Galane Gold Ltd.
TSX VENTURE : GG

Galane Gold Ltd.

April 30, 2012 08:00 ET

Galane Gold Ltd. Announces Fourth Quarter and Annual Financial and Operating Results for 2011

TORONTO, ONTARIO--(Marketwire - April 30, 2012) - Galane Gold Ltd. ("Galane Gold" or the "Company") (TSX VENTURE:GG) is pleased to announce its financial results for the fourth quarter and year ended December 31, 2011. All amounts are in United States dollars unless otherwise indicated.

Complete audited annual financial statements and the corresponding Management's Discussion and Analysis are expected to be available under the Company's profile on www.sedar.com on April 30, 2012.

Fourth Quarter Highlights
  • Produced 15,554 ounces of gold at an average cash cost of $1,025 per ounce (before royalties);
  • Sold 16,203 ounces of gold at an average selling price of $1,674 per ounce; and
  • Working capital increased by $10.6 million to $19.2 million as at December 31, 2011.
2011 Highlights
  • Completed private placement of units of the Company (at CAD$0.80 per unit), with each unit consisting of one common share and one-half of one common share purchase warrant of the Company, for gross proceeds of $16.8 million (net proceeds of $14.9 million) on August 30, 2011;
  • Purchased 100% of the issued and outstanding shares of Gallery Gold Pty Ltd. ("Gallery Gold") from IAMGOLD Corporation on August 30, 2011 for an aggregate purchase price of $34.5 million (the "Gallery Acquisition");
  • Completed reverse takeover transaction with Galane Gold Mines Limited ("GGM") on August 30, 2011, whereby the former shareholders of GGM acquired control of the Company (the "Carlaw Acquisition");
  • Assumed operational control of the Mupane gold mine in the Republic of Botswana ("Botswana") on August 30, 2011;
  • Produced 20,193 ounces of gold at an average cash cost of $1,039 per ounce (before royalties) during the period from August 30, 2011 (the date Gallery Gold was acquired) to December 31, 2011;
  • Sold 16,853 ounces of gold plus incidental silver at an average combined selling price of $1,697 per ounce; and
  • Increased working capital by $3.8 million to $19.2 million during the period from August 31, 2011 to December 31, 2011 after capital expenditures of $2.4 million.
Operations Summary

Q4 2011

Q3 2011
(one month)

Q2 2011

Q1 2011

2011
Tonnes milled 281,000 104,000 - - 385,000
Gold grade (g/t) 1.93 1.58 - - 1.86
Recovery % of gold 87.4% 87.8%** - - 87.5%
Gold ounces produced 15,554 4,639** - - 20,193
Gold ounces sold 16,203 650 - - 16,853
Gold price realized per ounce $ 1,674 $ 1,814 - - $ 1,697
Cash cost per ounce* $ 1,025 $ 1,086** - - $ 1,039
* before royalties
** As a result of an internal audit performed by management, the figure presented for "Gold ounces produced" has been adjusted from 4,410 ounces (as reported in the management's discussion and analysis of the Company for the period ended September 30, 2011) to 4,639 ounces. The related figures for "Recovery% of gold" and "Cash cost per ounce" have been adjusted accordingly. Management has deemed such adjustments to be immaterial.

The focus for the fourth quarter of 2011 was on the normal course operations and improvement in internal efficiencies of the Company's gold production and costs. A review of organisational structure, together with identification of skills requirements, was completed and an associated restructuring was implemented. An initial mine plan review was conducted, with a further refinement of the plan to follow upon completion of pit optimisations that were commenced in December 2011. These activities resulted in a sustained gold grade on plan of 1.93g/t average and recovery of 87.4%. Cash cost on a per ounce basis before royalties was reduced from $1,086/oz for the third quarter down to an average of $1,025/oz for the fourth quarter. A program of identifying further operational improvements and risk reduction was started in the mining and processing areas, with the positive impact of implementation of these improvements emerging during the fourth quarter. The program identifies areas requiring further refinement of operating efficiencies and any associated capital expenditures for 2012. Additional business development projects have been identified that are within the tenements of the Company and these will be evaluated in 2012. Specialist professionals have been recruited for this purpose.

