Galantas Reports Results for the Three Months Ended March 31, 2012

TORONTO, ONTARIO--(Marketwire - May 29, 2012) - Galantas Gold Corporation (TSX VENTURE:GAL)(AIM:GAL) (the 'Company') financial results for the Three Months Ended March 31, 2012 have been published. The Net Loss for the three months ended March 31,2012 amounted to CDN$ 643,389 compared to a Net Loss of CDN$ 319,985 for the Three Months Ended March 31, 2011.

Financial Highlights

	Three Months Ended March 31
All in CDN$	2012			2011
Revenue	$	1,025,146		$	1,202,141
Cost of Sales	$	1,020,507		$	1,028,862
Income before the undernoted	$	4,639		$	173,279
Amortization	$	184,565		$	140,133
General administrative expenses	$	455,462		$	348,133
Foreign exchange (gain) loss	$	8,001		$	4,998
Net Loss for the quarter	$	(643,389	)	$	(319,985	)

Sales revenues for the three months ended March 31, 2012 amounted to $ 1,025,146 (Q1 2011: $ 1,202,141) despite the increased gold prices in the current quarter and with production only marginally below first quarter 2011 production levels. The first quarter 2012 revenues were adversely impacted by a downward revision on December 2011 revenues arising from an over estimation of concentrate grades on December shipments.

Cost of sales for the three months ended March 31, 2012 amounted to $ 1,020,507 (Q1 2011: $ 1,028,862) were in line with cost of sales for the three months ended March 31, 2011.

General administrative costs increased to $455,462 (Q1 2011: $348,133) due to a number of factors including increases in insurance costs at the mine, travel costs, heath and safety costs and higher general administration costs following the relocation to new offices.

For the three months ended March 31, 2012 Galantas incurred a net loss of $643,389 (Q1 2011: $ 319,985) for the year three months ended March 31, 2011.

The Company had cash balances at March 31, 2012 of $2,924,890 compared to $ 4,240,081 at December 31, 2011. The working capital deficit at March 31, 2012 amounted to $ 2,072,975 which compared with a deficit of $ 536,142 at December 31, 2011.

Production Highlights

	Three Months Ended March 31
	2012	2011
Tonnes Milled	9,420	6,962
Average Grade g/t gold	3.54	4.00
Dry Tonnes Concentrate	268.0	282.5
Concentrate Gold Grade (g/t)	108.4	100.3
Gold Produced - kg (troy ozs)	29 kg (932.5oz)	28.3 kg (910oz)
Concentrate Silver Grade (g/t)	260.7	269.4
Silver Produced kg (troy ozs)	69.9 kg (2,247oz)	76.1 kg (2,446oz)
Lead Produced (tonnes)	24.9	50.1
Gold Equivalent (troy ozs)	1,006	1,063

Production at the Omagh mine during the three months ended March 31, 2012 as summarized above was below production levels of the first quarter 2011 and also below production levels of subsequent quarters of 2011. Tonnes milled during the three months ended March 31, 2012 totalled 9,420 tonnes (Q1 2011: 6,962 tonnes). Concentrate production for the first quarter 2012 declined by 5% to 268 dry tonnes (Q1 2011:282.5 dry tones). Gold equivalent output for the three months ended March 31, 2012 declined by 5% to 1,006 ozs (Q1 2011:1,063 ozs).

During the first quarter the mill was fed with a combination of lower grade ore which was blended with ore from other sources. Production was restricted over a three week period when a large amount of clay from the low grade material passed through the standard cone crusher and by unplanned downtime in the plant. However recoveries improved during the quarter.

The main mine production focus during the quarter has been on the open pit mining of the Kerr vein and the processing of ore from the low grade stockpile. Mining from the Kearney pit was restricted during the quarter which resulted in additional ore being mined from lower grade areas. Production from Kearney was restricted due to limitations in the disposal of surplus rock which had been stockpiled over a period of time from earlier mining at the Kearney pit. Whilst the mine is required under its planning permission to dispose of the surplus rock from the site the consent to transport the surplus rock offsite was not confirmed by the relevant local authority until February 2012.

