UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934

For the month of August 2023

Commission File No. 001-33580

GALIANO GOLD INC.
(Translation of registrant's name into English)

Suite 1640, 1066 West Hastings Street
Vancouver, British Columbia, V6E 3X1, Canada
(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

Form 20-F  [  ]  Form 40-F [X]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1)  [  ]

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7)  [  ]


SUBMITTED HEREWITH

Exhibits 99.1 and 99.2 included with this report are hereby incorporated by reference into the registrant's registration statement on Form F-10 (File no. 333-268945) (the "Registration Statement"), and to be a part thereof from the date on which this report is submitted, to the extent not superseded by documents or reports subsequently filed or furnished.

Exhibits    
99.1   Condensed consolidated interim financial statements for the three and six months ended June 30, 2023 and 2022
     
99.2   Management's Discussion and Analysis for the three and six months ended June 30, 2023 and 2022
     
99.3   CEO certification of interim filings
     
99.4   CFO certification of interim filings
     
99.5   News release dated August 2, 2023


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GALIANO GOLD INC.

/s/ Matthew Freeman
________________________________
Matthew Freeman
Chief Financial Officer

Date:  August 2, 2023

 


 

GALIANO GOLD INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

UNAUDITED

For the three and six months ended June 30, 2023 and 2022

TABLE OF CONTENTS

Condensed Consolidated Interim Statements of Financial Position 2
   
Condensed Consolidated Interim Statements of Operations and Comprehensive Income 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 6-25


GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
AS AT JUNE 30, 2023 AND DECEMBER 31, 2022
(In thousands of United States Dollars)

      June 30, 2023     December 31, 2022  
  Note   $     $  
Assets              
Current assets              
Cash and cash equivalents     55,503     56,111  
Receivables     22     54  
Receivable due from related party 4   473     1,684  
Prepaid expenses and deposits     430     756  
      56,428     58,605  
Non-current assets              
Financial assets 5   71,577     66,809  
Investment in joint venture 6   74,462     54,148  
Right-of-use asset     225     277  
Property, plant and equipment     70     55  
      146,334     121,289  
Total assets     202,762     179,894  
               
Liabilities              
Current liabilities              
Accounts payable and accrued liabilities     4,659     4,330  
Payable due to related party 4   3,107     1,364  
Lease liability     120     110  
      7,886     5,804  
Non-current liabilities              
Long-term incentive plan liabilities 8   73     195  
Lease liability     141     204  
      214     399  
               
Total liabilities     8,100     6,203  
               
Equity              
Share capital 7   579,591     579,591  
Equity reserves 8   52,515     51,998  
Accumulated deficit     (437,444 )   (457,898 )
Total equity     194,662     173,691  
               
Total liabilities and equity     202,762     179,894  
               
Commitments and contingencies 9            

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

Approved on behalf of the Board of Directors:

"Matt Badylak"   "Greg Martin"
Director   Director


GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands of United States Dollars, except dollar per share amounts)

      Three months ended     Six months ended  
      June 30, 2023     June 30, 2022     June 30, 2023     June 30, 2022  
  Note   $     $     $     $  
                           
Share of net income related to joint venture 6   11,007     -     20,314     -  
Service fee earned as operators of joint venture 4   1,418     1,307     2,836     2,614  
General and administrative expenses 10   (3,148 )   (2,004 )   (6,998 )   (4,756 )
Exploration and evaluation expenditures 11   (472 )   (55 )   (1,885 )   (192 )
Income (loss) from operations and joint venture     8,805     (752 )   14,267     (2,334 )
                           
Finance income 12   3,133     13,337     6,149     13,380  
Finance expense     (6 )   (7 )   (12 )   (16 )
Foreign exchange gain (loss)     29     (12 )   50     (1 )
Net income and comprehensive income for the period     11,961     12,566     20,454     11,029  
                           
Weighted average number of shares outstanding:                          
Basic 13   224,943,453     224,943,453     224,943,453     224,943,453  
Diluted 13   225,292,468     224,943,453     224,968,681     224,943,453  
                           
Net income per share:                          
Basic     0.05     0.06     0.09     0.05  
Diluted     0.05     0.06     0.09     0.05  

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


GALIANO GOLD INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands of United States Dollars, except for number of common shares)

        Number of           Equity     Accumulated        
        shares     Share capital     reserves     deficit     Total equity  
  Note           $     $     $     $  
Balance as at December 31, 2021       224,943,453     579,591     51,879     (498,707 )   132,763  
Share-based compensation expense 8(a)     -     -     (341 )   -     (341 )
Net income and comprehensive income for the period       -     -     -     11,029     11,029  
Balance as at June 30, 2022       224,943,453     579,591     51,538     (487,678 )   143,451  
                                     
Balance as at December 31, 2022       224,943,453     579,591     51,998     (457,898 )   173,691  
Share-based compensation expense 8(a)     -     -     517     -     517  
Net income and comprehensive income for the period       -     -     -     20,454     20,454  
Balance as at June 30, 2023       224,943,453     579,591     52,515     (437,444 )   194,662  

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


GALIANO GOLD INC.
UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOW
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
(In thousands of United States Dollars)

      Three months ended     Six months ended  
      June 30, 2023     June 30, 2022     June 30, 2023     June 30, 2022  
  Note   $     $     $     $  
Operating activities:                          
Net income for the period     11,961     12,566     20,454     11,029  
Adjustments for:     (11,007 )         (20,314 )      
Share of net income related to joint venture 6   -     -  
Depreciation     36     37     72     74  
Share-based compens ation 8,10   893     (188 )   2,490     (370 )
Finance income 12   (3,133 )   (13,337 )   (6,149 )   (13,380 )
Finance expense     4     6     9     13  
Unrealized foreign exchange (gain) loss     (13 )   8     (3 )   29  
Operating cash flow before working capital changes     (1,259 )   (908 )   (3,441 )   (2,605 )
Change in non-cash working capital 14   (118 )   3,473     1,521     2,005  
Cash (used in) provided by operating activities     (1,377 )   2,565     (1,920 )   (600 )
                           
Investing activities:     708           1,381        
Interest received     123     166  
Expenditures on property, plant and equipment     (5 )   -     (34 )   (1 )
Cash provided by investing activities     703     123     1,347     165  
                           
Financing activities:     (31 )         (62 )      
Office lease payments     (33 )   (67 )
                           
Impact of foreign exchange on cash and cash equivalents     35     (34 )   27     (14 )
                         
(Decrease) increase in cash and cash equivalents during the period   (670 )   2,621     (608 )   (516 )
Cash and cash equivalents, beginning of period     56,173     50,384     56,111     53,521  
Cash and cash equivalents, end of period     55,503     53,005     55,503     53,005  
                           
Supplemental cash flow information 14                        

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


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
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 2600, Three Bentall Centre, 595 Burrard Street, Vancouver, V7X 1L3. The Company's common shares trade on the Toronto Stock Exchange and NYSE American Exchange under the ticker symbol "GAU".

The Company's principal business activity is the operation of the Asanko Gold Mine ("AGM") through a joint venture arrangement (the "JV") associated with the Company's 45% equity interest in the entity that holds the AGM mining licenses and gold exploration tenements (see note 6). The Government of Ghana has a 10% free-carried interest in the AGM. 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.

In addition to its interest in the AGM, the Company holds the 100% owned Asumura property in Ghana.

2. Basis of presentation

(a) 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, 2022.

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, 2022.

These condensed consolidated interim financial statements were authorized for issue and approved by the Board of Directors on August 2, 2023.

(b) 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 June 30, 2023. 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.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

2. Basis of presentation (continued)

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.

All significant intercompany amounts and transactions between the Company and its subsidiaries have been eliminated on consolidation.

The principal subsidiaries and joint arrangements to which the Company is a party, as well as their geographic locations, were as follows as at June 30, 2023:

      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.1 Ghana 100% Consolidated
BUK West Africa Limited United Kingdom 100% Consolidated
Asanko Gold Ghana Ltd. Ghana 45% Joint venture; equity method
Adansi Gold Company (GH) Ltd. Ghana 50% Joint venture; equity method
Shika Group Finance Limited Isle of Man 50% Joint venture; equity method

1 Name changed from Asanko Gold Exploration Ghana Ltd. to Galiano Gold Exploration Ghana Ltd. effective March 29, 2023.

(c) Accounting standards adopted during the period

The Company adopted the following new IFRS standard effective January 1, 2023. The nature and impact of the new standard on the Company's current period financial statements, if any, are outlined below. Adoption of the standard was made in accordance with the applicable transitional provisions.

Amendments to IAS 1

On February 12, 2021, the IASB issued Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2, Making Materiality Judgements). The amendments help companies provide useful accounting policy disclosures and include requiring companies to disclose their material accounting policies rather than their significant accounting policies; clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves immaterial and as such need not be disclosed; and clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material to a company's financial statements. The amendments are effective for annual periods beginning on or after January 1, 2023, with early adoption permitted. The amendments to IAS 1 will be reflected in the Company's disclosures in its consolidated annual financial statements for the year ended December 31, 2023.

(d) Accounting standards and amendments issued but not yet adopted

There were no accounting standards or amendments to existing standards issued but not yet adopted as of June 30, 2023 that are expected to have a material effect on the Company's or the JV's financial statements in the future.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

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 and the JV's significant accounting judgements and estimates are unchanged as compared to those presented in note 5 of the Company's audited annual consolidated financial statements for the years ended December 31, 2022 and 2021.

4. Balances due from/to related party

Under the terms of the Joint Venture Agreement (the "JVA") that governs the management of the JV (note 6), the Company is the operator of the AGM and, in consideration for managing the operations of the mine, currently receives a gross annual service fee from the JV of $7.1 million (originally $6.0 million per annum, but adjusted annually for inflation).

During the three and six months ended June 30, 2023, the Company earned a service fee of $1.4 million and $2.8 million, respectively, as operator of the JV (three and six months ended June 30, 2022 - $1.3 million and $2.6 million, respectively). For the three and six months ended June 30, 2023, the service fee was comprised of a gross service fee of $1.7 million and $3.5 million, respectively, less withholding taxes payable in Ghana of $0.3 million and $0.7 million (three and six months ended June 30, 2022 - gross service fee of $1.7 million and $3.3 million, respectively, less withholding taxes payable in Ghana of $0.4 million and $0.7 million). As at June 30, 2023, the Company had a receivable due from the JV in respect of the service fee in the amount of $0.5 million, net of withholding taxes (December 31, 2022 - $1.7 million).

As at June 30, 2023, the Company had a payable due to the JV in the amount of $3.1 million relating to reimbursement for third party supplier costs and administrative and exploration services performed by the JV on the Company's wholly owned Asumura property in Ghana (December 31, 2022 - $1.4 million). During the three and six months ended June 30, 2023, the JV provided administrative and exploration services on the Company's Asumura property totaling $0.1 million and $0.2 million, respectively (three and six months ended June 30, 2022 - $0.1 million and $0.2 million, respectively).

All transactions with related parties have occurred in the normal course of operations. All amounts are unsecured, non-interest bearing and have no specific terms of settlement.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

5. Financial assets

As part of the JV transaction with Gold Fields (note 6), the Company initially subscribed to 184.9 million non-voting fixed redemption price redeemable preferences shares in Shika Group Finance Limited (the "preference shares"), which were issued with a par value of $1 per redeemable share. The preference shares have no fixed redemption date. As these preference shares have no contractual fixed terms of repayment that arise on specified dates, they are measured at fair value through profit or loss at each reporting period- end and are classified as a Level 3 financial asset in the fair value hierarchy.

The following table summarizes the change in the carrying amount of the Company's preference shares held in the joint venture for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    Number of shares     $     $  
Balance, beginning of period   132,400,000     66,809     72,426  
Fair value adjustment for the period   -     4,768     (5,617 )
Balance, end of period   132,400,000     71,577     66,809  

As at June 30, 2023, the Company re-measured the fair value of the preference shares (using the same methodology applied at December 31, 2022) to $71.6 million and recorded a positive fair value adjustment of $2.4 million and $4.8 million in finance income for the three and six months ended June 30, 2023, respectively (three and six months ended June 30, 2022 - positive fair value adjustment of $13.2 million).

6. Asanko Gold Mine joint venture

On July 31, 2018, the Company completed a transaction (the "JV Transaction") with a subsidiary of Gold Fields Limited ("Gold Fields"), following which:

 the Company and Gold Fields each own a 45% equity interest in Asanko Gold Ghana Ltd. ("AGGL"), which owns the AGM, with the Government of Ghana retaining a 10% free-carried interest in the AGM;

 the Company and Gold Fields each own a 50% interest in Adansi Gold Company (GH) Ltd. ("Adansi Ghana"), which owns a number of exploration licenses; and

 the Company and Gold Fields each acquired a 50% interest in the JV entity, Shika Group Finance Limited ("Shika").

