RNS Number:5597A
European Goldfields Ltd
29 March 2006
For Immediate Release 29 March 2006
European Goldfields Limited
Consolidated Financial Statements
(Audited)
31 December 2005 and 2004
Management's Responsibility for Consolidated Financial Statements
The accompanying consolidated financial statements of European Goldfields
Limited are the responsibility of management and have been approved by the Board
of Directors of the Company. The financial statements include some amounts that
are based on management's best estimate using reasonable judgment.
The financial statements have been prepared by management in accordance with
Canadian generally accepted accounting principles.
Management maintains an appropriate system of internal controls to provide
reasonable assurance that transactions are authorised, assets safeguarded and
proper records are maintained.
The Audit Committee of the Board of Directors has met with the Company's
external auditors to review the scope and results of the annual audit and to
review the consolidated financial statements and related financial reporting
matters prior to submitting the consolidated financial statements to the Board
of Directors for approval.
The financial statements have been audited by BDO Dunwoody LLP, Chartered
Accountants, and their report follows.
(s) David Reading (s) David Grannell
------------------ ------------------
David Reading David Grannell
Chief Executive Officer Chief Financial Officer
Auditors' Report to the Shareholders of European Goldfields Limited
We have audited the consolidated balance sheets of European Goldfields Limited
as at 31 December 2005 and 2004 and the consolidated statements of loss and
deficit, equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at 31 December 2005
and 2004 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.
(s) BDO Dunwoody LLP
--------------------
Chartered Accountants
Toronto, Canada, 24 February 2006
European Goldfields Limited
Consolidated Balance Sheets
As at 31 December 2005 and 2004
(in thousands of US Dollars, except per share amounts)
2005 2004
Note $ $
Assets
Current assets
Cash and cash equivalents 30,536 65,253
Accounts receivable, prepaid expenses and supplies 5 5,352 2,047
Inventory 6 1,865 -
-----------------------
37,753 67,300
-----------------------
Non current assets
Plant and equipment 7 19,374 13,687
Deferred exploration and development costs 8
Greek production stage mineral properties 10,129 -
Greek development stage mineral properties 162,738 195,807
-----------------------
172,867 195,807
Romanian development stage mineral properties 27,843 26,332
-----------------------
200,710 222,139
-----------------------
Restricted investment 9 3,543 -
Future tax asset 10 5,238 2,415
-----------------------
266,618 305,541
=======================
Liabilities
Current liabilities
Accounts payable and accrued liabilities 11 3,988 3,820
Non current liabilities
Future tax liability 10 43,261 48,256
Non-controlling interest 14,239 18,036
Asset retirement obligation 12 5,307 5,811
----------------------
62,807 72,103
----------------------
Shareholders' equity
Capital stock 13 240,234 238,420
Contributed surplus 13 6,197 5,589
Cumulative translation adjustment (12,843) 8,964
Deficit (33,765) (23,355)
----------------------
199,823 229,618
----------------------
266,618 305,541
======================
The accompanying notes are an integral part of these consolidated financial
statements.
Approved by the Board of Directors
(s) David Grannell (s) Jeffrey O'Leary
------------------ -------------------
David Grannell, Director Dr Jeffrey O'Leary, Director
European Goldfields Limited
Consolidated Statements of Loss and Deficit
For the years ended 31 December 2005 and 2004
(in thousands of US Dollars, except per share amounts)
2005 2004
Note $ $
Income
Sales 1,521 -
Cost of sales (including amortisation and depletion (1,367) -
of $197 in 2005)
-------------------
Gross profit 154 -
-------------------
Other income
-------------------
Interest income 1,263 500
-------------------
Expenses
Hellas Gold water treatment expenses (for 3,848 1,472
non-operating mines)
Corporate administrative and overhead expenses 3,147 6,246
Impairment of mineral properties 2,362 4,806
Hellas Gold administrative and overhead expenses 2,113 296
Equity based compensation expense 1,823 6,420
Foreign exchange loss/(gain) 937 (510)
Accretion of asset retirement obligation 12 267 24
Amortisation 236 93
Capital raising costs - Convertible loan notes - 1,122
-------------------
14,733 19,969
-------------------
Share of loss in equity investment - 730
-------------------
Loss for the year before income tax 13,316 20,199
Income taxes 10 (1,694) (482)
-------------------
Loss for the year after income tax 11,622 19,717
Non-controlling interest (1,212) (534)
-------------------
Loss for the year 10,410 19,183
Deficit - Beginning of year 23,355 4,172
-------------------
Deficit - End of year 33,765 23,355
-------------------
Loss per share 4 0.09 0.39
Weighted average number of shares (in thousands) 112,098 49,246
The accompanying notes are an integral part of these consolidated financial
statements.
European Goldfields Limited
Consolidated Statements of Equity
As at 31 December 2005 and 2004
(in thousands of US Dollars, except per share amounts)
Cumulative Deficit Total
Capital Contributed Translation $ $
Stock Surplus Adjustment
$ $ $
-------------------------------------------------------
Balance - 31 December 2003 27,302 2,374 5,404 (4,172) 30,908
-------------------------------------------------------
Shares issued as consideration
for shares in Hellas Gold
77,426 - - - 77,426
Shares issued from brokered
private placements
75,729 - - - 75,729
Shares issued from non-brokered
private placements
35,846 - - - 35,846
Shares issued on conversion of
convertible loan
14,920 (673) - - 14,247
Warrants exercised 7,428 - - - 7,428
Equity based compensation - 3,893 - - 3,893
expense
Movement in cumulative
translation adjustment
- - 3,560 - 3,560
Milestone shares issued as 1,802 725 2,527
compensation
Share options exercised 2,588 (652) - - 1,936
Transfer of broker warrant
related expense to share issue
cost - (78) - - (78)
Share issue costs (4,621) - - - (4,621)
Loss for the period - - - (19,183) (19,183)
--------------------------------------------------------
211,118 3,215 3,560 (19,183) 198,710
--------------------------------------------------------
--------------------------------------------------------
Balance - 31 December 2004 238,420 5,589 8,964 (23,355) 229,618
--------------------------------------------------------
Equity based compensation - 2,265 - - 2,265
expense
Restricted share units vested 815 (815) - - -
Share options exercised 287 (117) - - 170
Milestone shares issued as 725 (725) - - -
compensation
Share issue costs (13) - - - (13)
Movement in cumulative
translation adjustment
- - (21,807) - (21,807)
Loss for the period - - - (10,410) (10,410)
--------------------------------------------------------
1,814 608 (21,807) (10,410) (29,795)
--------------------------------------------------------
--------------------------------------------------------
Balance - 31 December 2005 240,234 6,197 (12,843) (33,765) 199,823
--------------------------------------------------------
The accompanying notes are an integral part of these consolidated financial
statements.