Exploration

The drilling program, with six drills operational, continued during the first quarter of 2012 with twelve additional holes being drilled covering 2,626 metres of exploration drilling on the Kearney and Joshua veins. This exploration program is seeking to expand the resources on veins close to the existing operating gold mine. Assay results released to date from both the drilling and channel sampling programmes have been encouraging with significant gold intersections being identified.

In addition Omagh Minerals was granted four new prospecting licenses in the Republic of Ireland during the quarter in an area that forms a westerly extension to the existing OM4 license.

Discussions with the regulatory authorities in Northern Ireland continued during the first quarter of 2012 when Omagh Minerals obtained confirmation of planning permits to transport surplus rock offsite to be integrated into the local aggregate industry. Permission is awaited regarding four planning applications which were submitted to the planning service authorities during the fourth quarter of 2011. Two of these were in connection with proposals to drill boreholes to determine mineralization at depth on the Kearney and Joshua veins. The remaining two were in connection with the construction and renovation of passing bays for the removal of surplus rock and the construction of a lower portal structure and truncated adit for underground mining on the Kearney vein. Additionally a further permitting application will require to be submitted by the mine in order to make additional ore available for mining and in particular for the proposed potential underground mine on the Kearney/Joshua deposits. Further progress was made on both the underground development plans and the surface infrastructure development plans during the quarter. The underground mine plan is being finalized and the Environmental Impact Assessment is now at draft stage and is being reviewed in detail prior to final sign off.

Outlook

Further results are awaited from the deep hole testing program on the Kearney vein.

A further six shorter holes are being drilled on lands owned by Omagh Minerals Ltd to the west of the current Joshua vein where the known strike and depth of mineralization continues to increase as drilling intercepts the vein progressively northwards. Some new results have been received on Joshua vein. These are under-going verification procedures and will be announced shortly.

A planning application has been drafted for sixteen further drill hole locations which target Joshua in the north, south and central regions.

The Company reported during the quarter that it had appointed ACA Howe International Ltd to prepare an Interim Resource for the Omagh Gold Project to Canadian National Instrument (NI) 43-101 standard. The report will estimate mineral resources and will comment on the Company's Underground Mining Scoping Study. The report was expected to be published by the end of May but the Company now expects it by mid June 2012.

The detailed results and Management Discussion and Analysis (MD&A) are available on www.sedar.com and www.galantas.com and the highlights in this release should be read in conjunction with the detailed results and MD&A. The MD&A provides an analysis of comparisons with previous periods, trends affecting the business and risk factors. Some of the production and metal figures are provisional and subject to averaging or umpiring provisions under the concentrate off-take contract with Xstrata Corporation detailed in a press release dated 3rd October 2007.

Qualified Person

The financial components of this disclosure has been reviewed by Leo O' Shaughnessy (Chief Financial Officer) and the production components by Richard Crew (Chief Operating Officer), qualified persons under the meaning of NI. 43-101. The information is based upon local production and financial data prepared under their supervision.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including revenues and cost estimates, for the Omagh Gold project. Forward-looking statements are based on estimates and assumptions made by Galantas in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Galantas believes are appropriate in the circumstances. Many factors could cause Galantas' actual results, the performance or achievements to differ materially from those expressed or implied by the forward looking statements or strategy, including: gold price volatility; discrepancies between actual and estimated production, actual and estimated metallurgical recoveries and throughputs; mining operational risk, geological uncertainties; regulatory restrictions, including environmental regulatory restrictions and liability; risks of sovereign involvement; speculative nature of gold exploration; dilution; competition; loss of or availability of key employees; additional funding requirements; uncertainties regarding planning and other permitting issues; and defective title to mineral claims or property. These factors and others that could affect Galantas's forward-looking statements are discussed in greater detail in the section entitled "Risk Factors" in Galantas' Management Discussion & Analysis of the financial statements of Galantas and elsewhere in documents filed from time to time with the Canadian provincial securities regulators and other regulatory authorities. These factors should be considered carefully, and persons reviewing this press release should not place undue reliance on forward-looking statements. Galantas has no intention and undertakes no obligation to update or revise any forward-looking statements in this press release, except as required by law.

Galantas Gold Corporation Issued and Outstanding Shares total 235,650,055.