As the JV is structured within the legal entities of AGGL, Adansi Ghana and Shika, the JV represents a joint venture as defined under IFRS 11 - Joint Arrangements, and the Company commenced equity accounting for its interest in the JV effective July 31, 2018.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

The following table summarizes the change in the carrying amount of the Company's investment in the AGM joint venture for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Balance, beginning of period   54,148     -  
Company's share of the JV's net income for the period   20,314     46,517  
Impairment reversal on investment in JV   -     7,631  
Balance, end of period   74,462     54,148  

The Company's share of the JV's net earnings for the three and six months ended June 30, 2023 was $11.0 million and $20.3 million, respectively. For the three and six months ended June 30, 2022, the Company did not recognize its share of the JV's net income as the recoverable amount of the Company's investment in the JV was estimated to be nil as at March 31, 2022 and June 30, 2022.

Operating and financial results of the AGM JV for the three and six months ended June 30, 2023 and 2022

Summarized financial information for the AGM JV, on a 100% basis, is outlined in the tables below.

All disclosures in this note 6 are on a 100% JV basis, unless otherwise indicated. The JV applies the same accounting policies as the

Company.

Statement of Income for the three and six months ended June 30, 2023 and 2022

      Three months ended June 30,     Six months ended June 30,  
      2023     2022     2023     2022  
  Note   $     $     $     $  
Revenue (i )   64,066     84,885     129,259     162,417  
Production costs (ii)   (33,319 )   (52,261 )   (68,261 )   (105,486 )
Depreciation and depletion     (2,626 )   (12,136 )   (4,955 )   (22,014 )
Royalties (iii)   (3,715 )   (4,244 )   (6,980 )   (8,121 )
Income from mine operations     24,406     16,244     49,063     26,796  
                           
Exploration and evaluation expenditures     (1,339 )   (3,562 )   (3,109 )   (6,420 )
General and administrative expenses     (719 )   1,474     (1,445 )   (20,407 )
Income (loss) from operations     22,348     14,156     44,509     (31 )
                           
Finance expense (x)   289     (850 )   (945 )   (1,577 )
Finance income (x)   1,058     46     1,997     76  
Foreign exchange gain (loss)     683     2,451     (569 )   3,697  
Net income for the period     24,378     15,803     44,992     2,165  
                           
Company's share of net income of the JV for the period     11,007     -     20,314     -  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

The assets and liabilities of the AGM JV, on a 100% basis, as at June 30, 2023 and December 31, 2022 were as follows:

          June 30, 2023
    December 31, 2022  
    Note     $     $  
Assets                  
Current assets                  
Cash and cash equivalents   (xi)     112,914     91,271  
Receivables         12,758     2,771  
Inventories   (iv)     46,448     54,003  
Prepaid expenses and deposits         2,904     2,907  
VAT receivable         7,045     6,235  
          182,069     157,187  
Non-current assets   (v),(vi)     197,625     180,640  
Total assets         379,694     337,827  
                   
Liabilties                  
Current liabilities                  
Accounts payable and accrued liabilities         25,208     30,811  
Lease liabilities         544     778  
          25,752     31,589  
Non-current liabilities                  
Lease liabilities         -     113  
Asset retirement provisions   (vii)     60,973     58,148  
          60,973     58,261  
Total liabilities         86,725     89,850  
Equity   (ix)     292,969     247,977  
Total liabilities and equity         379,694     337,827  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

The Company has provided the following incremental disclosures for stakeholders to evaluate the financial performance and financial condition of the AGM. All amounts in the following tables and descriptions are on a 100% basis.

(i) Revenues

AGGL has an offtake agreement (the "Offtake Agreement") with a special purpose vehicle of Red Kite Opportunities Master Fund Limited ("Red Kite") under which the AGM will sell 100% of future gold production from the AGM up to a maximum of 2.2 million ounces. The gold sale price will be a spot price selected by Red Kite during a nine-day quotational period following shipment of gold from the mine.

During the six months ended June 30, 2023, the AGM sold a portion of its production to the Bank of Ghana under the country's gold buying program. As agreed with Red Kite, gold ounces sold to the Bank of Ghana were considered delivered under the Offtake Agreement, and in consideration the AGM paid to Red Kite a "make whole" payment which was calculated in a similar manner to a nine-day quotational period. The "make whole" payments made to Red Kite were recognized as a reduction of revenues.

During the three and six months ended June 30, 2023, the AGM sold 32,912 and 68,086 ounces of gold, respectively, to Red Kite under the Offtake Agreement (three and six months ended June 30, 2022 - 46,236 and 88,165 gold ounces, respectively). As of June 30, 2023, the AGM has delivered 1,535,191 ounces to Red Kite under the Offtake Agreement.

Included in revenue of the AGM is $0.1 million and $0.2 million relating to by-product silver sales for the three and six months ended June 30, 2023, respectively (three and six months ended June 30, 2022 - $0.2 million and $0.3 million, respectively).

(ii) Production costs

The following is a summary of production costs by nature, on a 100% basis, incurred during the three and six months ended June 30, 2023 and 2022:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     2023     2023     2023  
Raw materials and consumables   (13,952 )   (14,637 )   (28,767 )   (27,772 )
Salaries and employee benefits   (5,286 )   (7,159 )   (10,727 )   (17,322 )
Contractors   (6,769 )   (14,732 )   (15,374 )   (42,435 )
Change in stockpile, gold-in-process and
   gold dore inventories
  (1,825 )   (10,823 )   (4,335 )   (7,564 )
Insurance, government fees, permits and other   (5,487 )   (4,910 )   (9,058 )   (10,393 )
Total production costs   (33,319 )   (52,261 )   (68,261 )   (105,486 )

During the three months ended June 30, 2023, the AGM recognized a $0.4 million downward net realizable value adjustment on its stockpile inventory, of which $0.3 million was recorded against production costs and $0.1 million was recorded against depreciation expense (three months ended June 30, 2022 - $3.8 million reversal of previously recorded net realizable value adjustments on stockpile inventory, of which $2.8 million was credited against production costs and $1.0 million was credited against depreciation expense).


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

During the six months ended June 30, 2023, the AGM recognized a $0.3 million reversal of previously recorded net realizable value adjustments on its stockpile inventory, of which $0.2 million was credited against production costs and $0.1 million was credited against depreciation expense (six months ended June 30, 2022 - $10.5 million reversal of previously recorded net realizable value adjustments on stockpile inventory, of which $7.3 million was credited against production costs and $3.2 million was credited against depreciation expense).

(iii) Royalties

All of the AGM's concessions are subject to a 5% gross revenue royalty payable to the Government of Ghana. The AGM's Akwasiso mining concession is also subject to an additional 2% net smelter return royalty payable to the previous owner of the mineral tenement, and the AGM's Esaase mining concession is also subject to an additional 0.5% net smelter return royalty payable to the Bonte Liquidation Committee.

On April 3, 2023, the Government of Ghana imposed a special levy, the Growth and Sustainability Levy ("GSL"), on all companies operating in Ghana with an effective date of May 1, 2023. The purpose of the GSL is to support growth and fiscal sustainability of the Ghanaian economy. For mining companies in Ghana, the GSL is levied at a rate of 1% of gold revenues for the fiscal years 2023 to 2025. The JV has presented the 1% GSL as royalties expense in the Statement of Operations.

(iv) Inventories

The following is a summary of inventories held by the AGM, on a 100% basis, as at June 30, 2023 and December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Gold dore on hand   2,331     3,592  
Gold-in-process   962     937  
Ore stockpiles   19,630     23,802  
Materials and spare parts   23,525     25,672  
Total inventories   46,448     54,003  

During the three months ended June 30, 2023, the JV reclassified $2.6 million of insurance and capital spares to mineral properties, plant and equipment (three and six months ended June 30, 2022 - nil for both periods).

(v) Reclamation deposit

The AGM is required to provide security to the Environmental Protection Agency of Ghana ("EPA") for the performance by the AGM of its reclamation obligations in respect of its mining leases.

The AGM deposits a reclamation deposit in a Ghanaian bank and the reclamation deposit is required to be held until receiving a final reclamation completion certificate from the EPA. The AGM is expected to be released from this requirement 45 days following the third anniversary of the date that the AGM receives a final completion certificate. The reclamation deposit accrues interest and is $5.0 million as of June 30, 2023 (December 31, 2022 - $5.0 million). Additionally, bank guarantees of $11.8 million were provided to the EPA, 50% of which is provided by the Company (see note 9). The AGM is in the process of updating its reclamation bond for the Obotan deposit, which is expected to conclude in the third quarter of 2023.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

(vi) Mineral properties, plant and equipment

Additions to mineral properties, plant and equipment

During the three and six months ended June 30, 2023, the AGM capitalized $8.9 million and $16.4 million, respectively, in expenditures related to mineral properties, plant and equipment ("MPP&E"), excluding capitalized deferred stripping costs and asset retirement costs (three and six months ended June 30, 2022 - additions of $3.5 million and $5.9 million, respectively).

The AGM will not incur any deferred stripping costs until mining operations resume.

2022 impairment reversal on MPP&E

On February 22, 2023, the Company reported the results of an independent feasibility study for the AGM, which included the reinstatement of the AGM's mineral reserves effective December 31, 2022, and an updated National Instrument 43-101 Technical Report was filed on March 28, 2023. The Company considered the positive results received from metallurgical test work carried out at Esaase in 2022 and the reinstatement of mineral reserves at the AGM as of December 31, 2022 to be indicators that the impairment recorded by the JV during the year ended December 31, 2021 may have decreased or no longer exists. As a result, during the year ended December 31, 2022, the JV recognized a $63.2 million impairment reversal on MPP&E based on an estimate of the recoverable amount of the AGM.

(vii) Asset retirement provisions

The following table shows the movement in the asset retirement provisions of the AGM for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Balance, beginning of period   58,148     81,028  
Accretion expens e   1,117     2,527  
Change in estimate   1,872     (25,331 )
Reclamation undertaken during the period   (164 )   (76 )
Total asset retirement provisions, end of period   60,973     58,148  

The asset retirement provisions consist of reclamation and closure costs for the JV's Ghanaian mining properties. Reclamation and closure activities include land rehabilitation, dismantling of buildings and mine facilities, ongoing care and maintenance and other costs.

As at June 30, 2023, the AGM's reclamation cost estimates were discounted using a long-term risk-free discount rate of 3.9% (December 31, 2022 - 3.9%). The change in estimate during the period was primarily due to an increase in the disturbed area of the tailings storage facility.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

(viii) Legal provision

A services provider of the AGM filed a dispute with an arbitration tribunal alleging the AGM breached the terms of a services agreement and claimed approximately $25 million in damages. The arbitrator ruled in favour of the AGM that there had not been a breach of any terms of the contract, yet made an award to the counterparty of approximately $13 million plus interest for services rendered. The AGM, consistent with the arbitration ruling, maintains the view that there was no breach of contract and all contractual amounts were paid as due. The AGM therefore is undertaking an appeals process in the Court of Appeal in Ghana. A provision of $2.0 million has been recorded as of June 30, 2023 (December 31, 2022 - $2.0 million), as management's best estimate to settle the claim. While the Company cannot reasonably predict the ultimate outcome of these actions, and inherent uncertainties exist in predicting such outcomes, the Company believes the estimated provision is reasonable based on the information currently available.

(ix) Preferred shares

The following table shows the movement in the JV partners' preferred share investments in the JV for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Balance, beginning of period   264,880     264,880  
Distributions to partners during the period   -     -  
Balance, end of period   264,880     264,880  

(x) Finance expense and income

The following is a summary of finance expense incurred by the AGM JV during the three and six months ended June 30, 2023 and 2022:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     $     $     $  
Unrealized gains on gold   1,030     -     504     -  
hedging instruments
                       
Accretion charges on ass et retirement   (606 )   (586 )   (1,117 )   (1,072 )
provis ions (note vii)
                       
Commitment and standby fees on RCF (note xii)   (57 )   (133 )   (113 )   (246 )
Withholding taxes   (47 )   -     (127 )   -  
Interes t on lease liabilities   (5 )   (67 )   (12 )   (170 )
Other   (26 )   (64 )   (80 )   (89 )
Total finance expense   289     (850 )   (945 )   (1,577 )

For the three and six months ended June 30, 2023, finance income of $1.1 million and $2.0 million, respectively, related primarily to interest earned on cash balances and short-term investments (three and six months ended June 30, 2022 – $46 and $76 of finance income, related primarily to interest earned on cash balances).


