RNS Number:6987B
European Goldfields Ltd
08 August 2007
Immediate Release 8 August 2007
European Goldfields Limited
Interim Consolidated Financial Statements
(Unaudited)
For the Three- and Six-Month Periods Ended
30 June 2007 and 2006
Disclosure of auditor review of interim consolidated financial statements
The interim consolidated financial statements of the Company for the three- and
six-month periods ended 30 June 2007 and 2006 have not been reviewed by the
auditors of the Company.
European Goldfields Limited 30 June 31 December
Consolidated Balance Sheets
As at 30 June 2007 and 31 December 2006
(Unaudited - Prepared by Management)
(in thousands of US Dollars, except per share
amounts)
2007 2006
$ $
Assets Note Unaudited Audited
Current assets
Cash and cash equivalents 221,596 34,587
Accounts receivable 17,993 14,945
Prepaid expenses 1,467 1,270
Inventory 4 2,762 854
--------- ---------
243,818 51,656
--------- ---------
Non current assets
Plant and equipment 5 41,208 27,007
Deferred exploration and development costs 6
Greek production stage mineral properties 28,866 14,677
Greek development stage mineral properties 374,962 182,157
--------- ---------
403,828 196,834
Romanian development stage mineral properties 34,666 31,782
--------- ---------
438,494 228,616
--------- ---------
Restricted investment 7 4,000 3,926
Future tax asset 2,254 738
--------- ---------
729,774 311,943
--------- ---------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 32,181 9,802
Non current liabilities
Future tax liability 8 102,390 48,150
Non-controlling interest 5,845 20,422
Asset retirement obligation 9 6,249 6,031
Deferred revenue 10 56,486 -
--------- ---------
170,970 74,603
--------- ---------
Shareholders' equity
Capital stock 11 532,252 246,890
Contributed surplus 11 8,365 7,135
Other comprehensive income 9,326 4,276
Deficit (23,320) (30,763)
--------- ---------
526,623 227,538
--------- ---------
--------- ---------
729,774 311,943
--------- ---------
The accompanying notes are an integral part of these interim consolidated
financial statements.
Approved by the Board of Directors
(s) Timothy Morgan-Wynne (s) Jeffrey O'Leary
Timothy Morgan-Wynne, Director Jeffrey O'Leary, Director
European Goldfields Limited
Consolidated Statements of
Profit and Loss
For the three-month periods
ended 30 June 2007 and 2006
(Unaudited - Prepared by
Management)
(in thousands of US Dollars,
except per share amounts)
3 months ended 30 June 6 months ended 30 June
Note 2007 2006 2007 2006
$ $ $ $
Income
Sales 24,944 8,274 42,027 17,357
Cost of sales (9,082) (3,228) (15,253) (7,558)
Depletion of asset
retirement obligation (78) (266) (198) (266)
Depreciation and depletion (835) (450) (1,488) (908)
-------- -------- -------- --------
Gross profit 14,949 4,330 25,088 8,625
-------- -------- -------- --------
Other income
-------- -------- -------- --------
Interest income 1,116 267 1,569 567
-------- -------- -------- --------
Expenses
Corporate administrative and
overhead expenses 884 467 1,731 1,002
Equity-based compensation
expense 450 758 906 1,431
Foreign exchange loss/(gain) 265 (201) 417 (217)
Hellas Gold administrative
and overhead expenses 2,320 1,056 4,532 1,800
Hellas Gold water treatment
expenses (non-operating mines) 1,078 893 2,180 1,386
Hellas Gold old adit and
equipment maintenance
(Stratoni mine) - 1,124 - 2,026
Accretion of asset
retirement obligation 31 28 60 54
Amortisation 112 220 231 421
-------- -------- -------- --------
5,140 4,345 10,057 7,903
-------- -------- -------- --------
-------- -------- -------- --------
Profit for the period before
income tax 10,925 252 16,600 1,289
Income taxes
Current taxes (2,082) - (3,243) -
Future taxes (714) (563) (1,272) (1,439)
-------- -------- -------- --------
(2,796) (563) (4,515) (1,439)
-------- -------- -------- --------
-------- -------- -------- --------
Profit/(loss) for the period
after income tax 8,129 (311) 12,085 (150)
Non-controlling interest (2,794) (225) (4,642) (700)
-------- -------- -------- --------
Profit/(loss) for the period 5,335 (536) 7,443 (850)
Deficit - Beginning of
period (28,655) (34,079) (30,763) (33,765)
-------- -------- -------- --------
Deficit - End of period (23,320) (34,615) (23,320) (34,615)
-------- -------- -------- --------
Earnings/(loss) per share 17
Basic 0.04 0.00 0.06 (0.01)
Diluted 0.04 0.00 0.06 (0.01)
Weighted average number of
shares (in thousands)
Basic 122,957 113,847 119,426 112,673
Diluted 124,652 113,847 121,105 112,673
The accompanying notes are an integral part of these interim consolidated
financial statements.
