RNS Number:0151M
European Goldfields Ltd
14 November 2006
For Immediate Release 14 November 2006
EUROPEAN GOLDFIELDS LIMITED
RESULTS FOR Q3 2006
FIRST NET EARNINGS REPORTED
SALES UP 84% OVER Q2 2006
SKOURIES FEASIBILITY NEARS COMPLETION
13 November 2006 - European Goldfields Limited (AIM: EGU / TSX: EGU) ("European
Goldfields" or the "Company") today reports its results for the third quarter
ended 30 September 2006. Highlights since 30 June 2006 are:
Financial:
* Sales of US$32.6m in first nine months of 2006, compared to nil in 2005;
Sales up 84% in Q3 over Q2 2006
* Profit (before tax) of $5.4m for first nine months of 2006, compared
with a loss of $8.7m in 2005
* Operating cash flow increasing to $10.4m in first nine months of 2006,
up $17.0m over 2005
* Net earnings reported for the first time; $1.5m for Q3 2006
* Working capital of $39.7m at 30 September 2006; funded beyond permitting
of new projects
Greece:
* Stratoni shipments double in Q3 vs. Q2 2006, reflecting continued
ramp-up in operations
* First shipments of Olympias gold concentrates completed; further
agreements signed
* Extension drilling starts at Stratoni, with the aim of increasing life
of mine
* Skouries feasibility study nears completion
* Mining schedule for Phase 1 of Olympias completed
Romania:
* Urbanisation Certificate received for Certej, first milestone in the
permitting process
* Certej feasibility study on track for submission to Romanian government
in Q1 2007
* Licence agreements signed for the Albion Process Technology; 92% gold
recovery achieved on composite sample
Commenting on the results, David Reading, Chief Executive Officer of European
Goldfields, said: "We are delighted to be reporting net earnings for the first
time in the company's history. This is a reflection of growing revenues from our
two profit centres, the Stratoni mine and the sale of Olympias gold
concentrates. Future growth will also come from our other three major gold and
base metals projects. These are well on track with feasibility work near
completion and permitting progressing as planned.
With rapidly increasing cash flows and one of the largest proven gold and base
metal reserves in Europe, we remain on track to become a leading mid-tier
producer over the next few years."
Conference Call & Webcast - 14 November 2006 at 9am (EST) / 2pm (GMT)
European Goldfields will host a conference call on Tuesday, 14 November 2006 at
9:00 a.m. ET / 2:00 pm (London, UK time) to update investors and analysts on its
results for Q3 2006. Participants may join the call by dialing one of the three
following numbers, approximately 10 minutes before the start of the call.
From North America (toll free): 1-866 400 3310
From the U.K. (toll free): 0808 234 7435
International (toll free): 1-800 722 66726
A live audio webcast of the call will be available on http://viavid.net/
dce.aspx?sid=000037BB.
SELECTED FINANCIAL DATA
Three months ended 30 September Nine months ended 30 September
-------------------- --------------------
(in thousands of 2006 2005 2006 2005
US dollars,
except per share $ $ $ $
amounts) ----------- ----------- ----------- -----------
---------------
Statement of
loss and
deficit
Sales 15,211 - 32,568 57
Gross profit 7,958 - 16,583 57
Profit/(loss) 4,102 (3,264) 5,392 (8,673)
before income
tax
Profit/(loss) 2,984 (3,729) 2,835 (7,368)
after income tax
Non-controlling (1,509) 1,003 (2,209) 1,267
interest
Profit/(loss) 1,475 (2,726) 626 (6,101)
for the period
Earnings/(loss) 0.01 (0.02) 0.01 (0.05)
per share ----------- ----------- ----------- -----------
---------------
(in thousands of US dollars) 30 September 31 December
2006 2005
$ $
------------------ ------------ -------------
Balance sheet
Working capital 39,666 33,765
Total assets 294,719 266,618
------------------ ------------ -------------
European Goldfields' unaudited interim consolidated financial statements and
management's discussion and analysis for the three- and nine-month periods ended
30 September 2006 and 2005 are filed on SEDAR at www.sedar.com.
STRATONI OPERATIONS (GREECE)
Shipments double in Q3 2006 vs. Q2 2006 - European Goldfields' 65%-owned
subsidiary Hellas Gold completed six shipments of concentrates from Stratoni in
Q3 2006, amounting to 11,130 dry metric tonnes (dmt) of zinc concentrates and
3,696 dmt of lead/silver concentrates. Hellas Gold also completed five shipments
of gold concentrates from an existing stockpile at Olympias, amounting to
approximately 6,500 wet metric tonnes (wmt) of gold concentrates. This generated
total revenues of US$15.21 million in Q3 2006 for which Hellas Gold recorded a
gross profit of US$7.96 million.
This compares favorably to three shipments in Q2 2006 amounting to approximately
5,513 dmt of zinc concentrates and 2,337 dmt of lead/silver concentrates. As a
result, Hellas Gold reported a significant increase in revenues and gross profit
in Q3 2006 compared to Q2 2006. In the first nine months of 2006, Hellas Gold
recorded a gross profit of US$16.58 million on sales of US$32.57 million.