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

6. Asanko Gold Mine joint venture (continued)

(xi) Summary of cash flows

The cash flows of the AGM, on a 100% basis, were as follows for the three and six months ended June 30, 2023 and 2022:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     $     $     $  
Cash provided by (used in):                        
Operating activities   17,979     34,344     36,922     38,269  
Investing activities   (7,750 )   (3,407 )   (14,359 )   (5,863 )
Financing activities   (168 )   (5,706 )   (596 )   (10,643 )
Impact of foreign exchange on cash and cash   103     (246 )   (324 )   (691 )
equivalents
                       
Increase in cash and cash equivalents during   10,164     24,985     21,643     21,072  
the period                        
Cash and cash equivalents, beginning of period   102,750     45,298     91,271     49,211  
Cash and cash equivalents, end of period   112,914     70,283     112,914     70,283  

(xii) Revolving credit facility

In October 2019, the JV entered into a $30.0 million revolving credit facility (the "RCF") with Rand Merchant Bank. During the year ended December 31, 2022, the maturity date of the RCF was extended to September 30, 2023 (with utilization subject to credit review) and the AGM will pay a facility maintenance fee of 0.70% per annum. As at June 30, 2023, the balance drawn under the RCF was nil (December 31, 2022 - nil).

During the three and six months ended June 30, 2023, the AGM recognized facility maintenance fees associated with the RCF of $57 and $113, respectively (three and six months ended June 30, 2022 - $0.1 million and $0.2 million, respectively).


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

7. Share capital

(a) Authorized:

Unlimited common shares without par value or restrictions.

(b) Base shelf prospectus

On December 21, 2022, the Company filed a final short form base shelf prospectus (the "Prospectus") under which the Company may sell from time-to-time common shares, warrants, subscription receipts, units, debt securities and/or share purchase contracts of the Company, up to an aggregate of $300 million. The Prospectus has a term of 25 months from the filing date. As of June 30, 2023, no securities were issued under the Prospectus.

8. Equity reserves and long-term incentive plan awards

The Company has a stock option plan and a share unit plan under which restricted share units ("RSUs"), performance share units ("PSUs") and deferred share units ("DSUs") may be awarded to directors, officers, employees and other service providers. All awards under the share unit plan may be designated by the Company's Board of Directors to be settled in either cash, shares or a combination thereof. As at June 30, 2023, all units awarded have been cash-settled.

Under the two plans, when combined, the number of shares issuable cannot exceed 9% of the issued and outstanding common shares of the Company. Specifically, shares reserved for issuance under the share unit plan, when designated as equity-settled, may not exceed 5% of the issued and outstanding common shares of the Company. Share units awarded as cash settled units will not be considered in computing the limits of the share unit plan.

RSUs, PSUs and DSUs are cash-settled awards and therefore represent financial liabilities, which are recorded at fair value at each reporting date and adjusted for the completed proportion of the vesting period, with any changes recorded as shared-based compensation expense in the Statement of Operations and Comprehensive Income. The financial liability associated with these cash- settled awards is recorded in accounts payable and accrued liabilities for amounts expected to be settled within one year, and a separate long-term incentive plan liability for amounts to be settled in excess of one year, as of the balance sheet date.

(a) Stock options

Options granted typically vest in 1/3 increments every twelve months following the grant date for a total vesting period of three years. Stock options have a maximum term of 5 years following the grant date. The fair value of stock options granted is determined using the Black Scholes option pricing model.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

8. Equity reserves and long-term incentive plan awards (continued)

The following table is a reconciliation of the movement in stock options for the period:

          Weighted average  
          exercise price  
    Number of Options     C$  
Balance, December 31, 2021   11,680,170     1.61  
Granted   4,790,000     0.66  
Cancelled/Expired/Forfeited   (7,973,000 )   1.65  
Balance, December 31, 2022   8,497,170     1.04  
Granted   4,574,000     0.85  
Expired   (54,168 )   1.07  
Balance, June 30, 2023   13,017,002     0.97  

During the three and six months ended June 30, 2023, the Company recognized $0.3 million and $0.5 million of share-based compensation expense, respectively, relating to stock options (three and six months ended June 30, 2022 - credit to share- based compensation expense of $0.5 million and $0.3 million, respectively).

(b) Restricted Share Units

RSUs granted vest in 1/3 increments every twelve months following the grant date for a total vesting period of three years.

The following table is a reconciliation of the movement in the number of RSUs outstanding for the six months ended June 30,

2023 and year ended December 31, 2022:

    Number of RSUs  
    June 30, 2023
    December 31, 2022  
Balance, beginning of period   534,508     1,184,594  
Granted   366,200     299,900  
Settled in cash   (279,069 )   (599,107 )
Cancelled/Forfeited   -     (350,879 )
Balance, end of period   621,639     534,508  

The following table is a reconciliation of the movement in the RSU liability for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Balance, beginning of period   169     575  
Awards vested and change in fair value during the period,   101     (95 )
net of cancelled/forfeited awards
           
Settled in cash during the period   (169 )   (311 )
Total RSU liability, end of period   101     169  
Less: current portion of RSU liability   (81 )   (143 )
Total non-current RSU liability, end of period   20     26  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

8. Equity reserves and long-term incentive plan awards (continued)

(c) Performance share units

PSUs vest in either 1/2 or 1/3 increments every twelve months following the grant date for a total vesting period of two or three years and also contain a performance criterion applied to the number of units that vest on a yearly basis. The number of units that vest will be determined by the Company's relative share price performance in comparison to a peer group of companies or upon achievement of certain Company strategic objectives. The PSU performance multiplier ranges from 0% to 150%.

The following table is a reconciliation of the movement in the number of PSUs outstanding for the six months ended June 30,

2023 and year ended December 31, 2022:

    Number of PSUs  
    June 30, 2023
    December 31, 2022  
Balance, beginning of period   1,739,401     571,000  
Granted   1,287,200     1,588,900  
Settled in cash   (908,429 )   (88,167 )
Added due to performance condition   563,857     -  
Cancelled/Forfeited   (180,547 )   (332,332 )
Balance, end of period   2,501,482     1,739,401  

The following table is a reconciliation of the movement in the PSU liability for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Balance, beginning of period   503     87  
Awards vested and change in fair value during the period,   488     462  
net of cancelled/forfeited awards
           
Settled in cash during the period   (583 )   (46 )
Total PSU liability, end of period   408     503  
Less: current portion of PSU liability   (355 )   (334 )
Total non-current PSU liability, end of period   53     169  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

8. Equity reserves and long-term incentive plan awards (continued)

(d) Deferred share units

DSUs granted vest over a period of one year and will be paid to directors upon their retirement from the Board of Directors of the Company or upon a change of control.

The following table is a reconciliation of the movement in the number of DSUs outstanding for the six months ended June 30,

2023 and year ended December 31, 2022:

    Number of DSUs  
    June 30, 2023     December 31, 2022  
Balance, beginning of period   3,132,000     844,200  
Granted   1,942,400     2,287,800  
Settled in cash   (588,975 )   -  
Cancelled/Forfeited   (145,250 )   -  
Balance, end of period   4,340,175     3,132,000  

The following table is a reconciliation of the movement in the DSU liability for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023
    December 31, 2022  
    $     $  
Balance, beginning of period   1,664     608  
Awards vested and change in fair value during the period   1,243     1,056  
Settled in cash during the period   (370 )   -  
Total DSU liability, end of period   2,537     1,664  

The financial liability associated with cash-settled DSU awards is recorded in accounts payable and accrued liabilities.

(e) Phantom share units

On November 6, 2020, the Company granted 1,000,000 cash-settled phantom share units to the Chair of the Board. The units will vest three years from the grant date, but will only become payable upon the Chair's departure from the Board or upon a change of control of the Company, in a cash settlement amount equal to the value of 1,000,000 common shares as at the Chair's departure date or date of change of control.

The phantom share units represent a financial liability, as they will be settled in cash, and are marked-to-market at each reporting period end and presented in the Statement of Financial Position within accounts payable and accrued liabilities.

The following table is a reconciliation of the movement in the phantom share unit liability for the six months ended June 30, 2023 and year ended December 31, 2022:

    June 30, 2023     December 31, 2022  
    $     $  
Balance, beginning of period   381     277  
Awards vested and change in fair value during the period   141     104  
Total phantom share unit liability, end of period   522     381  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

9. Commitments and contingencies

Commitments

The following table reflects the Company's contractual obligations as they fall due, excluding commitments and liabilities of the JV,

as at June 30, 2023 and December 31, 2022:

                Over     June 30,     December 31,  
    Within 1 year     1 - 5 years     5 years     2023     2022  
Accounts payable, accrued liabilities and   4,272     -     -     4,272     3,173  
payable due to related party
                             
Long-term incentive plan (cash-settled awards)   3,494     73     -     3,567     2,716  
Corporate office leases   134     158     -     292     348  
Total   7,900     231     -     8,131     6,237  

In addition to the above commitments, the Company has provided various parent company guarantees related to the unfunded portion of the AGM's reclamation bond in the amount of $5.9 million (December 31, 2022 - parent company guarantee of $5.9 million).

Contingencies

Due to the nature of its business, the Company and/or the JV may be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. While the Company cannot reasonably predict the ultimate outcome of these actions, and inherent uncertainties exist in predicting such outcomes, the Company believes that the ultimate resolution of these actions is not reasonably likely to have a material adverse effect on the Company's or JV's financial condition or future results of operations.

10. General and administrative ("G&A") expenses

The following is a summary of G&A expenses incurred during the three and six months ended June 30, 2023 and 2022. General and administrative expenses for the periods presented include, but are not limited to, those expenses incurred in order to earn the service fee as operators of the JV (note 4).

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     $     $     $  
Wages, benefits and consulting   (1,453 )   (1,355 )   (2,944 )   (3,719 )
Office, rent and administration   (316 )   (304 )   (630 )   (603 )
Professional and legal   (156 )   (231 )   (309 )   (380 )
Share-based compensation   (893 )   188     (2,490 )   370  
Travel, marketing, investor relations and regulatory   (294 )   (265 )   (553 )   (350 )
Depreciation   (36 )   (37 )   (72 )   (74 )
Total G&A expense   (3,148 )   (2,004 )   (6,998 )   (4,756 )


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

11. Exploration and evaluation ("E&E") expenditures

The following is a summary of E&E expenses incurred by the Company during the three and six months ended June 30, 2023 and 2022. E&E expenses incurred relate to work performed on the Company's wholly owned Asumura and Mali properties.

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     $     $     $  
Contractors and consulting   (93 )   (30 )   (218 )   (72 )
Drilling and assays   (273 )   (4 )   (1,486 )   (29 )
Field supplies and camp costs   (14 )   (56 )   (27 )   (78 )
Crop compensation, community and permitting   (91 )   35     (143 )   (9 )
Other   (1 )   -     (11 )   (4 )
Total E&E expense   (472 )   (55 )   (1,885 )   (192 )

12. Finance income

The following is a summary of finance income earned during the three and six months ended June 30, 2023 and 2022:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     $     $     $  
Fair value adjustment on redeemable   2,425     13,214     4,768     13,214  
preference shares (note 5)
                       
Interest income   708     123     1,381     166  
Total finance income   3,133     13,337     6,149     13,380  

13. Income per share

For the three and six months ended June 30, 2023 and 2022, the calculation of basic and diluted income per share is based on the following data:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
Net income for the period   11,961     12,566     20,454     11,029  
Number of shares                        
Weighted average number of ordinary   224,943,453     224,943,453     224,943,453     224,943,453  
shares - basic
                       
Effect of dilutive share options   349,015     -     25,228     -  
Weighted average number of ordinary shares - diluted   225,292,468     224,943,453     224,968,681     224,943,453  

For the three and six months ended June 30, 2023, excluded from the calculation of diluted weighted average shares were 8,675,002 and 12,707,002 stock options, respectively, that were determined to be anti-dilutive. For the three and six months ended June 30, 2022, there were no dilutive securities.


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

14. Supplemental cash flow information

The following table summarizes the changes in non-cash working capital for the three and six months ended June 30, 2023 and 2022:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
    $     $     $     $  
Receivables and receivable due from related party   -     3,597     1,243     2,191  
Prepaid expenses and deposits   313     266     325     516  
Accounts payable, accrued liabilities and payable   (431 )   (390 )   (47 )   (702 )
due to related party
                       
Change in non-cash working capital   (118 )   3,473     1,521     2,005  

15. Segmented information Geographic Information

As at June 30, 2023, the Company has only one reportable operating segment being the corporate function with its head office in Canada. Total assets in West Africa include the Company's 45% interest in the Asanko Gold Mine JV.

