Galiano Gold : First Quarter 2024 Financial Statements

GALIANO GOLD INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

UNAUDITED

For the three months ended March 31, 2024 and 2023

TABLE OF CONTENTS
Condensed Consolidated Interim Statements of Financial Position	2
Condensed Consolidated Interim Statements of Operations and Comprehensive Income (Loss)	3
Condensed Consolidated Interim Statements of Changes in Equity	4
Condensed Consolidated Interim Statements of Cash Flow	5
Notes to the Condensed Consolidated Interim Financial Statements	6-31

1

GALIANO GOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION

AS AT MARCH 31, 2024 AND DECEMBER 31, 2023
(In thousands of United States Dollars)		09.2019 AKG AFI	Q4 2018 FS
		March 31, 2024	December 31, 2023
	Note	$	$
Assets
Current assets
		130,804
Cash and cash equivalents	5	55,270
Accounts receivable		5,825	1,060
Inventories	6	29,920	-
Value added tax receivables		9,303	-
Prepaid expenses and deposits		6,616	764
		182,468	57,094
Non-current assets
Financial assets	7	-	70,165
Investment in joint venture	8	-	85,818
Reclamation deposits		5,311	-
Right-of-use assets	9	21,013	173
Mineral properties, plant and equipment	9	237,955	52
		264,279	156,208
Total assets		446,747	213,302
Liabilities
Current liabilities
Accounts payable and accrued liabilities		57,892	11,863
Provisions	10	7,000	-
Lease liabilities	11	8,264	125
		73,156	11,988
Non-current liabilities
Lease liabilities	11	16,509	78
Long-term incentive plan liabilities	15	685	318
Deferred and contingent consideration	12	64,672	-
Asset retirement provisions	13	62,548	-
		144,414	396
Total liabilities		217,570	12,384
Equity
Common shareholders' equity
Share capital	14	612,335	579,619
Equity reserves	15	53,414	53,112
Accumulated deficit		(436,572)	(431,813)
Total common shareholders' equity		229,177	200,918
Non-controlling interest	16	-	-
Total equity		229,177	200,918
Total liabilities and equity		446,747	213,302
Business combination	4
Commitments and contingencies	24

The accompanying notes form an integral part of these condensed consolidated interim financial statements .

Approved on behalf of the Board of Directors:

2		"Greg Martin"
"Matt Badylak"
Director		Director

GALIANO GOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(In thousands of United States Dollars, except dollar per share amounts)

		Three months ended
		March 31, 2024	March 31, 2023
	Note	$	$
Revenue	17	31,695	-
Cost of sales:
Production costs	18	(22,162)	-
Depreciation and depletion	9	(2,982)	-
Royalties	19	(1,905)	-
Total cost of sales		(27,049)	-
Income from mine operations		4,646	-
General and administrative expenses	20	(7,693)	(3,850)
Exploration and evaluation expenditures		(609)	(1,413)
Share of net income related to joint venture	8	2,432	9,307
Service fee earned as operators of joint venture	21	976	1,418
Gain on derecognition of equity investment in joint venture	8	1,298	-
Income from operations and joint venture		1,050	5,462
Transaction costs	4	(2,299)	-
Finance income	22(a)	2,506	3,016
Finance expense	22(b)	(5,725)	(6)
Foreign exchange (loss) gain		(291)	21
Net (loss) income and comprehensive (loss) income for the period		(4,759)	8,493
Net (loss) income attributable to:
Common shareholders of the Company		(4,759)	8,493
Non-controlling interest	16	-	-
Net (loss) income for the period		(4,759)	8,493
Weighted average number of shares outstanding:
Basic	23	233,510,750	224,943,453
Diluted	23	233,510,750	224,944,779
Net (loss) income per share attributable to common shareholders:
Basic		(0.02)	0.04
Diluted		(0.02)	0.04

The accompanying notes form an integral part of these condensed consolidated interim financial statements .

3

GALIANO GOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(In thousands of United States Dollars, except for number of common shares)

		Number of		Equity	Accumulated	Non-
		Share capital	controlling	Total equity
		shares	reserves	deficit
			interest
	Note		$	$	$	$	$
Ba lance as at December 31, 2022		224,943,453	579,591	51,998	(457,898)	-	173,691
Share-based compensation expense	15(a)	-	-	239	-	-	239
Net income and comprehensive income for the period		-	-	-	8,493	-	8,493
Balance as at March 31, 2023		224,943,453	579,591	52,237	(449,405)	-	182,423
Balance as at December 31, 2023		224,972,786	579,619	53,112	(431,813)	-	200,918
Issuance of common shares:
Business combination, net of share issuance costs	4	28,500,000	32,449	-	-	-	32,449
Exercise of stock options	15(a)	244,001	267	(86)	-	-	181
Share-based compensation expense	15(a)	-	-	388	-	-	388
Net loss and comprehensive loss for the period		-	-	-	(4,759)	-	(4,759)
Balance as at March 31, 2024		253,716,787	612,335	53,414	(436,572)	-	229,177

The accompanying notes form an integral part of these condensed consolidated interim financial statements .