Hellas Gold is completely un-hedged and fully exposed to metal prices under its
off-take agreements.
Production continues to ramp up in 2006 - In Q3 2006, 49,652 wmt of ore were
mined from underground and 56,769 dmt of ore were milled at the Stratoni plant.
During the first nine months of 2006, 129,370 wmt of ore were mined from
underground and 132,912 dmt of ore were milled at the Stratoni plant.
Ore production rates have steadily increased since the beginning of the year,
from 400 tonnes per day (tpd) in January to 880 tpd in September. Ore production
is on track to achieve the anticipated 170,000 tonnes by the end of 2006, and is
expected to increase steadily thereafter up to a maximum of 400,000 tonnes per
annum by year five. At the end of Q3 2006, Hellas Gold had already achieved
almost 80% of its full year production target for 2006, despite the mine being
in a ramp-up phase during the first nine months of the year.
The successful ramp-up in production to date is a result of extensive
refurbishment of mine infrastructure undertaken in 2006. This included the
refurbishment and re-equipping of mine workings and equipment, installation of
key items such as a backfill pump to ensure tight fill in the upper levels, and
backfilling a large void inventory to provide working faces. Rehabilitation work
at the Stratoni mill was also essentially complete by Q3 2006.
Hellas Gold has also started an improved programme of detailed grade control in
Q3 2006. This has already increased the understanding of grade distribution
within the orebody and should improve mining efficiency and plant recovery over
time.
Ongoing investment in the plant includes new pumps and commissioning of the
already installed on-stream analyser for improved recovery.
Development underway for continued production ramp-up in 2007 - A ramp to access
the upper parts of the mine has been commenced, along with infrastructure to
connect the upper part of the mine with existing ore bins to improve ore
handling and ventilation. This infrastructure will provide access to new working
ends in the upper part of the mine to ensure the ramp-up in production continues
in 2007.
Significant progress has also been made on the new decline to the Mavres Petres
orebody, which is now approximately 800 metres in and advancing at over 5m per
day on average. The new decline is not necessary for mining in 2007 but becomes
critical for the future production ramp-up involving the deeper portions of the
orebody, as well as providing better ventilation.
Tailings strategy outlined - In order to ensure tailings storage capacity for
the life of mine, a global strategy for the management of tailings has been
developed by Hellas Gold. Additional tailings storage space has been created by
removing coarse material from existing storage facilities. This will be used to
backfill old workings. Dried fine material has also been moved from the existing
tailings ponds and following successful trials, a filter press has been bought
and is expected to be commissioned by the end of 2006. The filter press will be
used for processing fine tailings and water treatment sludge and will allow the
maximum utilisation of the space created at the existing facility. Coarse
tailings from production will be used for backfill of current workings.
Water management programme adopted - To reduce future water pumping and
treatment costs, Hellas Gold commenced backfilling of the old Madem Lakkos mine
workings. A total of 13,000m3 of void has been filled so far. In addition, a
second water treatment plant at the Stratoni mine site will be commissioned in
2007 to improve efficiency and provide capacity for extreme rainfall events. The
new plant will include a second filter press to allow dry storage of treatment
residue as filter cake.
Extension drilling starts at Stratoni - In October 2006, European Goldfields
began an exploration drilling programme at Stratoni. Stratoni already has
well-defined reserves over a six-year life of mine. Six areas targeted by the
drilling are obvious extensions to known mineralisation, in addition to more
conceptual targets between the two main Stratoni deposits.
The two targets being investigated first are known extensions to previously
mined areas of the Stratoni (Madem Lakkos) deposit, where production grades of 9
to 10.7% lead, 9 to 9.6% zinc and 160 to 185.3 g/t silver are recorded. The
programme is aimed at drilling out resources in these areas of known economic
mineralisation.
A further four target areas are formed by the inferred resources extending from
the Stratoni (Mavres Petres) deposit. The drilling programme is designed to
upgrade these inferred resources to the measured and indicated categories. These
inferred resources are extrapolations from the known reserves and comprise some
375,000 tonnes grading 7.5% lead, 9.5% zinc and 160 g/t silver.
Additional drilling will also be conducted along the 1.5 kilometre zone between
the existing reserve and mined-out areas at Madem Lakkos. The new decline
currently being excavated to access the base of the existing Stratoni reserve
provides excellent access for drilling of this highly prospective corridor. The
decline will also enable immediate access for mining of any new discoveries.
The drilling programme aims to significantly increase reserves and life of mine.
Initial drilling results are expected by year end. The existing environmental
and mining permits for Stratoni will allow Hellas Gold to fully exploit any new
discoveries resulting from this drilling programme.
SKOURIES & OLYMPIAS PROJECTS (GREECE)
First shipments of Olympias gold concentrates completed- Olympias benefits from
an existing stockpile of gold concentrates representing a reserve of
approximately 258,000 tonnes grading 23.3 g/t gold (containing 193,000 oz of
gold), in addition to substantial underground reserves of gold, lead, zinc and
silver.
