climate change or extreme weather events may cause prolonged disruption to the delivery of essential commodities which could negatively affect production efficiency;
- the Company's operations and workforce are exposed to health and safety risks;
- unexpected costs and delays related to, or the failure of the Company to obtain, necessary permits could impede the Company's operations;
- the Company's title to exploration, development and mining interests can be uncertain and may be contested;
- geotechnical risks associated with the design and operation of a mine and related civil structures;
- the Company's properties may be subject to claims by various community stakeholders;
- risks related to limited access to infrastructure and water;
- risks associated with establishing new mining operations;
- the Company's revenues are dependent on the market prices for gold, which have experienced significant recent fluctuations;
- the Company may not be able to secure additional financing when needed or on acceptable terms;
- the Company's shareholders may be subject to future dilution;
- risks related to changes in interest rates and foreign currency exchange rates;
- risks relating to credit rating downgrades;
- changes to taxation laws applicable to the Company may affect the Company's profitability;
- ability to repatriate funds;
- risks related to the Company's internal controls over financial reporting and compliance with applicable accounting regulations and securities laws;
- future securities offerings issued pursuant to the Prospectus may not be successful depending on external market factors outside of the Company's control;
- risks related to information systems security threats;
- non-compliance with public disclosure obligations could have an adverse effect on the Company's stock price;
- the carrying value of the Company's assets may change and these assets may be subject to impairment charges;
- risks associated with changes in reporting standards;
- the Company may be liable for uninsured or partially insured losses;
- the Company may be subject to litigation;
- damage to the Company's reputation could result in decreased investor confidence and increased challenges in developing and maintaining community relations which may have adverse effects on the business, results of operations and financial conditions of the Company and the Company's share price;
- the Company may be unsuccessful in identifying targets for acquisition or completing suitable corporate transactions, and any such transactions may not be beneficial to the Company or its shareholders;
- the Company must compete with other mining companies and individuals for mining interests;
- the Company's growth, future profitability and ability to obtain financing may be impacted by global financial conditions;
- the Company's common shares may experience price and trading volume volatility;
- the Company has never paid dividends and does not expect to do so in the foreseeable future;
- the Company's shareholders may be unable to sell significant quantities of the Company's common shares into the public trading markets without a significant reduction in the price of its common shares, or at all; and
- the risk factors described under the heading "Risk Factors" in the Company's AIF.
Forward-looking statements are necessarily based upon estimates and assumptions, which are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which, regarding future business decisions, are subject to change. Assumptions underlying the Company's expectations regarding forward-looking statements or information contained in this MD&A include, among others:
|
GALIANO GOLD INC. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 |
- the price of gold will not decline significantly or for a protracted period of time;
- the accuracy of the estimates and assumptions underlying Mineral Reserve and Mineral Resource estimates;
- the Company's ability to raise sufficient funds from future equity financings to support its operations, and general business and economic conditions;
- the global financial markets and general economic conditions will be stable and prosperous in the future;
- the AGM will not experience any significant uninsured production disruptions that would materially affect revenues;
- the ability of the Company to comply with applicable governmental regulations and standards;
- the mining laws, tax laws and other laws in Ghana applicable to the AGM will not change, and there will be no imposition of additional exchange controls in Ghana;
- the success of the Company in implementing its development strategies and achieving its business objectives;
- the Company will have sufficient working capital necessary to sustain its operations on an ongoing basis and the Company will continue to have sufficient working capital to fund its operations; and
- the key personnel of the Company will continue their employment.
Although the Company has attempted to identify important factors that could cause actual results or events to differ materially from those described in the forward-looking statements, you are cautioned that this list is not exhaustive and there may be other factors that the Company has not identified. Furthermore, the Company undertakes no obligation to update or revise any forward-looking statements included in, or incorporated by reference in, this MD&A if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.
Historical results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate future results from operations. Historically, the Company's operations have been primarily funded from debt and share issuances. The Company has had and may have future capital requirements in excess of its currently available resources. In the event the Company's plans change, its assumptions change or prove inaccurate, or its capital resources in addition to projected cash flow, if any, prove to be insufficient to fund its future operations, the Company may be required to seek additional financing.
Although the Company has to-date been able to raise capital, there can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.
