Galiano Gold(GAU) - 2023 Q2 - Quarterly Report

Condensed Consolidated Interim Financial Statements Condensed Consolidated Interim Statements of Financial Position Galiano Gold's total assets grew to $202.8 million, driven by an increased investment in its joint venture, with total equity rising to $194.7 million | Financial Position (in thousands USD) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | 202,762 | 179,894 | | Current Assets | 56,428 | 58,605 | | Non-current Assets | 146,334 | 121,289 | | Total Liabilities | 8,100 | 6,203 | | Current Liabilities | 7,886 | 5,804 | | Non-current Liabilities | 214 | 399 | | Total Equity | 194,662 | 173,691 | - The increase in non-current assets was mainly due to the growth in the value of the Investment in joint venture, which rose from $54.1 million to $74.5 million, and Financial assets, which increased from $66.8 million to $71.6 million[2] Condensed Consolidated Interim Statements of Operations and Comprehensive Income Net income for the six-month period rose to $20.5 million, primarily driven by a $20.3 million share of income from its joint venture | Income Statement (in thousands USD) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Share of net income related to joint venture | 20,314 | - | | Service fee earned as operators of joint venture | 2,836 | 2,614 | | General and administrative expenses | (6,998) | (4,756) | | Exploration and evaluation expenditures | (1,885) | (192) | | Income (loss) from operations and joint venture | 14,267 | (2,334) | | Finance income | 6,149 | 13,380 | | Net income for the period | 20,454 | 11,029 | | Basic Net income per share ($) | 0.09 | 0.05 | - For the second quarter of 2023, net income was $12.0 million, slightly lower than the $12.6 million in Q2 2022, mainly due to lower finance income despite recognizing $11.0 million in income from the joint venture[4] Condensed Consolidated Interim Statements of Changes in Equity Total equity increased to $194.7 million, driven by the period's net income of $20.5 million and share-based compensation expense | Changes in Equity (in thousands USD) | Six Months Ended June 30, 2023 | | :--- | :--- | | Balance as at December 31, 2022 | 173,691 | | Share-based compensation expense | 517 | | Net income and comprehensive income | 20,454 | | Balance as at June 30, 2023 | 194,662 | Condensed Consolidated Interim Statements of Cash Flow The company saw a net cash decrease of $0.6 million, with negative operating cash flow resulting from the non-cash nature of its joint venture income | Cash Flow Summary (in thousands USD) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Cash (used in) provided by operating activities | (1,920) | (600) | | Cash provided by investing activities | 1,347 | 165 | | Cash used in financing activities | (62) | (67) | | (Decrease) in cash and cash equivalents | (608) | (516) | | Cash and cash equivalents, end of period | 55,503 | 53,005 | - Operating cash flow before working capital changes was negative $3.4 million, largely because the $20.3 million share of net income from the joint venture is a non-cash item and was adjusted out[8] Notes to the Condensed Consolidated Interim Financial Statements Note 1: Nature of Operations The company's principal business is operating the Asanko Gold Mine in Ghana through a 45% equity interest in a joint venture - The Company's primary business activity is managing the Asanko Gold Mine (AGM) via a joint venture (JV)[11] - Galiano holds a 45% equity interest in the entity that owns the AGM mining licenses[11] - The company's common shares are traded on the Toronto Stock Exchange and NYSE American Exchange under the ticker "GAU"[10] Note 2: Basis of Presentation The financial statements were prepared according to IAS 34, using accounting policies consistent with the 2022 annual report - The financial statements adhere to International Accounting Standard (IAS) 34 and are consistent with the accounting policies from the 2022 annual report[13][14] - The company's principal subsidiaries and joint arrangements are listed, including its 45% interest in Asanko Gold Ghana Ltd. and 50% interests in Adansi Gold Company (GH) Ltd. and Shika Group Finance Limited, all accounted for using the equity method[18] Note 4: Balances Due From/To Related Party The company earns a service fee from the joint venture and reported a net payable of $2.6 million to the JV as of June 30, 2023 | Related Party Balances (in thousands USD) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Receivable due from related party (JV) | 473 | 1,684 | | Payable due to related party (JV) | 3,107 | 1,364 | - The company earned a service fee of $2.8 million from the JV for the six months ended June 30, 2023, compared to $2.6 million for the same period in 2022[23] Note 5: Financial Assets The fair value of the company's preference shares in a JV entity increased to $71.6 million, resulting in a $4.8 million gain | Preference Shares Fair Value (in thousands USD) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Balance, beginning of period | 66,809 | 72,426 | | Fair value adjustment for the period | 4,768 | (5,617) | | Balance, end of period | 71,577 | 66,809 | Note 6: Asanko Gold Mine Joint Venture The investment in the Asanko Gold Mine JV increased to $74.5 million, reflecting the company's share of the JV's strong net income - The company and Gold Fields each own a 45% equity interest in Asanko Gold Ghana Ltd. ("AGGL"), which owns the AGM, with the Government of Ghana