In Q3 2006, Hellas Gold completed an initial five shipments of gold concentrates
from the Olympias stockpile, amounting to approximately 6,500 wmt of gold
concentrates.
In May 2006, Hellas Gold entered into its first off-take agreement with Shandong
MIC BioGold Ltd
(a subsidiary of Michelago Limited of Australia) for the sale of an initial
18,000 wet metric tonnes (wmt) of Olympias gold concentrates. The agreement with
MIC Biogold also includes the possible sale of an additional 100,000 tonnes over
a three-year period from April 2007. The monthly shipments of the initial 18,000
wmt of concentrates commenced in July 2006 and are expected to end in April
2007. The price payable for the concentrates will vary with the prevailing gold
price. The agreement produces an attractive return for Hellas Gold at a gold
price above $500/oz.
In October 2006, Hellas Gold also entered into a second off-take agreement with
MRI Trading AG of Switzerland for the sale of an additional 18,000 wmt of
concentrates. This order by MRI Trading follows the success of an initial trial
shipment of 3,000 wmt of concentrates announced in July 2006. MRI Trading also
has the option to increase its order by a further 12,000 wmt, exercisable by 31
December 2006. Shipments are scheduled to be completed by October 2007.
European Goldfields and Hellas Gold are currently in advanced stages of
negotiations for the sale of the remaining tonnage of concentrates in the
Olympias stockpile.
Skouries feasibility study nears completion -Hellas Gold is finalising various
studies for input in a final bankable feasibility study for Skouries. These
studies, which are expected to be completed in Q1 2007, include:
* A cost and definition study for the process plant and associated
infrastructure, undertaken by Aker Kvaerner Engineering Services
* A cost and definition study for underground mechanical and electrical
utilities, undertaken by Scott Wilson Mining
* The design of the tailings management facility (TMF), undertaken by
Golder Associates
* An Environmental Impact Study, carried out by the Greek consulting group
Enveco
* A study of hydrogeology and creek boundaries by the Greek Institute of
Geology & Mineral Exploration (IGME), to be used in the development of a new
hydrogeological model
In addition, all mining studies have now been completed and confirm that
Skouries will be a 8M tonnes per annum (tpa) operation with a low strip open pit
(0.6:1) of at least six years, followed by underground mining at 7Mtpa. This
will produce annually some 40,000t of copper and 200,000 oz of gold over a
21-year mine life. This production rate is shown to be sustainable based on the
detailed mine design carried out by SRK Consulting and benchmarking with other
comparable mines.
The metallurgy at Skouries is straight-forward. Approximately 30% of gold will
be recovered by a gravity circuit to produce dore on site. A high-quality
saleable copper/gold concentrate will also be produced by conventional methods.
Extensive testwork completed by Lakefield Research and other consultants has
shown average recoveries of 84% gold and 91% copper can be achieved. Concentrate
grades of at least 26% copper and averaging 27g/t gold are expected.
Golder Associates have carried out a pre-feasibility level study which
incorporates the latest paste production technology in a phased TMF that will
minimise land take and embankment height and provides increased stability. Paste
tailings also allows a greater proportion of the process water to be collected
and recycled at the process plant, reducing pumping costs and the quantity of
make-up water needed. The study shows that the paste tailings are inert with low
permeability. The use of paste tailings and a phased TMF also allows sequential
rehabilitation of the tailings management facility to minimise active tailings
areas.
In July 2006, European Goldfields announced a 13% increase in reserve tonnes for
Skouries. This increase resulted from a new mine plan and schedule which
includes the adoption of a deeper open pit, an optimised sub-level cave
underground mine design and improved long-term metal price forecasts. The
updated reserve was estimated by SRK Consulting at a gold price of $425/oz and a
copper price of $1.1/lb.
Mining schedule for Phase 1 of Olympias completed - Development at Olympias will
progress in two phases to allow refurbishment and construction of infrastructure
and the subsequent construction of new gold processing facilities at Stratoni.
This staged approach also allows the phasing of capital investment.
Hellas Gold has recently completed a mining schedule for Phase 1 which
prioritises underground mining around the existing shaft and other
infrastructure, thereby minimising capital investment. The mining schedule
indicates that ore will be extracted at a rate progressing between 200,000 and
400,000 tonnes per annum during Phase 1, expected to commence in 2008. Revenue
during Phase 1 will be generated from the sale of lead/silver, zinc and gold
pyrite/arsenopyrite concentrates.
Twenty exploration targets identified - Hellas Gold holds 317 km(2) of highly
prospective exploration licences in northern Greece. Recent work by European
Goldfields has highlighted a total of twenty exploration targets, including six
advance targets and extensions to known deposits, seven targets of known
mineralisation for follow-up work and seven conceptual targets. The geological
context of the targets has been identified and a model for the emplacement of
known mineralisation has now been developed.