15.2 Cautionary note for United States investors
All technical disclosure in this MD&A has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ materially from the requirements of United States securities laws applicable to domestic Unites States issuers. The terms "mineral reserves", "proven mineral reserves", "probable mineral reserves", "mineral resources", "measured mineral resources", "indicated mineral resources" and "inferred mineral resources" used in this MD&A are in reference to the mining terms defined in the Canadian Institute of Mining, Metallurgy and Petroleum Standards, as adopted by National Instrument 43-101, Standards of Disclosure for Mineral Projects. The Company's disclosure of mineralization and other technical information herein may differ significantly from the information that would be disclosed had the Company prepared the reserve and resource estimates under the standards adopted under the rule of the SEC applicable to domestic United States issuers. Accordingly, the disclosure in this MD&A regarding the AGM's mineral properties is not comparable to the disclosure of United States issuers subject to the SEC's mining disclosure requirements.
Form 52-109F2
Certification of interim filings - full certificate
I, Matt Badylak, Chief Executive Officer of Galiano Gold Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Galiano Gold Inc. (the "issuer") for the interim period ended September 30, 2024.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is based on Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2024 and ended on September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 7, 2024
/s/ Matt Badylak
_______________________
Matt Badylak
Chief Executive Officer
Form 52-109F2
Certification of interim filings - full certificate
I, Matthew Freeman, Chief Financial Officer of Galiano Gold Inc., certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the "interim filings") of Galiano Gold Inc. (the "issuer") for the interim period ended September 30, 2024.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer's other certifying officer(s) and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer's GAAP.
5.1 Control framework: The control framework the issuer's other certifying officer and I used to design the issuer's ICFR is based on Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
5.2 ICFR - material weakness relating to design: N/A
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer's ICFR that occurred during the period beginning on July 1, 2024 and ended on September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer's ICFR.
Date: November 7, 2024
/s/ Matthew Freeman
_____________________
Matthew Freeman
Chief Financial Officer
 |
GALIANO GOLD REPORTS Q3 PRODUCTION
AND FINANCIAL RESULTS
Vancouver, British Columbia, November 7, 2024 - Galiano Gold Inc. ("Galiano" or the "Company") (TSX, NYSE American: GAU) is pleased to report its third quarter ("Q3") 2024 production and financial results. Galiano owns a 90% interest in the Asanko Gold Mine ("AGM") located on the Asankrangwa Gold Belt in the Republic of Ghana, West Africa.
All financial information contained in this news release is unaudited and reported in United States dollars.
During Q3, the Company produced 29,784 gold ounces at all-in sustaining costs1 ("AISC") of $2,161 per gold ounce sold ("/oz"), or approximately $1,513/oz with the initial stripping at Abore deducted, and generated $24.4 million of operating cash flows while remaining debt free with $120.9 million in cash. Strong operating cash flows continue to support the ramp-up of mining at the AGM's Abore deposit.
Asanko Gold Mine Q3 Highlights (100% basis):
Subsequent to closing of the transaction with Gold Fields Ltd., the operational and financial results of the AGM have been consolidated into the Company from March 4, 2024 onwards. The following highlights for the AGM are presented on a 100% basis for the entire nine months ended September 30, 2024.
-
Safety: There were no lost-time injuries ("LTI") and one total recordable injury ("TRI") recorded during Q3. The 12‐month rolling LTI and TRI frequency rates as of September 30, 2024 were 0.00 and 0.30 per million employee hours worked, respectively.
-
Mining performance: During the quarter, waste stripping activities at Abore continued with 9.7 million tonnes ("Mt") of waste rock mined, while ore tonnes mined from the Abore deposit totalled 0.7 Mt at an average mined grade of 1.1 grams per tonne ("g/t") gold. Mining rates at Abore increased by 32% during the third quarter compared to the second quarter of 2024 due to lower precipitation levels, improved mining equipment productivity and additional mining equipment mobilized. These advancements resulted in Q3 mining rates averaging 113,000t per day compared to 87,000t per day in the second quarter of 2024, marking an approximate 30% increase.
-
Milling performance: Milled 1.2 Mt of ore at a grade of 0.9 g/t during Q3, with metallurgical recovery averaging 91%. Mill throughput during the quarter was 13% lower than the second quarter of 2024 due to harder material processed and lower mobile crushing circuit availability, which combined, resulted in suboptimal, coarser material delivered to the SAG mill. As harder Abore material is treated, it is expected that mill throughput will be directly linked to mobile crusher circuit performance until the new secondary crusher is commissioned in Q3 2025. Engineering and early earthworks for the secondary crusher continued during the quarter.