GALANTAS GOLD CORPORATION

Condensed Consolidated Interim Financial Statements

(Expressed in Canadian Dollars)

(Unaudited)

Three Months Ended March 31, 2012

The accompanying condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of management. The condensed consolidated interim financial statements have not been reviewed by the Company's auditors.

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited)
			As at March 31, 2012			As at December 31, 2011
ASSETS
Current assets
	Cash (note 4)	$	2,924,890		$	4,240,081
	Accounts receivable and advances (note 5)		897,304			1,056,573
	Inventory (note 6)		392,769			347,016
Total current assets			4,214,963			5,643,670
Non-current assets
	Property, plant and equipment (note 7)		3,926,290			3,547,393
	Long-term deposit (note 4)		391,265			371,277
	Deferred development and exploration costs (note 8)		5,131,158			4,507,753
Total assets		$	13,663,676		$	14,070,093
EQUITY AND LIABILITIES
Current liabilities
	Accounts payable and other liabilities (note 9)	$	1,680,017		$	1,683,142
	Due to related parties (note 14)		2,546,045			2,517,067
	Convertible debenture (note 10)		2,061,876			1,979,603
Total current liabilities			6,287,938			6,179,812
Non-current liabilities
	Asset retirement obligation		399,250			394,975
Total liabilities			6,687,188			6,574,787
Capital and reserves
	Share capital (note 11)		27,808,316			27,808,316
	Reserves		5,382,601			5,258,030
	Deficit		(26,214,429	)		(25,571,040	)
Total equity			6,976,488			7,495,306
Total equity and liabilities		$	13,663,676		$	14,070,093

The notes to the condensed consolidated interim financial statements are an integral part of these statements.

Going concern (note 1)

Contingent liability (note 16)

Approved on behalf of the Board:
Roland Phelps, Director	Lionel J. Gunter, Director

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Loss
(Expressed in Canadian Dollars)
(Unaudited)
			Three Months Ended
			March 31,
			2012			2011
Revenues
	Gold sales	$	1,025,146		$	1,202,141
Cost and expenses of operations
	Cost of sales (note 13)		1,020,507			1,028,862
	Amortization and depreciation		184,565			140,133
			1,205,072			1,168,995
(Loss) income before the undernoted			(179,926	)		33,146
Other expense
	Loss on disposal of property, plant and equipment		1,506			1,264
General administrative expenses
	Management and administration wages (note 14)		152,231			123,470
	Other operating expenses		70,234			35,078
	Accounting and corporate		13,167			17,481
	Legal and audit		24,631			72,880
	Stock-based compensation (note 11(d))		47,566			21,540
	Shareholder communication and investor relations		58,789			30,313
	Transfer agent		2,687			2,779
	Director fees (note 14)		7,350			9,750
	General office		2,447			2,080
	Accretion expenses (note 10)		45,529			10,151
	Bank interest and fees		29,325			21,347
			453,956			346,869
	Foreign exchange loss		8,001			4,998
			461,957			351,867
Net loss for the period		$	(643,389	)	$	(319,985	)
Basic net income per share (note 12)		$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding - basic			235,650,055			235,650,055
Diluted net loss per share (note 12)		$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding - diluted			235,650,055			235,650,055

The notes to the condensed consolidated interim financial statements are an integral part of these statements.

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Comprehensive Loss
(Expressed in Canadian Dollars)
(Unaudited)
		Three Months Ended
		March 31,
		2012			2011
Net loss for the period	$	(643,389	)	$	(319,985	)
Other comprehensive income
Foreign currency translation differences		77,005			11,496
Total comprehensive loss	$	(566,384	)	$	(308,489	)

The notes to the condensed consolidated interim financial statements are an integral part of these statements.