The model indicates that there are more than 20 km of structural corridors that
have acted as mineralising pathways with marble hosted polymetallic massive
sulphide mineralisation, including the Stratoni and Olympias deposits. The model
also identifies a 10 km intrusive belt which hosts the Skouries copper/gold
porphyry.
A phased exploration programme is planned which will include drilling of
advanced targets. Further targets will be generated from a focused programme of
remote sensing and ground investigation along the structural corridors
identified in the geological model.
CERTEJ PROJECT (ROMANIA)
In Romania, European Goldfields has made significant progress on its 80%-owned
Certej project by receiving an Urbanisation Certificate, the first milestone in
the permitting process, and entering into Licence Agreements securing the Albion
Process Technology.
Urbanisation Certificate received for Certej - In September 2007, European
Goldfields announced that the Hunedoara County Council has issued a General
Urbanisation Certificate for the company's 80%-owned Certej project in Romania.
The certificate confirms the designation of Certej as an industrial mining area
and confirms local community support for the project. This important milestone
is the first official step in the permitting process for Certej.
Feasibility study on track for submission to Romanian government - European
Goldfields has recently completed all necessary Environmental Impact Assessments
(Levels I and II) for the Certej project, and is now actively conducting various
additional studies in support of its permit application, including:
* An Environmental Impact Study (EIS), to be completed in Q1 2007, which
includes:
- A Social Impact Assessment Study, to be completed by November 2006
- An Archaeological Study, to be completed by the Ministry of Culture by January
2006
* A Romanian Feasibility Study (RFS), to be submitted to the government
together with the EIS
European Goldfields made significant progress on the RFS in Q3 2006, including
completion of geotechnical drilling and the studies on mineral resources,
mining, metallurgy and tailings design. The RFS will provide the majority of
technical analysis for a bankable feasibility study to be produced in H1 2007
for project financing.
European Goldfields already holds a mining permit for Certej, which is currently
being exploited in a small scale by the company's partner in Romania. In Q1
2007, European Goldfields plans to submit the RFS and EIS as part of its
application for environmental and mining permits, allowing an increase in
production at Certej and the processing of ore on site. The permits and a
detailed urbanisation plan would then be expected by
Q3 2007 following a standard public consultation process with the local
community. Customary construction and public utility permits would follow later
in 2007 when the detailed engineering design has been completed for the site
plant.
Licence agreements signed for Albion process - In October 2006, European
Goldfields entered into Licence Agreements securing the Albion Process
Technology for its 80%-owned Certej project in Romania. The Licence Agreements
were entered into with Xstrata Queensland Limited and Highlands Frieda Limited,
the co-owners of the technology.
Flexibility of two viable development options - European Goldfields is actively
pursuing two viable development options for the Certej project:
* the production and sale of high-grade gold/silver flotation concentrates
* the production of gold dore on site using the Albion Process.
The project is expected to involve the mining and processing of 3.0 Mt per annum
over at least nine years. This would yield approximately 275,000 tonnes of
concentrate per annum with high grades ranging realistically between 17 - 22 g/t
gold and 85 - 165 g/t silver (depending on the source of the ore in the
deposit), with a flotation gold recovery of approximately 88%. This translates
into an annual production of approximately 170,000 oz of contained gold in the
concentrate.
Using the Albion Process to produce gold dore on site is expected to
significantly increase project profitability and returns. Recent results using
the Albion Process suggest recoveries from concentrates of approximately 96% for
gold (92% on a composite sample) and 92% for silver.
Generative study initiated - A generative study over European Goldfields'
licence areas in Romania has identified four exploration targets near Certej.
The study has highlighted the importance of the overall structural framework and
intrusives for the channeling, concentration and trapping of mineralisation.
Work by an internationally renowned consultant has clarified the model which now
identifies the main pathways for mineralising fluids and linkage structures
between the main ore zones at Certej. The linkage structures have been targeted
for future drilling.
Systematic investigation of these targets including drilling, metallurgical
testwork and resource definition is aimed at providing additional feed to extend
the mine life of the Certej project and if possible provide higher grade feed to
add additional value in the early years of the project.
For further information please contact:
European Goldfields: website: www.egoldfields.com
David Reading, Chief Executive Officer e-mail: info@egoldfields.com
Office: +44 (0)20 7408 9534
Buchanan Communications: e-mail: bobbym@buchanan.uk.com
Bobby Morse / Ben Willey
Office: +44 (0)20 7466 5000
Renmark Financial Communication: website: www.renmarkfinancial.com
Tina Cameron e-mail: tcameron@renmarkfinancial.com
Office: +1 514 939 3989
Resources & reserves parameters
For additional information on the resource and reserve estimates quoted in this
news release, please refer to the Company's Resources & Reserves Declaration at
www.egoldfields.com/goldfields/resources.jsp. Patrick Forward, General Manager,
Exploration of the Company, was the Qualified Person under Canadian National
Instrument 43-101 responsible for reviewing the disclosure of resource and
reserve estimates quoted in this news release.