Recent Developments

On April 10, 2012, the Company completed the acquisition of The Northern Lights Exploration Company (Pty) Ltd ("NLE"). NLE holds several prospecting licenses in the Tati Greenstone Belt in Botswana which are adjacent to existing licenses held by Galane Gold's Botswana subsidiaries. The combination of NLE's prospecting licenses and the prospecting and mining licenses currently held by Galane Gold's Botswana subsidiaries gives Galane Gold control of an area of more than 1200km2 comprising what the Company believes are all of the prospective gold areas in the Tati Greenstone Belt. Galane Gold's processing plant is centrally located on the Tati Greenstone Belt in the Mupane mining license area.

Exploration

Exploration activity for the fourth quarter was mainly on planning and preparation of an exploration program for both near mine exploration and the exploration tenements owned by the Company. This has included the review of all available historical exploration data which was generated in the previous extensive exploration programs from 1995 to 2007, including:

  • Soil geo-chemical survey conducted over 1,200 km2;
  • Drill hole database and core samples; and
  • Raw aero-magnetic survey database and reinterpretation of this data with up-to-date software.

Further, a full exploration team has been recruited and assembled for the program and additional preparations have been made, such as sourcing of drilling contractors, refurbishment of a sample preparation facility for the drilling program, and drill site preparation.

The trenching and drilling program for both near mine and other priority targets is underway and will consist of a planned 8,000m of near mine drilling and an additional 8,000m of drilling on priority targets within our mining license and prospecting license areas. It is anticipated that this program will be completed by the end of 2012. A revised NI 43-101 mineral reserve and mineral resource statement will be developed concurrently with the drilling program.

2012 Outlook

On August 30, 2011, the Company completed the Gallery Acquisition and the Carlaw Acquisition (collectively, the "Acquisitions") and thereby took control of Mupane Gold Mining (Pty) Ltd.'s mining operations in Botswana. Following the Acquisitions, management of the Company immediately commenced the implementation of its improvement plan, with a focus on optimization of the mining operations and expansion of the mine-life resource base. While the Company is still in the early stages of the implementation of the plan, positive progress has thus far been achieved in the stabilization of operations, restructuring of the organization and recruitment of quality senior personnel. This progress has prepared the mining operation for the next phase of improvement, where the focus is on mining and processing efficiency improvement.

Galane Gold CEO, Philip Condon commented: "The completion of the Acquisitions was effected smoothly and efforts were immediately focused on the development and implementation of the operations improvement program. Employees from all corners of the operation contributed to the program and its implementation. Whilst it is early times in the program, the achievements from efforts to date are an encouraging sign and one that all employees should be deservedly proud.

"Ongoing improvement efforts are expected to continue into 2012 on further productivity improvement, as well as implementation of the Galane Gold exploration program and an investigation of other potential business development opportunities within our portfolio of properties.

"Our ultimate aim is to minimise the risks to our business and maximise both the efficiency of gold production and the life of the operation. The Company has made an excellent start on this and we intend to continue to build further into 2012 and beyond.

"Provided that the current gold price environment continues, we anticipate working capital to continue to build thus placing the Company in an increasingly strengthened position to ensure sufficient funding for both exploration and Mupane operations' capital expenditure requirements, as well as contributing funding to the expansion of the Galane Gold business."

Financial Discussion:
A. Results for the Fourth Quarter and Year Ended December, 2011

