RNS Number:2626M
European Goldfields Ltd
13 May 2005
Suite 200, Financial Plaza
204 Lambert Street
Whitehorse, Yukon
Canada Y1A 3T2
For Immediate Release 13 May 2005
EUROPEAN GOLDFIELDS LIMITED
RESULTS FOR THE FIRST QUARTER 2005
LOSS DOWN 50% VS. Q1 2004 - CASH BALANCE UP $45 MILLION
European Goldfields Limited (AIM: EGU / TSX: EGU) today reported its results for
the first quarter to 31 March 2005. Highlights of the first quarter 2005 are:
Corporate:
* As at 31 March 2005, we had cash and cash equivalents of US$58.12
million, compared to US$65.25 million as at 31 December 2004 and US$13.43
million as at 31 March 2004.
* With the current cash balance and projected revenue, we expect to be
self-funded to the end of 2006 and beyond, covering the permitting process for
our major gold and base metal projects in Greece.
* In Q1 2005, we halved our loss to US$2.65 million ($0.02 per share),
compared to US$5.28 million ($0.18 per share) in Q1 2004. This reduction in loss
is particularly significant considering we recorded start-up costs in Greece of
US$1.56 million in Q1 2005 compared to $Nil in Q1 2004.
* In March 2005, our shares were listed on the Toronto Stock Exchange
(TSX), graduating from the
TSX Venture Exchange.
* We completed our technical teams in Romania and Greece and recently
recruited Neil Hepworth from Rio Tinto. Neil has over 20 years' experience as a
mining engineer and his expertise in underground mining with backfill will
complement our existing team at Stratoni.
Greece:
* Our 65%-owned subsidiary, Hellas Gold S.A., was awarded all environmental
permits for its Stratoni operations. Final approval to commence mining
operations is expected shortly, to be followed by production launch.
* The Stratoni mine is now ready to resume production following the recent
completion of refurbishment work on the underground infrastructure and plant.
* We have also agreed terms for the construction of a new 1,900 metre adit
tunnel at Stratoni to allow better access to the reserve.
* We have continued to update feasibility studies and prepare new business
plans defining the way forward for Hellas Gold's major gold and base metal
projects of Olympias and Skouries.
* We intend to submit our new business plans for Olympias and Skouries to
the Greek government in
Q4 2005, followed by updated feasibility studies in Q1 2006.
* By contract, the Greek State is committed to review the business plans
within two months of submission, and issue all necessary environmental, mining
and development permits within 10 months.
* We have also initiated a focused exploration programme to look for new
discoveries in Greece. We have developed a good exploration model defining where
we must look for further Olympias and Skouries type targets and we will be
actively pursuing these opportunities in 2005.
Romania:
* In Romania, we published a new, better defined estimate for our 80%-owned
Certej deposit which outlined resources of 31.4 Mt grading 2.1 g/t gold and 11 g
/t silver for 2.3 Moz of gold equivalent. This estimate includes a 11.4 Mt high
grade core to the deposit grading 3.4 g/t at a 2 g/t gold cut-off. This work has
underpinned the fact that Certej can be mined more selectively to optimise an
open pit.
* We have continued work on an in-house pre-feasibility study for Certej,
which we expect to complete in Q2 2005. The pre-feasibility study is focused on
generating a higher grade metallurgical concentrate, optimising the pit and
defining appropriate mining, plant and tailings infrastructure.
* We were awarded a new exploration licence area, referred to as Cainel,
which covers an area of 31.3 km(2) and is located contiguous with our Certej
property. Exploration work continues to define the mineralised system with a
view to either defining a stand-alone project or a satellite for Certej.
David Reading, CEO of European Goldfields, said: "The first quarter has seen
further progress on our Greek assets with the key environmental permits being
awarded for Stratoni, the first such permits to be granted in the country for
over six years. Subject to being awarded the ensuing mining permit, we are now
ready to commence production. In Romania we are pleased with the progress made
on the in-house pre-feasibility study and at increasing the grade at Certej, as
well as being excited about prospects of Cainel, the licence awarded to us in
January this year".
