EGU European Gold

RNS Number:0103Y
European Goldfields Ltd
07 February 2006



For Immediate Release                                            7 February 2006

                          EUROPEAN GOLDFIELDS LIMITED

                BUSINESS PLANS SUBMITTED FOR GREEK GOLD PROJECTS

European Goldfields Limited (AIM: EGU / TSX: EGU) is pleased to announce that
its 65%-owned subsidiary Hellas Gold S.A. has submitted business plans to the
Greek State for its major gold and base metal projects in Northern Greece. This
submission represents a significant milestone in obtaining the permits for the
Skouries and Olympias projects.

The business plans focus on a phased approach to the development of the projects
with emphasis on achieving full production at the Skouries gold-copper porphyry
deposit as soon as possible, and the phasing of the Olympias
gold-lead-zinc-silver deposit. This approach minimises financial risk by the
phased injection of capital. The principal revenue stream in the early phases
will be through the sale of concentrates.

Commenting on the announcement, David Reading, Chief Executive Officer of
European Goldfields, said: "The Hellas Gold team has successfully delivered the
business plans on time to the Greek government for the major gold and base
metals projects of Skouries and Olympias. Having had significant input from both
Aktor, our Greek partner, and the local communities, the business plans focus on
implementing a modern and sustainable gold mining industry to the region. These
business plans represent a significant milestone in obtaining the permits for
Skouries and Olympias."

Skouries is planned as an 8 Mtpa operation with an open pit of at least 6 years,
followed by underground mining which will produce some 750,000t of copper and
3.6M oz of gold over a 20 year mine life. Feasibility work continues in order to
optimise the open pit depth and finalise the underground mine design. The start
of production is planned for 2008.

Production from the Olympias deposit is expected to commence in 2008 with the
sale of concentrates in the early stages. Three phases are planned with
production in the first two years of 250,000 tpa ramping up to 400,000 tpa in
Phase 2 and finally 900,000 tpa in Phase 3. This allows the staged development
of a new decline and construction of a gold plant which will be completed for
the final phase. In addition to underground reserves, Olympias benefits from
existing surface stockpiles of concentrates (270,000 tonnes grading +20 g/t
gold) which Hellas Gold intends to sell as soon as possible to generate early
cash flow.

Mining operations at Stratoni recommenced in October 2005, producing lead/silver
and zinc concentrates. The continuing exploitation at Stratoni features ramping
up of throughput over the next four years to an annual production of 400,000
tonnes. Favourable off-take agreements have been secured for the sale of
concentrates until 2008.

Exploration in 2006 will concentrate on expanding the Stratoni reserves through
focussed drilling between the two known deposits and around the peripheries of
the existing reserves. Additional exploration for further major Olympias and
Skouries style deposits within Hellas Gold's highly prospective licence areas
will commence upon receipt of the gold permits, focusing on known targets
outside inhabited areas.

The business plans have been prepared based on extensive research by European
Goldfields, Hellas Gold and several internationally renowned consultants
including Outokumpu, Aker Kvaerner Engineering Services, SRK, Golder Associates,
Hazen Research, SGS Lakefield Research, Brook Hunt and CRU.

                                    SKOURIES

The Skouries deposit is a typical gold-copper porphyry deposit which forms a
near vertical pipe and is located 35 km by road from the Stratoni port in
Northern Greece. Skouries is located on a high plateau with no habitation in the
immediate vicinity.

The total measured and indicated resource at Skouries is 191.2 Mt grading 0.82 g
/t gold and 0.55% copper. The probable reserve currently stands at 130 Mt
grading 0.9 g/t gold and 0.6% copper. However, European Goldfields plans to
publish increased reserves in the first half of 2006 reflecting a deeper open
pit, more efficient underground mining and improved long term metal price
forecasts.

SRK have re-evaluated the Skouries deposit and shown that favourable economics
can be obtained by operating a medium depth open pit followed by underground
mining at an annual production rate of 8 Mtpa.