Geographic allocation of total assets and liabilities

June 30, 2023   Canada     West Africa     Total  
    $     $     $  
Current assets   56,412     16     56,428  
Property, plant and equipment and right-of-use assets   295     -     295  
Other non-current assets   -     146,039     146,039  
Total assets   56,707     146,055     202,762  
Current liabilities   4,592     3,294     7,886  
Non-current liabilities   214     -     214  
Total liabilities   4,806     3,294     8,100  

December 31, 2022   Canada     West Africa     Total  
    $     $     $  
Current assets   58,568     37     58,605  
Property, plant and equipment and right-of-use assets   332     -     332  
Other non-current assets   -     120,957     120,957  
Total assets   58,900     120,994     179,894  
Current liabilities   4,363     1,441     5,804  
Non-current liabilities   399     -     399  
Total liabilities   4,762     1,441     6,203  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

15. Segmented information (continued)

Geographic allocation of the Statement of Operations and Comprehensive Income

For the three months ended June 30, 2023:

    Canada     West Africa     Total  
    $     $     $  
Share of net income related to joint venture   -     11,007     11,007  
Service fee earned as operators of joint venture   1,418     -     1,418  
General and administrative expenses   (3,107 )   (41 )   (3,148 )
Exploration and evaluation expenditures   -     (472 )   (472 )
(Loss) income from operations and joint venture   (1,689 )   10,494     8,805  
Finance income   708     2,425     3,133  
Finance expense   (6 )   -     (6 )
Foreign exchange gain   29     -     29  
Net (loss) income and comprehensive (loss) income for the period   (958 )   12,919     11,961  

For the three months ended June 30, 2022:

    Canada     West Africa     Total  
    $     $     $  
Service fee earned as operators of joint venture   1,307     -     1,307  
General and administrative expenses   (1,987 )   (17 )   (2,004 )
Exploration and evaluation expenditures   -     (55 )   (55 )
Loss from operations and joint venture   (680 )   (72 )   (752 )
Finance income   123     13,214     13,337  
Finance expense   (7 )   -     (7 )
Foreign exchange loss   (10 )   (2 )   (12 )
Net (loss) income and comprehensive (loss) income for the period   (574 )   13,140     12,566  


GALIANO GOLD INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
Expressed in thousands of United States Dollars unless otherwise stated

15. Segmented information (continued)

For the six months ended June 30, 2023:

    Canada     West Africa     Total  
    $     $     $  
Share of net income related to joint venture   -     20,314     20,314  
Service fee earned as operators of joint venture   2,836     -     2,836  
General and administrative expenses   (6,913 )   (85 )   (6,998 )
Exploration and evaluation expenditures   -     (1,885 )   (1,885 )
(Loss) income from operations and joint venture   (4,077 )   18,344     14,267  
Finance income   1,381     4,768     6,149  
Finance expense   (12 )   -     (12 )
Foreign exchange gain (loss)   52     (2 )   50  
Net (loss) income and comprehensive (loss) income for the period   (2,656 )   23,110     20,454  

For the six months ended June 30, 2022:

    Canada     West Africa     Total  
    $     $     $  
Service fee earned as operators of joint venture   2,614     -     2,614  
General and administrative expenses   (4,722 )   (34 )   (4,756 )
Exploration and evaluation expenditures   -     (192 )   (192 )
Loss from operations and joint venture   (2,108 )   (226 )   (2,334 )
                   
Finance income   166     13,214     13,380  
Finance expense   (16 )   -     (16 )
Foreign exchange gain (loss)   1     (2 )   (1 )
Net (loss) income and comprehensive (loss) income for the period   (1,957 )   12,986     11,029  




GALIANO GOLD INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS

For the three and six months ended June 30, 2023 and 2022

(Expressed in United States dollars)

TABLE OF CONTENTS

1. Second quarter 2023 highlights 3
   
2. Business overview 4-7
   
3. Guidance and outlook 7
   
4. Results of the AGM 8-15
   
5. Results of the Company 15-17
   
6. Selected quarterly financial data 17-18
   
7. Liquidity and capital resources 18-20
   
8. Non-IFRS measures 20-25
   
9. Summary of outstanding share data 25
   
10. Related party transactions 25
   
11. Critical accounting policies and estimates 25-26
   
12. Risks and uncertainties 26
   
13. Internal control 27
   
14. Qualified Person 27
   
15. Cautionary statements 27-31



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

This Management's Discussion and Analysis ("MD&A") of Galiano Gold Inc. ("Galiano" or the "Company") has been prepared by management as of August 2, 2023 and should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and the notes thereto for the three and six months ended June 30, 2023 and 2022, the audited consolidated annual financial statements and the notes thereto for the year ended December 31, 2022 and the related MD&A. The unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting of the International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board.

Galiano was incorporated on September 23, 1999, under the Business Corporations Act of British Columbia, Canada.

Additional information on the Company, including its most recent Annual Information Form ("AIF"), is available under the Company's profile at www.sedar.com and the Company's website: www.galianogold.com.

All dollar amounts herein are expressed in United States dollars ("US dollars") unless otherwise stated. References to $ means US dollars and C$ are to Canadian dollars.

This MD&A contains forward-looking statements and should be read in conjunction with the risk factors described in sections "12. Risks and uncertainties" and "15. Cautionary statements" at the end of this MD&A.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

1. Second quarter 2023 highlights

The Asanko Gold Mine ("AGM") is a 50:50 joint venture ("JV") with Gold Fields Limited ("Gold Fields"), which is managed and operated by Galiano. Galiano owns a 45% equity interest in the entity that holds the AGM mining licenses.

1.1 Key Metrics of the AGM JV (on a 100% basis)

  • Safety: No lost‐time injuries ("LTI") and one total recordable injury ("TRI") recorded during the quarter, resulting in 12‐month rolling LTI and TRI frequency rates of 0.37 and 1.12 per million employee hours worked, respectively.

  • Production performance and upward revised guidance: Gold production of 33,673 ounces during the second quarter. Year-to-date gold production of 66,351 ounces. Full year gold production guidance has been revised upward from between 100,000 to 120,000 ounces to between 120,000 to 130,000 ounces. Refer to section “3. Guidance and outlook” for further details on guidance.

  • Milling performance: Achieved milling throughput of 1.5 million tonnes (“Mt”) of ore at a grade of 0.8 g/t during the quarter. Metallurgical recovery in Q2 2023 was 85%.

  • Cost performance and cash flow: Total cash costs1 of $1,127 per gold ounce ("/oz") and all-in sustaining costs1 ("AISC") of $1,374/oz for the three months ended June 30, 2023. Additionally, the JV generated positive cash flow from operations of $18.0 million and Free Cash Flow1 of $10.1 million during the quarter.

  • Financial performance: Gold revenue of $64.0 million generated from 32,912 gold ounces sold at an average realized price of $1,944/oz for the quarter. Net income of $24.4 million and Adjusted EBITDA1 of $25.5 million during the quarter.

  • Mining contract awarded: A competitive tender process was conducted during Q2 2023 and a preferred contractor was selected by the JV partners to resume mining operations at the AGM, with Abore scheduled to start in Q4 2023.

  • Exploration focus: Drilled 5,204 metres ("m") at Kaniago West with an objective to evaluate the strike and depth extent of the deposit in order to assess potential economic viability, and completed the extension drilling program at Nkran South. 

  • Robust liquidity: $112.9 million in cash and cash equivalents, $12.0 million in gold sales receivables, $2.3 million in gold on hand and no debt as of June 30, 2023.

1.2 Highlights of the Company

  • Stable balance sheet: Cash and cash equivalents of $55.5 million as at June 30, 2023, while remaining debt-free.

  • Positive earnings: Net income of $12.0 million or $0.05 per common share during the quarter, which includes the Company's share of the JV's net earnings for the quarter.

  • Board changes: Gordon Fretwell did not stand for re‐election at the Company’s Annual General Meeting and as such resigned as a director of the Company effective June 1, 2023.  The Company would like to express its gratitude to Mr. Fretwell for his years of leadership and service to the Company.

____________________________________

1 See "8. Non-IFRS measures"



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

2. Business overview

Galiano owns a 45% equity interest in the entity that holds the AGM mining licenses and gold exploration tenements and a 50% equity interest in an exploration entity (collectively the "joint venture" or "JV") on the Asankrangwa Gold Belt in the Republic of Ghana ("Ghana"), West Africa. Galiano is the operator of the JV and currently receives a gross annual service fee from the JV of $7.1 million. Gold Fields also owns a 45% equity interest in the AGM, with the Government of Ghana owning a 10% free-carried interest.

The AGM consists of four main open-pit mining areas: Abore, Miradani North, Nkran and Esaase, multiple satellite deposits and a carbon-in-leach ("CIL") processing plant, with a current capacity of 5.8 Mt per annum.

In addition to its interest in the AGM, the Company holds the 100% owned Asumura property in Ghana.

Galiano is focused on creating a sustainable business capable of value creation for all stakeholders through production, exploration, accretive business acquisitions and disciplined deployment of its financial resources. The Company's shares are listed on the Toronto Stock Exchange and the NYSE American Exchange under the symbol "GAU".

2.1  Updated NI 43-101 Technical Report

The Company published the details of a new life‐of‐mine ("LOM") plan for the AGM on March 28, 2023 in a National Instrument 43-101 ("NI 43-101") technical report titled "NI 43‐101 Technical Report and Feasibility Study for Asanko Gold Mine, Ghana" with an effective date of December 31, 2022 (the "2023 Technical Report"), which included the reinstatement of Mineral Reserves and demonstrated an improved long-term outlook for the mine. The 2023 Technical Report was prepared independently by SRK Consulting (Canada) Inc. Highlights of the 2023 Technical Report, on a 100% basis, include:

  • Proven Mineral Reserves of 7.2 Mt at 0.67 g/t for 0.2 million ounces ("Moz") gold contained and Probable Mineral Reserves of 41.7 Mt at 1.43 g/t for 1.9 Moz gold contained. Mineral Reserves were reported assuming a gold price of $1,500/oz.

  • Measured Mineral Resources of 7.4 Mt at 0.67 g/t for 0.2 Moz gold contained and Indicated Mineral Resources of 75.0 Mt at 1.39 g/t for 3.3 Moz gold contained, inclusive of Mineral Reserves. Mineral Resources were reported assuming a gold price of $1,800/oz.

  • Inferred Mineral Resources of 25.1 Mt at 1.34 g/t for 1.1 Moz gold contained.

  • 21% increase in total Measured and Indicated ounces and a 251% increase in total Inferred ounces compared to the previous technical report dated February 28, 2022.

  • Diversified feed source with 4 main open-pit mining areas: Abore, Miradani North, Esaase and Nkran, and 2 satellite deposits: Dynamite Hill and Adubiaso.
  • Robust mine economics with a $343 million after-tax net present value discounted at 5% ("NPV5%") and a $478 million pre-tax NPV5%, applying a $1,700/oz gold price.

  • Low cash costs: $905/oz average total cash costs1 and $1,143/oz average AISC1 over the LOM.

  • Increased production profile: annual average gold production of 254,000 ounces from 2025 to 2030, inclusive, and LOM average annual production of 217,000 ounces per year.

  • Mining to recommence in 2023: mining contractors expected to be in operation at Abore during the fourth quarter.

For further information regarding the Mineral Reserve and Mineral Resource estimates and to review scientific and technical information contained in the 2023 Technical Report, readers are encouraged to read the entire 2023 Technical Report found under the Company's SEDAR profile at www.sedar.com.

2.2  Key business developments in 2023

a) Mining Restart at the AGM

Several workstreams are ongoing to support a mining restart at the AGM during the fourth quarter of 2023, as described in the 2023 Technical Report. During Q2 2023, a competitive tendering process was completed for the mining contracts of the Abore, Miradani North and Esaase deposits, and a preferred contractor was selected by the JV partners. Abore is the first deposit to be mined and is scheduled to start in the fourth quarter of 2023, with higher-grade mill feed expected in the second quarter of 2024. In order to realize productivity and scheduling benefits, while offsetting the impact of current inflationary pressures, the mining fleet at Abore and Miradani North has been optimized to utilize 100-ton haul trucks. Work continues at the JV level to identify and execute on additional optimization opportunities and further reducing expected operating costs.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

At Abore, crop compensation is almost complete and a public road diversion is in progress. Following the award of the mining contract, clearing and grubbing has commenced. The mining contractor is currently mobilizing equipment to the AGM, which is expected to complete in time for a Q4 2023 mining restart.