About European Goldfields
European Goldfields Limited is a resource company involved in the acquisition,
exploration and development of mineral properties in Greece, Romania and the
Balkans.
Greece - European Goldfields holds a 65% interest in Hellas Gold S.A. Hellas
Gold owns assets in Northern Greece which consist of three near-production
deposits within 70-year mining concessions covering a total area of 317 km(2).
The deposits include the polymetallic projects of Stratoni and Olympias which
contain gold, lead, zinc and silver, and the copper-gold porphyry body referred
to as Skouries. All three deposits have been well defined with over 200,000
metres of drilling and the completion of feasibility studies and later
engineering studies.
The total proven and probable reserves of these assets are 17.0 Moz on a gold
equivalent basis
(65% attributable = 11.1 Moz) from a measured and indicated resource base of
21.8 Moz gold equivalent (65% attributable = 14.2 Moz). These assets represent
some of the largest defined deposits in Europe. The three deposits are located
within a 10 km radius of each other, making this effectively a gold and base
metal centre. Furthermore, both Stratoni and Olympias were previously in
production and have extensive existing mining and plant infrastructure and a
ship loading facility on the Aegean Sea, making them near-production properties
which require new permits. Hellas Gold's assets also include potential revenue
generating stockpiles and tailings located on the surface.
Romania - European Goldfields holds five mineral properties located within the
"Golden Quadrilateral" area of Romania, where it has embarked on a resource
development and pre-feasibility programme to underpin the value of its 80%-owned
Certej deposit and surrounding satellite bodies. The Certej deposit hosts
measured and indicated resources of 31.4 Mt grading 2.1 g/t gold and 11 g/t
silver for 2.34 Moz of gold equivalent
(80% attributable = 1.88 Moz).
For additional information on the resource and reserve estimates quoted above,
please refer to the Company's Resources & Reserves Declaration at
www.egoldfields.com/goldfields/resources.jsp.
For further information please contact:
European Goldfields:
David Reading, Chief Executive Officer
David Grannell, Chief Financial Officer
Office: +44 (0)20 7408 9534 e-mail: info@egoldfields.com
Mobile: +44 (0)7703 190 652 website: www.egoldfields.com
Buchanan Communications:
Bobby Morse / Ben Willey
Office: +44 (0)20 7466 5000 e-mail: bobbym@buchanan.uk.com
Mobile: +44 (0)7802 875 227
Forward-looking statements
This news release contains certain forward-looking statements concerning the
Company's future operations, economic performances, financial condition and
financing plans. These statements are based on certain assumptions and analyses
made by the Company in light of the its experience and its perception of
historical trends, current conditions and expected future developments as well
as other factors the Company believes are appropriate in the circumstances.
However, whether actual results and developments will conform to the Company's
expectations and predictions is subject to a number of risks, uncertainties and
assumptions. Consequently, all of the forward-looking statements made in this
news release are qualified by these cautionary statements, and there can be no
assurance that the results or developments anticipated by the Company will be
realised or, even if substantially realised, that they will have the expected
consequences to or effects on the Company and its subsidiaries or their
businesses or operations. The Company undertakes no obligation and do not intend
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as may be required under
applicable law.
MANAGEMENT'S DISCUSSION & ANALYSIS
FOR THE THREE-MONTH PERIOD ENDED 31 MARCH 2005
The following discussion and analysis, prepared as at 13 May 2005, is intended
to assist in the understanding and assessment of the trends and significant
changes in the results of operations and financial conditions of European
Goldfields Limited (the "Company"). Historical results may not indicate future
performance. Forward-looking statements are subject to a variety of factors
that could cause actual results to differ materially from those contemplated by
these statements. The following discussion and analysis should be read in
conjunction with the Company's unaudited consolidated financial statements for
the three-month periods ended 31 March 2005 and 2004 and accompanying notes (the
"Consolidated Financial Statements").