European Goldfields Limited
Consolidated Statements of Cash Flows
For the years ended 31 December 2005 and 2004
(in thousands of US Dollars, except per share amounts)
2005 2004
Note $ $
Cash flows from operating activities
Loss for the year (10,410) (19,183)
Foreign exchange loss/(gain) 1,384 (510)
Amortisation 364 93
Capital raising costs - Convertible loan notes - 1,122
Equity based compensation expense 1,956 6,420
Impairment of mineral properties 2,362 4,806
Accretion of asset retirement obligation 12 267 24
Future tax asset recognised (1,729) (528)
Loss on disposal of equipment - 2
Non-controlling interest (1,212) (535)
Depletion of mineral properties 8 69 -
-----------------
(6,949) (8,289)
Net changes in non-cash working capital 16 (4,769) 2,093
------------------
(11,718) (6,196)
------------------
Cash flows from investing activities
Deferred exploration and development costs - Romania (3,901) (5,971)
Plant and equipment - Greece (7,839) -
Deferred development costs - Greece (2,840) -
Acquisition of Hellas Gold assets net of cash - (61,075)
acquired
Short term investment - 3,091
Restricted investment (3,543) -
Proceeds from disposal of equipment 42 22
Purchase of equipment (219) (339)
------------------
(18,300) (64,272)
------------------
Cash flows from financing activities
Proceeds from exercise of warrants - 7,428
Proceeds from brokered private placements - 75,729
Proceeds from non-brokered private placement - 35,846
Proceeds from exercise of share options 170 1,936
Share issue costs (14) (4,621)
------------------
156 116,318
------------------
Effect of foreign currency translation on cash (4,855) 4,405
------------------
(Decrease)/Increase in cash and cash equivalents (34,717) 50,255
Cash and cash equivalents - Beginning of year 65,253 14,998
------------------
Cash and cash equivalents - End of year 30,536 65,253
------------------
The accompanying notes are an integral part of these consolidated financial
statements.
European Goldfields Limited
Notes to Consolidated Financial Statements
For the years ended 31 December 2005 and 2004
(in thousands of US Dollars, except per share amounts)
1. Nature of operations
European Goldfields Limited (the "Company"), a company incorporated under the
Yukon Business Corporations Act, 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 - The Company holds a 65% interest in Hellas Gold S.A. ("Hellas Gold").
Hellas Gold owns assets in northern Greece which consist of three 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.
The three deposits are located within a 10 km radius of each other. Both
Stratoni and Olympias were previously in production and have existing mining and
plant infrastructure and a ship-loading facility on the Aegean Sea. Hellas
Gold's assets also include potential revenue-generating stockpiles of
concentrates located on the surface.
In September 2005, Hellas Gold resumed production at Stratoni following the
award by the Greek state of all necessary environmental and mining permits.
Hellas Gold is in the process of applying for similar permits for Olympias and
Skouries, having met its first milestone by submitting business plans to the
Greek government in January 2006.
Romania - The Company holds five mineral properties located within the "Golden
Quadrilateral" area of Romania through an 80% interest in Deva Gold S.A. ("Deva
Gold") and a 100% interest in European Goldfields Deva SRL, which are in the
process of exploring their mineral properties and have not yet determined
whether those properties contain economic reserves. The Company's primary focus
is to advance its 80%-owned Certej deposit. The Company has recently completed
an in-house pre-feasibility study underpinning the value of the Certej deposit.
The underlying value of the deferred exploration and development costs for
mineral properties is dependent upon the existence and economic recovery of
reserves in the future, and the ability to raise long-term financing to complete
the development of the properties.
For the coming year, the Company believes it has adequate funds available to
meet its corporate and administrative obligations and its planned expenditures
on its mineral properties.
These consolidated financial statements have been prepared on a going concern
basis, which assumes the Company will be able to realise assets and discharge
liabilities in the normal course of business for the foreseeable future. These
consolidated financial statements do not include the adjustments that would be
necessary should the Company be unable to continue as a going concern.
2. 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.
3. Business combination - Acquisition of a controlling interest in Hellas Gold
In February 2004, the Company acquired an initial 37.97% interest (30% on a
fully-diluted basis) in Hellas Gold for a total subscription price of Euro18
million ($24.06 million) in cash.
In November 2004, the Company completed the acquisition of additional shares in
Hellas Gold
(the "Purchased Shares"), increasing its total interest from 37.97% to 55.70%,
and assumed an obligation to subscribe to additional shares in Hellas Gold for a
subscription price of $23.48 million (the "Subscription Obligation"), resulting
in an interest of 65% on a fully-diluted basis (the "Acquisition"). The total
price paid by the Company for the Purchased Shares and for the assumption of the
Subscription Obligation was $125.35 million, satisfied as follows:
(a) $77.43 million by the issue in November 2004 of 30,423,280 common shares to
the vendors at a deemed issue price of #1.75 (C$3.98) per share. This was
accounted for at a price per share of
#1.38 (C$3.14), representing the then fair market value of such shares; and
(b) $47.92 million paid in cash to the vendors in December 2004.
Transaction costs of $3.99 million were also accounted for as part of the
Acquisition.
In January 2005, the Company satisfied the Subscription Obligation for a
subscription price of
US$23.48 million.
To fund the cash requirements relating to the Acquisition and provide additional
working capital, the Company raised concurrently #40 million ($75.73 million)
(before expenses) by the issue of
29,629,630 common shares at a price of #1.35 (C$3.07) per share (the "Placing").
The balance of the cash consideration required for the Acquisition was funded by
a non-brokered private placement with Commerzbank A.G. completed in May 2004,
where 5,882,000 common shares at a price of #1.70 (C$4.18) per share were
issued, for total subscription proceeds of #10 million ($17.76 million).
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. From 9 February
2004 to 30 November 2004, the Company's initial 37.97% interest (30% on a
fully-diluted basis) in Hellas Gold was accounted for as an equity investment
and the Company's share of loss in Hellas Gold was included in the consolidated
statements of loss and deficit.
