News & Media

Galane Gold Ltd. Announces Financial and Operating Results for Second Quarter 2012

August 27, 2012

TORONTO, Aug. 27, 2012 /CNW/ - Galane Gold Ltd. ("Galane Gold" or the "Company") (TSX VENTURE:GG)(BOTSWANA:GG) is pleased to announce its financial results for the second quarter ended June 30, 2012. All amounts are in United States dollars unless otherwise indicated.

A copy of the unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2012 and the corresponding Management's Discussion and Analysis will be available under the Company's profile on

Second Quarter Highlights

2012 Year to Date Highlights

Operations Summary


Q2 2012







YTD 2012






Total since





Tonnes milled   307,624   285,185   592,809   385,000   977,809
Gold grade (g/t)   1.46   2.18   2.18   1.86   1.71
Recovery % of gold  





Gold ounces produced  





Gold ounces sold   14,024   15,155   29,179   16,853   46,032
Gold price realized per ounce $





Total operating cash cost per ounce(1) $





Total cash cost per ounce(1) $





(1) Excluding royalties. Total cash cost excluding royalties and total operating cash cost excluding royalties are non-GAAP measures. Refer to "Supplemental Information to Management's Discussion and Analysis" in the Company's Management's Discussion and Analysis for the three and six months ended June 30, 2012 for a reconciliation to measures reported in the Company's financial statements.
(2) As a result of the Company's OI Program (as defined below), a one-time net downward adjustment to inventory quantities and cost has been recognized in Q2 2012 as discussed in the Commentary to the Financial Results section of this press release.
(3) 2011 results are for the four months from the date of acquisition of the Mupane mine (August 30, 2011 to December 31, 2011).

Comments on operations are as follows:



Early benefits of some of these programs have resulted in improved performance as planned for Q2 2012 such as improved tonnage throughput rates through the processing plant from 285,185 tonnes in Q1 2012 to 307,624 tonnes for Q2 2012. The combination of average gold ore grade of 1.46 g/t and 80% recovery for Q2 2012, and an average ore grade of 1.82 g/t and 85.6% recovery for the six months ended June 30, 2012, was anticipated and resulted in the total gold production, sales and cash costs outlined in the table at the beginning of this section.

The review of the metal accounting system identified possible inconsistencies in GIC at the end of May 2012, and an investigation was initiated immediately. Certain inconsistencies in inputs were identified, quantified and rectified. These include over-estimation of the volume of loaded carbon in the CIL tanks (from both sample gathering and sample analysis techniques used) and incorrect density Specific Gravity factor, which resulted in an overestimation of the GIC by 3,380 ounces. Corrective measures have now been put in place that include: (i) a more representative sample gathering technique; (ii) an accurate estimate of contained carbon and associated assay of gold load; (iii) more accurate density factors being utilised and reviewed on an ongoing basis; and (iv) a rigorous monthly review of the end of month reconciliation of GIC.

Similarly, a review of the procedures used to quantify the gold content of the low-grade stockpiles identified an error in conversion of surveyed volume to tonnage estimate. This had a positive impact with an upward adjustment to the quantity of ore contained therein by 3,139 ounces. The monthly reconciliation procedure on the low-grade stockpile has now been modified to be driven by actual survey data carried out monthly, which will help to ensure that a regular and accurate estimate of low-grade stockpile tonnage is maintained.


Exploration activity for Q2 2012 has ramped up significantly as anticipated. Subsequent to the NLE Acquisition, a portfolio-wide exploration plan was developed and this extensive program is now underway.

BSE Secondary Listing

The Company is also pleased to announce that it has listed its shares on the Botswana Stock Exchange ("BSE") under the trading symbol "GG". This listing will serve as a secondary listing for the Company's common shares and the primary exchange for the common shares will remain the TSX Venture Exchange (the "TSXV").

The listing on the BSE does not involve the issuance of new common shares of the Company or any other securities or derivatives, such as depositary receipts, as it was structured solely to allow the common shares of the Company that are currently issued and outstanding to be tradable by investors through the facilities of the BSE. The listing will not result in any changes to the rights and entitlements of holders of the Company's common shares, irrespective of whether they purchase their shares through the TSXV or the BSE.

2012 Outlook

The transition from Signal Hill mine to Golden Eagle mine has progressed well during Q2 2012. Mining operations at Signal Hill will finish during Q3 2012 as planned, at which time it is anticipated that Golden Eagle will be producing approximately 50% of the run of mine ore being processed at the Mupane mill. The Tholo strip continues to progress as planned and is producing ore at progressively increasing rates. In addition, the Company has completed a revised mine plan that involves accelerated stripping of the Tholo pit cut back to make more ore available at a higher grade sooner. The board of directors has considered the financial implications of this accelerated stripping and approved the increase in expenditure rate. Company management and the board of directors have also considered the Company's improved liquidity position and prospects for additional future sources of ore and concluded that the Company would benefit materially by bringing forward the availability and subsequent processing of higher grade ore from the Tholo pit.