Additional information relating to the Company is available on the Canadian
System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.
Except as otherwise noted, all dollar amounts in the following discussion and
analysis and the Consolidated Financial Statements are stated in United States
dollars.
Overview
The Company, a company incorporated in the Yukon, Canada, is a resource company
involved in the acquisition, exploration and development of mineral properties
in Greece, Romania and the Balkans.
The Company's Common Shares are listed on the AIM Market of the London Stock
Exchange and on the Toronto Stock Exchange (TSX) under the symbol "EGU".
Greece - As at 31 December 2004, the Company held a 65% interest (on a
fully-diluted basis) in Hellas Gold S.A ("Hellas Gold"). Hellas Gold owns assets
in Northern Greece which include 70-year mining concessions over a total area of
317 km2 and three polymetallic near-production deposits, known as Olympias,
Stratoni and Skouries, which contain proven and probable reserves. The Stratoni
and Olympias deposits were previously in production and benefit from significant
infrastructure which includes underground mining development, two plants and a
ship loading facility on the Aegean Sea. Hellas Gold's assets also include
potential revenue generating stockpiles and tailings located on the surface.
Romania - In Romania, the Company holds a 80% interest in Deva Gold S.A. and a
100% interest in European Goldfields (Romania) SRL, which are in the process of
exploring their mineral properties in Romania and have not yet determined
whether those properties contain economic reserves.
Results of operations
The Company's results of operations for the three-month period ended 31 March
2005 were comprised primarily of activities related to the Company's regional
exploration programs in Romania and the results of operations of the Company's
65%-owned subsidiary Hellas Gold. The Company continues to incur losses and
until commercial production commences and revenues are generated, the Company
will continue to do so.
The Company's results of operations for the eight most recently completed
quarters are summarised in the following table:
(in thousands of US 2005 2004 2004 2004 2004 2003 2003 2003
dollars, except Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2
per share amounts) $ $ $ $ $ $ $ $
Statement of loss and deficit
Interest Income 326 279 143 60 18 28 16 69
Expenses 3,831 9,225 2,854 2,848 5,042 1,715 293 352
Loss 2,652 8,134 2,190 3,580 5,279 1,687 277 283
Loss per share (cents) 0.02 0.17 0.05 0.09 0.18 0.08 0.01 0.01
Balance sheet
Working capital 57,285 63,480 29,045 31,117 14,413 5,058 5,433 6,709
Total assets 300,689 304,758 86,879 83,517 67,875 45,943 29,929 29,785
Non current liabilities 71,179 71,320 - - - - - -
Statement of cash flows
Deferred exploration and development costs
- Romania 860 2,462 1,171 943 1,394 1,097 1,088 1,134
Plant and equipment
- Greece 1,582 - - - - - - -
The breakdown of deferred exploration and development costs per mineral property
for the three-month periods ended 31 March 2005 and 2004 is as follows:
Three-month periods ended 31 March
2005 2004
(in thousands of US dollars) $ (%) $ (%)
Romanian mineral properties
Certej 685 (80%) 1,171 (84%)
Caniel 102 (12%) - (- %)
Zlatna - (- %) 139 (10%)
Voia 17 (2%) 28 (2%)
Baita-Craciunesti 40 (5%) 42 (3%)
Bolcana 16 (1%) 14 (1%)
860 (100%) 1,394 (100%)
Greek mineral properties
Stratoni - (- %) - (- %)
Skouries - (- %) - (- %)
Olympias - (- %) - (- %)
- (- %) - (- %)
Total 860 (100%) 1,394 (100%)
The Company incurred a loss of $2.65 million ($0.02 per share) for the
three-month period ended 31 March 2005, compared to $5.28 million ($0.18 per
share) for the same period of 2004. The following factors have contributed to
this reduction in loss:
* The Company's corporate administrative and overhead expenses have
decreased by 28% from $1.25 million in Q1 2004 to $0.89 million in Q1 2005,
primarily as a result of the Company being less reliant on external consultants
and professional advisors following recruitment of full-time employees in 2004.