-
Production performance: Gold production of 29,784 ounces during Q3 and 86,607 ounces year-to-date. Gold production during the quarter was 13% higher than the second quarter of 2024, resulting from higher mined grades at Abore and an increase in the recovery rate from 82% to 91%. Given mill throughput is anticipated to remain constrained by harder material in the fourth quarter, the Company expects meeting the lower end of full year guidance of between 120,000 to 130,000 ounces.
-
Cost performance: Total cash costs1 of $1,247/oz and AISC1 of $2,161/oz for the three months ended September 30, 2024. Year-to-date AISC1 of $1,903/oz, tracking in line with revised AISC1 guidance of between $1,975/oz to $2,075/oz. Deducting the initial stripping at Abore would result in Q3 2024 AISC1 of $1,513/oz and $1,466/oz year-to-date.
________________________________________
1 Refer to Non-IFRS Performance Measures
 |
|
-
Cash flow generation: Generated positive cash flow from operations of $28.6 million and Free Cash Flow1 of $2.9 million during Q3, despite significant investment in developing the Abore pit.
-
Financial performance: Gold revenue of $71.0 million generated from 29,014 gold ounces sold at an average realized price of $2,446/oz during Q3. Net income of $3.7 million and Adjusted EBITDA1 of $25.6 million during Q3.
Galiano Q3 Highlights:
-
Robust liquidity: The Company ended the quarter with $120.9 million in cash and cash equivalents and no debt.
-
Earnings: Net income of $1.1 million or $0.00 per common share and adjusted net income1 of $17.7 million or $0.07 per common share during Q3.
-
Advanced the optimized Life of Mine ("LOM") plan: Progressed technical work related to the optimized LOM plan, in parallel with updated Mineral Reserve and Mineral Resource estimates for the AGM. The updated LOM is focused on earlier mining of the Nkran deposit, compared to the previous technical report (see “NI 43-101 Technical Report and Feasibility Study for the Asanko Gold Mine, Ashanti Region, Ghana" with an effective date of December 31, 2022). The optimized LOM plan is expected to be completed early during the first quarter of 2025.
-
Senior management appointment: Appointed Michael Cardinaels as Executive Vice President and Chief Operating Officer, effective September 3, 2024. Mr. Cardinaels brings over two decades of mining experience across various commodities, most recently with Perseus Mining Ltd. The appointment of Mr. Cardinaels is part of the Company's commitment to operational improvements and its overarching strategy to drive growth at the AGM.
"It was a productive quarter operationally at the AGM, with increased mining rates at Abore resulting in more ore mined and higher grades delivered to the mill," said Matt Badylak, President and Chief Executive Officer of Galiano. "This led to improved recovery and increased production quarter-over-quarter. Although mill throughput will remain constrained until the secondary crusher is operational, the ongoing investments in waste stripping during the third quarter position the Company strongly to ramp up production in 2025."
"Importantly, we maintained positive operational cash flows and closed the quarter with a robust balance sheet, holding over $120 million in cash and remaining debt-free. This financial position gives Galiano the capacity and flexibility to optimize our mine plan and advance mining activities at Nkran. Looking ahead, we are on track to update our global mineral resource and mineral reserve projections and Life of Mine Plan early in the first quarter of 2025."
|
|
Asanko Gold Mine - Summary of quarterly operational and financial highlights (100% basis)
Operating and financial results are on a 100% basis for all periods presented to enable comparability with prior quarters.