The mining at Skouries is phased with the open pit mined at full rate for the
first six years and the underground mining development starting in the fourth
year of operation. A continuous feed of 8 Mtpa to the mill is ensured by the use
of stockpiled open pit ore. The current model uses a 300m deep pit followed by
an underground operation, which the SRK study shows to give the best economic
return. However, a deeper pit is being investigated to facilitate the phasing of
capital and also the phased use and rehabilitation of tailings and waste
disposal areas.

The metallurgy at Skouries is straight forward. The mine will feed a process
plant designed for a nominal throughput of 24,000 tpd. The concentrator will
comprise gyratory crushing for open pit and underground ore, single stream SAG
and ball mill grinding. Approximately 30% of gold will be recovered by a gravity
circuit to produce dore on site. A high quality saleable gold/copper bearing
concentrate will also be produced by conventional froth flotation, thickening
and filtration.

Extensive test work carried out by Lakefield Research and others has shown
average recoveries of 83.9% gold and 90.6% copper. Concentrate grades of at
least 26% copper and averaging 27 g/t gold are expected.

Concentrates will be trucked to Hellas Gold's port storage facility at Stratoni
which is some 35 km away by road from the Skouries plant site.

Golder Associates have incorporated the latest paste production technology in a
tailings management facility that minimises land take and embankment height and
provides increased stability. Paste tailings also allow process water to be
returned directly to the process plant, reducing pumping costs and the quantity
of make-up water needed. Studies have shown that the tailings are inert with low
permeability. The use of paste tailings also allows sequential rehabilitation of
the tailings management facility to minimise active tailings areas.

Skouries is a robust project at copper prices of $1.06/lb and gold at $400/oz.

                                    OLYMPIAS

Olympias is a polymetallic deposit located 8 km north of the Stratoni mine.
Olympias benefits from extensive mining and plant infrastructure already in
place and a port facility nearby at Stratoni.

The total surface and underground measured and indicated resource at Olympias is
14.5 Mt grading 9.3 g/t gold, 129 g/t silver, 4.2% lead and 5.6% zinc. The total
proven and probable reserve currently stands at 14 Mt grading 8.6 g/t gold, 120
g/t silver, 3.9% lead and 5.2% zinc.

Development at Olympias will progress in three phases to allow refurbishment and
construction of infrastructure and the subsequent construction of new central
processing facilities at Stratoni. This staged approach also allows the phasing
of capital investment.

   * Phase 1 is expected to commence in 2008 with low capital investment for
    the start of underground mining operations in areas around the existing
    shaft. Ore is expected to be extracted at a rate of 250,000 tpa for the
    first two years. Revenue during Phase 1 will be generated from the sale of
    lead/silver, zinc and auriferous pyrite/arsenopyrite concentrates.


   * Phase 2 will consist of the expansion of the underground infrastructure
    in order to increase production. This infrastructure upgrade includes a new
    decline from the base of the Olympias deposit to the Stratoni mine area. Ore
    will be extracted at a rate of 400,000 tpa for the four years of Phase 2.
    Revenue during Phase 2 will be generated from the sale of concentrates for
    all metals.


   * In Phase 3, production will be at a rate of 900,000 tpa with the new
    decline used to convey the ore to a new centralised concentrator, gold plant
    and tailings management facility at a brown field site located in the
    Stratoni mine area.

The mining in all phases will use drift and fill methods. In areas of wide
orebody, a double lift drift and fill method called "mini bench" has been
designed. The drift and fill method is well tested at Olympias and is also
flexible, allowing headings to change direction with changing ore geometry. This
use of drift and fill methods minimises surface rock waste and tailings by
utilising underground backfill methods.

Gold concentrates will be sold through off-take agreements along with the lead/
silver and zinc concentrates. Unsold gold concentrate produced in Phases 1 and 2
will be stockpiled for subsequent treatment through the gold plant. In Phase 3,
all of the gold concentrate will be processed to gold and silver bullion at the
new gold processing plant.

The phasing of the project allows time for optimisation and development on the
metallurgical process for treating the auriferous arsenopyrite/pyrite
concentrates. Pilot scale test work has shown that flash smelting is a
technically viable process option for extracting the gold and silver to bullion,
although more proving research and development work is required. R&D work will
also focus on optimising the process for treating the Olympias concentrates.
Also, a pre-feasibility level study was completed in 2005 for treating the gold
concentrate comprising roasting, pressure oxidation and leaching.