Also, in Q1 2004, the Company incurred higher expenses for the listing of its
common shares on the AIM Market of the London Stock Exchange, compared to
expenses incurred in Q1 2005 for the listing on the Toronto Stock Exchange.
* In February 2004, the Company acquired an initial 37.97% interest in
Hellas Gold. From 9 February 2004 to 31 March 2004, the Company's interest in
Hellas Gold was accounted for as an equity investment. In November 2004, the
Company completed the acquisition of shares in Hellas Gold, increasing its total
interest from 37.97% to 55.70%, and assumed an obligation to subscribe to
additional shares in Hellas Gold, resulting in an interest of 65% on a
fully-diluted basis. The acquisition was accounted for as a purchase and the
results of operations of Hellas Gold were included in the consolidated
statements of loss and deficit from 30 November 2004, the effective date of the
acquisition. Hellas Gold's operating, general and administrative expenses of
$1.56 million in Q1 2005 were incorporated in the Company's consolidated
statement of loss and deficit for the period, compared to the Company's share of
loss in equity investment of $0.26 million in Q1 2004.
* Effective 1 October 2004, the Company changed its functional currency
from the Canadian dollar to the United States dollar. Nevertheless, during Q1
2005, the Company retained significant cash balances in Euro in order to meet a
Euro subscription obligation in Hellas Gold. Consequently, the Company recorded
a foreign exchange loss of $0.99 million in Q1 2005, which resulted from a
strengthening of the United States dollar against the Euro as at 31 March 2005
compared to 31 December 2004.
In Q1 2004, the Company realised a foreign exchange gain of $0.47 million mainly
due to the weakening of the Canadian dollar against the Euro as at 31 March 2004
compared to 31 December 2003.
* The Company's amortisation expense has increased to $0.26 million in Q1
2005 from $Nil in Q1 2004 primarily as a result of the Company acquiring
significant assets through the acquisition of a
65% interest in Hellas Gold in 2004.
* In December 2003, the Company raised $15.09 million by way of a brokered
private placement of convertible loan notes, for which the Company recorded a
non-cash expense for financing costs of $1.12 million in Q1 2004, compared to
$Nil in Q1 2005.
* The Company recorded a non-cash stock-based compensation expense of $0.13
million in Q1 2005, compared to $3.17 million in Q1 2004. Such decrease reflects
the fact that no share options or milestone shares were granted in Q1 2005
compared to significant grants to newly hired employees in Q1 2004.
* The Company recorded a credit for future income taxes of $0.71 million in
Q1 2005, compared to $Nil in Q1 2004. The credit has arisen due to the Company
recognising a future tax asset for the losses carried forward in Hellas Gold.
* The Company's interest income has increased to $0.33 million in Q1 2005
from $0.02 million in Q1 2004, primarily as a result of the Company holding
significantly higher cash balances in Q1 2005 following completion of private
placements during 2004.
Liquidity and capital resources
As at 31 March 2005, the Company had cash and cash equivalents of $58.12
million, compared to $65.25 million as at 31 December 2004 and $13.43 million as
at 31 March 2004.
As at 31 March 2005, the Company had working capital of $57.29 million, compared
to $63.48 million as at 31 December 2004 and $14.41 million as at 31 March 2004.
The increase in cash and cash equivalents and working capital as at 31 March
2005, compared to the balances as at 31 March 2004, resulted primarily from two
private placements ($93.50 million), the effects of foreign currency translation
on cash ($3.75 million), the exercise of warrants and options ($3.40 million)
and interest earned ($0.81 million), partly offset by the payment of the cash
portion of the acquisition price for an additional 35% interest in Hellas Gold
($37.01 million), operating losses ($9.47 million), deferred exploration and
development costs in Romania ($5.44 million), capital raising costs ($4.32
million) and capital expenditure in Greece ($1.58 million).