The acquisition of NLE was completed in April 2012 and as a result, the Company now has approximately 90% of the Tati greenstone belt area, an area exceeding 1,200 square km, under either exploration or mining license. This has allowed a portfolio-wide exploration approach that will bring efficiencies in exploration activity not possible with smaller tenement areas. The first review of the previous exploration database was completed during Q1 and Q2 2012 and included the re-interpretation of a previously generated aero-magnetic survey data utilising up-to-date software technology. This resulted in the confirmation of existing high priority targets and generated additional high priority targets. As a result of this updated review, including the aero-magnetic data, the Company has expanded the exploration budget for the remainder of 2012 and all of 2013 from $3.8 million to $7.8 million. An intense phase of drilling and pitting activity began in Q2 of 2012 and will continue well into 2013.

One of the Company's key post-acquisition activities has been the implementation of a comprehensive Operations Improvement Program (the "OI Program"), which has continued to build momentum throughout Q2 2012. Some of the activities undertaken as part of the OI Program are achieving immediate results whilst others will require a longer time-period to achieve the desired outcomes. Certain outcomes of the OI Program have had a negative one-off impact, such as the adjustment to the GIC inventory; however it is the intent of the program to identify and eliminate such items expediently and therefore further reduce business risk and improve management performance. Such OI Program developments are critical to the long-term success of the business. There remains considerable scope for additional improvement across the whole of the operation both in the short to medium term and on an ongoing basis. Further recruitment of high quality employees progressed during Q2 2012 and the positive impact of these professionals is being realised across the operations and exploration activities of the Company.

Galane Gold CEO, Philip Condon commented: "The Company is now well advanced in the implementation of its OI Program, which is aimed at changing the trajectory at Mupane to that of an efficient and continuously improving operation with a long-term perspective. OI Program-driven improvements in measurement procedures and processes have had a short-term negative impact due to the downward adjustment to the GIC inventory; however, precise and accurate measurement systems and processes are critical to reporting and optimising operating performance and this improvement among others was a critical one.

The ramp up of Golden Eagle mine continues as planned in conjunction with the winding down of mining operations at Signal Hill. Mining activity at Signal Hill will be completed during Q3 2012 and run of mine ore feed for the mill is planned to be approximately 50% from Golden Eagle and 50% from Tholo during Q4 2012. Anticipated fluctuations in grade and stripping ratios occurred which had a short term detrimental impact on business performance. Fluctuations in gold recovery also occurred as anticipated primarily due to changing amounts of sulphide to oxide ore ratios. Such fluctuations will continue throughout the transitional period for the remainder or 2012 and into Q1 2013 as Golden Eagle production ramps up and Signal Hill winds down, and Tholo production progressively increases. Sulphide levels have increased to levels such that they have now reached the threshold whereby the sulphide flotation circuit will be invoked during Q3 2012 to assist with improving gold recovery and reducing such fluctuations.

The exploration program has advanced significantly during Q2 2012, building on the preliminary review and planning phase carried out during Q1 2012. An exciting phase of drilling and pitting across multiple high priority targets is underway and will be ongoing for the remainder of 2012 and into 2013. Drilling and pitting activity will be reviewed at appropriate stages throughout the exploration program to ensure focused and efficient use of exploration resources as well as optimised resource development direction and progress. Exploration results will be released as assays are received and reviewed throughout this field exploration phase. Concurrently, exploration results will be added to the Company's resource model with the target of producing an updated resource statement as soon as permissible.

Listing our shares on the BSE further aligns our Company with Botswana, home to our operations, employees and future aspirations. We are very pleased to facilitate investor participation from Botswana and Southern Africa and believe that increased ownership inBotswana will benefit the Company and all of its shareholders. We expect that over time, the BSE listing will contribute to a lower cost-of-capital for the Company and increased liquidity in our shares.

The Company remains on plan for 2012 in respect of mining and processing operations and exploration activity. The strategy for the Company continues to be the improvement of operational efficiency, development of resources and minimization of business risk. Good progress has been made thus far on this strategy and is anticipated to continue."

Financial Discussion:

A. Results for the Second Quarter Ended June 30, 2012

(In thousands of dollars)
Six Months


June 30,

Three Months


June 30,

Three Months


March 31,

Three Months


December 31,

Mining Revenue: $ 48,387 $ 22,451 $ 25,936 $ 27,125
Mining Costs:   (35,772)   (20,678)   (15,094)   (19,937)
Earnings from mining operations   12,615   1,773   10,842   7,188
Exploration   (383)   (310)   (73)   (35)
Corporate general and administration:                
  Cash   (869)   (612)   (257)   (790)
  Share-based compensation   -   -   -   271
Earnings from operations   11,363   851   10,512   6,634
Other income (expenses) (1)   444   (491)   935   (957)
Net earnings $ 11,807   360 $ 11,447 $ 5,677
Per share                
  Basic $ 0.254 $ 0.008   0.254   0.126
  Fully diluted $ 0.254 $ 0.008   0.254   0.126
(1) Other income (expenses) include:                
  Foreign exchange gain (loss)   214   318   (104)   720
  Movement in fair value of warrants   609   (627)   1,236   (1,444)
  Non-cash acquisition expenses   -   -   -   -
  Accretion   (258)   (131)   (127)   (174)
  Interest on long term debt   (115)   (57)   (58)   (60)
  Other   (6)   6   (12)   1
    444   (491)   935   (957)