As Esaase was previously mined from 2018 to 2022, all infrastructure and permits are already in place.

b) Changes to Board and Management

Gordon Fretwell did not stand for re‐election at the Company's Annual General Meeting and as such resigned as a director of the Company effective June 1, 2023.

On April 1, 2023, Krista Muhr joined the Company as Senior Vice President, Investor Relations. Mrs. Muhr brings nearly 20 years of experience working with public companies in the global metals and mining sector with strong ESG and capital market credentials at senior levels. Advisor to both corporate and trade association boards during her 10 years in executive roles, Mrs. Muhr most recently served as Senior Vice President, External Affairs and Sustainability for Eldorado Gold Corporation and currently serves as a director for Moneta Gold Inc. and Ensign Minerals Inc.

2.3  Financial and operating highlights

    Three months ended June 30,     Six months ended June 30,  
(All amounts in 000's of US dollars, unless otherwise stated)   2023
    2022     2023
    2022  
Galiano Gold Inc.                        
Net income   11,961     12,566     20,454     11,029  
Adjusted EBITDA1   9,634     (1,181 )   16,374     (2,603 )
Cash and cash equivalents   55,503     53,005     55,503     53,005  
                         
Asanko Gold Mine (100% basis)                        
Financial results                        
Revenue   64,066     84,885     129,259     162,417  
Income from mine operations   24,406     16,244     49,063     26,796  
 Net income   24,378     15,803     44,992     2,165  
Adjusted net income1   24,378     13,723     44,992     21,085  
Adjusted EBITDA1   25,541     21,064     48,404     34,169  
                         
Cash and cash equivalents   112,914     70,283     112,914     70,283  
Cash generated from operating activities   17,979     34,344     36,922     38,269  
Free cash flow1   10,113     25,338     22,072     21,975  
AISC margin1   18,760     18,541     39,286     30,593  
Key mine performance data                        
Gold produced (ounces)   33,673     50,010     66,351     92,353  
Gold sold (ounces)   32,912     46,236     68,086     88,165  
                         
Average realized gold price ($/oz)   1,944     1,832     1,896     1,839  
                         
Total cash costs ($ per gold ounce sold)1   1,127     1,218     1,104     1,286  
AISC ($ per gold ounce sold)1   1,374     1,431     1,319     1,492  



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

2.4  Environmental, Social and Corporate Governance ("ESG")

Sustainability is at the core of the Company's business strategy. The Company believes that a comprehensive sustainability strategy is integral to meeting its strategic objectives as it will assist the JV to positively support relationships with its local and external stakeholders, improve its risk management, reduce the AGM's cost of production and both directly and indirectly benefit the catchment communities that the JV and the Company operate in, beyond the life of the mine.

The Company implements its sustainability program with a focus on four key areas: (1) protecting human rights; (2) ensuring the occupational health and safety of our employees and local communities; (3) advancing the socio-economic welfare and health of local catchment communities; and (4) managing environmental impacts of our operations and exploration activities. For further details on the Company's sustainability program, refer to the Company's 2022 Sustainability Report (the "2022 Sustainability Report") published on July 27, 2023 and which is available on the Company's website at www.galianogold.com. The disclosures and metrics of the 2022 Sustainability Report align with international reporting standards including the Global Reporting Initiative and the Metals and Mining Standards of the Sustainability Accounting Standards Board.

In June 2023, the International Sustainability Standards Board ("ISSB") released its inaugural IFRS Sustainability Disclosure Standards, specifically IFRS S1 "General Requirements for Disclosure of Sustainability-related Financial Information" and IFRS S2 "Climate-related Disclosures", the purpose of which is to standardize a single, global baseline of sustainability disclosures for capital markets. IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used in conjunction with IFRS S1. Both standards fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures ("TCFD").  IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after January 1, 2024, with early adoption permitted.

Although the ISSB has issued IFRS S1 and IFRS S2, the standards are not currently mandated in Canada. The Canadian Securities Administrators, who are responsible for Canadian reporting issuer disclosure requirements, has formed the Canadian Sustainability Standards Board ("CSSB") to review the final ISSB standards and consider their suitability for adoption in Canada.  Consultation efforts by the CSSB are currently underway and decisions about adoption, including how effective dates are determined in Canada, will be part of the CSSB's initial discussions.

In March 2022, the United States Securities and Exchange Commission ("SEC") announced plans to enhance and standardize climate-related disclosures for reporting issuers. The proposed disclosure rules would require reporting issuers to disclose both climate-related risks that are reasonably likely to have a material impact on their business, results of operations or financial condition, in addition to Scope 1, Scope 2, and certain Scope 3 emissions.  The SEC has yet to finalize its ESG disclosure rules for reporting issuers; however, it is expected that the rules and an implementation plan will be announced in 2023. It is not yet clear how the SEC's ESG disclosure rules will interact with Canadian standards.

During 2023, the Company advanced its Climate-Related Financial Disclosure assessment in alignment with the TCFD recommendations and remains on track for completion this year.  The Company is currently evaluating how the ISSB's sustainability disclosure standards will impact its disclosure obligations. For further information on the Company's approach and policies on ESG, refer to the Company's MD&A for the year ended December 31, 2022 which is available on www.sedar.com and the Company's website.

2.5  Macroeconomic factors

During the three months ended June 30, 2023, the average London PM gold price was $1,975/oz while gold prices traded in a range from $1,901/oz to $2,085/oz. With inflation readings in the US declining, market expectations for further central bank rate increases have reduced significantly. The US Federal Reserve increased its policy rate by 0.25% to 5.50% at its most recent meeting on July 26, 2023. In response, the yield on US 10-year Treasuries moved higher from a low of 3.25% in Q2 2023 to 4.04% on July 28, 2023.  Due to lowering inflation expectations in the US as the most recent Consumer Price Index readings as of June 2023 reported a 3.0% increase in inflation over the last 12-months, the smallest increase since March 2021, market participants (CME Group) forecast the July rate hike as the last for 2023. With future rate hike expectations declining, this has put further downward pressure on the US dollar, which is generally viewed as a positive for gold prices.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

In May 2023, the International Monetary Fund approved a $3 billion financing arrangement over a 3-year period with Ghana (the "IMF Loan"). The IMF Loan is expected to be used to bolster Ghana's foreign currency reserves, stabilize the Ghanaian Cedi and slow the rate of inflation.

Rising gold prices benefitted the JV's operating performance during the quarter, and consequently the Company's share of the JV's net income. Management continues to implement and evaluate opportunities to hedge the JV's gold price risk, particularly in light of an expected capital-intensive period in the second half of 2023 in anticipation of a restart of mining operations at the AGM by Q4 2023.

3. Guidance and outlook

3.1  2023 Guidance for the AGM JV (100% basis)

The Company provided preliminary guidance for 2023 based on the new LOM plan for the AGM, which outlined production of between 100,000 to 120,000 ounces at AISC1 between $1,900/oz and $1,975/oz. Following the outperformance of recoveries achieved on processed stockpiles, production guidance is being revised upwards to between 120,000 to 130,000 ounces of gold production in 2023 (originally 100,000 to 120,000 ounces). Given the strong financial performance of the AGM, AISC1 was revised in Q1 2023 to be between $1,650/oz to $1,750/oz and this has been maintained as of Q2 2023. AISC1 is still anticipated to be elevated in 2023 compared to the LOM average primarily due to waste stripping necessary to restart mining at Abore, which will benefit future years production, as well as higher expenditures on the tailings storage facility ("TSF").

With the JV partners having awarded a mining contract for the AGM in Q2 2023, the Company has refined its sustaining and development capital spend for 2023, although total capital expenditure remains largely unchanged. It is currently expected that $43 million of sustaining capital expenditures (previously $38 million), excluding capitalized waste stripping at Abore estimated to be $15 million, will be spent on the TSF Stage 7 expansion, plant infrastructure and water management in 2023 (spend as of June 30, 2023: $11.6 million).  The increase in sustaining capital expenditure is primarily due to accelerating the construction of water management facilities.

Development capital of $17 million (previously $24 million) is expected to be spent on Abore and Miradani North site establishments (spend as of June 30, 2023: $1.6 million).  The decrease in development capital is primarily due to timing of site establishment activities at Miradani North.

For 2023, the exploration budget at the AGM is estimated at $15 million (spend as of June 30, 2023: $6.3 million), which includes approximately 40,000 metres of drilling, as well as ground geophysics, trenching, soil sampling and regional mapping. The 2023 exploration program is focused on targeting discoveries on underexplored greenfield areas of the AGM tenements, as well as increasing the Mineral Reserve and Mineral Resources at known deposits.

___________________________
1  See "8. Non-IFRS measures"



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

4. Results of the AGM

All results of the AGM in this section are on a 100% basis, unless otherwise noted. The Company's attributable equity interest in the AGM is 45%.

4.1  Operating performance

The following table and subsequent discussion provide a summary of the operating performance of the AGM (on a 100% basis) for the three and six months ended June 30, 2023 and 2022, unless otherwise noted.

    Three months  ended June 30,     Six months ended June 30,  
Key mine performance data of the AGM (100% basis)   2023     2022     2023     2022  
                         
Mining                        
Ore tonnes mined (000 t)   -     675     -     1,750  
Waste tonnes mined (000 t)   -     1,320     -     6,599  
Total tonnes mined (000 t)   -     1,995     -     8,349  
Strip ratio (waste:ore)   -     2.0     -     3.8  
Average gold grade mined (g/t)   -     1.6     -     1.5  
Mining cost ($/t mined)   -     8.30     -     5.51  
Ore transportation                        
Ore transportation from Esaase (000 t)   729     901     2,096     2,205  
Ore transportation cost ($/t trucked)   5.88     6.19     5.64     5.97  
Processing                        
Tonnes milled (000 t)   1,457     1,406     3,023     2,888  
Average mill head grade (g/t)   0.8     1.3     0.9     1.3  
Average recovery rate (%)   85%     84%     79%     77%  
Processing cost ($/t milled)   11.01     10.40     10.37     9.92  
G&A costs ($/t milled)2   4.68     5.40     4.38     5.80  
Gold produced (ounces)   33,673     50,010     66,351     92,353  
Gold sold (ounces)   32,912     46,236     68,086     88,165  
All-in sustaining costs1                        
AISC ($ per gold ounce sold)1   1,374     1,431     1,319     1,492  
AISC margin ($ per gold ounce sold)1   570     401     577     347  

2 Excludes Galiano's service fee for the three and six months ended June 30, 2023 and 2022, and for the six months ended June 30, 2022 severance costs associated with the AGM's workforce restructuring.

a) Health and safety

There were no LTIs and 1 TRI reported during the quarter, and the rolling 12‐month LTI and TRI frequency rates were 0.37 and 1.12, respectively. The Company reports recordable LTI and TRI cases in accordance with the International Council on Mining and Metals Mining Principles.

b) Mining

As previously communicated, the AGM processed ore from existing stockpiles during the quarter and as such there was no mining activity. The AGM did incur $3.3 million of ore rehandle and mining overhead costs during the quarter.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

c) Ore transportation

During the quarter, 0.7 Mt of stockpiled ore was trucked from the Esaase pit to the processing plant, compared to 0.9 Mt in Q2 2022.

d) Processing

The AGM produced 33,673 ounces of gold during Q2 2023, as the processing plant achieved milling throughput of 1.5 Mt of ore at a grade of 0.8 g/t with metallurgical recovery averaging 85%. Compared to Q1 2023, recoveries improved from 73% to 85% due to the composition of the feed blend processed having a higher percentage of oxide ore during Q2 2023.

A portion of the low grade stockpiled ore processed during the quarter had no accounting book value, and as such had no mining cost attributed to it. Stockpiled ore fed to the processing plant during the quarter yielded ounces that were in line with expectations. The nature of stockpiled ore, however, can result in highly variably grades and metallurgical recoveries; therefore, the current quarter performance may not be indicative of future performance.

Processing cost per tonne for Q2 2023 was $11.01 compared to $10.40 in Q2 2022. Processing costs were higher in Q2 2023 due to higher consumption of key reagents and consumables resulting from the nature of the ore treated as well as inflationary cost pressures ($1.9 million increase from Q2 2022). This was partly offset by lower labour costs in Q2 2023 primarily due to restructuring the AGM's workforce during Q2 2022 ($0.5 million decrease).

e) Total cash costs and AISC

For the three and six months ended June 30, 2023, total cash costs1 were $1,127/oz and $1,104/oz, respectively, compared to the three and six months ended June 30, 2022 of $1,218/oz and $1,286/oz, respectively. Although gold sales volumes decreased by 29% in Q2 2023, total cash costs per ounce1 were lower in Q2 2023 compared to Q2 2022 as a result of lower mining contractor costs and processing ore that had no carrying value for accounting purposes. In addition, labour costs were lower in Q2 2023 ($1.9 million decrease) as a result of the AGM's workforce restructuring completed during Q2 2022. These factors were partly offset by higher consumption of key reagents and consumables resulting from the nature of the ore treated during Q2 2023, as well as inflationary cost pressures as described above. 