(In thousands of dollars)
Three Months ended
December 31,
2011
Year ended
December 31, 2011
(four Months)
Mining Revenue: $ 27,125 $ 28,607
Mining Costs: (19,937 ) (23,610 )
Earnings from mining operations 7,188 $ 4,997
Corporate general and administration:
- Cash (790 ) (1,504 )
- Share-based compensation 271 (588 )
(519 ) (2,092 )
Earnings from operations 6,669 $ 2,905
Other expenses (1) (992 ) (1,480 )
Net earnings 5,677 $ 1,425
Per share
- Basic 0.126 0.0862
- Fully diluted 0.126 $ 0.0860
(1) Other expenses include:
Exploration costs (35 ) (35 )
Foreign exchange gain 720 584
Movement in fair value of warrants (1,444 ) (1,444 )
Non-cash acquisition expenses - (397 )
Accretion (174 ) (174 )
Interest on long term debt (60 ) (79 )
Other income 1 65
(992 ) (1,480 )
Commentary:
  • Fourth quarter ended December 31, 2011:
    • The fourth quarter reflects the first full quarter of mining operations for the Company, generating earnings from mining operations of $7.2 million from the sale of 16,203 ounces of gold, with a net margin of $444 per ounce; and
    • Corporate general and administration costs maintained a level consistent with prior periods at $790,000 for the quarter.
  • Year ended December 31, 2011:
    • The year ended December 31, 2011 incorporated financing and acquisition activity, plus four months of mining operations. The results reflect the aggregate effect of these, generating $0.0862 in basic earnings per share ($0.0860 fully diluted).
B. Financial Position
Selected Consolidated Financial Position Data
(In thousands of dollars) December 31, 2011
$
Total current assets 26,431
Total current liabilities 7,197
Working capital 19,234
Mining assets 26,603
Non-current liabilities 13,476
Total shareholders' equity 32,361
Commentary:
Financing, acquisition, and four months of mining operations activity generated the following:
• Working capital:
- Financing activity $ 2,479
- Acquisition activity 12,929
- Mining operating activity:
Working capital generated 6,234
Capital expenditures (2,408 )
Net from mining operations 3,826
Total working capital generated $ 19,234
• The Company also issued $3.8 million in long-term debt as part of its acquisition activity.

About Galane Gold

Galane Gold is an un-hedged gold producer and explorer with mining operations and exploration tenements in Botswana. Galane Gold is a public company and its shares are quoted on the TSX Venture Exchange under the symbol GG. Galane Gold's management team is comprised of senior mining professionals with extensive experience in managing mining and processing operations and large-scale exploration programmes. Galane Gold is committed to operating at world-class standards and is focused on the safety of its employees, respecting the environment, and contributing to the communities in which it operates.

Cautionary Notes

Certain statements contained in this press release constitute "forward-looking statements". All statements other than statements of historical fact contained in this press release, including, without limitation, those regarding the Company's future financial position and results of operations, strategy, proposed acquisitions, plans, objectives, goals and targets, and any statements preceded by, followed by or that include the words "believe", "expect", "aim", "intend", "plan", "continue", "will", "may", "would", "anticipate", "estimate", "forecast", "predict", "project", "seek", "should" or similar expressions or the negative thereof, are forward-looking statements. These statements are not historical facts but instead represent only the Company's expectations, estimates and projections regarding future events. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. Therefore, actual results may differ materially from what is expressed, implied or forecasted in such forward-looking statements.

Additional factors that could cause actual results, performance or achievements to differ materially include, but are not limited to: the Company's dependence on a single mineral project; gold price volatility; risks associated with the conduct of the Company's mining activities in Botswana; regulatory, consent or permitting delays; risks relating to the Company's exploration, development and mining activities being situated in a single country; risks relating to reliance on the Company's management team and outside contractors; risks regarding mineral resources and reserves; the Company's inability to obtain insurance to cover all risks, on a commercially reasonable basis or at all; currency fluctuations; risks regarding the failure to generate sufficient cash flow from operations; risks relating to project financing and equity issuances; mining tax regimes; risks arising from holding derivative instruments; the Company's need to replace reserves depleted by production; risks and unknowns inherent in all mining projects, including the inaccuracy of reserves and resources, metallurgical recoveries and capital and operating costs of such projects; contests over title to properties, particularly title to undeveloped properties; laws and regulations governing the environment, health and safety; operating or technical difficulties in connection with mining or development activities; lack of infrastructure; employee relations, labour unrest or unavailability; health risks in Africa; the Company's interactions with surrounding communities and artisanal miners; the Company's ability to successfully integrate acquired assets; the speculative nature of exploration and development, including the risks of diminishing quantities or grades of reserves; development of the Company's exploration properties into commercially viable mines; stock market volatility; conflicts of interest among certain directors and officers; lack of liquidity for shareholders of the Company; and litigation risk. Management provides forward-looking statements because it believes they provide useful information to investors when considering their investment objectives and cautions investors not to place undue reliance on forward-looking information. Consequently, all of the forward-looking statements made in this press release are qualified by these cautionary statements and other cautionary statements or factors contained herein, and there can be no assurance that the actual results or developments will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, the Company. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect subsequent information, events or circumstances or otherwise, except as required by law.

Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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