4

GALIANO GOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(In thousands of United States Dollars)

		Three months ended
		March 31, 2024	March 31, 2023
	Note	$	$
Operating activities:		(4,759)
Net (loss) income for the period		8,493
Adjustments for:		3,016
Depreciation and depletion	9,20	36
Share-based compensation	15,20	5,128	1,597
Share of net income related to joint venture	8	(2,432)	(9,307)
Gain on derecognition of equity investment in joint venture	8	(1,298)	-
Transaction costs	4	2,299	-
Finance income	22(a)	(2,506)	(3,016)
Finance expense	22(b)	5,725	5
Unrealized foreign exchange (gain) loss		(78)	10
Operating cash flow before working capital changes		5,095	(2,182)
Change in non-cash working capital	25	7,933	1,639
Cash provided by (used in) operating activities		13,028	(543)
Investing activities:		(65,000)
Acquisition of 45% interest in joint venture from Gold Fields	4	-
Cash and cash equivalents assumed on acquisition	4	112,502	-
Transaction costs paid	4	(2,299)	-
Redemption of preferred shares in joint venture	7	25,000	-
Expenditures on mineral properties, plant and equipment	9	(7,303)	(29)
Interest received		848	673
Cash provided by investing activities		63,748	644
Financing activities:		(1,078)
Payment of lease liabilities	11	(31)
Shares issued for cash on exercise of stock options	15(a)	181	-
Share issuance costs		(40)	-
Cash used in financing activities		(937)	(31)
Impact of foreign exchange on cash and cash equivalents		(305)	(8)
Increase in cash and cash equivalents during the period		75,534	62
Cash and cash equivalents, beginning of period		55,270	56,111
Cash and cash equivalents, end of period		130,804	56,173
Supplemental cash flow information	25

The accompanying notes form an integral part of these condensed consolidated interim financial statements .

5

GALIANO GOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Expressed in thousands of United States Dollars unless otherwise stated

1. Nature of operations
   Galiano Gold Inc. ("Galiano" or the "Company") was incorporated on September 23, 1999 under the Business Corporations Act of British Columbia, Canada. The Company's head office and principal address is located at 1640 - 1066 West Hastings Street, Vancouver, British Columbia, V6E 3X1, Canada. The Company's registered and records office is located at Suite 3500, 1133 Melville Street, Vancouver, V6E 4E5. The Company's common shares trade on the Toronto Stock Exchange and NYSE American Exchange under the ticker symbol "GAU".
   Until March 4, 2024, the Company's principal business activity was the operation of the Asanko Gold Mine ("AGM") through a joint venture arrangement (the "JV") associated with the Company's then 45% equity interest in the entity that held the AGM mining licenses and gold exploration tenements (see note 8).
   On March 4, 2024 (the "Acquisition Date"), the Company acquired Gold Fields Limited's ("Gold Fields") 45% interest in the AGM (the "Acquisition"). As of the Acquisition Date, the Company owns a 90% interest in the AGM with the Government of Ghana continuing to hold a 10% free-carried interest (non-controlling interest). Refer to note 4 for further details on the Acquisition and preliminary purchase price accounting.
   The AGM consists of four main open-pit mining areas: Abore, Miradani North, Nkran and Esaase, multiple satellite deposits and exploration projects located on the Asankrangwa Gold Belt in the Amansie West District of the Republic of Ghana ("Ghana"), West Africa.
2. Basis of presentation
3. 1. Statement of compliance
      These condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard ("IAS") 34 - Interim Financial Reporting, using accounting policies consistent with 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 consolidated interim financial statements do not include all of the necessary annual disclosures in accordance with IFRS and should be read in conjunction with the Company's audited consolidated annual financial statements for the year ended December 31, 2023.
      These condensed consolidated interim financial statements were authorized for issue and approved by the Board of Directors on May 2, 2024.
      The accounting policies followed in these condensed consolidated interim financial statements are the same as those applied in the Company's audited consolidated annual financial statements for the year ended December 31, 2023, except as described below. The accounting policies of the JV outlined in the Company's annual financial statements for the year ended December 31, 2023 are the same accounting policies applied by the consolidated Galiano group in these financial statements.
      Business combinations
      Upon the acquisition of a business, the acquisition method of accounting is applied, whereby the purchase consideration is allocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) acquired on the basis of fair value at the date of acquisition.