A summary of the fair value of net assets acquired and consideration given is as
follows:
$
Cash and short term investments 14,270
Net current assets 936
Land 4,023
Mines, farms and forest 3,994
Other assets 5,102
Asset retirement obligation (5,787)
Future tax assets 1,104
Mineral properties 195,807
Future tax liabilities (47,473)
Non-controlling interest (18,571)
-------
153,405
-------
Purchase consideration
Cash paid 71,983
Shares issued (30,423,280 common shares) 77,426
Transaction costs 3,996
-------
Purchase price 153,405
-------
4. Significant accounting policies
These consolidated financial statements have been prepared on the going concern
basis in accordance with Canadian GAAP and reflect the following significant
accounting policies.
Basis of consolidation
Business acquisitions are accounted for under the purchase method and the
results of operations of these businesses are included in these consolidated
financial statements from the acquisition date. Investments in affiliated
companies over which the Company has significant influence are accounted for
using the equity method. Investments in other businesses are recorded at cost.
These consolidated financial statements include the accounts of the Company and
the following subsidiaries:
Company Country of
incorporation
Ownership
European Goldfields (Services) England 100% owned
Limited
European Goldfields Deva SRL Romania 100% owned
Deva Gold (Barbados) Ltd Barbados 100% owned
Castle Europa Ltd * Barbados 100% owned
Deva Gold S.A. Romania 80% owned
European Goldfields Mining Netherlands 100% owned
(Netherlands) B.V.
European Goldfields (Greece) B.V. Netherlands 100% owned
Global Mineral Resources Limited * Barbados 100% owned
Global Mineral Resources Holdings Luxembourg 100% owned
S.a.r.l.
Global Mineral Resources S.a.r.l. Luxembourg 100% owned
Hellas Gold S.A. Greece 65% owned
* Dissolved during the financial year ended 31 December 2005.
The 20% minority interest held in the Company's 80% owned subsidiary, Deva Gold,
is not accounted for in these consolidated financial statements. The basis for
this treatment is that the Company is required to fund 100% of all costs related
to the exploration and development of the mineral properties held by Deva Gold.
As a result, the Company is entitled to the refund of such costs (plus interest)
out of future cash flows generated by Deva Gold, prior to any dividends being
distributed to shareholders.
Estimates, risks and uncertainties
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the period. Significant
estimates and assumptions include those related to the recoverability of
deferred exploration and development costs for mineral properties.
While management believes that these estimates and assumptions are reasonable,
actual results could vary significantly.
Income taxes
Income taxes are calculated using the asset and liability method of tax
accounting. Under this method, current income taxes are recognised for the
estimated income taxes payable for the current period.
Future income tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities, and are
measured using the substantially enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The benefit of the
temporary differences is not recognised to the extent the recoverability of
future income tax assets is not considered more likely than not.
Plant and equipment
Plant and equipment are recorded at cost less accumulated amortisation.
Amortisation is calculated on a straight-line basis based on a useful life of
three years for office equipment, six years for vehicles, ten years for
leasehold improvements, at rates varying between three and five years for
exploration equipment and at rates varying between four and 20 years for
buildings. Amortisation for equipment used for exploration and development are
capitalised to mineral properties.
Deferred exploration and development costs
Acquisition costs of resource properties, together with direct exploration and
development costs incurred thereon, are deferred and capitalised. Upon reaching
commercial production, these capitalised costs are transferred from exploration
properties to producing properties on the consolidated balance sheets and are
amortised into operations using the unit-of-production method over the estimated
useful life of the estimated related ore reserves.
Based on annual impairment reviews made by management, in the event that the
long-term expectation is that the net carrying amount of these capitalised
exploration and development costs will not be recovered such as would be
indicated where:
- Producing properties:
* the carrying amounts of the capitalised costs exceed the related
undiscounted net cash flows of reserves;
- Exploration properties:
* exploration activities have ceased;
* exploration results are not promising such that exploration will not be
planned for the foreseeable future;
* lease ownership rights expire; or
* insufficient funding is available to complete the exploration program;
then the carrying amount is written down accordingly and the write-down amount
charged to operations.
Foreign currency translation
The Company's functional currency is the United States dollar. Monetary assets
and liabilities denominated in foreign currencies are translated at the exchange
rate in effect at the balance sheet date. Non-monetary assets and liabilities
and revenue and expenses arising from foreign currency transactions are
translated at the exchange rate in effect at the date of the transaction.
Exchange gains or losses arising from the translation are included in
operations.
Integrated foreign subsidiaries are accounted for under the temporal method.
Under this method, monetary assets and liabilities are translated at the
exchange rate in effect at the balance sheet date. Non-monetary assets and
liabilities are translated at historical rates. Revenue and expenses are
translated at average rates for the period. Exchange gains or losses arising
from the translation are included in operations except for those related to
mineral properties which are capitalised. The Company accounts for Deva Gold and
European Goldfields Deva SRL as integrated foreign subsidiaries.
Self-sustaining foreign subsidiaries are accounted for under the current rate
method. Under this method, all assets and liabilities are translated at the
exchange rate in effect at the balance sheet date. Revenue and expenses are
translated at average rates for the period. Exchange gains or losses arising
from the translation are recorded in equity in the cumulative translation
adjustment account. The Company accounts for Hellas Gold as a self-sustaining
foreign subsidiary.
Revenue recognition
Revenues from the sale of concentrates are recognised and are recorded at market
prices when title transfers and the rights and obligations of ownership pass to
the customer. A number of the Company's concentrate products are sold under
pricing arrangements where final prices are determined by quoted market prices
in a period subsequent to the date of sale. These concentrates are provisionally
priced at the time of sale based on forward prices for the expected date of the
final settlement. The terms of the contracts result in non-hedge derivatives
that do not qualify for hedge accounting treatment, because of the difference
between the provisional price and the final settlement price. These embedded
derivatives, if material, are adjusted to fair value through revenue each period
until the date of final price determination. Subsequent variations in the price
are recognised as revenue adjustments as they occur until the price is
finalised.
