Galane Gold - Turning Around Troubled Assets into Profitable Mines

• Galane Gold (GG) is a TSXV-listed gold producer and explorer with assets in Botswana and South Africa.
• CEO Nick Brodie discusses the company's profile and strategy in an interview.
• Galane operates two assets: one in Botswana producing around 30,000-35,000 oz/year at an all-in cost of $1,050/oz, and Galaxy in South Africa, ramping up to 26,000 oz/year in Phase 1, with a potential Phase 2 to reach 45,000 oz/year at $800/oz.
• B2, a partner in exploration, didn't take up earning option due to not finding desired resources; Galane now has an opportunity to expand its resource potential.
• Despite share price fluctuations, Galane has increased insider shareholding to 60% and is focused on improving recovery rates and cost-effectiveness while seeking further expansion and acquisitions.

About Galane Gold

Galane Gold was founded in 2011 with the acquisition of the Mupane gold mine in Botswana from IAMGOLD. At the time, Mupane only had a 1 year mine life remaining, but Galane has extended operations to 9 years and counting. In 2015, Galane acquired the Galaxy gold mine in South Africa, which was under care and maintenance. They restarted operations and continue to ramp up production. The company's strategy is to target historic gold mining regions in Africa with existing infrastructure and known gold mineralization that can be acquired cheaply due to lack of exploration or capital investment. Galane's experienced management team applies modern technology and mining techniques to optimize operations.

Interview with CEO Nick Brodie

Mupane Gold Mine

The Mupane mine is located in northeastern Botswana near Francistown. Galane acquired the mine in 2011 when it had only 500,000 ounces in resources and a 1 year remaining mine life. Since acquiring the mine, Galane has mined over 100,000 ounces while replacing reserves to maintain a 5-7 year mine life. Mupane is an underground and open pit operation currently producing around 30,000 ounces per year at all-in sustaining costs of $1,050/oz. In 2021, B2Gold spent $2 million exploring the project but did not execute their earn-in option as they were looking for a higher volume, lower grade open pit deposit. However, B2Gold identified over 120 exploration targets that Galane can now follow up on to expand resources. The company believes they can delineate a 200,000 to 300,000 ounce open pit resource to extend the mine life without significant capital investment.

Galaxy Gold Mine

The Galaxy mine is located in the Barberton area of South Africa, a well-known gold mining region. Galane acquired Galaxy in 2015 when it was under care and maintenance. The company restarted operations and continues to ramp up production in phases. Galaxy contains multiple ore bodies that can be mined with minimal additional infrastructure capital. Galaxy Phase 1 involves mining the Princeton ore body underground and is expected to reach 26,000 ounces production in 2022 at all-in sustaining costs under $900/oz. The plant was oversized so that Phase 2 can expand production to 45,000 ounces per year without significant capital investment. The expanded production will be funded through Phase 1 cash flows. Galaxy has potential for further expansion with over 20 additional ore bodies that could be developed.

Growth Outlook

With Mupane producing around 30,000 ounces and Galaxy Phase 1 ramping up to 26,000 ounces by next year, Galane will become a 60,000 ounce low-cost gold producer in 2022. The company has outlined a clear growth plan to become a 100,000+ ounce mid-tier producer through optimization of its existing assets and accretive acquisitions. The Galaxy mine has expansion potential to +60,000 ounces with minimal capital investment. Mupane can add up to 300,000 ounces in open pit resources through exploration of existing targets. Galane is actively looking at distressed, undervalued gold assets in Africa that it can turn around. The ideal acquisition target would be an already built mine operating below capacity or care and maintenance of 50,000 to 60,000 ounce production capacity. The experienced Galane team has demonstrated its capability to optimize operations and profitably run mines others have given up on.

Financial Performance

In Q2 2021, Galane generated revenue of $8.9 million from selling 7,753 gold ounces at average realized price of $1,811/oz, up significantly from Q2 2020. The company earned net income of $1 million compared to a $1.4 million loss in Q2 2020. All-in sustaining costs decreased to $1,148/oz. Galane has been paying down debt and ended Q2 with $3.3 million in cash and positive working capital of $3.1 million. The balance sheet has strengthened considerably in the past year with the higher gold price environment.

Conclusion

Galane Gold represents a unique investment opportunity in the gold mining sector. The company has acquired high quality gold assets in safe mining jurisdictions at low valuations and proven its ability to turn around struggling operations. Investors benefit from production and cash flows with mine optimization and expansion funded through internal cash flow. Exploration upside can further boost resources and production profile. Galane's growing production, lower costs, paying down debt and stronger balance sheet have not yet been reflected in the share price. The company expects to reach 60,000 ounces in 2022 without dilution and has 100,000+ ounce potential. Galane Gold offers investors looking for junior producer exposure at a discounted valuation an attractive investment case to consider.