Galantas Gold Corporation
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)
			Three Months Ended
			March 31,
			2012			2011
Operating activities
Net loss for the period		$	(643,389	)	$	(319,985	)
Adjustment for:
	Amortization and depreciation		184,565			140,133
	Stock-based compensation (note 11(d))		47,566			21,540
	Foreign exchange		60,905			(2,913	)
	Loss on disposal of property, plant and equipment		1,506			1,264
	Accretion expenses		45,529			10,151
Non-cash working capital items:
	Accounts receivable and advances		159,269			(607,330	)
	Inventory		(45,753	)		24,735
	Accounts payable and other liabilities		(3,125	)		731,827
Net cash used in operating activities			(192,927	)		(578	)
Investing activities
Purchase of property, plant and equipment			(505,428	)		(716,848	)
Proceeds from sale of property, plant and equipment			32,100			18,714
Deferred development and exploration costs			(631,353	)		(113,196	)
Long-term deposit			(15,970	)		-
Net cash used in investing activities			(1,120,651	)		(811,330	)
Financing activities
Net repayments of financing facility			-			(18,681	)
Repayments to related parties			(94,392	)		(20,080	)
Advances from related parties			123,370			-
Proceeds from convertible debenture			-			1,953,750
Financing charges related to convertible debenture			-			(14,594	)
Net cash provided by financing activities			28,978			1,900,395
Net change in cash			(1,284,600	)		1,088,487
Effect of exchange rate changes on cash held in foreign currencies			(30,591	)		(17,638	)
Cash, beginning of period			4,240,081			2,661,798
Cash, end of period		$	2,924,890		$	3,732,647

The notes to the condensed consolidated interim financial statements are an integral part of these statements.

Galantas Gold Corporation

Condensed Consolidated Interim Statements of Changes in Equity

(Expressed in Canadian Dollars)

(Unaudited)

					Reserves
					Equity settled				Foreign			Equity
					share-based				currency			portion of
			Share		payments		Warrant		translation			convertible
			capital		reserve		reserve		reserve			debenture		Deficit			Total
Balance, December 31, 2010		$	27,808,316	$	4,069,045	$	976,414	$	(264,020	)		-	$	(27,182,030	)		5,407,725
	Convertible debenture		-		-		-		-			168,082		-			168,082
	Stock-based compensation		-		21,540		-		-			-		-			21,540
	Net loss and comprehensive income for the period		-		-		-		11,496			-		(319,985	)		(308,489	)
Balance, March 31, 2011			27,808,316		4,090,585		976,414		(252,524	)		168,082		(27,502,015	)		5,288,858
Balance, December 31, 2011			27,808,316		4,320,247		976,414		(206,713	)		168,082		(25,571,040	)		7,495,306
	Stock-based compensation		-		47,566		-		-			-		-			47,566
	Net loss and comprehensive income for the period		-		-		-		77,005			-		(643,389	)		(566,384	)
Balance, March 31, 2012		$	27,808,316	$	4,367,813	$	976,414	$	(129,708	)	$	168,082	$	(26,214,429	)	$	6,976,488

The notes to the condensed consolidated interim financial statements are an integral part of these statements.

Galantas Gold Corporation

Notes to Condensed Consolidated Interim Financial Statements

March 31, 2012

(Expressed in Canadian Dollars)

(Unaudited)

1. Going Concern

These condensed consolidated interim financial statements have been prepared on a going concern basis which contemplates that Galantas Gold Corporation (the "Company") will be able to realize assets and discharge liabilities in the normal course of business. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period. Management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. The Company's future viability depends on the consolidated results of the Company's wholly-owned subsidiary Cavanacaw Corporation ("Cavanacaw"), the ability of the Company to obtain future financing and to recover its investment in Omagh Minerals Limited ("Omagh"). Cavanacaw has a 100% shareholding in Omagh which is engaged in the acquisition, exploration and development of gold properties, mainly in Omagh, Northern Ireland.

As at December 31, 2001, studies performed on Omagh's mineral property confirmed the existence of economically recoverable reserves. As at July 1, 2007, the mineral property was in the production stage and the directors believe that the capitalized development expenditures will be fully recovered by the future operation of the mine. The recoverability of Omagh's capitalized development costs is thus dependent on the ability to secure financing, future profitable production or proceeds from the disposition of the mineral property. While the Company is expending its best efforts in this regard, the outcome of these matters can not be predicted at this time.

As at March 31, 2012, the Company had a deficit of $26,214,429 (December 31, 2011 - $25,571,040). Management is confident that it will be able to secure the required financing to enable the Company to continue as a going concern. However, this is subject to a number of factors including market conditions. These condensed consolidated interim financial statements do not reflect adjustments to the carrying values of assets and liabilities, the reported expenses and financial position classifications used that would be necessary if the going concern assumption was not appropriate. Such adjustments could be material.