6

GALIANO GOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Expressed in thousands of United States Dollars unless otherwise stated

2. Basis of presentation (continued)

When the cost of the acquisition exceeds the fair value attributable to the Company's share of the identifiable net assets, the difference is recorded as goodwill, which is not amortized and is reviewed for impairment annually or more frequently when there is an indication of impairment.

If the fair value attributable to the Company's share of the identifiable net assets exceeds the cost of acquisition, the difference is immediately recognized in the Statement of Operations and Comprehensive Income (Loss). Acquisition related costs, other than costs to issue equity securities of the Company, including investment banking fees, legal fees, accounting fees, valuation fees, and other professional or consulting fees are expensed as incurred. The cost to issue equity securities of the Company as consideration for the acquisition are reduced from share capital as share issuance costs.

Non-controlling interests are measured either at fair value or at the non-controlling interests' proportionate share of the recognized amounts of the acquirer's identifiable net assets as at the date of acquisition. The choice of measurement basis is made on a transaction-by-transaction basis.

Upon the acquisition of control, any previously held interest is re-measured to fair value at the date control is obtained resulting in a gain or loss upon the acquisition of control.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, the Company reports provisional amounts for the items for which the accounting is incomplete. These provisional amounts are adjusted during the measurement period (up to 12 months from the acquisition date) to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognized at that date.

1. Basis of presentation and consolidation
   These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for financial instruments carried at fair value.
   All amounts are expressed in thousands of United States dollars, unless otherwise stated, and the United States dollar is the functional currency of the Company and each of its subsidiaries. References to C$ are to Canadian dollars.
   These condensed consolidated interim financial statements incorporate the financial information of the Company and its subsidiaries as at March 31, 2024. Subsidiaries are entities controlled by the Company. Control exists when the Company has power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
   Subsidiaries are included in the consolidated financial statements of the Company from the effective date of acquisition up to the effective date of disposition or loss of control. The results of operations and cash flows of Asanko Gold Ghana Ltd., Adansi Gold Company (GH) Ltd. and Shika Group Finance Limited have been consolidated commencing on March 4, 2024 (refer to note 4).
   All significant intercompany amounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.

7

GALIANO GOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Expressed in thousands of United States Dollars unless otherwise stated

2. Basis of presentation (continued)

The principal subsidiaries to which the Company is a party, as well as their geographic locations, were as follows as at March 31, 2024:

			Classification and accounting
Affiliate name	Location	Interest	method
Galiano Gold South Africa (PTY) Ltd.	South Africa	100%	Consolidated
Galiano International (Isle of Man) Ltd.	Isle of Man	100%	Consolidated
Galiano Gold (Isle of Man) Ltd.	Isle of Man	100%	Consolidated
Galiano Gold Exploration Mali SARL	Mali	100%	Consolidated
Galiano Gold Exploration Ghana Ltd.	Ghana	100%	Consolidated
BUK West Africa Limited	United Kingdom	100%	Consolidated
Asanko Gold Ghana Ltd.1	Ghana	90%	Consolidated
Adansi Gold Company (GH) Ltd. 1	Ghana	100%	Consolidated
Shika Group Finance Limited1	Isle of Man	100%	Consolidated
Galiano Gold Netherlands B.V.2	Netherlands	100%	Consolidated

1. 1. From January 1, 2024 to March 3, 2024, the Company equity accounted for its 45% interest in Asanko Gold Ghana Ltd. and its 50% interest in each of Adansi Gold Company (GH) Ltd. and Shika Group Finance Limited.
   2. Acquired on March 4, 2024 as part of the Acquisition and name changed from GFI Netherlands B.V. to Galiano Gold Netherlands B.V. on April 2, 2024.
2. Accounting standards adopted during the period
3. 
   There were no new accounting standards effective January 1, 2024 that impacted these condensed consolidated interim financial statements.
4. Accounting standards and amendments issued but not yet adopted
5. 
   There were no accounting standards or amendments to existing standards issued but not yet adopted as of January 1, 2024 that are expected to have a material effect on the Company's financial statements in the future.

3. Significant accounting judgements and estimates

The preparation of financial statements, in conformity with IFRS, requires management to make judgements, estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Management believes the estimates and assumptions used in these condensed consolidated interim financial statements are reasonable; however, actual results could differ from those estimates and could impact future results of operations and cash flows and reported amounts of assets and liabilities.