|
Asanko Gold Mine (100% basis) |
Q3 2024 |
Q2 2024 |
Q1 2024 |
Q4 2023 |
Q3 2023 |
|
Mining |
|
|
|
|
|
|
Ore mined ('000t) |
670 |
467 |
265 |
22 |
- |
|
Waste mined ('000t) |
9,726 |
7,427 |
4,877 |
3,415 |
- |
|
Total mined ('000t) |
10,396 |
7,894 |
5,142 |
3,437 |
- |
|
Strip ratio (W:O) |
14.5 |
15.9 |
18.4 |
155.2 |
- |
|
Average gold grade mined (g/t) |
1.1 |
1.0 |
0.9 |
0.7 |
- |
|
Mining cost ($/t mined) |
3.52 |
2.98 |
3.63 |
4.30 |
- |
|
Ore tonnes trucked ('000 t) |
665 |
503 |
566 |
657 |
695 |
|
Ore transportation cost ($/t trucked) |
4.56 |
5.71 |
6.79 |
6.54 |
6.63 |
|
Processing |
|
|
|
|
|
|
Ore milled ('000t) |
1,162 |
1,336 |
1,467 |
1,486 |
1,573 |
|
Average mill head grade (g/t) |
0.9 |
0.7 |
0.8 |
0.8 |
0.8 |
|
Average recovery rate (%) |
91 |
82 |
83 |
84 |
87 |
|
Processing cost ($/t milled) |
12.49 |
11.18 |
10.55 |
9.94 |
9.69 |
|
G&A cost ($/t milled) |
5.74 |
5.13 |
4.74 |
5.55 |
4.16 |
|
Gold produced (oz) |
29,784 |
26,437 |
30,386 |
31,947 |
35,779 |
|
Financials, costs and cash flow |
|
|
|
|
|
|
Revenue ($m) |
71.1 |
64.0 |
65.6 |
59.5 |
67.8 |
|
Gold sold (oz) |
29,014 |
27,830 |
31,840 |
30,555 |
35,522 |
|
Average realized gold price ($/oz) |
2,446 |
2,292 |
2,056 |
1,942 |
1,902 |
|
Total cash costs1 ($/oz) |
1,247 |
1,271 |
1,180 |
1,352 |
1,056 |
|
All-in sustaining costs1 ($/oz) |
2,161 |
1,759 |
1,793 |
2,065 |
1,445 |
|
All-in sustaining margin1 ($/oz) |
285 |
533 |
263 |
(123) |
457 |
|
All-in sustaining margin1 ($m) |
8.3 |
14.8 |
8.4 |
(3.8) |
16.2 |
|
Income from mine operations ($m) |
26.2 |
23.1 |
23.5 |
8.7 |
23.7 |
|
Adjusted net income1 ($m) |
20.3 |
13.9 |
23.5 |
3.7 |
21.3 |
|
Cash generated from operating activities ($m) |
28.6 |
9.2 |
26.1 |
24.1 |
39.7 |
|
Free cash flow1 ($m) |
2.9 |
(4.5) |
5.8 |
2.3 |
24.0 |
|
|
-
Ore tonnes mined from the Abore deposit totalled 0.7 Mt at an average mined grade of 1.1 g/t. Ore mining rates at Abore increased by 43% during Q3 2024 compared to Q2 2024, as lower precipitation levels resulted in improved ground conditions and mining equipment productivity. Additional mining equipment was also mobilized during the quarter and, as a result, Q3 mining rates averaged 113,000t per day compared to 87,000t per day in the second quarter of 2024.
-
Waste stripping activities at Abore continued with 9.7 Mt of waste rock mined at a strip ratio of 14.5:1. The strip ratio is expected to remain elevated for the remainder of 2024 due to an increase in the Abore pit shell, a result of a larger mineral reserve (refer to news release dated August 8, 2024).
-
The AGM produced 29,784 ounces of gold during Q3 2024, as the processing plant milled 1.2 Mt of ore at a grade of 0.9 g/t with metallurgical recovery averaging 91%. Gold production during Q3 2024 was slightly impacted by lower milling rates as mined ore from Abore and stockpiles of harder Nkran ore both required additional crushing and grinding. Concurrently, two mobile crushers at the processing plant experienced considerable mechanical downtime during the quarter, adding to lower throughput. Despite 13% lower mill throughput, gold production during Q3 2024 was 13% higher than Q2 2024 resulting from higher mined grades at Abore and an increase in the recovery rate from 82% to 91%.
To improve mill throughput, a mobile crushing unit was installed at the Abore pit at the end of October 2024, which is expected to increase Abore ore fragmentation. This will also improve haul truck load volumes before transport to the processing plant.
Asanko Gold Mine - Financial and operational highlights for the three and nine months ended September 30, 2024 and 2023 (100% basis)
The following tables present excerpts of the operating and financial results of the AGM on a 100% basis for the three and nine months ended September 30, 2024 and 2023, allowing performance to be compared with the comparative period in the prior quarter.