2. Incorporation and Nature of Operations

The Company was formed on September 20, 1996 under the name Montemor Resources Inc. on the amalgamation of 1169479 Ontario Inc. and Consolidated Deer Creek Resources Limited. The name was changed to European Gold Resources Inc. by articles of amendment dated July 25, 1997. On May 5, 2004, the Company changed its name from European Gold Resources Inc. to Galantas Gold Corporation. The Company was incorporated to explore for and develop mineral resource properties, principally in Europe. In 1997, it purchased all of the shares of Omagh which owns a mineral property in Northern Ireland, including a delineated gold deposit. Omagh obtained full planning and environmental consents necessary to bring its property into production.

The Company entered into an agreement on April 17, 2000, approved by shareholders on June 26, 2000, whereby Cavanacaw, a private Ontario corporation, acquired Omagh. Cavanacaw has established an open pit mine to extract the Company's gold deposit near Omagh. Cavanacaw also has developed a premium jewellery business founded on the gold produced under the name Galántas Irish Gold Limited ("Galántas").

As at July 1, 2007, the Company's Omagh mine began production.

The Company's operations include the consolidated results of Cavanacaw and its wholly-owned subsidiaries Omagh and Galántas.

The Company's common shares are listed on the TSX Venture Exchange (the "Exchange") and London Stock Exchange AIM under the symbol GAL. The primary office is located at 360 Bay Street, Suite 500, Toronto, Ontario, Canada, M5H 2V6.

3. Basis of Preparation

(a) Statement of compliance

The Company applies 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 interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by IASB and interpretations issued by IFRIC.

The policies applied in these condensed interim consolidated financial statements are based on IFRSs issued and outstanding as of May 25, 2012, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these condensed interim consolidated financial statements as compared with the most recent annual financial statements as at and for the year ended December 31, 2011. Any subsequent changes to IFRS that are given effect in the Company's annual financial statements for the year ending December 31, 2012 could result in restatement of these condensed interim financial statements.

New standards not yet adopted and interpretations issued but not yet effective

There are no relevant changes in accounting standards applicable to future periods other than as disclosed in the most recent annual consolidated statements as at and for the year ended December 31, 2011.

4. Cash Position
		As at March 31, 2012			As at December 31, 2011
Cash	$	2,924,890		$	4,240,081
Long-term deposit		391,265			371,277
Total cash position	$	3,316,155		$	4,611,358
5. Accounts Receivable and Advances
		As at March 31, 2012			As at December 31, 2011
Sales tax receivable - Canada	$	30,700		$	24,680
Sales tax receivable - Ireland		254,184			248,348
Accounts receivable		500,222			690,433
Prepaid expenses		112,198			93,112
	$	897,304		$	1,056,573
6. Inventory
		As at March 31, 2012			As at December 31, 2011
Concentrate inventory	$	78,614		$	32,159
Finished goods		314,155			314,857
	$	392,769		$	347,016

7. Property, Plant and Equipment
		March 31, 2012
					Accumulated
		Cost			amortization			Net
Freehold land and buildings	$	2,671,974		$	1,212,519		$	1,459,455
Plant and machinery		6,050,642			3,663,219			2,387,423
Motor vehicles		64,982			47,552			17,430
Office equipment		99,245			37,263			61,982
Moulds		58,088			58,088			-
	$	8,944,931		$	5,018,641		$	3,926,290
		December 31, 2011
					Accumulated
		Cost			amortization			Net
Freehold land and buildings	$	2,246,768		$	1,195,684		$	1,051,084
Plant and machinery		5,968,298			3,549,698			2,418,600
Motor vehicles		63,338			45,928			17,410
Office equipment		94,788			34,489			60,299
Moulds		57,466			57,466			-
	$	8,430,658		$	4,883,265		$	3,547,393
8. Deferred Development and Exploration Costs
		March 31, 2012
					Accumulated
		Cost			amortization			Net
Deferred development and exploration costs	$	10,909,613		$	5,778,455		$	5,131,158
		December 31, 2011
					Accumulated
		Cost			amortization			Net
Deferred development and exploration costs	$	10,168,806		$	5,661,053		$	4,507,753

