Notes to the Financial Statements

1.         Status of interim report

The Group unaudited condensed interim results for the 6 months ended 30 September 2021 have been prepared using the accounting policies applied by the Company in its 31 March 2021
annual report, which are in accordance with International Financial Reporting Standards (IFRS and IFRC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU ("IFRS"), including the SAICA financial reporting guides as issued by the Accounting Practices Committee, IAS 34 - Interim Financial Reporting, , the AIM rules of the London Stock Exchange and the Companies Act 2006 (UK). This condensed consolidated interim financial report does not include all notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 March 2021 and any public announcements by Galileo Resources Plc. All monetary information is presented in the presentation currency of the Company being Great British Pound. The Group's principal accounting policies and assumptions have been applied consistently over the current and prior comparative financial period. The financial information for the year ended 31 March 2021 contained in this interim report does not constitute statutory accounts as defined by section 435 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a statement under section 498(2)-(3) of the Companies Act 2006.

2.         Basis of preparation

The consolidated annual financial statements incorporate the annual financial statements of the Company   and all entities, including special purpose entities, which are controlled by the Company. Control exists when the Company has the power to govern the financial and operating policies of an entity to obtain benefits from its activities. The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the annual financial statements of subsidiaries to bring their accounting policies in line with those of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the Group's interest therein and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest. Transactions which result in changes in ownership levels, where the Group has control of the subsidiary both before and after the transaction, are regarded as equity transactions and are recognised directly in the statement of changes in equity. The difference between the fair value of consideration paid or received and the movement in non-controlling interest for such transactions is recognised in equity attributable to the owners of the parent.

3.         Segmental analysis

Business segments

The Company's investments in subsidiaries and associates, that were operational during the period, operate in four geographical locations being South Africa, Zambia, Botswana and USA, and are organised into one business unit, namely Mineral Assets, from which the Group's expenses are incurred and future revenues are expected to be earned. This being the exploration for and extraction of its mineral assets through direct and indirect holdings. The reporting on these investments to the board focuses on the use of funds towards the respective projects and the forecasted profit earnings potential of the projects. An analysis of the loss on ordinary activities before taxation is given below:

4.         Financial review

The Group reported a net loss of £ 552 493 (2020: £ 366,945) before and after taxation. Basic loss reported is 0.06 pence (2020: 0.06 pence) per share. Loss per share is based on a weighted average number of ordinary shares of 919 808 258 (2020: 600 066 170).

5.         Share Capital

During the period under review the Company issued a total of 138 066 664 bringing the total number of shares in issue at the period end to 1 050 042 981 ordinary shares. During the period under review the Company issued 133 666 664 ordinary shares for cash to raise £ 2.0 million before expenses and 4 400 000 ordinary shares through the exercise of warrants with total proceeds of £ 0.03 million. Post the period under review the Company issued a total of 41 903 863 ordinary shares bringing the total shares in issue at the date of this report to 1 091 946 844 ordinary shares.

During the period under review the Company issued new ordinary shares as follows:

Post the period under review the Company issued new ordinary shares as follows:

The Company had the following warrants outstanding at the period end:

The Company had the following warrants outstanding at the date of this report:

6.         Intangible assets

Reconciliation of Intangible assets:

Group as at 30 September 2021

Botswana

1.   Sale of 9 licenses held in the Kalahari Copper Belt

Further to announcements in May 2020 and October 2020, Sandfire and Galileo entered into a variation agreement on 30 July2021. The key commercial terms of the Variation Agreement were to make the following variations to the Licence Sale Agreement:

·    Change the long stop date for the meeting of the conditions from 31 July 2021 to 31 August 2021;

·    Sandfire to at completion of the Licence Sale Agreement, reimburse Galileo up to US$500,000 of exploration expenditure incurred by Galileo in relation to licence obligations of certain Included Licences being transferred to Sandfire (the "Reimbursed Exploration Expenditure");

·    Sandfire's US$4,000,000 Exploration Commitment under the Licence Sale Agreement to be reduced by the amount of the Reimbursed Exploration Expenditure;

·    PL 368/2018 which was due to expire on 30 September 2021 to be removed from the list of Included Licences to be transferred to Sandfire as this licence is, with the agreement of Sandfire, being relinquished; and

·    Removing the option for Sandfire to elect to pay the Success Payment under the Licence Sale Agreement by issuing Sandfire shares to Galileo which means the Success Payment if due will be paid in cash. Note: given the limited exploration conducted on the Included Licences to date and the many years that it could take to establish an Ore Reserve, there can be no guarantee that any such Success Payment will be forthcoming.