Loss per share ("LPS")
LPS is calculated based on the weighted average number of common shares issued
and outstanding during 2005 being 112,098,010 (2004 - 49,245,920). Diluted per
share amounts are calculated using the treasury stock method whereby proceeds
deemed to be received on the exercise of share options and warrants and on the
granting of restricted share units in the per share calculation are applied to
reacquire common shares. The effect of potential issuances of shares under share
options, warrants and restricted share units would be anti-dilutive, and
accordingly basic and diluted loss per share are the same.
Financial instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable and accounts payable and accrued liabilities. Unless
otherwise noted, it is management's opinion that the Company is not exposed to
significant interest or credit risks arising from these financial instruments.
The fair values of these financial instruments approximate their carrying values
unless otherwise noted.
The Company's operations expose it to significant fluctuations in foreign
exchange rates. The Company has monetary assets and liabilities denominated in
British pounds sterling, Romanian lei, euros and Canadian dollars, which are,
therefore, subject to exchange variations against the reporting currency, the
United States dollar. Included in cash and cash equivalents is approximately
$12.15 million denominated in euros.
The Company does not currently have any hedging policies or practices in place.
Equity-based compensation
The Company operates a share option plan and a restricted share unit plan, which
are described in Note 14. The Company accounts for equity-based compensation
granted under such plans using the fair value method of accounting. Under such
method, the cost of equity-based compensation is estimated at fair value and is
recognised in the income statement as an expense, or capitalised to deferred
exploration and development costs when the compensation can be attributed to
mineral properties. This cost is amortised over the relevant vesting period for
grants to directors, officers and employees, and recorded in full on the date of
grant for grants to non-employees. Any consideration received by the Company on
exercise of share options is credited to share capital.
Cash and cash equivalents
Cash and cash equivalents include cash and deposits with original maturities of
three months or less.
Asset retirement obligation
Effective 1 January 2004, the Company adopted the CICA Handbook Section 3110
"Asset Retirement Obligations", which established standards for asset retirement
obligations and the associated retirement costs related to reclamation and
abandonment. The fair value of the liability of an asset retirement obligation
is recorded when it is incurred and the corresponding increase to the asset is
depreciated over the life of the asset. The liability is increased over time to
reflect an accretion element considered in the initial measurement at fair
value. At 31 December 2005, the Company had an asset retirement obligation
relating to its mineral properties in Greece.
Impairment of long-lived assets
Effective 1 January 2004, the Company adopted the new recommendations of CICA
Handbook Section 3063 "Impairment of Long-lived Assets" on a prospective basis.
Section 3063 requires that long-lived assets and intangibles to be held and used
by the Company be reviewed for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
If changes in circumstances indicate that the carrying amount of an asset that
an entity expects to hold and use may not be recoverable, future cash flows
expected to result from the use of the asset and its disposition must be
estimated. If the undiscounted value of the future cash flows is less than the
carrying amount of the asset, impairment is recognised based on the fair value
of the assets. Effective 31 December 2004, the Company relinquished its
80%-owned exploitation license for the Zlatna perimeter in Romania and a
provision for the costs of this property has been recorded. Effective 31
December 2005, the Company relinquished its 80%-owned exploitation license for
the Bolcana perimeter in Romania and a provision for the costs of this property
has been recorded.
Inventory
Inventories of ore mined and metal concentrates are valued at the lower of
combined production cost and net realisable value. Production costs include the
costs directly related to bringing the inventory to its current condition and
location, such as materials, labour, mine site overheads, related depreciation
of mining and processing facilities, related depletion of mineral properties and
deferred exploration and development costs. Exploration supplies are valued at
the lower of cost and net realisable value .
5. Accounts receivable, prepaid expenses and supplies
This balance comprises the following:
2005 2004
$ $
Taxes recoverable 2,950 1,100
Accounts receivable 2,236 701
Prepaid expenses 129 204
Exploration supplies 37 18
Interest receivable - 24
-----------------
5,352 2,047
-----------------
6. Inventory
This balance comprises the following:
2005 2004
$ $
Ore mined 583 -
Metal concentrates 1,274 -
Material and supplies 8 -
-----------------
1,865 -
-----------------
7. Plant and equipment
Exploration
/ office Land and Leasehold Total
equipment Vehicles buildings Improvements
$ $ $ $ $
Cost - 2004
At 31 December 2003 352 433 - - 785
Additions 1,275 782 11,379 219 13,655
Disposals (27) - - - (27)
Currency translation 11 9 - - 20
adjustment
Transfer to mineral (222) (103) - - (325)
properties
-------------------------------------------------
At 31 December 2004 1,389 1,121 11,379 219 14,108
-------------------------------------------------
Accumulated amortisation - 2004
At 31 December 2003 171 128 - - 299
Provision for the year 137 85 16 11 249
Disposals (3) - - - (3)
Currency translation 4 3 - - 7
adjustment
Transfer to mineral (177) 46 - - (131)
properties
-------------------------------------------------
At 31 December 2004 132 262 16 11 421
-------------------------------------------------
Net book value at 31 1,257 859 11,363 208 13,687
December 2004 -------------------------------------------------
Cost - 2005
At 31 December 2004 1,389 1,121 11,379 219 14,108
Additions 4,318 190 3,546 4 8,058
Disposals - (42) - - (42)
Currency translation (148) (135) (1,523) - (1,806)
adjustment
-------------------------------------------------
At 31 December 2005 5,559 1,134 13,402 223 20,318
-------------------------------------------------
Accumulated amortisation - 2005
At 31 December 2004 132 262 16 11 421
Provision for the year 321 150 134 22 627
Disposals - - - - -
Currency translation (33) (40) (31) - (104)
adjustment
-------------------------------------------------
At 31 December 2005 420 372 119 33 944
-------------------------------------------------
Net book value at 31 5,139 762 13,283 190 19,374
December 2005 -------------------------------------------------
8. Deferred exploration and development costs
Romanian mineral properties:
Baita-
Certej Zlatna Bolcana Craciunesti Voia Cainel Total
$ $ $ $ $ $ $
---------------------------------------------------------------------
Balance - 31 16,663 4,294 2,103 2,032 271 - 25,363
---------------------------------------------------------------------
December 2003
Drilling and 2,323 211 36 279 6 - 2,855
assaying
Geosciences and 458 48 20 45 34 - 605
tech. consulting
Samplers, miners and 122 26 5 24 9 - 186
surveying
Project management 205 33 24 38 25 - 325
Project overhead 696 65 14 81 100 - 956
Amortisation 108 16 15 15 3 - 157
Currency adjustment 456 113 62 53 7 - 691
Impairment of - (4,806) - - - - (4,806)
mineral properties
---------------------------------------------------------------------
4,368 (4,294) 176 535 184 - 969
---------------------------------------------------------------------
Balance - 31 21,031 - 2,279 2,567 455 - 26,332
December 2004 ---------------------------------------------------------------------
Drilling and 487 - 10 157 1 396 1,051
assaying
Geosciences and 429 - 20 48 25 189 711
tech. consulting
Samplers, miners and 89 - 8 6 - 153 256
surveying
Project management 269 - 1 (8) 24 78 364
Project overhead 995 - 31 165 7 161 1,359
Amortisation 100 - 13 13 1 5 132
Impairment of - - (2,362) - - - (2,362)
mineral properties
2,369 - (2,279) 381 58 982 1,511
---------------------------------------------------------------------
Balance - 31 23,400 - - 2,948 513 982 27,843
December 2005 ---------------------------------------------------------------------
The Certej, Bolcana and Zlatna exploitation licences and the Baita- Craciunesti
exploration licence are held by the Company's 80%-owned subsidiary, Deva Gold.