9. Accounts Payable and Other Liabilities
			As at March 31, 2012			As at December 31, 2011
Falling due within the year
	Trade payables	$	1,680,017		$	1,683,142

10. Convertible Debenture
					Equity
					portion of
		Convertible			convertible
		debenture			debenture
Balance, December 31, 2010	$	-		$	-
Proceeds from issuance		1,953,750			-
Fair value of conversion option		(169,347	)		169,347
Financing charges		(13,329	)		(1,265	)
Accretion charges - effective interest rate		10,151			-
Accretion charges - financing charges		613			-
Interest expenses		2,938			-
Foreign exchange		(3,996	)		-
Balance, March 31, 2011	$	1,780,780		$	168,082
Balance, December 31, 2011	$	1,979,603		$	168,082
Accretion charges - effective interest rate		45,529			-
Accretion charges - financing charges		2,538			-
Interest expenses		12,725			-
Foreign exchange		21,481			-
Balance, March 31, 2012	$	2,061,876		$	168,082

11. Share Capital and Reserves

a) Authorized share capital

At March 31, 2012, the authorized share capital consisted of unlimited number of common and preference shares issuable in Series. The common shares do not have a par value. All issued shares are fully paid.

b) Common shares issued

At March 31, 2012, the issued share capital amounted to $27,808,316. The change in issued share capital for the periods presented:

	Number of
	common
	shares		Amount
Balance, December 31, 2010, March 31, 2011, December 31, 2011 and March 31, 2012	235,650,055	$	27,808,316

c) Warrant reserve

The following table shows the continuity of warrants for the periods presented:

			Weighted
	Number of		average
	warrants		price
Balance, December 31, 2010, March 31, 2011, December 31, 2011 and March 31, 2012	45,550,000	$	0.10

As at March 31, 2012, the following warrants were outstanding:

	Number	Fair	Exercise
Expiry date	of warrants	value ($)	price ($)
June 8, 2012	21,000,000	411,764	0.10
July 22, 2012	24,550,000	564,650	0.10
	45,550,000	976,414	0.10

(d) Stock options

The following table shows the continuity of stock options for the periods presented:

			Weighted
	Number of		average
	options		price
Balance, December 31, 2010	10,800,000	$	0.13
Granted (i)	4,950,000		0.10
Balance, March 31, 2011	15,750,000	$	0.13
December 31, 2011 and March 31, 2012	15,750,000	$	0.12

Stock-based compensation expense includes $47,566 (three months ended March 31, 2011 - $16,625) relating to stock options granted in previous years that vested during the three months ended March 31, 2012.

(i) On January 28, 2011, 250,000 stock options were granted to a consultant of the Company to purchase common shares at a price of $0.10 per share until January 28, 2016. The options vest one-third upon grant, one-third on the first anniversary of grant and one-third on the second anniversary of grant. The fair value attributed to these options was $11,750 and will be expensed in the consolidated statements of income and credited to equity settled share-based payments reserve as the options vest. During the three months ended March 31, 2011, included in stock-based compensation is $4,915 related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 141.25%; risk-free interest rate - 2.53% and an expected life of 5 years.

(ii) On April 5, 2011, 500,000 stock options were granted to a consultant of the Company to purchase common shares at a price of $0.10 per share until April 5, 2013. The options vest one quarter equally over 3, 6, 9, and 12 months from the date of the grant. The fair value attributed to these options was $27,500 and will be expensed in the consolidated statements of income and credited to equity settled share-based payments reserve as the options vest. During the three months ended March 31, 2012, included in stock-based compensation is $1,846 related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 151.35%; risk-free interest rate - 1.81% and an expected life of 2 years.

(iii) On September 7, 2011, 4,200,000 stock options were granted to certain directors, officers and employees to purchase common shares at a price of $0.10 per share until September 6, 2016. The options vest one-third upon grant, one-third on the first anniversary of grant and one-third on the second anniversary of grant. The fair value attributed to these options was $315,000 and will be expensed in the consolidated statements of income and credited to equity settled share-based payments reserve as the options vest. During the three months ended March 31, 2012, included in stock-based compensation is $39,375 related to the vested portion of these options.

The fair value of the options was estimated using the Black-Scholes option pricing model with the following assumptions: dividend yield - 0%; volatility - 142.95%; risk-free interest rate - 1.30% and an expected life of 5 years.