Included Licences to be assigned to Sandfire at completion:

On 16 September 2021, the Company reported that all the conditions precedent had been met in relation to its conditional licence sale agreement with Sandfire entered into in January 2021.

2.   Star Zinc

Assets of £1,574,460 are included as held for sale in the balance sheet as at 30 September 2021.

On 4 March 2021, the Company entered into a conditional agreement with Siege Mining Limited ("Siege") in relation to the ceding of ownership and operation of the Star Zinc Project (the "Star Zinc Project") for US$750,000 (being US$200,000 in relation to the large-scale exploration license 19653-HQ-LEL (the "Star Zinc Project License") (the "License Consideration") and US$550,000 for the Company ceding its participation in the Star Zinc Project and all exploration information which it has in relation to the Star Zinc Project (the "Project Assets") (the "Project Consideration"). The Company will also be paid a royalty (proportion share) based on future sales of zinc from the Star Zinc Project for Galileo allowing Siege to use Galileo's information, know-how and commercial experience in relation to the Star Zinc Project (the "Agreement").                             

Royalties payable under the Agreement are dependent upon the zinc concentrate in ore sold, future price of Zinc and ore produced at the Star Zinc project. The Company had previously announced that following a second phase of drilling the tonnage target was between 600,000 to 900,000 tonnes with an estimated average grade of 10-12% zinc at above 3% cut off grade.                                 

The Company entered into the Agreement following a period in which it reviewed the options for putting the Star Zinc Project into operation taking into consideration operational, community and regulatory issues associated with mining a project that is in the outskirts of Lusaka and allowing ownership and operational responsibilities to be assumed by a Zambian mining company, whilst the Company can still participate in the future success of the Star Zinc Project.                

The royalty will vary based on the contained zinc percentage of the ore sold (the "Contained Zinc Percentage") and the LME Zinc price at which the ore is sold (the "LME Zinc Price") The base royalty rate is 3% and will increase by 1% for each US$250 increase in the Zinc sale price over US$2,500 per tonne up to a maximum of 10% (the "Royalty Rate") The royalty will be calculated by multiplying the Contained Zinc Percentage * the LME Zinc price * Royalty Rate.                         

Group as at 30 September 2020

Group as at 31 March 2021

7.         Going concern

The Group has sufficient financial resources to enable it to continue in operational existence for the foreseeable future, to continue the current development programme and meet its liabilities as they fall due. During the period under review the Group raised £2 million before expenses and the Company has no external debt or overdrafts. The Company also received proceeds on the exercise of warrants in an amount of £ 0.2 million.

The directors have further reviewed the Group's cash flow forecast, and in light of this review and the financial position at the date of this report, they are satisfied that the Company and Group have access to adequate resources to continue in operational existence for the foreseeable future. Accordingly, the directors consider it appropriate to continue to adopt the going-concern basis in preparing these financial statements. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

8.         Post balance sheet events

8.1.      Issue of equity

On 30 November 2021 the Company issued a total of 18,591,363 shares, which included 17,358,363 shares ("Fee Shares") which was approved by shareholders at the last AGM, to settle contractually accrued but unpaid fees due to directors and consultants in respect of the period from October 2018 to March 2021, amounting to £118,750 (the "Accrued Fees") as well as 1,233,000 shares ("Consultant Fee Shares") issued at an issue price of 2.68p per share, to a consultant of the Company in relation to fees amounting to £22,030.

The Accrued Fees includes accrued fees owed to directors totalling £106,250 (£ 65,000 owed to Mr Bird and £41,250 to Mr Wollenberg). Following the issue of the Fee Shares, Mr Bird was issued 10,570,862 Ordinary Shares and Mr Wollenberg 5,854,170 Ordinary Shares, following which Mr Bird is interested in a total of 78,605,862 Ordinary Shares representing 7.22% and Mr Wollenberg a total of 13,575,511 Ordinary Shares representing 1.25% of the Company's enlarged issued share capital.

On 23 December 2021 the Company announced that it had issued 2,812,500 fully paid ordinary shares in the Company at a price of 0.8p per share pursuant to the exercise of warrants in terms of the Placing Agreement dated 30 May 2020 (RNS announced 1 June 2020).