Minvest S.A. (a Romanian state owned mining company), together with three
private Romanian companies, hold the remaining 20% interest in Deva Gold and the
Company holds the pre-emptive right to acquire such 20% interest. The Company is
required to fund 100% of all costs related to the exploration and development of
these properties. As a result, the Company is entitled to the refund of such
costs (plus interest) out of future cash flows generated by Deva Gold, prior to
any dividends being distributed to shareholders.
The Voia and Cainel exploration licences are held by the Company's wholly-owned
subsidiary, European Goldfields Deva SRL.
Effective 31 December 2004, the Company relinquished its exploitation license
for the Zlatna perimeter in Romania and a provision for the costs of this
property has been recorded. Effective 31 December 2005, the Company relinquished
its exploitation license for the Bolcana perimeter in Romania and a provision
for the costs of this property has been recorded.
Individual property spending commitments for each of the Company's Romanian
licences have been met as at 31 December 2005 and 2004.
Greek mineral properties:
Stratoni Skouries Olympias Total
$ $ $ $
------------------------------------------------
Balance - 31 December 2004 11,376 73,517 110,914 195,807
------------------------------------------------
Deferred development costs 421 687 1,939 3,047
Depletion of mineral (168) - - (168)
properties
Currency translation (1,500) (9,694) (14,625) (25,819)
adjustment
-------------------------------------------------
(1,247) (9,007) (12,686) (22,940)
-------------------------------------------------
Balance - 31 December 2005 10,129 64,510 98,228 172,867
-------------------------------------------------
The Stratoni, Skouries and Olympias properties are held by the Company's
65%-owned subsidiary, Hellas Gold. In September 2005, the Stratoni property
commenced production.
Greek State Contract
On 12 December 2003, Hellas Gold entered into a contract with the Greek State
(the "Greek State Contract") pursuant to which Hellas Gold acquired the assets
referred to in the preceding paragraph (the "Greek Assets"). The Greek State
Contract was ratified by Greek parliament on 8 January 2004 and passed into law
on 28 January 2004. The purchase price paid by Hellas Gold to the Greek State
for the Greek Assets was Euro11 million ($15 million) in cash. Under the Greek
State Contract, among other things:
a) Hellas Gold must prepare business plans for the development of the Greek
Assets and construction/operation of a gold processing plant on or before 28
January 2006, and the Greek state is committed to review the business plans
within two months of submission, and issue environmental and mining permits for
the projects within 10 months of receiving all necessary studies and reports for
the projects;
b) Hellas Gold must commence preparatory work in respect of the Madem Lakkos and
Mavres Petres mines in order to allow recommencement of production activities
within a reasonable period of time;
c) Hellas Gold must take all required actions and procedures to protect the
environment as directed by the Minister of Development for Greece, including the
adoption of measures for water re-treatment;
d) Hellas Gold does not have any environmental liabilities arising before the
date of ratification of the Greek State Contract;
e) all licences and approvals which were issued by an administrative or other
government authority and which expire before 31 December 2006 were automatically
extended to 31 December 2006;
f) if Hellas Gold is evicted from any of the transferred property, no claim can
be made by Hellas Gold in order to reduce the purchase price; and
g) if either party breaches the terms of the Greek State Contract, the
non-defaulting party may terminate the contract and, on termination, all assets
are to be returned to the Greek government and the purchase price repaid without
interest. The non-defaulting party may be entitled to compensation for damages
resulting from the termination.
9. Restricted investment
The balance consists of an amount of $3,543 (Euro3 million) pledged by Hellas Gold
to the National Bank of Greece as collateral for a Letter of Guarantee issued by
the National Bank of Greece to the Greek Ministry of Development to guarantee
Hellas Gold's environmental commitments under its mining permit at Stratoni. The
Letter of Guarantee expires on 31 December 2010. The investment bears a rate of
interest of Euribor plus 0.8% per annum.
10. Income taxes
The following table reconciles the expected income tax recovery at the Canadian
statutory income tax rate to the amounts recognised in the consolidated
statements of loss and deficit:
2005 2004
$ $
------------------
Income tax rate 36.12% 37.12%
Income taxes at statutory rates (4,373) (7,333)
Tax rate difference from foreign jurisdictions 501 490
Permanent differences 757 2,845
Change in tax rate (64) (40)
Currency translation adjustment - (144)
Change in valuation allowance 1,451 3,667
Large corporations tax 9 33
Other 25 -
------------------
(1,694) (482)
------------------
The following table reflects future income tax assets:
2005 2004
$ $
------------------
Loss carry forwards 10,280 6,637
Retirement obligation 1,388 783
Plant and equipment 22 5
Inventory 9 -
Valuation allowance (6,461) (5,010)
------------------
Future income tax recognised 5,238 2,415
------------------
The following table reflects future income tax liabilities:
2005 2004
$ $
------------------
Mineral properties 41,213 48,256
Plant and equipment 1,276 -
Exploration and development expenditure 772 -
------------------
43,261 48,256
------------------
The tax liability arises as a result of the increase in value placed on the
mineral properties held by Hellas Gold on acquisition by the Company. This
future tax liability will reverse as the corresponding mineral properties are
amortised.