Forward-looking statements
Certain statements and information contained 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 information under provisions of Canadian
provincial securities laws. When used in this document, the words "anticipate",
"expect", "will", "intend", "estimate", "forecast", "planned" and similar
expressions are intended to identify forward-looking statements or information.
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 price of gold, base metals or certain other
commodities (such as fuel and electricity) and currencies; uncertainty of
mineral reserves, resources, grades and recovery estimates; uncertainty of
future production, capital expenditures and other costs; currency fluctuations;
financing and additional capital requirements; the successful and timely
permitting of the Company's Skouries, Olympias and Certej projects; legislative,
political, social 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; the risks normally involved in the
exploration, development and mining business; and risks associated with internal
control over financial reporting. For a more detailed discussion of such risks
and material factors or assumptions underlying these forward-looking statements,
see the Company's Annual Information Form for the year ended 31 December 2005,
filed on SEDAR at www.sedar.com. The Company does not intend, and does not
assume any obligation, to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise, except as
required by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE- AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER 2006
The following discussion and analysis, prepared as at 13 November 2006, 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- and nine-month periods ended 30 September 2006 and
2005 and accompanying notes (the "Consolidated Financial Statements").
Additional information relating to the Company, including the Company's Annual
Information Form, 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 under the Yukon Business Corporations Act,
is a resource company involved in the acquisition, exploration and development
of mineral properties in Greece, Romania and South-East Europe.
The Company's Common Shares are listed on the AIM Market of London Stock
Exchange plc 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 the three major gold and base metal deposits of Stratoni,
Skouries and Olympias in Northern Greece. Hellas Gold commenced production at
Stratoni in September 2005 and selling an existing stockpile of Olympias gold
concentrates in July 2006. Hellas Gold is applying for permits to develop the
Skouries and Olympias projects.
Romania - The Company owns 80% of the Certej gold/silver project in Romania.
European Goldfields is completing a feasibility study for submission to the
Romanian government in Q1 2007, in support of a permit application to develop
the project.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE- AND NINE-MONTH PERIODS ENDED 30 SEPTEMBER 2006
The following discussion and analysis, prepared as at 13 November 2006, 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- and nine-month periods ended 30 September 2006 and
2005 and accompanying notes (the "Consolidated Financial Statements").
Additional information relating to the Company, including the Company's Annual
Information Form, 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 under the Yukon Business Corporations Act,
is a resource company involved in the acquisition, exploration and development
of mineral properties in Greece, Romania and South-East Europe.
The Company's Common Shares are listed on the AIM Market of London Stock
Exchange plc 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 the three major gold and base metal deposits of Stratoni,
Skouries and Olympias in Northern Greece. Hellas Gold commenced production at
Stratoni in September 2005 and selling an existing stockpile of Olympias gold
concentrates in July 2006. Hellas Gold is applying for permits to develop the
Skouries and Olympias projects.
Romania - The Company owns 80% of the Certej gold/silver project in Romania.
European Goldfields is completing a feasibility study for submission to the
Romanian government in Q1 2007, in support of a permit application to develop
the project.
Results of operations
The Company's results of operations for the three- and nine-month periods ended
30 September 2006 were comprised primarily of activities related to the results
of operations of the Company's 65%-owned subsidiary Hellas Gold in Greece and
the Company's exploration and development program in Romania.
In September 2005, Hellas Gold commenced production at its Stratoni mine in
Greece. The following table summarises operational results at Stratoni for the
three most recently completed quarters.
Stratoni Mine (Greece)
---------------------------------------------------
Q1 2006 Q2 2006 Q3 2006 Total
------------------ ----------- ------------- -------- ---------
Inventory (start of period)
Ore mined (wet tonnes) 10,963 1,155 12,326 -
Zinc concentrate (tonnes) 95 1,034 1,562 -
Lead/silver concentrate 1,268 308 674 -
(tonnes)
Production
Ore mined (wet tonnes) 31,752 47,966 49,652 129,370
Ore milled (tonnes) 40,333 35,810 56,769 132,912
- Average grade: Zinc (%) 8.89 9.45 10.54 9.75
Lead (%) 7.28 5.83 5.78 6.25
Silver (g/t) 183.45 146.09 142.29 155.80
Zinc concentrate (tonnes) 6,222 6,041 10,768 23,031
- Containing: Zinc (tonnes) 3,229 3,098 5,468 11,795
Lead concentrate (tonnes) 3,662 2,703 4,368 10,733
- Containing: Lead (tonnes) 2,667 1,881 2,997 7,545
Silver (oz) 207,496 141,809 227,817 577,122
Sales
Zinc concentrate (tonnes) 5,283 5,513 11,130 21,926
- Containing payable: Zinc 2,335 2,320 4,702 9,357
(tonnes)*
Lead concentrate (tonnes) 4,623 2,337 3,696 10,656
- Containing payable: Lead 3,166 1,554 2,418 7,138
(tonnes)*
Silver (oz)* 252,559 121,350 189,349 563,258
Operating costs per tonne 96 130 112 112
milled ($)
Operating costs per unit of
payable:
- Zinc ($) 744 937 999 920
- Lead ($) 496 367 330 412
- Silver ($) 4.06 3.99 3.50 3.85
Inventory (end of period)
Ore mined (wet tonnes) 1,155 12,326 3,618 -
Zinc concentrate (tonnes) 1,034 1,562 1,200 -
Lead/silver concentrate 308 674 1,345 -
(tonnes)
Financial information
(in thousands of US dollars)
Sales ($)** 9,083 8,274 15,211 32,568
Gross profit ($)** 4,295 4,330 7,958 16,583
Capital expenditure ($) 526 1,351 1,487 3,364
Amortisation and depletion 456 942 796 2,194
($) ---------- ----------- --------- ---------
--------------------
* Net of smelter deductions
** Includes the sale of approximately 6,500 wmt of gold concentrates from an
existing stockpile at Olympias.