The Company's significant accounting judgements and estimates are unchanged as compared to those presented in note 6 of the Company's audited annual consolidated financial statements for the year ended December 31, 2023, except as follows:

8

GALIANO GOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Expressed in thousands of United States Dollars unless otherwise stated

1. Significant accounting judgements and estimates (continued) Business combinations
   Judgements
   The Company has concluded that the AGM constitutes a business and, therefore, the acquisition is accounted for in accordance with IFRS 3, Business Combinations. Acquisitions of businesses are accounted for using the acquisition method of accounting.
   Estimates
   The measurement of consideration transferred and fair value of assets acquired and liabilities assumed required the Company to make certain judgements and estimates taking into account information available at the time of acquisition about future events, including but not limited to: estimates of mineral reserves and resources acquired, exploration potential, future operating costs and capital expenditures, reclamation and closure costs, timing of development of the Nkran pit, future gold prices, discount rates and tax rates. Changes to any of these estimates may impact the fair values disclosed in the preliminary purchase price allocation, which would be adjusted retrospectively until the purchase price allocation is finalized within twelve months of the acquisition date.
2. Acquisition of control of AGM
   On March 4, 2024, the Company completed the acquisition of Gold Fields' 45% interest in the Asanko Gold Mine JV. Following the closing of the Acquisition, the Company owns a 90% interest in Asanko Gold Ghana Ltd. ("AGGL"), the entity which holds the AGM's mining concessions and licenses, a 100% interest in Adansi Gold Company (GH) Ltd., an entity which holds exploration licenses in Ghana, and a 100% interest in Shika Group Finance Limited, the former JV entity. The Company also acquired a 100% interest in GFI Netherlands B.V., the entity through which Gold Fields held its former 45% interest in the JV.
   The objective of the Acquisition is to consolidate ownership of the AGM and obtain control of the asset.
   The Company began consolidating the operating results, cash flows and net assets of the AGM commencing on March 4, 2024. The total consideration payable to Gold Fields comprised the following:
3. • $65.0 million in cash;
   • issuance of 28.5 million common shares of the Company;
   • $55.0 million of deferred consideration comprised of a:

1. $25.0 million cash payment on or before December 31, 2025; and

1. $30.0 million cash payment on or before December 31, 2026 (collectively "Deferred Consideration")

The Deferred Consideration is to be paid in cash subject to the Company's right to satisfy up to 20% of each payment with common shares of the Company, subject to Gold Fields not owning more than 19.9% of the Company's issued and outstanding common shares at that time; and

• $30.0 million cash payment contingently payable upon production of 100,000 gold ounces from the Nkran deposit ("Contingent Consideration").

Gold Fields will also receive a 1% net smelter return royalty on production from the Nkran deposit beginning upon 100,000 gold ounces being produced, and subject to a maximum of 447,000 gold ounces of production ("Nkran Royalty"). Galiano has a right of first refusal on any full or partial disposition of the Nkran Royalty by Gold Fields.

9

GALIANO GOLD INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Expressed in thousands of United States Dollars unless otherwise stated

4. Acquisition of control of AGM (continued)

For accounting purposes, the consideration also includes the fair value of the Company's pre-existing investments in the JV, specifically the preferred shares and equity accounted investment.

The estimated fair value of consideration paid to Gold Fields as of the acquisition date is summarized as follows:

	Fair value
	$
Ca s h	65,000
Common shares (1)	32,490
Deferred consideration(2)	47,628
Contingent consideration(3)	13,243
Nkran royalty(4)	3,006
Fair value of consideration paid for 45% interest in AGM	161,367
Fair value of Galiano's previously held 45% interest	136,367
Fair value of consideration	297,734

1. The common share consideration fair value is based on a value of $1.14 per share, being the closing price of the Company's common shares on the NYSE American on March 4, 2024.
2. The Deferred Consideration fair value was estimated using a discounted cash flow model and applying a 6.3% discount rate.
3. The Contingent Consideration fair value was estimated using a discounted cash flow model and applying a 14.6% discount rate.
4. The Nkran Royalty fair value was estimated using a discounted cash flow model and applying a forecast gold price of $1,725 per ounce and a discount rate of 14.6%.

The fair value of the Company's previously held 45% interest in the JV is comprised of the fair value of preferred shares amounting to $46.8 million and the fair value of the Company's previous equity investment of $89.5 million.

A preliminary allocation of the purchase price is presented in the table below.

Assets acquired

Cash and cash equivalents

Accounts receivable

Value added tax receivables

Inventories

Prepaid expenses and deposits

Reclamation deposits

Mineral properties, plant and equipment

Liabilities assumed

Accounts payable and accrued liabilities

Lease liabilities

Asset retirement provisions

Net assets acquired

Non-controlling interest

Net assets attributable to Galiano

Fair value

$

112,502

102

7,885

45,395

5,509

5,308

230,621

(44,469)

(19,176)

(45,943)

297,734

-

297,734

10