The decrease in cash and cash equivalents and working capital as at 31 March
2005, compared to the balances as at 31 December 2004, resulted primarily from
operating losses ($3.05 million), capital expenditure in Greece ($1.58 million),
deferred exploration and development costs in Romania ($0.86 million) and the
effects of foreign currency translation on cash ($1.75 million), partly offset
by the exercise of options ($0.17 million).
During the three-month period ended 31 March 2005, the Company received total
proceeds of $0.17 million through the exercise of 75,000 common share options at
a weighted average price of C$2.80 per share.
The following table sets forth the Company's contractual obligations including
payments due for each of the next five years and thereafter:
Payments due by period
(in thousands of US dollars)
Contractual obligations Total Less than 1 1 - 3 years 4 - 5 years After
year 5 years
Operating lease
(London office) 1,037 104 373 373 187
Exploration licence
spending commitments
(Voia, Romania) 1,500 - 1,500 - -
Total contractual
obligations 2,537 104 1,873 373 187
For the coming year, the Company believes it has adequate funds available to
meet its corporate and administrative obligations (estimated at $2.94 million
for the remainder of 2005) and its planned expenditures on its mineral
properties (estimated at $5.10 million for Romania and at $7.95 million for
Greece for the remainder of 2005).
Change in functional and reporting currency
Effective 1 October 2004, the Company changed its functional currency from the
Canadian dollar to the United States dollar. In general, this change resulted
from a combination of a gradual increase in the operational exposure to the
United States dollar and predominantly United States dollar based asset and
investment base of the Company and from a gradual increase in the overall
proportion of business activities conducted in United States dollars. Concurrent
with this change in functional currency, the Company adopted the United States
dollar as its reporting currency. In accordance with accounting principles
generally accepted in Canada ("Canadian GAAP"), the change was effected by
translating all assets and liabilities, at the end of the prior reporting
periods, at the existing United States/Canadian dollar foreign exchange spot
rate, while income for those periods were translated at the average rate for
each period. Equity transactions have been translated at the historical rates,
with opening equity on 30 June 2000, restated at the rate of exchange on that
date. The resulting net translation adjustment has been credited to the
cumulative translation adjustment account in the equity section of the balance
sheet.
Outstanding share data
The following represents all equity shares outstanding and the number of common
shares into which all securities are convertible, exercisable or exchangeable:
Preferred shares: Nil
Common shares: 112,173,708
Common share options: 3,720,000
Common share broker warrants: 415,498
Common shares (fully-diluted): 116,309,206
Outlook
In Greece, the Company is currently updating the feasibility studies and
preparing new business and environmental plans defining the way forward for
Hellas Gold's gold and base metal projects of Olympias and Skouries. The Company
will also continue to look for new discoveries through focused exploration
programmes.
In Romania, work at Certej is now directed towards completing an in-house
pre-feasibility study with specific focus on optimising metallurgical recoveries
and defining a practical open pit. The Company also continues to look at new
satellite targets around the Certej deposit with a view to adding additional
incremental ounces. At Cainel, underground channel sampling continues to define
the bigger mineralised target covering an area of 200 x 1,000 metres. Aggressive
drilling campaigns will be effected during the second half of 2005 to test the
Company's geological model and the potential for a major mineralised system.
The Company also intends to continue growing its portfolio by new exploration
discoveries and the pursuit of accretive, value enhancing acquisitions in Europe
and the Balkans.
Risks and uncertainties
The risks and uncertainties affecting the Company are substantially unchanged
from those disclosed in the Company's Management's Discussion & Analysis for the
year ended 31 December 2004.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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