The Company's results of operations for the eight most recently completed
quarters are summarised in the following table:
------------------ ------ ------ ------ ------ ------ ------ ------ ------
(in thousands
of US dollars, 2006 2006 2006 2005 2005 2005 2005 2004
except per share Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4
amounts)
$ $ $ $ $ $ $ $
------------------ ------ ------ ------ ------ ------ ------ ------ ------
Statement of loss
and deficit
Sales 15,211 8,274 9,083 1,464 - 57 - -
Cost of sales 7,253 3,944 4,788 1,367 - - - -
Gross profit 7,958 4,330 4,295 97 - 57 - -
Interest
income 485 767 300 339 272 326 326 279
Expenses 643 4,345 3,558 5,079 3,536 2,287 3,831 9,225
Profit/(loss)
before income
tax 4,102 252 1,037 (4,643) (3,264) (1,904) (3,505) (8,946)
Profit/(loss)
after income
tax 2,984 (311) 161 (4,251) (3,729) (846) (2,793) (8,669)
Non-controllin
g interest (1,509) (225) (475) 58 (1,003) (123) (141) (535)
Profit/(loss)
for the period 1,475 (536) (314) (4,309) (2,726) (723) (2,652) (8,134)
Earnings/(loss
) per share 0.01 0.00 0.00 (0.04) (0.02) (0.01) (0.02) (0.17)
Balance sheet (end
of period)
Working
capital 39,666 36,453 34,515 33,765 39,171 49,544 57,285 63,480
Total assets 294,719 292,236 274,381 266,618 295,914 298,948 300,689 305,541
Non current
liabilities 70,080 69,018 64,684 62,807 70,053 71,056 71,179 72,103
Statement of cash
flows
Deferred
exploration
and
development
costs -
Romania 598 992 848 1,081 1,067 893 860 2,462
Plant and
equipment -
Greece 1,268 1,599 568 1,298 2,506 2,453 1,582 -
Deferred
development
costs - Greece 462 999 476 1,510 439 891 - -
---------------- ------ ------ ------ ------ ------ ------ ------ ------
The breakdown of deferred exploration and development costs per mineral property
for the three- and nine-month periods ended 30 September 2006 and 2005 is as
follows:
Nine months ended 30 September Three months ended 30 September
(in thousands of
US dollars) 2006 2005 2006 2005
$ (%) $ (%) $ (%) $ (%)
---------------- ----------- ----------- ----------- -----------
Romanian mineral
properties
Certej 2,131 (87%) 1,655 (59%) 495 (83%) 379 (35%)
Cainel 21 (1%) 802 (28%) 2 (1%) 459 (43%)
Voia 217 (9%) 46 (2%) 72 (11%) 19 (2%)
Baita-Craciunesti 69 (3%) 255 (9%) 29 (5%) 181 (17%)
Bolcana - (-%) 59 (2%) - (-%) 30 (3%)
---------------- ----------- ----------- ----------- -----------
2,438 (100%) 2,817 (100%) 598 (100%) 1,068 (100%)
---------------- ----------- ----------- ----------- -----------
Greek mineral
properties
Stratoni - (-%) 410 (31%) - (-%) 154 (35%)
Skouries 1,140 (59%) 569 (43%) 273 (59%) 167 (38%)
Olympias 797 (41%) 351 (26%) 189 (41%) 118 (27%)
---------------- ----------- ----------- ----------- -----------
1,937 (100%) 1,330 (100%) 462 (100%) 439 (100%)
---------------- ----------- ----------- ----------- -----------
Total 4,375 (100%) 4,147 (100%) 1,060 (100%) 1,507 (100%)
---------------- ----------- ----------- ----------- -----------
The Certej exploitation licence and the Baita-Craciunesti exploration licence
are held by the Company's
80%-owned subsidiary, Deva Gold S.A. ("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.
The Company recorded a profit (before tax) of $5.39 million for the nine-month
period ended
30 September 2006, compared to a loss (before tax) of $8.67 million for the same
period of 2005.
The Company recorded a net profit (after tax and non-controlling interest) of
$0.63 million ($0.01 per share) for the nine-month period ended 30 September
2006, compared to a net loss of $6.10 million ($0.05 per share) for the same
period of 2005.