The Company has available tax losses for income tax purposes of approximately
$32,158 (2004 - $17,736) which may be carried forward to reduce taxable income
derived in future years. The non-capital losses will expire as follows:
2005
$
------
2007 130
2008 383
2009 7,227
2010 9,571
2014 6,443
2015 2,605
Non expiring losses 5,799
-------
32,158
-------
In addition, the Company incurred share issue costs and other deductible
temporary differences, which have not yet been claimed for income tax purposes,
totalling approximately $5,050 (2004 - $6,980). Subject to certain restrictions,
exploration and development expenditures available to reduce taxable income in
Romania is $23,405 (2004 - $25,641)
A valuation allowance has been provided as a portion of the potential income tax
benefits of these carry-forward non-capital losses and deductible temporary
differences and the realisation thereof is not considered more likely than not.
11. Accounts payable and accrued liabilities
The balance principally comprises amounts outstanding for normal operations and
ongoing costs. The average credit period taken during the financial year ended
31 December 2005 was 30 days
(2004 - 30 days).
12. Asset retirement obligation
Management has estimated the total future asset retirement obligation based on
the Company's net ownership interest in the Olympias, Skouries and Stratoni
mines and facilities. This includes all estimated costs to dismantle, remove,
reclaim and abandon the facilities and the estimated time period during which
these costs will be incurred in the future. The following table reconciles the
asset retirement obligations for the financial years ended 31 December 2005 and
2004:
2005 2004
$ $
------------------
Asset retirement obligation - Beginning of year 5,811 -
Additional obligation - 5,787
Currency translation adjustment (771) -
Accretion expense 267 24
------------------
Asset retirement obligation - End of year 5,307 5,811
------------------
The undiscounted amount of estimated cash flows required to settle the
obligation is $5,970 (2004 - 16,850). The estimated cash flow has been discounted
using a credit adjusted risk free rate of 5.04%. The expected period until settlement
is six years.
13. Capital stock
Authorised:
- Unlimited number of common shares, without par value
- Unlimited number of preferred shares, issuable in series, without par value
Issued and outstanding (common shares - all fully paid):
Number of Amount
Shares $
-------------------
Balance - 31 December 2003 22,021,126 27,302
-------------------
Shares issued on conversion of convertible loan notes 8,309,947 14,920
(a)
Shares issued from non-brokered private placement (b) 9,458,750 18,079
Shares issued from non-brokered private placement (c) 5,882,000 17,767
Shares issued from brokered private placement (d) 29,629,630 75,729
Shares issued as consideration for shares in Hellas 30,423,280 77,426
Gold S.A. (e)
Share options exercised 1,350,000 2,588
Milestone shares issued as compensation (f) 755,000 1,802
Warrants exercised 3,918,975 7,428
Share issue costs - (4,621)
-------------------
89,727,582 211,118
-------------------
Balance - 31 December 2004 111,748,708 238,420
--------------------
Restricted share units vested (Note 14) 425,000 815
Milestone shares issued as compensation (f) 350,000 725
Share options exercised (Note 14) 75,000 287
Share issue costs - (13)
--------------------
850,000 1,814
--------------------
Balance - 31 December 2005 112,598,708 240,234
--------------------
a) In December 2003, the Company raised $14.92 million by way of a
brokered private placement of convertible loan notes. Following the completion
of certain transactions (the "Conversion Events"), the convertible loan notes
were automatically converted in March 2004 into 8,309,947 common shares of the
Company at a price of C$2.35 per share. The convertible loan notes were
non-interest bearing unless the Conversion Events did not occur by 31 March 2004
or certain other events of default occurred, in which case they would have born
interest at a rate of 18% per annum thereafter. The present value of interest
forgone, amounting to $751,928, attributable to the convertibility features of
the convertible loan notes has been credited to contributed surplus.
b) In February 2004, the Company raised $18.08 million by way of a
non-brokered private placement of 9,458,750 special warrants at a price of
C$2.50 per warrant. The warrants were exercised in February 2004 into 9,458,750
common shares of the Company.
c) In May 2004, the Company completed a non-brokered private placement
with Commerzbank A.G. of 5,882,000 common shares of the Company at a price of
#1.70 (C$4.18) per share for total subscription proceeds of #10 million ($17.76
million).
d) In November 2004, the Company raised $75.73 million by way of a
brokered private placement of 29,629,630 common shares of the Company at a price
of #1.35 (C$3.07) per share.
e) In November 2004, the Company issued 30,423,280 common shares at a
price of #1.75 (C$3.98) per share in partial payment ($95.83 million) of the
purchased price paid by the Company for the acquisition of a controlling
interest in Hellas Gold (Note 3). This was accounted for at a price per share of
#1.38 (C$3.14) amounting to $77.43 million, representing the then fair market
value of such shares.
f) During the financial year ended 31 December 2004, the Company
issued a total of 755,000 common shares to senior officers of the Company under
its Milestone Share Compensation Plan, 250,000 of which at a fair value of
C$2.71 per share, 100,000 at a fair value of C$3.36 per share and 405,000 at a
fair value of #1.35 (C$3.07) per share. Furthermore, in July 2004, the Company
undertook to issue in March 2005 an additional 350,000 commons shares at a fair
value of C$2.71 per share to a senior officer of the Company under its Milestone
Share Compensation Plan. Such shares were issued on
17 March 2005.
As at 31 December 2005, the Company had 30,423,280 common shares held in escrow
or in respect of which trading restrictions applied, representing the common
shares of the Company issued to the vendors pursuant to the Acquisition (Note
3). Of such shares, 7,500,000 were released from escrow on 7 February 2006. The
remaining shares will be released from escrow on the date on which the Company
publishes its audited consolidated financial statements for the year ended 31
December 2005. The escrow agent is Computershare Trust Company of Canada.
Contributed surplus:
2005 2004
$ $
Equity based compensation expense 5,619 5,011
Broker warrants 578 578
-----------------
6,197 5,589
-----------------
14. Share options, restricted share units and milestone shares
Share Option Plan
The Company operates a Share Option Plan (together with its predecessor, the
"Share Option Plan") authorising the directors to grant options to acquire
common shares of the Company to the directors, officers, employees and
consultants of the Company and its subsidiaries, on terms that the Board of
Directors may determine, within the limitations of the Share Option Plan.