The second quarter reflects the third full quarter of mining operations for the Company, generating earnings from mining operations of $3.844 million ($1.773 million after inventory adjustments) from the sale of 14,024 ounces of gold, with earnings from mining operations of $274 per ounce before inventory adjustments ($692 per ounce, Q1 2012). This brings year-to date results to $14.686 million ($12.615 million after inventory adjustments) from the sale of 29,179 ounces of gold, and earnings from mining operations of $504 per ounce ($432 per ounce after inventory adjustments).

As the mine was purchased on August 30, 2011, there are no comparable results for the corresponding periods in 2011.

Total operating cash costs in Q2 2012 reflect the effect of two factors:

  1. Lower grade ore (1.46 vs 2.18 g/t in Q1 2012) was mined in the period; and
  2. Higher stripping costs were experienced in Q2 2012, as the ore was mined from pits with stripping ratios more indicative of the mine, compared to Q1 2012, where the main source of ore was from one of the pits ("Signal Hill") at which the stripping ratio was reduced significantly as it was nearing the end of its economic life on the current mine plan.

Year-to-date, the average grade is 1.82 g/t and the operating strip ratio is 5.46.

In future quarters, the Company anticipates fluctuating grades and stripping ratios causing cash costs to fluctuate as well. It is also anticipated that variations in the sulphide to oxide ore ratios in the feed will cause fluctuations in gold recovery.

As part of the post-acquisition OI Program, the Company has been and continues to evaluate all of the systems used previously. Based on such evaluation during Q2 2012, the Company has concluded that the variables used in the models for the purposes of calculating inventory quantities have differed slightly from actuals. This has affected the low-grade stockpile and the GIC inventory at June 30, 2012, and earnings for Q2 2012 and YTD 2012, as follows:

  1. The quantity and average grade of ore contained in the low-grade stockpile has been adjusted upward, resulting in an increase of 3,139 ounces, and, based on the average cost of gold contained therein of $8.61 per ounce, by $0.8 million. This has decreased the mining cost of sales for the three and six months ended June 30, 2012 by an offsetting amount.
  2. The variable which estimates the amount of gold contained in the processing line has been revised to more properly reflect the process, and as a result the GIC inventory has been reduced downward by 3,380 ounces ($2.9 million), and the processing costs of sales increased by the same amount in the three and six months ended June 30, 2012. The Company has also made the requisite adjustments to the model used to reflect the proper variables going forward.

While the inventory adjustments above had no effect on the cash costs of production in the aggregate, given that the number of ounces has been adjusted, they do have the effect of increasing the cash cost before royalties per ounce as follows:

Corporate general and administration costs of $0.6 million and $0.9 million in Q2 2012 and YTD 2012, respectively, have increased to properly reflect the costs of running a growing publicly-listed company, including an increase in compensation for the Company's Chief Financial Officer by $56,000 as a result of increased time requirements to fulfill this role. Further, as a result of the movement of fair value of warrants, the Company recorded financing expense in Q2 2012 of $0.6 million, and income of $0.6 million for the six months then ended.

B. Financial Position

Selected Consolidated Financial Position Data

(In thousands of dollars) June 30,


March 31,


December 31,


Total current assets 31,125 32,734 26,431
Total current liabilities 5,675 5,402 7,197
Working capital 25,450 27,332 19,234
Mining assets 35,118 28,828 26,603
Non-current liabilities 13,723 12,351 13,476
Total shareholders' equity 46,845 43,809 32,361


  Q2 2012 YTD 2012
  Mining operations:        
    Working capital generated $ 6,060 $ 18,786
    Capital expenditures   (4,418)   (8,789)
    Inventory adjustment   (2,912)   (2,912)
  Net from (to) mining operations   (1,270)   7,085
  General and administration   (612)   (869)
Total working capital generated (used) $ (1,882) $ 6,216
  June 30,

March 31,

December 31,

Cash $ 15,688 $ 10,669 $ 6,531
  Trade Receivable   5,281   8,181   6,264
  Gold Inventory (at average cost)   1,937   6,269   5,837
Total cash and gold   22,906   14,450   12,101
Other receivables   2,696   3,002   2,077
Supplies inventory   5,523   4,613   5,722
Accounts payable   (5,675)   (5,402)   (7,197)
  $ 25,450 $ 27,332 $ 19,234

About Galane Gold

Galane Gold is an un-hedged gold producer and explorer with mining operations and exploration tenements in BotswanaGalane Gold is a public company and its shares are quoted on the TSX Venture Exchange and the BSE under the symbol GG. Galane Gold'smanagement 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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