The Company recorded a profit (before tax) of $4.10 million for the three-month
period ended
30 September 2006, compared to a loss (before tax) of $3.26 million for the same
period of 2005.
The Company recorded a net profit (after tax and non-controlling interest) of
$1.48 million ($0.01 per share) for the three-month period ended 30 September
2006, compared to a net loss of $2.73 million ($0.02 per share) for the same
period of 2005.
The following factors have contributed to the Company recording a profit for the
three- and nine-month periods ended 30 September 2006, compared to a loss for
the same periods of 2005:
* Hellas Gold commenced production at its Stratoni mine in September 2005
and selling an existing stockpile of gold concentrates located at Olympias
in July 2006. As a result, the Company recorded a gross profit of $16.58
million in the first nine months of 2006 and $7.96 million in Q3 2006, on
revenues of $32.57 million in the first nine months of 2006 and $15.21
million in Q3 2006 for the sale of concentrates by Hellas Gold, compared to
$0.06 million for the same periods of 2005. Cost of sales of $15.99 million
in the first nine months of 2006 and $7.25 million in Q3 2006 included
non-recurring costs relating to the start-up of operations at Stratoni,
fixed costs disproportionate to production output in a ramp-up phase, and
amortisation and depletion expenses of $1.92 million in the first nine
months of 2006 and $0.75 million in Q3 2006.
* The Company's corporate administrative and overhead expenses have
decreased from $2.09 million in the first nine months of 2005, to $1.65
million for the same period of 2006, primarily as a result of the Company
recharging a larger portion of its overhead costs to its operating
subsidiaries, a portion of which is capitalised by such subsidiaries.
Corporate administrative and overhead expenses have increased marginally
from $0.50 million in Q3 2005, to $0.64 million in Q3 2006, as a result of
increasing investor relations activities.
* The Company recorded a non-cash equity-based compensation expense of
$2.10 million in the first nine months of 2006 and $0.67 million in Q3 2006,
compared to $0.77 million and $0.45 million, respectively, for the same
periods of 2005. This increase is due to the larger cost recognised in the
first nine months of 2006 related to outstanding restricted share units and
share options during this period, compared to the same period of 2005. In
the first nine months of 2005, there were no restricted share units and
fewer share options outstanding which had not been fully expensed. In the
first nine months of 2006, the Company continued a practice of recharging
some of its equity-based compensation expense to its operating subsidiaries,
a portion of which is capitalised by such subsidiaries.
* Effective 1 October 2004, the Company changed its functional currency
from the Canadian dollar to the United States dollar. Despite this, during
the first nine months of 2005, the Company retained significant cash
balances in Euro in order to meet a Euro subscription obligation in Hellas
Gold in Q1 2005. Hellas Gold also retained significant cash balances in Euro
in order to meet operating, administrative and overhead expenses.
Consequently, the Company recorded a foreign exchange loss of $0.90 million
in the first nine months of 2005 and a small gain of $0.03 million in Q3
2005. The loss resulted primarily from a strengthening of the United States
dollar against the Euro as at 30 September 2005 compared to 31 December
2004. In contrast, the Company realised a foreign exchange gain of $0.15
million in the first nine months of 2006 and a small loss of $0.07 million
in Q3 2006. The gain is due in part to the weakening of the United States
dollar against the Euro as at 30 September 2006 compared to 31 December
2005. During Q2 2006, the Company converted Canadian dollars received upon
the exercise of share options into United States dollars, which also
contributed to the foreign exchange gain in the first nine months of 2006.
* Hellas Gold's administrative and overhead expenses amounted to $3.54
million in the first nine months of 2006 and $1.74 million in Q3 2006,
compared to $2.25 million and $0.97 million, respectively, for the same
periods of 2005. Hellas Gold's administrative and overhead expenses are
mostly attributable to operations related to the Stratoni mine and plant,
and have increased moderately in the first nine months of 2006 compared to
the same period of 2005 reflecting an increase in activity following the
commencement of operations in September 2005.
* Hellas Gold incurred an expense of $2.14 million in the first nine
months of 2006 and $0.76 million in Q3 2006, compared to $3.23 million and
$1.56 million, respectively, for the same periods of 2005, for ongoing water
pumping and treatment at its non-operating mines of Olympias and Stratoni
(Madem Lakkos), in compliance with Hellas Gold's commitment to the
environment under its contract with the Greek State.
* Hellas Gold incurred a non-recurring expense of $2.30 million in the
first nine months of 2006 and $0.27 million in Q3 2006, compared to $Nil
million for the same periods of 2005, for the rehabilitation of old adits
and equipment at Stratoni.
* The Company recorded a charge for income taxes of $2.56 million in the
first nine months of 2006 and $1.12 million in Q3 2006, compared to a credit
of $1.31 million and a charge of $0.47 million, respectively, for the same
periods of 2005. The charge in 2006 has arisen due to the Company recording
a profit (before tax) which led to a reduction in the future tax asset based
on losses carried forward in Hellas Gold. The credit in 2005 had arisen due
to the Company recognising a future tax asset for the losses carried forward
in Hellas Gold. The charge in Q3 2005 had arisen due to Hellas Gold
capitalising a portion of its costs, resulting in a decrease in future tax
asset.