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

Relative to Q1 2023, total cash costs1 were higher in Q2 2023, increasing by 4% from $1,083/oz to $1,127/oz. Total cash costs per ounce1 were higher in Q2 2023 primarily due to 6% fewer ounces gold ounces sold.

For the three and six months ended June 30, 2023, AlSC1 for the AGM amounted to $1,374/oz and $1,319/oz, respectively, compared to $1,431/oz and $1,492/oz in the comparative periods of 2022. The decrease in AlSC1 from Q2 2022 to Q2 2023 was predominantly due to the decrease in total cash costs per ounce1 described above and lower sustaining lease payments ($118/oz decrease) resulting from the temporary cessation of mining since the end of Q2 2022. This was partly offset by an increase in sustaining capital expenditures ($138/oz increase) relating to a TSF lift.

Relative to Q1 2023, AlSC1 increased by 8% from $1,268/oz to $1,374/oz. The increase in AISC1 was primarily due to the increase in total cash costs per ounce1 mentioned above, in addition to higher sustaining capital expenditures associated with the TSF lift.

For the three and six months ended June 30, 2023, the AGM incurred non-sustaining capital and exploration expenditures (net of changes in payables) of $3.5 million and $7.9 million, respectively, compared to $4.0 million and $7.4 million during the comparative periods in 2022. Non-sustaining capital expenditures during Q2 2023 amounted to $0.8 million and related primarily to Abore site preparations, while $2.7 million of non-sustaining exploration expenditures incurred related to extension drilling at Kaniago West and work performed on various greenfield exploration targets.

4.2  Exploration update

The JV holds a district-scale land package of 476km2 on the prospective and underexplored Asankrangwa Gold Belt. The following exploration programs were undertaken during the period to evaluate the current and potential expanded mineralization of several of the AGM’s deposits to improve the mineral resource estimate and to assess the broader potential of these deposits. Additionally, work was undertaken to identify new growth targets across the wider regional AGM tenements.

  • Nkran South - Drilling at Nkran South Extension has an objective of increasing mineral reserves by converting inferred mineral resources to indicated mineral resources between the current Nkran Cut 3 reserve shell and the $1,800/oz resource shell, as well as to test for new mineralization along the southern margin of the deposit. This initial phase consisted of a planned 15 holes totaling approximately 6,000m and was drilled along vertical fences spaced approximately 35m apart immediately along strike to the south of the current Nkran reserve shell. As of June 30, 2023, 13 holes have been completed for 7,235m.

Figure: Targeted exploration pierce points for Nkran South extension drilling.

  • Kaniago West - Drilling at Kaniago West is aimed at evaluating the strike and depth extent of the deposit in order to assess potential economic viability. As of June 30, 2023, 17 holes have been completed for 5,204m.

  • Abore Sterilization - Sterilization drilling in areas of planned future mining infrastructure at Abore was completed during the quarter and confirmed mineralization was not present.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

In addition to the drill programs above, the JV also initiated geophysical surveys and soil sampling programs on several regional greenfield targets across the AGM's tenements with an objective of identifying new potential drill targets. A preliminary drilling program for Akwasiso has also been designed to evaluate the underground potential of the deposit, which is expected to commence in Q3 2023.

4.3  Financial results

The following table presents excerpts of the financial results of the JV for the three and six months ended June 30, 2023 and 2022. These results are presented on a 100% basis.

Three and six months ended June 30, 2023 and 2022 

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars)   $     $     $     $  
Revenue   64,066     84,885     129,259     162,417  
Cost of sales:                        
Production costs   (33,319 )   (52,261 )   (68,261 )   (105,486 )
Depreciation and depletion   (2,626 )   (12,136 )   (4,955 )   (22,014 )
Royalties   (3,715 )   (4,244 )   (6,980 )   (8,121 )
Income from mine operations   24,406     16,244     49,063     26,796  
                         
Exploration and evaluation expenditures   (1,339 )   (3,562 )   (3,109 )   (6,420 )
General and administrative expenses   (719 )   1,474     (1,445 )   (20,407 )
Income (loss) from operations   22,348     14,156     44,509     (31 )
Finance expense   289     (850 )   (945 )   (1,577 )
Finance income   1,058     46     1,997     76  
Foreign exchange gain (loss)   683     2,451     (569 )   3,697  
Net income for the period   24,378     15,803     44,992     2,165  
Adjusted net income for the period1   24,378     13,723     44,992     21,085  
                         
Average realized price per gold ounce sold ($/oz)   1,944     1,832     1,896     1,839  
Average London PM fi x ($/oz)   1,975     1,871     1,931     1,874  
Gold sold (ounces)   32,912     46,236     68,086     88,165  

1 Non-IFRS measure. Adjus ted net income as presented in the table was derived by adjus ting the net income of the JV for the six months ended June 30, 2022 by the $18.9 million severance provis ion as sociated with res tructuring the AGM's workforce. For the three months ended June 30, 2022, net income was adjusted by a credit to G&A expens e of $2.1 million rela ted to a reversal of previously recorded severance provis ions.

a) Revenue

During Q2 2023, the AGM sold 32,912 ounces of gold at an average realized gold price of $1,944/oz for total revenue of $64.1 million (including $0.1 million of by-product silver revenue). During Q2 2022, the AGM sold 46,236 ounces of gold at an average realized gold price of $1,832/oz for total revenue of $84.9 million (including $0.2 million of by-product silver revenue). The decrease in revenue quarter-on-quarter was primarily a function of a 29% reduction in sales volumes relative to Q2 2022, partly offset by a 6% increase in realized gold prices.

During the six months ended June 30, 2023, the AGM sold 68,086 ounces of gold at an average realized gold price of $1,896/oz for total revenue of $129.3 million (including $0.2 million of by-product silver revenue). During the comparative period of 2022, the AGM sold 88,165 ounces of gold at an average realized gold price of $1,839/oz for total revenue of $162.4 million (including $0.3 million of by-product silver revenue). The decrease in revenue period-on-period was primarily a function of a 23% reduction in sales volumes, partly offset by a 3% increase in realized gold prices.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

The AGM continues to sell all the gold it produces to a special purpose vehicle of Red Kite Opportunities Master Fund Limited ("Red Kite") under an offtake agreement (the "Offtake Agreement). The terms of the Offtake Agreement require the AGM to sell 100% of its gold production up to a maximum of 2.2 million ounces to Red Kite.  As of June 30, 2023, 1,535,191 gold ounces have been delivered to Red Kite under the Offtake Agreement (December 31, 2022 - 1,467,105 gold ounces delivered).

During the three and six months ended June 30, 2023, the AGM sold a portion of its production to the Bank of Ghana under the country's gold buying program. As agreed with Red Kite, gold ounces sold to the Bank of Ghana were considered delivered under the Offtake Agreement, and in consideration the AGM paid to Red Kite a "make whole" payment which was calculated in a similar manner to a nine‐day quotational period. The "make whole" payments made to Red Kite were recognized as a reduction of revenues.

b) Production costs and royalties

During the three and six months ended June 30, 2023, the AGM incurred production costs of $33.3 million and $68.3 million, respectively, compared to $52.3 million and $105.5 million in the comparative periods of 2022, respectively.

Production costs were lower in Q2 2023 primarily due to 29% fewer gold ounces sold, lower mining contractor costs and processing ore that had no carrying value for accounting purposes. Additionally, labour costs were lower in Q2 2023 resulting from realized cost savings associated with restructuring the AGM's workforce completed during Q2 2022 ($1.9 million decrease).

Production costs were lower in 2023 primarily due to 23% fewer gold ounces sold, lower mining contractor costs and processing ore that had no carrying value for accounting purposes. Labour costs were also lower in 2023 resulting from restructuring the AGM's workforce as described above ($6.6 million decrease). These factors were partly offset by inflationary pressures on key reagents and other consumables.

The Ghanaian government charges a 5% royalty on revenues earned through sales of minerals from the AGM's concessions. The AGM's Akwasiso mining concession is also subject to a further 2% net smelter return royalty payable to the previous owner of the mineral tenement, and the Esaase concession is subject to a 0.5% net smelter return royalty payable to the Bonte Liquidation Committee, both of which are presented in production costs.

On April 3, 2023, the Government of Ghana imposed a special levy, the Growth and Sustainability Levy ("GSL"), on all companies operating in Ghana with an effective date of May 1, 2023. The purpose of the GSL is to support growth and fiscal sustainability of the Ghanaian economy. For mining companies in Ghana, the GSL is levied at a rate of 1% of gold revenues for the fiscal years 2023 to 2025. The JV has presented the 1% GSL as royalties expense in the Statement of Operations.

Royalties payable to the Government of Ghana are presented as a component of cost of sales and amounted to $3.7 million and $7.0 million for the three and six months ended June 30, 2023, respectively (three and six months ended June 30, 2022 - $4.2 million and $8.1 million, respectively). Royalties expense was lower in 2023 due to lower revenue, partly offset by the introduction of the GSL in April 2023.

c) Depreciation and depletion

Depreciation and depletion on mineral properties, plant and equipment ("MPP&E") recognized during Q2 2023 was $2.6 million compared to $12.1 million for Q2 2022. Depreciation and depletion expense was lower in Q2 2023 due to fewer gold ounces sold; lower depreciation on mining related assets resulting from the temporary cessation of mining at the end of Q2 2022; processing existing stockpiles that had no carrying value for accounting purposes; and lower depreciation on capitalized leases ($3.2 million decrease).  These factors were partly offset by a $63.2 million impairment reversal on MPP&E recorded at December 31, 2022.

Depreciation and depletion on MPP&E recognized during the six months ended June 30, 2023 was $5.0 million compared to $22.0 million in the comparative period of 2022. Depreciation and depletion expense was lower in 2023 due to fewer gold ounces sold; lower depreciation on mining related assets as described above; processing existing stockpiles that had no carrying value for accounting purposes; and lower depreciation on capitalized leases ($6.2 million decrease).  These factors were partly offset by the impairment reversal on MPP&E described above and recorded at December 31, 2022.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

d) Exploration and evaluation ("E&E") expenditures

During the three and six months ended June 30, 2023, the AGM incurred E&E expenses of $1.3 million and $3.1 million, respectively, (see 4.2 "Exploration update") compared to $3.6 million and $6.4 million of E&E expenses in the comparative periods of 2022, respectively. E&E expenses were higher in 2022 as drilling programs were undertaken on several mining concessions to support the AGM's updated Mineral Reserve and Mineral Resource estimates.

e) General and administrative ("G&A") expenses

During the three and six months ended June 30, 2023, the AGM incurred G&A expenses of $0.7 million and $1.4 million, respectively, compared to a credit of $1.5 million and an expense of $20.4 million in the comparative periods of 2022, respectively.

G&A expense was lower in Q2 2022 due to a credit of $2.1 million related to a reversal of previously recorded severance provisions, while G&A expense was higher for the six months ended June 30, 2022 due to the recognition of an $18.9 million severance provision related to the AGM's workforce restructuring.

f) Finance expense

Finance expense for the three and six months ended June 30, 2023 was a credit of $0.3 million and an expense of $0.9 million, respectively, compared to an expense of $0.9 million and $1.6 million during the comparative periods of 2022, respectively. The credit to finance expense in Q2 2023 resulted from a $1.0 million unrealized gain on the AGM's zero cost gold collar ("ZCCs") hedges. For the six months ended June 30, 2023, finance expense was lower primarily due to a $0.5 million unrealized gain on the ZCCs. All gold hedges for the period January to June 2023 expired unutilized. In 2022, the AGM did not have any gold hedging instruments.

g) Finance income

Finance income of $1.1 million and $2.0 million for the three and six months ended June 30, 2023, respectively, were higher than the comparative periods in 2022 due to higher interest rates earned on cash balances and short-term investments (maturities of 90 days or less).

h) Legal provision

A services provider of the AGM filed a dispute with an arbitration tribunal alleging the AGM breached the terms of a services agreement and claimed approximately $25 million in damages. The arbitrator ruled in favour of the AGM that there had not been a breach of any terms of the contract, yet made an award to the counterparty of approximately $13 million plus interest for services rendered. The AGM, consistent with the arbitration ruling, maintains the view that there was no breach of contract and all contractual amounts were paid as due. The AGM therefore is undertaking an appeals process in the Court of Appeal in Ghana. A provision of $2.0 million has been recorded as of June 30, 2023 as management's best estimate to settle the claim. While the Company cannot reasonably predict the ultimate outcome of these actions, and inherent uncertainties exist in predicting such outcomes, the Company believes the estimated provision is reasonable based on the information currently available.