The following table reflects the actual stock options issued and outstanding as of March 31, 2012:

Expiry date	Exercise price ($)	Weighted average remaining contractual life (years)	Number of options outstanding	Number of options vested (exercisable)	Number of options unvested
June 15, 2012	0.23	0.21	500,000	500,000	-
December 24, 2012	0.14	0.73	5,300,000	5,300,000	-
April 5, 2013	0.10	1.01	500,000	375,000	125,000
October 2, 2013	0.10	1.51	1,500,000	1,500,000	-
November 23, 2015	0.10	3.65	3,500,000	2,333,333	1,166,667
January 28, 2016	0.10	3.83	250,000	166,667	83,333
September 6, 2016	0.10	4.44	4,200,000	1,400,000	2,800,000
	0.12	2.48	15,750,000	11,575,000	4,175,000

12. Net Loss per Common Share

The calculation of basic and diluted loss per share for the three months ended March 31, 2012 and 2011 was based on the loss attributable to common shareholders of $643,389 (three months ended March 31, 2011 - $319,985) and the weighted average number of common shares outstanding of 235,650,055 (March 31, 2011 - 235,650,055) for basic loss per share. Diluted loss did not include the effect of warrants and options for the three months ended March 31, 2012 and 2011 as they are anti-dilutive.

13. Cost of Sales

		Three months ended
		March 31,
		2012			2011
Production wages	$	360,898		$	335,081
Oil and fuel		369,324			271,399
Repairs and servicing		137,653			167,751
Equipment hire		89,643			105,768
Consumable		51,511			68,742
Royalties		21,235			23,460
Carriage		11,168			12,267
Other costs		23,324			19,659
Production costs		1,064,756			1,004,127
Inventory movement		(44,249	)		24,735
Cost of sales	$	1,020,507		$	1,028,862

14. Related Party Balances and Transactions

Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note.

Related parties include the Board of Directors, close family members and enterprises that are controlled by these individuals as well as certain persons performing similar functions.

Related party transactions conducted in the normal course of operations are measured at the exchange value (the amount established and agreed to by the related parties).

(a) The Company entered into the following transactions with related parties:

			Three Months Ended
			March 31,
	Notes		2012		2011
Interests on related party loans	(i)	$	10,330	$	16,425

(i) G&F Phelps, a company controlled by a director of the Company, had amalgamated loans to Galantas of $1,639,404 (GBP 1,026,552) (December 31, 2011 - $1,716,643 - GBP 1,086,552) bearing interest at 2% above UK base rates, repayable on demand and secured by a mortgage debenture on all the Company's assets. Interest accrued on related party loans is included with due to related parties. As at March 31, 2012, the amount of interest accrued is $54,038 (GBP 33,837) (December 31, 2011 - $43,085 - GBP 27,271).

(b) Remuneration of Directors and key management of the Company was as follows:

		Three Months Ended
		March 31,
		2012		2011
Salaries and benefits(1)	$	94,820	$	97,240
Stock-based compensation		25,781		-
	$	120,601	$	97,240

(1) Salaries and benefits include director fees. As at March 31, 2012, due to directors for fees amounted to $7,350 (December 31, 2011 - $nil) and due to directors for salaries and benefits amounted to $845,253 (GBP 529,277) (December 31, 2011 - $757,339 - GBP 479,277), and is included with due to related parties.

15. Segment Disclosure

The Company, after reviewing its reporting systems, has determined that it has one reportable segment. The Company's operations are substantially all related to its investment in Cavanacaw and its subsidiaries, Omagh and Galántas. Substantially all of the Company's revenues, costs and assets of the business that support these operations are derived or located in Northern Ireland.

16. Contingent Liability

During the year ended December 31, 2010, the Company's subsidiary Omagh received a payment demand from Her Majesty's Revenue and Customs in the amount of $532,042 (GBP 333,151) in connection with an aggregate levy arising from the removal of waste rock from the mine site during 2008 and early 2009. The Company believes this claim is without merit. An appeal has been lodged and the Company's subsidiary Omagh intends to vigorously defend itself against this claim. No provision has been made for the claim in the audited consolidated annual financial statements.