* The Company recorded a charge of $2.21 million in the first nine months
of 2006 and $1.51 million in Q3 2006 relating to the non-controlling
shareholder's interest in Hellas Gold's profit (after tax) for these
periods, compared to a credit of $1.27 million and $1.00 million,
respectively, for the same periods of 2005, relating to the non-controlling
shareholder's interest in Hellas Gold's loss (after tax) for this period.
Liquidity and capital resources
As at 30 September 2006, the Company had cash and cash equivalents of $31.81
million, compared to $30.54 million as at 31 December 2005, and working capital
of $39.67 million, compared to $33.77 million as at 31 December 2005.
The increase in cash and cash equivalents as at 30 September 2006, compared to
the balances as at 31 December 2005, resulted primarily from operating profits
($10.40 million), proceeds received from exercise of share options ($2.45
million) and the effects of foreign currency translation on cash ($0.81
million), partly offset by a net increase in accounts receivable vs accounts
payable ($4.38 million), capital expenditure in Greece ($3.44 million), deferred
exploration and development costs in Romania ($2.44 million), deferred
development costs in Greece ($1.94 million), an increase in inventory ($0.14
million) and purchase of equipment ($0.07 million).
The following table sets forth the Company's contractual obligations including
payments due for each of the next five years and thereafter:
(in thousands of
US dollars) Payments due by period
Contractual Total Less than 1 1 - 3 years 4 - 5 years After 5 years
obligations -------- year --------- --------- ---------
---------------- ----------
Operating
lease (London
office) 840 187 373 280 -
Exploration
licence
spending
commitments
(Voia,
Romania) 1,242 - 1,242 - -
---------------- -------- ---------- --------- --------- ---------
Total
contractual
obligations 2,082 187 1,615 280 -
---------------- -------- ---------- --------- --------- ---------
For the three-month period ending 31 December 2006, the Company expects to spend
a total of
(i) $3.48 million in capital expenditures to fund the development of its
Stratoni projects (including exploration costs), (ii) $1.18 million in
exploration and development costs for Greece ($0.62 million) and Romania ($0.56
million), (iii) $3.05 million in Hellas Gold administrative and overhead
expenses and other Hellas Gold non-operating expenses and (iv) $0.65 million in
corporate administrative and overhead expenses. The Company expects to fund such
costs from existing cash balances and operating cash flow generated at Stratoni.
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:
Common shares: 113,890,876
Common share options: 3,739,332
Restricted share units: 1,920,000
Common shares (fully-diluted): 119,550,208
Preferred shares: Nil
Outlook
Greece - In September 2005, Hellas Gold resumed production at Stratoni following
the award by the Greek State of all necessary environmental and mining permits.
Production of ore is expected to reach 170,000 tonnes by the end of 2006,
steadily increasing to 400,000 tonnes per annum by year five.
In January 2006, Hellas Gold submitted a business plan to the Greek State for
the joint development of its major gold and base metal projects of Skouries and
Olympias. This submission represents a significant milestone in obtaining the
permits for these projects.
The business plan focuses 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.
In March 2006, Hellas Gold received an official response from the Greek Ministry
of Development (the "Ministry") on the business plan. The response states that
the Ministry is in agreement with the principles stated in the business plan,
and that the Ministry considers the business plan to be in the best interest of
the Greek economy. This response was received by Hellas Gold within the
timeframe provided for in its contract with the Greek State.
Hellas Gold is currently finalising a full environmental impact study which is
expected to be submitted to the Greek government in December 2006. On approval
of the study, the environmental permits for Skouries and Olympias are expected
to be issued.
Hellas Gold will then submit to the Greek government a final technical report on
the Skouries and Olympias projects, which will restate the principles of the
business plan and take into account any conditions detailed in the environmental
permit. The mining permits are expected to be issued on approval of the
technical report by the Greek government.
Romania - The Company has completed all necessary Environmental Impact
Assessments (EIA Levels I and II) for the Certej project. The Company is now
completing an Environmental Impact Study (EIS) and a feasibility study, in
support of an application for mining permits expected to be submitted in Q1
2007.
The Company is actively pursuing two viable development options for the Certej
project: the production and sale of gold-rich concentrates from Certej, and the
production of gold dore on site using the Albion Process.
Finally, the Company continues to conduct focused exploration programmes to
expand the resource base in Romania.
Risks and uncertainties
The risks and uncertainties affecting the Company, its subsidiaries and their
business are discussed in the Company's Annual Information Form for the year
ended 31 December 2005, filed on SEDAR at www.sedar.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRTBIBDBDBBGGLX
European Gold (LSE:EGU)
Historical Stock Chart
From Jun 2024 to Jul 2024
European Gold (LSE:EGU)
Historical Stock Chart
From Jul 2023 to Jul 2024