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
(All amounts in 000's of US dollars, unless otherwise stated) |
2024 |
2023 |
2024 |
2023 |
|
Asanko Gold Mine (100% basis) |
||||
|
Financial results |
||||
|
Revenue |
71,130 |
67,770 |
200,695 |
197,029 |
|
Income from mine operations |
26,199 |
23,745 |
72,766 |
72,808 |
|
Net income |
3,718 |
21,284 |
32,120 |
66,276 |
|
Adjusted EBITDA1 |
25,621 |
25,475 |
66,413 |
73,879 |
|
Cash generated from operating activities |
28,646 |
39,740 |
63,982 |
76,662 |
|
Free cash flow1 |
2,932 |
24,016 |
4,236 |
46,088 |
|
AISC margin ($ per gold ounce sold)1 |
285 |
457 |
355 |
536 |
|
Operating results |
||||
|
Gold produced (ounces) |
29,784 |
35,779 |
86,607 |
102,130 |
|
Gold sold (ounces) |
29,014 |
35,522 |
88,684 |
103,608 |
|
Average realized gold price ($/oz) |
2,446 |
1,902 |
2,258 |
1,898 |
|
Total cash costs ($ per gold ounce sold)1 |
1,247 |
1,056 |
1,230 |
1,088 |
|
AISC ($ per gold ounce sold)1 |
2,161 |
1,445 |
1,903 |
1,362 |
- Sold 29,014 ounces of gold in Q3 2024 at an average realized gold price of $2,446/oz for total revenue of $71.1 million (including $0.2 million of by-product silver revenue). Revenue was higher in Q3 2024 relative to the comparative period as a 29% increase in realized gold prices was partly offset by an 18% reduction in sales volumes.
|
|
-
Income from mine operations for Q3 2024 totaled $26.2 million compared to $23.7 million in Q3 2023, higher due to an increase in revenue.
-
Reported Adjusted EBITDA1 of $25.6 million in Q3 2024, comparable to the $25.5 million in Q3 2023.
-
Total cash costs1 in Q3 2024 amounted to $1,247/oz compared to $1,056/oz in Q3 2023. The increase in total cash costs1 was primarily driven by 18% lower gold sales volumes, which had the effect of increasing fixed costs on a per ounce basis. During Q3 2023, a higher portion of low grade stockpiled ore was processed that had no accounting book value, and as such had no mining cost attributed to it, resulting in lower total cash costs1 in the comparative quarter.
-
AISC1 for Q3 2024 was $2,161/oz compared to $1,445/oz in the comparative period. The increase in AlSC1 from Q3 2023 to Q3 2024 was mainly due to the higher stripping costs at Abore and 18% fewer gold ounces sold, as well as the increase in total cash costs per ounce1 described above. Deducting the initial stripping costs required at Abore, AISC1 for Q3 2024 would be $1,513/oz.
-
The AGM generated $28.6 million of cash flow from operating activities and Free Cash Flow1 of $2.9 million during Q3 2024. This compares to $39.7 million of cash flow from operating activities and Free Cash Flow1 of $24.0 million during Q3 2023. The decrease in Free Cash Flow1 was primarily due to investments in waste stripping at the expanded Abore deposit during Q3 2024.
Galiano Gold Inc. - Financial highlights for the three and nine months ended September 30, 2024 and 2023
|
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
(All amounts in 000's of US dollars, unless otherwise stated) |
2024 |
2023 |
2024 |
2023 |
|
Galiano Gold Inc. |
||||
|
Revenue |
71,130 |
- |
166,788 |
- |
|
Income from mine operations |
26,444 |
- |
56,222 |
- |
|
Net income |
1,100 |
11,389 |
5,172 |
31,843 |
|
Net income per share attributable to common shareholders |
0.00 |
0.05 |
0.02 |
0.14 |
|
Adjusted net income1 |
17,743 |
11,389 |
37,119 |
31,843 |
|
Adjusted net income per share attributable to common shareholders 1 |
0.07 |
0.05 |
0.15 |
0.14 |
|
Adjusted EBITDA1 |
29,012 |
10,282 |
50,117 |
26,656 |
|
Cash and cash equivalents |
120,916 |
56,079 |
120,916 |
56,079 |
|
Cash generated from (used in) operating activities |
24,449 |
(140) |
41,940 |
(2,060) |
-
The Company consolidated the financial results of the AGM commencing on March 4, 2024. As revenue and income from mine operations for the three and nine months ended September 30, 2024 relate to the financial results of the AGM, refer to the discussion above on the AGM's financial results for the quarter.