4.4   Cash flows

The following table provides a summary of cash flows for the AGM on a 100% basis for the three and six months ended June 30, 2023 and 2022:

    Three months ended June     Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars)   $     $     $     $  
Cash provided by (used in):                        
Operating activities   17,979     34,344     36,922     38,269  
Investing activities   (7,750 )   (3,407 )   (14,359 )   (5,863 )
Financing activities   (168 )   (5,706 )   (596 )   (10,643 )
Impact of foreign exchange on cash and cash equivalents   103     (246 )   (324 )   (691 )
Increase in cash and cash equivalents during the period   10,164     24,985     21,643     21,072  
Cash and cash equivalents, beginning of period   102,750     45,298     91,271     49,211  
Cash and cash equivalents, end of period   112,914     70,283     112,914     70,283  



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

a) Cash flows from operating activities

During the three and six months ended June 30, 2023, the AGM generated cash flows from operations of $18.0 million and $36.9 million due to strong AISC margins1 of $570/oz and $577/oz, respectively (three and six months ended June 30, 2022 - $401/oz and $347/oz, respectively).

The decrease in operating cash flows in Q2 2023 was largely driven by fewer gold ounces sold and working capital tie-up, partly offset by higher AISC margins1.

b) Cash used in investing activities

During Q2 2023, the AGM invested $8.8 million in additions to MPP&E, compared to $3.4 million in Q2 2022, and earned $1.1 million of interest on cash balances. Total cash expenditure on MPP&E during the quarter included $6.7 million of sustaining capital related primarily to raising the height of the TSF, and $2.1 million of development and exploration capital expenditure primarily related to Abore site preparations and drilling programs at Nkran South, Abore and Akwasiso.

The increase in cash flows invested in MPP&E in Q2 2023 resulted from higher sustaining capital expenditures ($3.7 million increase) related to raising the height of the TSF, and higher development capital ($1.7 million increase) related mainly to Abore site preparation as mentioned above.

During the six months ended June 30, 2023, the AGM invested $16.4 million in additions to MPP&E, compared to $5.9 million in the comparative period of 2022, and earned $2.0 million of interest on cash balances. Total cash expenditure on MPP&E during 2023 included $11.6 million of sustaining capital related primarily to raising the height of the TSF and $4.8 million of development and exploration capital expenditure mainly on Nkran South extension drilling and site preparations at Abore.

The increase in cash flows invested in MPP&E in 2023 resulted from higher sustaining capital expenditures ($6.6 million increase) related to raising the height of the TSF, and higher development and exploration capital ($3.9 million increase) related to a drilling program at Nkran South and Abore site preparations.

c) Cash used in financing activities

For the three and six months ended June 30, 2023, cash used in financing activities related to lease payments on the JV's ore haulage contracts and fees associated with the JV's revolving credit facility ("RCF").  The decrease in cash used in financing activities during the three and six months ended June 30, 2023, relative to the comparative periods of 2022, was due to the temporary cessation of mining activities at the end of Q2 2022 resulting in lower lease payments.

d) Liquidity position

In October 2019, the JV entered into a $30.0 million RCF with Rand Merchant Bank. During the year ended December 31, 2022, the maturity date of the RCF was extended to September 30, 2023 (with utilization subject to credit review) and the AGM will pay a facility maintenance fee of 0.70% per annum. As at June 30, 2023, the balance drawn under the RCF was nil (December 31, 2022 - nil).

As at June 30, 2023, the JV held cash and cash equivalents of $112.9 million, $12.0 million in receivables from gold sales and $2.3 million in gold on hand. This compares to December 31, 2022 when the JV held $91.3 million in cash and cash equivalents, $2.7 million in receivables from gold sales and $3.6 million in gold on hand.

The Company does not control the funds of the JV. The liquidity of the Company is further discussed in section "7. Liquidity and capital resources".

e) Gold price hedges

During the six months ended June 30, 2023, the AGM entered into ZCCs to mitigate gold price risk and protect AISC1 margins during a period of elevated capital investment. As of June 30, 2023, the ZCCs cover approximately 50% of the AGM's forecast gold production for the second half of 2023 with put strikes of $1,900/oz and call strikes between $2,172/oz to $2,222/oz. All gold hedges to date in 2023 expired unutilized.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

5. Results of the Company

5.1 Financial performance

The following table is a summary of the Unaudited Condensed Consolidated Interim Statements of Operations and Comprehensive Income of the Company for the three and six months ended June 30, 2023 and 2022.

    Three months ended June     Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars, except per share amounts)   $     $     $     $  
Share of net income related to joint venture   11,007     -     20,314     -  
Service fee earned as operators of joint venture   1,418     1,307     2,836     2,614  
General and administrative expenses   (3,148 )   (2,004 )   (6,998 )   (4,756 )
Exploration and evaluation expenditures   (472 )   (55 )   (1,885 )   (192 )
Income (loss) from operations and joint venture   8,805     (752 )   14,267     (2,334 )
Finance income   3,133     13,337     6,149     13,380  
Finance expense   (6 )   (7 )   (12 )   (16 )
Foreign exchange gain (loss)   29     (12 )   50     (1 )
Net income and comprehensive income for the period   11,961     12,566     20,454     11,029  
                         
Weighted average number of shares outstanding:                        
Basic   224,943,453     224,943,453     224,943,453     224,943,453  
Diluted   225,292,468     224,943,453     224,968,681     224,943,453  
                         
Net income per share:                        
Basic   0.05     0.06     0.09     0.05  
Diluted   0.05     0.06     0.09     0.05  

a) Share of net income related to the AGM JV

For the three and six months ended June 30, 2023, the Company recognized its 45% interest in the JV's net earnings which amounted to $11.0 million and $20.3 million. For the three and six months ended June 30, 2022, the Company did not recognize its share of the JV's net income as the recoverable amount of the Company's investment in the JV was estimated to be nil at March 31, 2022 and June 30, 2022.

b) Service fee earned as operators of the AGM JV

Under the terms of the Joint Venture Agreement ("JVA"), the Company is the operator of the AGM and, in consideration for managing the operations of the mine, currently receives a gross annual service fee from the JV of $7.1 million (originally $6.0 million per annum, but adjusted annually for inflation). For the three and six months ended June 30, 2023, the Company earned a gross service fee of $1.7 million (less withholding taxes payable in Ghana of $0.3 million) and $3.5 million (less withholding taxes payable in Ghana of $0.7 million), respectively.

During the three and six months ended June 30, 2022, the Company earned a gross service fee of $1.7 million (less withholding taxes of $0.4 million) and $3.3 million (less withholding taxes of $0.7 million).  The increase in the gross service fee during 2023 was due to an annual inflationary adjustment made in Q3 2022.

c) G&A expenses

G&A expenses for the three and six months ended June 30, 2023 and 2022 comprised the following:



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

    Three months ended June 30,       Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars)   $     $     $     $  
Wages, benefits and consulting   (1,453 )   (1,355 )   (2,944 )   (3,719 )
Office, rent and administration   (316 )   (304 )   (630 )   (603 )
Professional and l egal   (156 )   (231 )   (309 )   (380 )
Share-based compensation   (893 )   188     (2,490 )   370  
Travel, marketing, investor relations and regulatory   (294 )   (265 )   (553 )   (350 )
Depreciation   (36 )   (37 )   (72 )   (74 )
Total G&A expense   (3,148 )   (2,004 )   (6,998 )   (4,756 )

G&A expenses in Q2 2023 were $1.1 million higher than Q2 2022 primarily due to a $1.1 million increase in share-based compensation expense resulting from an increase in the fair value of cash-settled long‐term incentive plan awards linked to the Company's share price and the vesting of the related awards over the quarter. Additionally, Q2 2022 share-based compensation expense was reduced by awards forfeited resulting from employee resignations.

G&A expenses in 2023 were $2.2 million higher than 2022 mainly due to a $2.9 million increase in share-based compensation expense for the reasons described above. Additionally, travel and marketing costs increased by $0.2 million as the Company focused on external stakeholder engagement. These factors were partly offset by a $0.8 million decrease in consulting expenses as the prior period contained costs related to corporate development initiatives.

d) E&E expenditures

E&E expenses for the three and six months ended June 30, 2023 were $0.4 million and $1.7 million higher than the comparative periods in 2022, respectively, due to a Phase 1 drilling campaign undertaken on the Company's wholly owned Asumura property in Ghana. During the comparative period, E&E expenses primarily related to holding costs on the Company's wholly owned Mali properties.

e) Finance income

Finance income includes changes in the fair value of the Company's preferred share investment in the JV and interest earned on cash balances and short-term investments with maturities less than 90 days. For the three and six months ended June 30, 2023, the Company recognized a $2.4 million and $4.8 million upward fair value adjustment, respectively, on its preferred shares in the JV (three and six months ended June 30, 2022 - $13.2 million upward fair value adjustment). The upward fair value adjustment on preferred shares in 2023 related to the passage of time.

Relative to the comparative periods in 2022, interest earned on cash balances and short-term investments was $0.6 million and $1.2 million higher during the three and six months ended June 30, 2023, respectively, due to rising interest rates.

5.2 Exploration update

The Company completed a Phase 1 drilling program on its wholly owned Asumura property on the Sefwi gold belt in Ghana, designed to test for gold mineralization along two interpreted structural trends with coincident surface gold anomalies identified through soil sampling. Drilling consisted of reverse circulation ("RC") pre-collars through regolith and saprolite followed by diamond drill ("DD") tails to an average depth of approximately 150m. The diamond core is oriented and will be critical for gaining an understanding of the local lithologies, structure and alteration in this area. As of June 30, 2023, a total of 15,388m has been drilled.

The Company is currently evaluating an extension of the Phase 1 program with additional targets identified for drilling.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

6. Selected quarterly financial data

The following table provides a summary of unaudited financial data for the last eight quarters. Except for basic and diluted income (loss) per share, the totals in the following table are presented in thousands of US dollars.

    2023     2022     2021  
    Q2     Q1     Q4     Q3     Q2     Q1     Q4     Q3  
    $     $     $     $     $     $     $     $  
Share of net income (loss) related to joint venture   11,007     9,307     46,517     -     -     -     (74,063 )   3,448  
Service fee earned as operators of joint venture   1,418     1,418     1,418     1,381     1,307     1,307     1,307     1,284  
General and administrative expenses   (3,148 )   (3,850 )   (2,854 )   (3,490 )   (2,004 )   (2,752 )   (3,109 )   (2,665 )
Exploration and evaluation expenditures   (472 )   (1,413 )   (938 )   (281 )   (55 )   (137 )   (121 )   (148 )
Income (loss) from operations and joint venture   8,805     5,462     44,143     (2,390 )   (752 )   (1,582 )   (75,986 )   1,919  
Impairment reversal (loss) on investment
  in joint venture
  -     -     7,631     -     -     -     (7,631 )   -  
Impairment of exploration and evaluation assets   -     -     (1,628 )   -     -     -     -     -  
Other income (expense)   3,156     3,031     (21,646 )   3,670     13,318     45     (7,416 )   2,199  
Net income (loss) for the period   11,961     8,493     28,500     1,280     12,566     (1,537 )   (91,033 )   4,118  
Basic and diluted income (loss) per share $ 0.05   $ 0.04   $ 0.13   $ 0.01   $ 0.06     ($0.01 )   ($0.40 ) $ 0.02  
                                                 
Adjusted net income (loss) for the period1   11,961     8,493     (6,010 )   1,280     12,566     (1,537 )   (14,478 )   4,118  
Adjusted basic and diluted income (loss) per share1 $ 0.05   $ 0.04     ($0.03 ) $ 0.01   $ 0.06     ($0.01 )   ($0.06 ) $ 0.02  
                                                 
EBITDA1   8,870     5,519     50,205     (2,378 )   (727 )   (1,534 )   (83,553 )   1,946  

The results of the Company are heavily influenced by its share of profits and losses related to the JV, which is directly related to the underlying performance of the AGM.

During Q3 2021, results reflected the gold price environment and the grade of deposits being mined.

The net loss in Q4 2021 was due to the Company recognizing its 45% interest in the $153.2 million impairment recorded by the JV associated with the AGM not being in a position to declare a mineral reserve at December 31, 2021.  Additionally, the Company recorded a $7.6 million impairment on its equity investment in the AGM JV during Q4 2021 again due to the inability of the AGM to declare mineral reserves as a result of metallurgical uncertainty of the material mined from Esaase at that time.