As at 31 December 2005, the following share options were outstanding:
Number of Exercise
options price
C$
Expiry date
2006 226,000 1.40
2006 64,000 2.50
2007 300,000 2.50
2008 175,000 2.20
2009 890,000 2.80
2009 265,000 3.20
2009 250,000 4.20
2009 625,000 3.07
2009 285,000 3.15
2010 1,379,333 2.00
2010 75,000 2.11
2010 150,000 2.40
-------------------
4,684,333 2.58
-------------------
During the financial years ended 31 December 2005 and 2004, share options were
granted, exercised and cancelled as follows:
Number of Weighted
Options average
exercise
price
C$
---------------------
Balance - 31 December 2003 2,690,000 1.96
---------------------
Options granted - 2004 3,260,000 3.05
Options exercised - 2004 (1,350,000) 1.80
Options cancelled - 2004 (585,000) 2.31
---------------------
Balance - 31 December 2004 4,015,000 2.85
---------------------
Options granted - 2005 1,626,000 2.04
Options exercised - 2005 (75,000) 2.80
Options cancelled - 2005 (881,667) 2.78
---------------------
Balance - 31 December 2005 4,684,333 2.58
---------------------
Of the 4,684,333 share options outstanding as at 31 December 2005, 3,443,889
were fully vested and had a weighted average exercise price of C$2.70 per share.
The weighted average grant-date fair value of the 1,626,000 share options
granted during 2005 (2004 - 3,260,000) was C$2.04 (2004 - C$3.05).
An equity-based compensation cost of $1,324 (2004 - $4,858) has been recognised
in the income statement for these share options.
The fair value of the share options granted has been estimated at the date of
grant using a Black-Scholes option pricing model with the following assumptions:
weighted average risk free interest rate of 2.25%
(2004 - 2.3%); volatility factor of the expected market price of the Company's
shares of 53.98% to 60.60% (2004 - 62.84%); and a weighted average expected life
of the share options of five years
(2004 - 4 to 5 years).
Restricted Share Unit Plan
The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorising
the directors, based on recommendations received from the Compensation
Committee, to grant Restricted Share Units ("RSUs") to designated directors,
officers, employees and consultants. The RSUs are "phantom" shares that rise and
fall in value based on the value of the Company's common shares and are redeemed
for actual common shares on the vesting dates determined by the Board of
Directors when the RSUs are granted. The RSUs would typically become 100% vested
upon a change of control of the Company. The maximum number of common shares of
the Company which may be reserved for issuance for all purposes under the RSU
Plan shall not exceed 2.5% of the common shares issued and outstanding from time
to time.
As at 31 December 2005, the following RSUs were outstanding:
Number of Grant date
RSUs fair value
of
underlying
shares
Vesting date C$
31 December 2006 400,000 2.19
31 December 2007 350,000 2.19
------------------------
750,000 2.19
------------------------
During the financial years ended 31 December 2005 and 2004, RSUs were granted,
vested and cancelled as follows:
Weighted
average
grant date
fair value
of
underlying
Number of shares
RSUs C$
-----------------------
Balance - 31 December 2003 and 2004 - -
-----------------------
RSUs granted - 2005 1,175,000 2.20
RSUs vested - 2005 (425,000) 2.22
RSUs cancelled - 2005 - -
-----------------------
Balance - 31 December 2005 750,000 2.19
-----------------------
The weighted average grant date fair value of underlying shares of the 1,175,000
RSUs granted during 2005 (2004 - Nil) was C$2,573 (2004 - Nil). For the RSUs
granted during 2005, an equity-based compensation cost of $498 (2004 - Nil) has
been recognised in the income statement and $442 (2004 - Nil) has been
capitalised to deferred exploration and development costs.
Milestone Share Compensation Plan
Until the adoption of the RSU Plan in June 2005, the Company operated a
Milestone Share Compensation Plan (the "Milestone Share Compensation Plan")
authorising the directors, based on recommendations received from the
Compensation Committee, to issue common shares of the Company to executive
officers of the Company and its subsidiaries to recognise out of the ordinary
performance in achieving corporate milestones set by the Board of Directors. The
maximum number of common shares of the Company which was reserved for issuance
under the Milestone Share Compensation Plan could not exceed
1,108,970 common shares. As at 31 December 2005, a total 1,105,000 common shares
(2004 - 755,000 common shares) had been issued under the Milestone Share
Compensation Plan, at a weighted average fair value of C$2.90 per share.
15. Warrants
During the financial years ended 31 December 2005 and 2004, warrants were
granted, exercised and expired as follows:
Weighted
average
exercise
Number of price
warrants C$
----------------------
Balance - 31 December 2003 4,655,498 2.49
----------------------
Warrants granted - 2004 - -
Warrants exercised - 2004 (3,918,975) 2.50
Warrants expired - 2004 (321,025) 2.50
----------------------
Balance - 31 December 2004 415,498 2.35
----------------------
Warrants granted - 2005 - -
Warrants exercised - 2005 - -
Warrants expired - 2005 (415,498) 2.35
----------------------
Balance - 31 December 2005 - -
----------------------
As part of the compensation related to the December 2003 brokered private
placement of convertible loan notes, the agents received 415,498 broker warrants
at an exercise price of C$2.35 for a period of eighteen months. The fair value
of the 415,498 broker warrants has been estimated using a Black-Scholes pricing
model resulting in an amount of $309. Of this amount $293 has been debited to
deferred financing costs and $15 has been debited to contributed surplus as
capital raising costs - convertible loan notes.
The following assumptions were used in the Black-Scholes pricing model: weighted
average risk free interest rate of 4.3%; volatility factor of the expected
market price of the Company's stock of 93.4%; and an expected life of the
warrants of eighteen months.
16. Supplementary cash flow information
2005 2004
$ $
------------------
Changes in non-cash operating accounts:
Accounts receivable, prepaid expenses and supplies (3,305) (1,032)
Accounts payable 169 3,125
Inventory (1,633) -
------------------
(4,769) 2,093
------------------
Supplemental cash flow information:
Income taxes paid 34 47
Supplemental disclosure of non-cash transactions:
Share options issued for non-cash consideration - 4,585
Exercise of share options - Transfer from contributed
surplus (725) (653)
to share capital
Vesting of restricted share units (815) -
17. Commitments
As at 31 December 2005, the Company had remaining spending commitments of $1,459
(2004 - $1,517) over the remaining term of its Voia exploration licence in
Romania which expires in March 2007.