-
The Company reported net income of $1.1 million in Q3 2024 compared to net income of $11.4 million in Q3 2023. The decrease in net earnings during Q3 2024 was due to unrealized losses on gold hedge instruments. Adjusting for the unrealized losses on gold hedge instruments, adjusted net income1 was $17.7 million in Q3 2024 and was higher than the comparative period due to consolidating the financial results of the AGM.
-
Adjusted EBITDA1 for Q3 2024 amounted to $29.0 million, compared to $10.3 million in Q3 2023. The increase in Adjusted EBITDA1 was due to consolidating the financial results of the AGM; whereas, in the prior quarter the Company only recognized its 45% share of the AGM's Adjusted EBITDA1.
|
|
-
Cash generated from operating activities in Q3 2024 was $24.4 million, compared to cash used in operating activities of $0.1 million in Q3 2023. The increase in cash generated from operating activities in Q3 2024 was driven by the consolidation of the AGM's cash flows.
-
As of September 30, 2024, the Company had cash and cash equivalents of $120.9 million and no debt.
|
This news release should be read in conjunction with Galiano's Management's Discussion and Analysis and the Unaudited Condensed Consolidated Interim Financial Statements for the three and nine months ended September 30, 2024 and 2023, which are available at www.galianogold.com and filed on SEDAR+. |
1 Non-IFRS Performance Measures
The Company has included certain non-IFRS performance measures in this news release. These non-IFRS performance measures do not have any standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Accordingly, these performance measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Refer to the Non-IFRS Measures section of Galiano's Management's Discussion and Analysis for an explanation of these measures and reconciliations to the Company's and the AGM's reported financial results in accordance with IFRS.
- Total Cash Costs per Gold Ounce
Management of the Company uses total cash costs per gold ounce sold to monitor the operating performance of the AGM. Total cash costs include the cost of production, adjusted for by-product revenue and production royalties per ounce of gold sold.
- AISC per Gold Ounce and All-in Sustaining Margin
The Company has adopted the reporting of "AISC per gold ounce sold" as per the World Gold Council's guidance. AISC include total cash costs, AGM general and administrative expenses, sustaining capital expenditure, sustaining capitalized stripping costs, reclamation cost accretion and lease payments made to and interest expense on the AGM's mining and service lease agreements per ounce of gold sold. All-in sustaining margin is calculated by taking the average realized gold price for a period less that period's AISC per ounce.
- EBITDA and Adjusted EBITDA
EBITDA provides an indication of the Company's continuing capacity to generate income from operations before taking into account the Company's financing decisions and costs of amortizing capital assets. Accordingly, EBITDA comprises net income excluding interest expense, interest income, amortization and depletion, and income taxes. Adjusted EBITDA adjusts EBITDA to exclude non-recurring items and to include the Company's interest in the Adjusted EBITDA of the AGM joint venture for the period from January 1, 2024 to March 3, 2024. Other companies may calculate EBITDA and Adjusted EBITDA differently.
- Free cash flow
The Company believes that in addition to conventional measures prepared in accordance with IFRS, the Company and certain investors and analysts use free cash flow to evaluate the AGM's performance with respect to its operating cash flow capacity to meet non-discretionary outflows of cash. The presentation of free cash flow is not meant to be a substitute for the cash flow information presented in accordance with IFRS, but rather should be evaluated in conjunction with such IFRS measures. Free cash flow is calculated as cash flows from operating activities of the AGM adjusted for cash flows associated with sustaining and non-sustaining capital expenditures and payments made to mining and service contractors for leases capitalized under IFRS 16.
- Adjusted net income and adjusted net income per common share
The Company has included the non-IFRS performance measures of adjusted net income and adjusted net income per common share. Neither adjusted net income nor adjusted net income per share have any standardized meaning and are therefore unlikely to be comparable to other measures presented by other issuers. Adjusted net income excludes certain non-cash items or non-recurring items from net income or net loss to provide a measure which helps the Company and investors to evaluate the results of the underlying core operations of the Company or the AGM and its ability to generate cash flows and is an important indicator of the strength of the Company's or the AGM's operations and performance of its core business.
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Qualified Person
Richard Miller, P.Eng., Vice President Technical Services with Galiano, is a Qualified Person as defined by Canadian National Instrument 43-101, Standards of Disclosure for Mineral Projects, and has approved the scientific and technical information contained in this news release.
Conference Call and Webcast
Management will host a conference call and webcast to discuss the results of Q3 2024, at 10:30am ET on November 8, 2024. Please refer to the details below to join the conference call or the webcast.