The Olympias project is self sustaining over the initial phases with the sale of
concentrates, and the high recoveries for the on-site gold processing are
considered promising for the latter phase.

In addition to underground reserves, Olympias benefits from existing surface
stockpiles of concentrates (270,000 tonnes grading +20 g/t gold) which Hellas
Gold intends to sell as soon as possible to generate early cash flow.

                                    STRATONI

Stratoni consists of a stratabound lead-zinc-silver replacement deposit and lies
about 4 km from the coastal town of Stratoni and just to the west of the village
of Stratoniki.

The total measured and indicated resource at Stratoni is 2.221 Mt grading 11.4%
zinc, 8.6% lead and 202 g/t silver. The total proven and probable reserve is
1.923Mt grading 10.8% zinc, 8.1% lead and 190 g/t silver.

In addition to existing underground access and tailings facilities, Stratoni
benefits from recently refurbished and fully operational mill and flotation
plant, offices and a laboratory, together with a port loading facility for
vessels of up to 8,000 tonnes capacity, all located near the coast at Stratoni.

In September 2005, Hellas Gold was awarded all necessary environmental and
mining permits to commence mining operations at Stratoni. The mining method at
Stratoni is conventional cut and fill which is ideally suited to this high grade
orebody as it minimises dilution and maximises recovery allowing headings to
change direction with changing ore geometry.

During the last two months of 2005, the focus was on preparing and re-equipping
production areas and filling previously mined stopes to provide the production
faces necessary to achieve the target production for the first year of operation
. In this period, 16,000 wmt of ore were treated at the mill with an additional
11,000 wmt stockpiled for treatment in January 2006.

Work on a new 1,900 metre access decline to the base of the orebody has
commenced. The decline is being developed to provide improved ore handling and
access to the Stratoni reserve o allow larger scale and more efficient mining
operations. In parallel with developing the decline, new accesses to the ore
will be made to enable ramping up of production from 2007 onward. The yearly
production schedule is as follows:

   -   Year 2006:170,000 tonnes
   -   Year 2007:250,000 tonnes
   -   Year 2008:300,000 tonnes
   -   Year 2009:375,000 tonnes
   -   Year 2010:400,000 tonnes
   -   Year 2011:400,000 tonnes

The Stratoni concentrator commenced production of lead/silver and zinc
concentrates in September 2005. To date, the concentrator has treated 32,000
tonnes of ore with recoveries in excess of 90% lead, zinc and silver to the
respective concentrates. Historic production resulted in consistent ore grades
of 8-10% lead, 8-11% zinc and 200 g/t silver, with concentrator metal recoveries
consistently high at around 90%. All concentrates are shipped by sea using
Hellas Gold's Stratoni sea port facilities.

Hellas Gold commenced production in an environment of strong metal demand and
depleting global stockpiles, especially for zinc; Stratoni is the only lead and
zinc start-up in 2005.

Hellas Gold has entered into off-take agreements for the sale of lead/silver and
zinc concentrates produced at Stratoni in which it is agreed to sell
approximately 90% of concentrates produced until 2007, and 65% of lead/silver
and 25% of zinc production in 2008. The agreements provide for fixed penalties
and treatment charges for the contract term. Hellas Gold intends to sell excess
production on the spot market. The first shipment of concentrates was completed
in December 2005.

Stratoni is an financially robust project, especially at current metal prices
and under the favourable off-take agreements secured for the project.

                                  EXPLORATION

Stratoni has a mine life of six years based on current reserves, but the deposit
is open in all directions and there is good potential to expand the resource and
reserve base. Hellas Gold intends to initiate an aggressive exploration
programme, with drilling expected to start in Q2 2006.

The Stratoni mine comprises two deposits that are about 2 km apart, the Mavres
Petres deposit to the west and the Madem Lakkos to the east. Both deposits are
hosted by marble units. The exploration programme will mainly focus on the areas
of high potential between the two deposits outside inhabited areas, which
remains largely unexplored. The new Stratoni decline is ideally placed to allow
the exploration of this prospective area, and the rapid access to and
exploitation of any new discoveries. Drilling will be conducted using fanned
holes from 200 metre spaced drill cubbies along the decline. Drilling will also
be conducted in order to upgrade current inferred resources around the
peripheries of defined reserves, and to investigate western extensions to the
mineralisation.