holding a 10% free-carried interest[30] | Change in Investment in JV (in thousands USD) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Balance, beginning of period | 54,148 | - | | Company's share of the JV's net income | 20,314 | 46,517 | | Balance, end of period | 74,462 | 54,148 | Operating and Financial Results of the AGM JV (100% Basis) On a 100% basis, the AGM JV's net income surged to $45.0 million despite lower revenue, due to reduced production costs AGM JV Statement of Income (100% Basis, in thousands USD) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Revenue | 129,259 | 162,417 | | Production costs | (68,261) | (105,486) | | Depreciation and depletion | (4,955) | (22,014) | | Income from mine operations | 49,063 | 26,796 | | Net income for the period | 44,992 | 2,165 | AGM JV Financial Position (100% Basis, in thousands USD) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | 112,914 | 91,271 | | Total Current Assets | 182,069 | 157,187 | | Total Assets | 379,694 | 337,827 | | Total Current Liabilities | 25,752 | 31,589 | | Total Liabilities | 86,725 | 89,850 | Incremental Disclosures for AGM JV Key disclosures include lower gold sales, a new government levy, an increased asset retirement provision, and an undrawn credit facility - The AGM sold 68,086 ounces of gold in the first six months of 2023, compared to 88,165 ounces in the same period of 2022[38] - The Government of Ghana imposed a new 1% Growth and Sustainability Levy (GSL) on gold revenues, effective May 1, 2023, which is recorded as a royalty expense[43] - The JV's asset retirement provision increased from $58.1 million to $61.0 million, primarily due to a change in estimate related to the tailings storage facility[51][52] - The JV has a $30.0 million revolving credit facility (RCF) with Rand Merchant Bank, which was undrawn as of June 30, 2023[59] Note 8: Equity Reserves and Long-Term Incentive Plan Awards The company manages several incentive plans, with cash-settled awards recorded as liabilities and new stock options granted in H1 2023 - The company's incentive plans include stock options, Restricted Share Units (RSUs), Performance Share Units (PSUs), and Deferred Share Units (DSUs)[63] - All RSU, PSU, and DSU awards are cash-settled, meaning they are treated as financial liabilities and recorded at fair value at each reporting date[63][65] Stock Options Outstanding stock options increased to 13.0 million after 4.6 million new options were granted in the first half of 2023 | Stock Option Movement | Number of Options | Weighted Avg. Exercise Price (C$) | | :--- | :--- | :--- | | Balance, Dec 31, 2022 | 8,497,170 | 1.04 | | Granted | 4,574,000 | 0.85 | | Expired | (54,168) | 1.07 | | Balance, June 30, 2023 | 13,017,002 | 0.97 | RSU, PSU, DSU, and Phantom Units The number of outstanding cash-settled units and their corresponding liabilities increased across all award types during H1 2023 | Outstanding Units & Liability (in thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | RSUs Outstanding | 621,639 | 534,508 | | RSU Liability ($) | 101 | 169 | | PSUs Outstanding | 2,501,482 | 1,739,401 | | PSU Liability ($) | 408 | 503 | | DSUs Outstanding | 4,340,175 | 3,132,000 | | DSU Liability ($) | 2,537 | 1,664 | Note 9: Commitments and Contingencies The company has total contractual obligations of $8.1 million, primarily due within one year, and a $5.9 million parent company guarantee | Contractual Obligations (in thousands USD) | Within 1 year | 1 - 5 years | Total June 30, 2023 | | :--- | :--- | :--- | :--- | | Accounts payable & related party payable | 4,272 | - | 4,272 | | Long-term incentive plan (cash-settled) | 3,494 | 73 | 3,567 | | Corporate office leases | 134 | 158 | 292 | | Total | 7,900 | 231 | 8,131 | - The company has provided a parent company guarantee of $5.9 million for the unfunded portion of the AGM's reclamation bond[77] Note 10: General and Administrative (G&A) Expenses G&A expenses increased to $7.0 million for the six-month period, driven by a significant rise in share-based compensation costs | G&A Expenses (in thousands USD) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Wages, benefits and consulting | (2,944) | (3,719) | | Share-based compensation | (2,490) | 370 | | Office, rent and administration | (630) | (603) | | Total G&A expense | (6,998) | (4,756) | Note 11: Exploration and Evaluation (E&E) Expenditures Exploration and evaluation expenditures rose sharply to $1.9 million in H1 2023, primarily due to increased spending on drilling and assays | E&E Expenses (in thousands USD) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Drilling and assays | (1,486) | (29) | | Contractors and consulting | (218) | (72) | | Crop compensation, community and permitting | (143) | (9) | | Total E&E expense | (1,885) | (192) | Note 15: Segmented Information The company operates as a single segment, with the majority of its assets and all comprehensive income generated from its West Africa operations | Geographic Allocation of Total Assets (in thousands USD) | Canada | West Africa | Total | | :--- | :--- | :--- | :--- | | June 30, 2023 | 56,707 | 146,055 | 202,762 | | December 31, 2022 | 58,900 | 120,994 | 179,894 | | Geographic Income (Loss) for Six Months Ended June 30, 2023 (in thousands USD) | Canada | West Africa | Total | | :--- | :--- | :--- | :--- | | (Loss) income from operations and joint venture | (4,077) | 18,344 | 14,267 | | Net (loss) income and comprehensive (loss) income | (2,656) | 23,110 | 20,454 |