The Company has spending commitments of $187 per year (plus service charges and
value added tax) for a term of ten years under the lease for its office in
London, England, which commenced in April 2004. The rent will be reviewed on the
fifth anniversary of the commencement of the term to reflect any increase in
rents in the market.
In November 2005, Hellas Gold entered into off-take agreements pursuant to which
Hellas Gold agreed to sell the following quantities of metal concentrates
produced at the Stratoni mine during the financial years ending 31 December
2006, 2007 and 2008:
2006 2007 2008
(dry metric tonnes)
------------------------
Zinc concentrates 42,700 51,000 15,000
Lead/silver concentrates 25,000 26,000 20,000
------------------------
67,700 77,000 35,000
------------------------
18. Transactions with related parties
As part of the Acquisition described in Note 3, the Company acquired from
companies owned by Frank Timis or over which he exercised control or direction,
an obligation to subscribe for a 21% interest (on a fully-diluted basis) in
Hellas Gold for an aggregate subscription price $23.48 million (Euro18 million).
Prior to the Acquisition, Frank Timis owned, or exercised control or direction
over, approximately 9% of the issued and outstanding common shares of the
Company. After completion of the Acquisition and the Placing described in Note
3, Frank Timis owned, or exercised control or direction over, approximately
18.9% of the issued and outstanding common shares of the Company.
As part of the Acquisition, the Company acquired a 14% interest (on a
fully-diluted basis) in Hellas Gold from Dimitrios Koutras. Prior to the
Acquisition, Dimitrios Koutras owned, or exercised control or direction over,
Nil% of the issued and outstanding common shares of the Company. After
completion of the Acquisition and the Placing, Dimitrios Koutras owned, or
exercised control or direction over, approximately 12.7% of the issued and
outstanding common shares of the Company.
The Acquisition was approved by the disinterested shareholders of the Company at
a Special Meeting of Shareholders held on 26 November 2004, and was completed
following the rules of the TSX Venture Exchange and the AIM Market of the London
Stock Exchange.
During the financial year ended 31 December 2005, Hellas Gold incurred costs of
$9,657 (2004 - $3,645) for management, technical and engineering services
received from a related party, Aktor S.A., a 35% shareholder in Hellas Gold. As
at 31 December 2005, Hellas Gold had accounts payable of $1,466 (2004 - $1,366)
to Aktor S.A. These expenses were contracted in the normal course of operations
and are recorded at the exchange amount agreed by the parties.
19. Segmented information
The Company has one operating segment: the acquisition, exploration and
development of precious and base metal mineral resources properties located in
Greece and Romania.
Geographic segmentation of plant and equipment and deferred exploration and
development costs and operating liabilities is as follows:
2005 2004
$ $
------------------
Revenue
Canada - -
Greece 1,521 -
Romania - -
United Kingdom - -
-----------------
1,521 -
-----------------
Plant and equipment and deferred exploration and development costs
Canada - -
Greece 191,659 208,873
Romania 28,081 26,543
United Kingdom 344 410
-------------------
220,084 235,826
-------------------
Operating liabilities
Canada 214 387
Greece 3,144 1,953
Romania 310 286
United Kingdom 320 1,194
------------------
3,988 3,820
------------------
20. Reconciliation to International Accounting Standards ("IAS")
These financial statements have been prepared in accordance with Canadian GAAP.
For Canadian GAAP, the Company has accounted for its investment in Hellas Gold
from the parent entity perspective which, focuses on the parent entity
shareholders and their interests in the subsidiary. For International Financial
Reporting purposes, the Company would account for its investment in Hellas Gold
from the economic entity perspective which views both the controlling and
non-controlling shareholders as equity holders in a consolidated entity that
should be viewed as, and accounted for, as a whole.
The effect of the differences between Canadian GAAP and IAS on the Company's
consolidated balance sheets and statements of equity is summarised as follows:
2005 2004
$ $
--------------------
Non current assets
Greek mineral properties under Canadian GAAP 172,867 195,807
Adjustment for IAS 88,234 105,209
--------------------
Greek mineral properties under IAS 261,101 301,016
--------------------
Non current liabilities
Non current liabilities under Canadian GAAP 62,807 72,103
Adjustment to future tax 22,069 27,780
Adjustment for non-controlling interest (14,239) (18,036)
-------------------
Non current liabilities under IAS 70,637 81,847
-------------------
Shareholders' equity
Shareholders' equity under Canadian GAAP 199,823 229,618
Adjustment to cumulative translation adjustment account (26,388) 5,658
Non-controlling interest under IAS 72,706 85,176
Additional depletion 41 -
-------------------
Shareholders' equity under IAS 246,182 320,452
-------------------
During the financial year ended 31 December 2004, the Company changed its
reporting currency from the Canadian dollar to the United States dollar. In
accordance with Canadian GAAP, the change was effected retrospectively, with
assets and liabilities translated at the end of the prior reporting periods (see
Note 2). Under IAS, a change in reporting currency is treated prospectively with
assets and liabilities translated at the rate prevailing at the date of change
in the functional currency. The impact of this difference on the balance sheets
of the prior periods has not been reported.
Other than the differences noted above, management considers that there are no
material differences between amounts reported under Canadian GAAP and those that
would result from the application of IAS.
21. Reclassification of comparative figures
Certain comparative figures have been reclassified to conform to the current
year's presentation.
22. Legal proceedings
The Company, from time to time, is involved in various claims, legal proceedings
and complaints arising in the ordinary course of business. There are no legal
proceedings to which the Company or any of its subsidiaries is a party or of
which any of their properties is the subject that would have a material adverse
effect on the consolidated financial condition or future results of the Company.
There are no such proceedings known to the Company to be contemplated.
23. Post balance sheet event
In January 2006, the Company granted 65,000 restricted share units ("RSUs")
under the Company's Restricted Share Unit Plan. The RSUs were redeemed for an
equal number of common shares of the Company on 31 January 2006. In March 2006,
the Company granted 100,000 RSUs under the Company's Restricted Share Unit Plan.
The RSUs are redeemable for an equal number of common shares of the Company on
15 May 2006.
In February 2006, the Company issued a total of 25,000 common shares pursuant to
the exercise of outstanding share options. Since 1 January 2006, 641,666
outstanding share options expired and were cancelled.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR VVLFLQXBLBBB
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