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Conference Call Participant Details |
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RapidConnect URL: |
https://emportal.ink/3XVW7iq |
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Local: |
Toronto: 1-437-900-0527 |
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North American Toll Free: |
1-888-510-2154 |
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Webcast URL |
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Audience URL: |
https://app.webinar.net/gNJWpR3dMkz |
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Conference Replay |
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Conference Replay Local: |
(+1) 289 819 1450 |
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Conference Replay North American Toll Free: |
(+1) 888 660 6345 |
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Conference Replay Entry Code: |
09652 # |
| Conference Replay Expiration Date: | 11/15/2024 |
About Galiano Gold Inc.
Galiano is focused on creating a sustainable business capable of value creation for all stakeholders through production, exploration and disciplined deployment of its financial resources. The Company owns the Asanko Gold Mine, which is located in Ghana, West Africa. Galiano is committed to the highest standards for environmental management, social responsibility, and the health and safety of its employees and neighbouring communities. For more information, please visit www.galianogold.com.
Contact Information
Krista Muhr
Toll-Free (N. America): 1-855-246-7341
Telephone: 1-778-239-0446
Email: info@galianogold.com
Cautionary Note Regarding Forward-Looking Statements
Certain statements and information contained in this news release constitute "forward-looking statements" within the meaning of applicable U.S. securities laws and "forward-looking information" within the meaning of applicable Canadian securities laws, which we refer to collectively as "forward-looking statements". Forward-looking statements are statements and information regarding possible events, conditions or results of operations that are based upon assumptions about future conditions and courses of action. All statements and information other than statements of historical fact may be forward-looking statements. In some cases, forward-looking statements can be identified by the use of words such as "seek", "expect", "anticipate", "budget", "plan", "estimate", "continue", "forecast", "intend", "believe", "predict", "potential", "target", "may", "could", "would", "might", "will" and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook.
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Forward-looking statements in this news release include, but are not limited to: statements regarding the Company's operating plans for the AGM and timing thereof; expectations and timing with respect to current and planned drilling programs, including at Abore, and the results thereof; anticipated production and cost guidance; performance of a mobile crushing unit installed at the Abore pit; timing of installation of a permanent secondary crushing circuit; timing of delivery of higher grade ore from the Abore pit; the Company's plans to update a consolidated Mineral Reserve Estimate and LOM plan and timing thereof; any additional work programs to be undertaken by the Company; potential exploration opportunities and statements regarding the usefulness and comparability of certain non-IFRS measures; and total cash costs and corresponding cost performance relating to the Company's activities. Such forward-looking statements are based on a number of material factors and assumptions, including, but not limited to: development plans and capital expenditures; the price of gold will not decline significantly or for a protracted period of time; the accuracy of the estimates and assumptions underlying mineral reserve and mineral resource estimates; the Company's ability to raise sufficient funds from future equity financings to support its operations, and general business and economic conditions; the global financial markets and general economic conditions will be stable and prosperous in the future; the AGM will not experience any significant uninsured production disruptions that would materially affect revenues; the ability of the Company to comply with applicable governmental regulations and standards; the mining laws, tax laws and other laws in Ghana applicable to the AGM will not change, and there will be no imposition of additional exchange controls in Ghana; the success of the Company in implementing its development strategies and achieving its business objectives; the Company will have sufficient working capital necessary to sustain its operations on an ongoing basis and the Company will continue to have sufficient working capital to fund its operations; and the key personnel of the Company will continue their employment.