Other expense for Q4 2021 includes a $7.5 million negative fair value adjustment on the Company's preference shares in the JV which resulted from the aforementioned impairment indicators.

From Q1 2022 to Q3 2022, the Company did not recognize its share of the JV's net earnings as the recoverable amount of the Company's equity investment in the JV was estimated to be nil during those periods. Other income for Q2 2022 and Q3 2022 includes a $13.2 million and a $3.4 million positive fair value adjustment on the Company's preference shares in the JV, respectively, largely driven by strong operating performance resulting in improved working capital of the AGM.

During Q4 2022, as a result of the JV's reinstatement of mineral reserves in the AGM's 2023 Technical Report, the Company recommenced the recognition of its share of the JV's net earnings and also recognized a $7.6 million impairment reversal on its equity investment in the JV, leading to a significant increase in net income over the prior quarters. Other expense in Q4 2022 includes a $22.2 million negative fair value adjustment on the Company's preference shares in the JV resulting from a change in the timing of expected cash distributions and applying a higher discount rate to forecast preference share redemptions primarily due to a Ghana country risk premium applied resulting from the economic conditions in the country at that time. Additionally, the Company also recognized a $1.6 million impairment on its wholly owned Mali exploration assets in Q4 2022.

During Q1 2023 to Q2 2023, improvements in net income and EBITDA over prior periods are reflective of the JV's underlying performance and rising gold price environment. In addition, other income for Q1 2023 and Q2 2023 includes a $2.4 million and a $4.8 million upward fair value adjustment on the Company's preference shares in the JV, respectively, resulting from the passage of time.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

7. Liquidity and capital resources

A key financial objective of the Company is to actively manage its cash balance and liquidity in order to meet the Company's strategic plans, as well as those of the JV in accordance with the JVA. The Company shares control of the JV and aims to manage the JV in such a manner as to generate positive cash flows from the AGM's operating activities in order to fund its operating, capital and project development requirements, and to return capital to the JV partners. A summary of the Company's net assets and key financial ratios related to liquidity are presented in the table below.  Note that the June 30, 2023 and December 31, 2022 balances below do not include any assets or liabilities of the JV.

    June 30, 2023     December 31, 2022  
(in thousands of US dollars, except outstanding shares and options)   $     $  
             
Cash and cash equivalents   55,503     56,111  
Other current assets   925     2,494  
Non-current assets   146,334     121,289  
Total assets   202,762     179,894  
             
Current l iabilities   7,886     5,804  
Non-current l iabilities   214     399  
Total liabilities   8,100     6,203  
             
Total equity   194,662     173,691  
Working capital   48,542     52,801  
             
Total common shares outstanding   224,943,453     224,943,453  
Total s tock options outstanding   13,017,002     8,497,170  
             
Key financial ratios            
Current ratio1   7.16     10.10  
Total l iabilities-to-equity   0.04     0.04  

1 Non-IFRS measure. The current ratio is calculated as Total Assets divided by Total Liabilities as reported in the Company's financial statements for the periods presented.

Subsequent to the JV transaction with Gold Fields, other than the JV service fee, the Company has no current direct sources of revenue and any cash flows generated by the AGM are not within the Company's exclusive control as the distribution of cash from the JV is governed by the JVA. The JVA provides that "Distributable Cash" will be calculated and distributed quarterly, if available. Further information regarding the definition of "Distributable Cash" is included in section "8.3 EBITDA and Adjusted EBITDA". However, given the Company's cash balance and interest earned thereon, zero debt and ongoing service fee receipts from the JV, the Company believes it is in a position to meet all working capital requirements, contractual obligations and other financial commitments as they fall due (see "Commitments" below) during the next 12 months.

On December 21, 2022, the Company filed a final short form base shelf prospectus (the "Prospectus") under which the Company may sell from time-to-time common shares, warrants, subscription receipts, units, debt securities and/or share purchase contracts of the Company, up to an aggregate of $300 million.  The Prospectus has a term of 25-months from the filing date. As of the date of this MD&A, no securities have been issued under the Prospectus.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

7.1  Commitments

The following table summarizes the Company's contractual obligations as at June 30, 2023 and December 31, 2022. Note the following table excludes commitments and liabilities of the JV for the periods presented.

                                     
(in thousands of US dollars)   Within 1 year     1 - 3 years     4 - 5 years     Over 5 years     June 30, 2023     December 31, 2022  
Accounts payable, accrued liabilities and                                    
   payable due to related party   4,272     -     -     -     4,272     3,173  
Long-term incentive plan (cash-settled
   awards)
  3,494     73     -     -     3,567     2,716  
Corporate office leases   134     158     -     -     292     348  
Total   7,900     231     -     -     8,131     6,237  

In addition to the above commitments, the Company has provided various parent company guarantees related to the unfunded portion of the AGM's reclamation bonds in the amount of $5.9 million (December 31, 2022 - $5.9 million).

7.2  Contingencies

Due to the nature of its business, the Company and/or the JV may from time to time be subject to regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of its business. While the Company cannot reasonably predict the ultimate outcome of any such actions, and inherent uncertainties exist in predicting such outcomes, the Company believes that the ultimate resolution of these actions is not reasonably likely to have a material adverse effect on the Company's or the JV's financial condition or future results of operations.

7.3  Cash flows

The following table provides a summary of the Company's cash flows for the three and six months ended June 30, 2023 and 2022:

    Three months ended June 30,     Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars)   $     $     $     $  
Cash provided by (used in):                        
Operating activities   (1,377 )   2,565     (1,920 )   (600 )
Investing activities   703     123     1,347     165  
Financing activities   (31 )   (33 )   (62 )   (67 )
Impact of foreign exchange on cash and cash
   equivalents
  35     (34 )   27     (14 )
(Decrease) increase in cash and cash equivalents   (670 )   2,621     (608 )   (516 )
   during the period                        
Cash and cash equivalents, beginning of period   56,173     50,384     56,111     53,521  
Cash and cash equivalents, end of period   55,503     53,005     55,503     53,005  

a)  Cash (used in) provided by operating activities

During Q2 2023, the Company utilized cash flows in operations of $1.4 million (three months ended June 30, 2022 - generated cash flows from operations of $2.6 million) due to corporate head office expenses and payment of long-term incentive plan awards.

The increase in cash used in operating activities from Q2 2022 to Q2 2023 was largely driven by a positive working capital movement in Q2 2022 due to collecting $4.8 million of the Company's service fee receivable from the JV.

During the six months ended June 30, 2023, the Company utilized cash flows in operations of $1.9 million (six months ended June 30, 2022 - utilized cash flows in operations of $0.6 million) due to corporate head office expenses and payment of long-term incentive plan awards, which were partly offset by a $1.5 million positive working capital movement mainly relating to collection of the Company's service fee receivable from the JV.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

The increase in cash used in operating activities from 2022 to 2023 was largely driven by the aforementioned collection of the Company's service fee receivable from the JV in Q2 2022 and higher long-term incentive plan award payouts.

b)  Cash provided by investing activities

During the three and six months ended June 30, 2023, cash provided by investing activities amounted to $0.7 million and $1.3 million, respectively, and related to interest earned on cash balances and short-term investments (with maturities less than 90 days).

The increase in cash provided by investing activities during 2023 was due to higher interest rates earned on cash balances and short-term investments.

8. Non-IFRS measures

The Company has included certain non-IFRS performance measures throughout this MD&A. These performance measures are employed by management to assess the Company's operating and financial performance and to assist in business decision-making. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors and other stakeholders use this information to evaluate the Company's operating and financial performance; however, as explained elsewhere herein, these non-IFRS performance measures do not have any standardized meaning and therefore may not be comparable to similar measures presented by other issuers. Accordingly, these performance measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

The JV does not calculate this information for use by both JV partners, rather it is calculated by the Company solely for the Company's own disclosure purposes.

8.1 Operating cash costs and total cash costs per gold ounce

The Company has included the non-IFRS performance measures of operating cash costs and total cash costs per gold ounce sold on a by-product basis throughout this MD&A. In the gold mining industry, this is a common performance measure but does not have any standardized meaning. The Company follows the recommendations of the Gold Institute Production Cost Standard. The Gold Institute, which ceased operations in 2002, was a non-regulatory body and represented a global group of suppliers of gold and gold products. The production cost standard developed by the Gold Institute remains the generally accepted standard of reporting cash costs of production by many gold mining companies. Management uses operating cash costs and total cash costs per gold ounce sold to monitor the operating performance of the JV. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate the Company's performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate operating cash costs and total cash costs per gold ounce sold differently.

The following table provides a reconciliation of operating and total cash costs per gold ounce sold of the AGM to production costs of the AGM on a 100% basis (the nearest IFRS measure) as presented in the notes to the unaudited condensed consolidated interim financial statements of the Company for the three and six months ended June 30, 2023 and 2022.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

    Three months ended June     Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars, except per ounce amounts)   $     $     $     $  
Production costs as reported   33,319     52,261     68,261     105,486  
Share-based compensation expense included in
   production costs
  152     (4 )   142     61  
By-product revenue   (87 )   (173 )   (194 )   (293 )
Total operating cash costs   33,384     52,084     68,209     105,254  
Royalties   3,715     4,244     6,980     8,121  
Total cash costs   37,099     56,328     75,189     113,375  
Gold ounces sold   32,912     46,236     68,086     88,165  
Operating cash costs per gold ounce sold ($/oz)   1,014     1,126     1,002     1,194  
Total cash costs per gold ounce sold ($/oz)   1,127     1,218     1,104     1,286  

8.2 AISC per gold ounce

In June 2013, the World Gold Council, a non-regulatory association of many of the world's leading gold mining companies established to promote the use of gold to industry, provided guidance for the calculation of "AISC per gold ounce" in an effort to encourage improved understanding and comparability of the total costs associated with mining an ounce of gold. The Company has adopted the reporting of "AISC gold ounce", which is a non-IFRS performance measure. The Company believes that the AISC per gold ounce measure provides additional insight into the costs of producing gold by capturing all of the expenditures required for the discovery, development and sustaining of gold production and allows the Company to assess its ability to support capital expenditures to sustain future production from the generation of operating cash flows. The Company believes that, in addition to conventional measures prepared in accordance with IFRS, some investors use this information to evaluate the JV's performance and ability to generate cash flow, distribution of which is subject to the terms of the JVA. Other companies may calculate AISC per gold ounce sold differently. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

AISC adjust "Total cash costs" for G&A expenses, reclamation cost accretion, sustaining capitalized stripping costs, sustaining capital expenditures and lease payments and interest expense on the AGM's mining and service lease agreements. Sustaining capital expenditures, capitalized stripping costs, reclamation cost accretion and lease payments and interest expense on lease agreements are not line items on the AGM's financial statements. Sustaining capital expenditures are defined as those capital expenditures which do not materially benefit annual or life of mine gold ounce production at a mine site.  A material benefit to a mine site is considered to be at least a 10% increase in annual or life of mine production, net present value, or reserves compared to the remaining life of mine of the operation.  As such, sustaining costs exclude all expenditures at the AGM's 'new projects' and certain expenditures at the AGM's operating sites which are deemed expansionary in nature. Capitalized stripping costs represent costs incurred at steady-state operations during the period; these costs are generally not considered expansionary in nature as the stripping phase is expected to take less than 12 months and resulting ore production is of a short-term duration. Reclamation cost accretion represents the growth in the AGM's decommissioning provision due to the passage of time. This amount does not reflect cash outflows, but it is considered to be representative of the periodic costs of reclamation and remediation. Lease payments on mining and service lease agreements represent cash outflows while interest expense represents the financing component inherent in the lease. Reclamation cost accretion and lease interest are included in finance expense in the AGM's results as disclosed in the notes to the unaudited condensed consolidated interim financial statements of the Company for the three and six months ended June 30, 2023 and 2022.

All-in sustaining margin per ounce is calculated as the difference between the average realized gold price for the period and AISC per gold ounce sold.  All-in sustaining margin is calculated as all-in sustaining margin per ounce multiplied by the number of gold ounces sold during the period.

The following table provides a reconciliation of AISC of the AGM to production costs and various operating expenses of the AGM on a 100% basis (the nearest IFRS measure), as presented in the notes to the unaudited condensed consolidated interim financial statements of the Company for the three and six months ended June 30, 2023 and 2022.



GALIANO GOLD INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

    Three months ended June     Six months ended June 30,  
    2023     2022     2023     2022  
(in thousands of US dollars except per ounce amounts)   $     $     $     $  
Total cash costs (as reconciled above)   37,099     56,328     75,189     113,375  
General and administrative expenses - JV 4   719     613     1,435     1,531  
Sustaining capital expenditures (see table below)   6,667     2,987