Hellas Gold is also carrying out the compilation of all data which will be
combined with satellite imagery interpretation into a single digital database to
assist with building geological models. Priority targets have been identified by
historic exploration, including the massive sulphide target at Piavitsa 800
metres to the west of the Mavres Petres reserves at Stratoni, and the
copper-gold porphyry target at Fisoka 2.5 kilometres south of the Stratoni mine.

Previous drilling at Piavitsa in 1998 along two lines identified a zone of
massive sulphide mineralisation grading 3 to 14 g/t gold, 58 to 198 g/t silver
and combined lead and zinc ranging between 1% and 20% over true widths of 2
metres to 7 metres. At Fisoka, a total of 26 diamond cores were drilled into the
target area between 1972 and 1982, and these returned grades of 0.3 to 0.5%
copper and 0.2 to 0.9 g/t gold over true widths of 10 metres to 72 metres.

Once the permits are granted for Skouries and Olympias, exploration focusing on
these priority targets will commence in parallel with targeted geophysical and
geochemical surveys along the main structural belts that host the mineralisation
identified to date on Hellas Gold's licence areas. The overall objective of this
exploration programme is to generate drill targets for the potential discovery
of major new massive sulphide and porphyry deposits.

                                THE WAY FORWARD

The submission of the business plans represents a significant milestone in
obtaining the necessary environmental and mining permits to develop the major
gold and base metals projects of Olympias and Skouries.

Hellas Gold is now focused on completing a full environmental impact study to be
submitted to the Greek State in Q3 2006. On approval, the environmental permits
for Skouries and Olympias will be issued.

Hellas Gold will then submit to the Greek State a technical report on the
Skouries and Olympias projects. This will be based on feasibility studies on the
projects which Hellas Gold is currently updating. The mining permits will be
issued on approval of the technical reports.

By contract, the Greek State is committed to review the business plans within
two months of submission, and issue environmental and mining permits for
Skouries and Olympias within 10 months of receiving all necessary studies and
reports for the projects.

Resources & Reserves Parameters

For additional information on the resource and reserve estimates for the
Company's projects, please refer to the Company's Resources & Reserves
Declaration at www.egoldfields.com/goldfields/resources.jsp.

The quantity and grade of the Piavitsa and Fisoka targets are conceptual in
nature, there has been insufficient exploration yet to define a mineral resource
on the properties and it is uncertain if further exploration will result in
discovery of a mineral resource on the properties.

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                 e-mail:bobbym@buchanan.uk.com
Office: +44 (0)20 7466 5000
Mobile: +44 (0)7802 875 227

The Sherbourne Group
Forbes West                             e-mail:forbes@sherbournegroup.ca
Office: +1 416 203 2200

Forward-looking Statements

Certain information included in this document, including any information as to
the Company's future financial or operating performance and other statements
that express management's expectations or estimates of future performance,
constitute "forward-looking statements." The words "expect", "will", "intend",
"estimate" and similar expressions identify forward-looking statements.
Forward-looking statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by management, are inherently
subject to significant business, economic and competitive uncertainties and
contingencies. The Company cautions the reader that such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual financial results, performance or achievements of the
Company to be materially different from its estimated future results,
performance or achievements expressed or implied by those forward-looking
statements and the forward-looking statements are not guarantees of future
performance. These risks, uncertainties and other factors include, but are not
limited to: changes in the worldwide price of gold, base metals or certain other
commodities (such as fuel and electricity) and currencies; ability to
successfully integrate acquired assets; legislative, political or economic
developments in the jurisdictions in which the Company carries on business;
operating or technical difficulties in connection with mining or development
activities; the speculative nature of gold and base metals exploration and
development, including the risks of diminishing quantities or grades of
reserves; and the risks involved in the exploration, development and mining
business. These factors are discussed in greater detail in the Company's
Management's Discussion & Analysis for the year ended 31 December 2004 filed on
SEDAR at www.sedar.com. The Company disclaims any intention or obligation to
update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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