The foregoing list of assumptions cannot be considered exhaustive.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those anticipated in such forward-looking statements. The Company believes the expectations reflected in such forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and you are cautioned not to place undue reliance on forward-looking statements contained herein. Some of the risks and other factors which could cause actual results to differ materially from those expressed in the forward-looking statements contained in this news release, include, but are not limited to: mineral reserve and mineral resource estimates may change and may prove to be inaccurate; metallurgical recoveries may not be economically viable; life of mine estimates are based on a number of factors and assumptions and may prove to be incorrect; risks related to the expected benefits of the Acquisition; actual production, costs, returns and other economic and financial performance may vary from the Company's estimates in response to a variety of factors, many of which are not within the Company's control; inflationary pressures and the effects thereof; the AGM has a limited operating history and is subject to risks associated with establishing new mining operations; sustained increases in costs, or decreases in the availability, of commodities consumed or otherwise used by the Company may adversely affect the Company; adverse geotechnical and geological conditions (including geotechnical failures) may result in operating delays and lower throughput or recovery, closures or damage to mine infrastructure; the ability of the Company to treat the number of tonnes planned, recover valuable materials, remove deleterious materials and process ore, concentrate and tailings as planned is dependent on a number of factors and assumptions which may not be present or occur as expected; the Company's mineral properties may experience a loss of ore due to illegal mining activities; the Company's operations may encounter delays in or losses of production due to equipment delays or the availability of equipment; outbreaks of COVID-19 and other infectious diseases may have a negative impact on global financial conditions, demand for commodities and supply chains and could adversely affect the Company's business, financial condition and results of operations and the market price of the common shares of the Company; the Company's operations are subject to continuously evolving legislation, compliance with which may be difficult, uneconomic or require significant expenditures; the Government of Ghana may increase the Growth and Sustainability Levy, increasing the Company's expenditures; the Company may be unsuccessful in attracting and retaining key personnel; labour disruptions could adversely affect the Company's operations; recoveries may be lower in the future and have a negative impact on the Company's financial results; the lower recoveries may persist and be detrimental to the AGM and the Company; the Company's business is subject to risks associated with operating in a foreign country; risks related to the Government of Ghana defaulting on local and international bonds; risks related to the Company's use of contractors; the hazards and risks normally encountered in the exploration, development and production of gold; the Company's operations are subject to environmental hazards and compliance with applicable environmental laws and regulations; the effects of climate change or extreme weather events may cause prolonged disruption to the delivery of essential commodities which could negatively affect production efficiency; the Company's operations and workforce are exposed to health and safety risks; unexpected costs and delays related to, or the failure of the Company to obtain, necessary permits could impede the Company's operations; the Company's title to exploration, development and mining interests can be uncertain and may be contested; geotechnical risks associated with the design and operation of a mine and related civil structures; the Company's properties may be subject to claims by various community stakeholders; current, ongoing and future legal disputes and appeals from third parties may be successful, and the Company may be required to pay settlement costs or damages; risks related to limited access to infrastructure and water; risks associated with establishing new mining operations; the Company's revenues are dependent on the market prices for gold, which have experienced significant recent fluctuations; the Company may not be able to secure additional financing when needed or on acceptable terms; the Company's shareholders may be subject to future dilution; risks related to changes in interest rates and foreign currency exchange rates; risks relating to credit rating downgrades; changes to taxation laws applicable to the Company may affect the Company's profitability and ability to repatriate funds; risks related to the Company's internal controls over financial reporting and compliance with applicable accounting regulations and securities laws; future securities offerings issued pursuant to the Company's base shelf prospectus may not be successful depending on external market factors outside of the Company's control; risks related to information systems security threats; non-compliance with public disclosure obligations could have an adverse effect on the Company's stock price; the carrying value of the Company's assets may change and these assets may be subject to impairment charges; risks associated with changes in reporting standards; the Company may be liable for uninsured or partially insured losses; the Company may be subject to litigation; damage to the Company's reputation could result in decreased investor confidence and increased challenges in developing and maintaining community relations which may have adverse effects on the business, results of operations and financial conditions of the Company and the Company's share price; the Company may be unsuccessful in identifying targets for acquisition or completing suitable corporate transactions, and any such transactions may not be beneficial to the Company or its shareholders; the Company must compete with other mining companies and individuals for mining interests; the Company's growth, future profitability and ability to obtain financing may be impacted by global financial conditions; the Company's common shares may experience price and trading volume volatility; the Company has never paid dividends and does not expect to do so in the foreseeable future; the Company's shareholders may be unable to sell significant quantities of the Company's common shares into the public trading markets without a significant reduction in the price of its common shares, or at all; and the risk factors described under the heading "Risk Factors" in the Company's Annual Information Form.
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Although the Company has attempted to identify important factors that could cause actual results or events to differ materially from those described in the forward-looking statements, you are cautioned that this list is not exhaustive and there may be other factors that the Company has not identified. Furthermore, the Company undertakes no obligation to update or revise any forward-looking statements included in, or incorporated by reference in, this news release if these beliefs, estimates and opinions or other circumstances should change, except as otherwise required by applicable law.
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Neither the Toronto Stock Exchange nor the Investment Industry Regulatory Organization of Canada accepts responsibility for the adequacy or accuracy of this news release.
Source: Galiano Gold Inc.
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