8.2.      Option and Joint Venture Agreement over Shinganda Copper-Gold Project, Zambia

On entered into an Option and Joint Venture agreement with Garbo Resource Solutions Ltd ("Garbo"), a private special purpose UK company established to hold the Shinganda copper-gold property located in Central Zambia. The property is held as a large-scale exploration licence No. 22990-HQ-LEL, covering an area of 186.76km2, by Garbo Resource Zambia Ltd., which is 99.4% owned by Garbo.

Project Licence

Licence No. 22990-HQ-LEL is in its initial 4-year term which expires on 22 August 2022. An exploration licence is valid for a period of four years. It may be renewed for two further periods not exceeding three years each but the maximum period from the initial grant of the licence shall not exceed 10 years. A holder of an exploration licence shall relinquish 50% of the licence at each renewal.

Summary of Option Terms

An Option and Joint Venture Agreement has been signed with Garbo on the following summary terms:

i.          Galileo may earn an initial 51% interest in the Project by spending US$500,000 on exploration,       including drilling and evaluation studies, over a two-year period, subject to any necessary Zambian     regulatory approval.

ii.         Galileo may withdraw without penalty at any stage during the Option period.

iii.        At any time during the Option period Galileo may elect to move forward to a Joint Venture to          more fully evaluate and, if warranted, develop the Project.

iv.        Should the parties decide to advance the Project to feasibility study, then Galileo will pay the cost    of such a study.

v.         Galileo's share of profits from a mining operation will vary, depending on the projected size of       the deposit, ranging from 85% if the project has the potential of greater than 50,000 but up to     200,000 tonnes of contained copper equivalent, to 65% if the project has the potential for more     than 1,000,000 tonnes of contained copper equivalent.

vi.        On decision to mine, each party will be responsible for funding of the development pro-rata to its    equity holding in the Joint Venture.

vii.       Should Garbo fail to finance its share in the development of the Project, 100% ownership of the      Project will revert to Galileo and Garbo will be granted a 2% net smelter royalty on commercial production.

8.3 Glenover

On 9 December2021 Galileo announced a transaction in relation to its investment in Glenover Phosphate Proprietary Limited ("Glenover") as follows:

a.   Glenover in which Galileo has a 29% direct shareholding and a 4.99% indirect shareholding held via Galagen Proprietary Limited who are the BEE partner of Galileo entered into an Asset sale agreement with JSE Limited listed Afrimat Limited (JSE: AFT) ("Afrimat") for ZAR 250M (approx. £11.64m) of certain deposits of phosphate rock located at the Glenover Mine and mining rights to mine the Vermiculite Deposit at the Glenover Mine (the "Asset Sale Agreement").

o  ZAR 215.1M (approx. £10m) of the Asset Sale Agreement consideration is unconditional and is anticipated to result in a dividend of ZAR42M (approx. approx. £1.97M) being paid to Galileo by 28 February 2022 in respect of its 29% shareholding in Glenover; and

o  ZAR34.9M (approx. £1.64m ) of the Asset Sale Agreement consideration is conditional on the issue of a vermiculite mining licence to Glenover and is anticipated to result in a dividend to Galileo of Afrimat Shares worth approximately ZAR10M (approx.£470K) in Q3 2022 in relation to Galileo's 29% shareholding in Glenover.

b.   Glenover also entered into a conditional sale of shares agreement between Afrimat, Glenover and the shareholders of Glenover including Galileo Resources SA (Pty) Ltd the Company's wholly owned South African subsidiary under which Glenover has the option to acquire the sale of shares in and shareholders loans made to Glenover for ZAR300M (approx. £14m) which is expected to complete by 15 June 2023 if the option is exercised ("Conditional Share Sale Agreement"). Galileo's 29% share of the gross Conditional Share Sale Agreement consideration is ZAR87M (approx. £4.1m)

8.4 Joint Venture Agreement over Luansobe Copper Project, Zambia

On 30 December 2021, the Company announced that it had entered into a Joint Venture Agreement (the "JV Agreement") on 29 December 2021 with Statunga Investments Limited (the "Vendor"), a private Zambian  company owns the Luansobe Project comprising small-scale exploration licence No. 28340-HQ-SEL, covering an area of 918 Hectares granted on 16 February 2021 and with its initial 4-year term expiring on 15 February 2025.

Summary of JV Agreement Terms