European Goldfields Limited
Consolidated Statements of Equity
As at 30 June 2007 and 2006
(Unaudited - Prepared by
Management)(in thousands
of US Dollars, except Other
per share amounts) Contributed Comprehensive
Capital Surplus Income Deficit Total
$ $ $ $ $
--------- --------- ---------- -------- --------
Balance - 31
December 2005 240,234 6,197 (12,843) (33,765) 199,823
--------- --------- ---------- -------- --------
Equity-based
compensation
cost - 2,429 - - 2,429
Restricted share
units vested 435 (435) - - -
Share options
exercised or
exchanged 3,827 (1,375) - - 2,452
Movement in
cumulative
translation
adjustment - - 12,093 - 12,093
Loss for the period - - - (850) (850)
--------- --------- ---------- -------- --------
4,262 619 12,093 (850) 16,124
--------- --------- ---------- -------- --------
--------- --------- ---------- -------- --------
Balance - 30 June
2006 244,496 6,816 (750) (34,615) 215,947
--------- --------- ---------- -------- --------
Equity-based
compensation
cost - 2,670 - - 2,670
Restricted share
units vested 1,636 (1,636) - - -
Share options
exercised or
exchanged 758 (715) - - 43
Movement in
cumulative
translation
adjustment - - 5,026 - 5,026
Profit for the
period - - - 3,852 3,852
--------- --------- ---------- -------- --------
2,394 319 5,026 3,852 11,591
--------- --------- ---------- -------- --------
--------- --------- ---------- -------- --------
Balance - 31
December 2006 246,890 7,135 4,276 (30,763) 227,538
--------- --------- ---------- -------- --------
Equity-based
compensation
cost - 2,261 - - 2,261
Shares issued for
equity financing 130,059 - 130,059
Shares issued as
consideration for
acquisition 161,424 - - - 161,424
Share issue costs (7,152) - (7,152)
Restricted share
units vested 850 (850) - - -
Share options
exercised or
exchanged 181 (181) - - -
Movement in
cumulative
translation
adjustment - - 5,050 - 5,050
Profit for the
period - - - 7,443 7,443
--------- --------- ---------- -------- --------
285,362 1,230 5,050 7,443 299,085
--------- --------- ---------- -------- --------
--------- --------- ---------- -------- --------
Balance - 30 June
2007 532,252 8,365 9,326 (23,320) 526,623
--------- --------- ---------- -------- --------
The accompanying notes are an integral part of these interim consolidated
financial statements.
European Goldfields
Limited Consolidated
Statements of Cash Flows
For the three- and six-month
periods ended 30 June 2007
and 2006 (Unaudited - Prepared by
Management) (in thousands of US Dollars,
except per share amounts)
3 months ended 30 June 6 months ended 30 June
2007 2006 2007 2006
$ $ $ $
Note
Cash flows from operating
activities
Profit/(loss) for the period 5,335 (536) 7,443 (850)
Foreign exchange loss 290 170 486 143
Amortisation 651 458 1,070 876
Equity-based compensation
expense 450 782 906 1,505
Accretion of asset
retirement obligation 31 28 60 54
Current taxation 2,083 - 3,244 -
Future tax asset recognised 713 563 1,272 1,439
Non-controlling interest 2,794 225 4,642 700
Deferred revenue recognised (1,014) - (1,014) -
Depletion of mineral
properties 373 440 846 677
--------- --------- --------- ---------
11,706 2,130 18,955 4,544
--------- --------- --------- ---------
Net changes in non-cash
working capital 13 1,489 1,001 (3,351) 92
--------- --------- --------- ---------
13,195 3,131 15,604 4,636
--------- --------- --------- ---------
Cash flows from investing
activities
Deferred exploration and
develop. costs - Romania (1,248) (992) (1,944) (1,840)
Plant and equipment - Greece (4,673) (1,599) (6,250) (2,167)
Deferred development costs -
Greece (520) (999) (941) (1,475)
Purchase of equipment (24) (25) (35) (68)
Restricted investment 56 12 28 12
--------- --------- --------- ---------
(6,409) (3,603) (9,142) (5,538)
--------- --------- --------- ---------
Cash flows from financing
activities
Proceeds from equity
financing 130,059 - 130,059 -
Deferred revenue 57,500 - 57,500 -
Proceeds from exercise of
share options - 2,391 - 2,452
Share issue costs (7,152) - (7,152) -
--------- --------- --------- ---------
180,407 2,391 180,407 2,452
--------- --------- --------- ---------
Effect of foreign currency
translation on cash 444 827 140 1,000
--------- --------- --------- ---------
Increase in cash and cash
equivalents 187,637 2,746 187,009 2,550
Cash and cash equivalents -
Beginning of period 33,959 30,340 34,587 30,536
--------- --------- --------- ---------
Cash and cash equivalents -
End of period 221,596 33,086 221,596 33,086
--------- --------- --------- ---------
The accompanying notes are an integral part of these interim consolidated
financial statements.
European Goldfields Limited
Consolidated Statements of
Comprehensive Income
For the three- and six-month
periods ended 30 June 2007 and
2006
(Unaudited - Prepared by
Management)
(in thousands of US Dollars,
except per share amounts)
3 months ended 30 June 6 months ended 30 June
2007 2006 2007 2006
$ $ $ $
Profit/(loss) for the period 5,335 (536) 7,443 (850)
Other comprehensive income in
the period
Currency translation
adjustment 3,336 9,161 1,714 12,093
-------- -------- -------- --------
Comprehensive income 8,671 8,625 9,157 11,243
-------- -------- -------- --------
European Goldfields Limited
Notes to Consolidated Financial Statements
For the three- and six-month periods ended 30 June 2007 and 2006
(Unaudited - Prepared by Management)
(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 South-East Europe.
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 95% interest in Hellas Gold S.A ("Hellas Gold").
Hellas Gold owns three major gold and base metal deposits in Northern Greece.
The deposits are the polymetallic operation at Stratoni, the Olympias project
which contain gold, zinc, lead and silver, and the Skouries copper/gold porphyry
project. Hellas Gold commenced production at Stratoni in September 2005 and
commenced selling an existing stockpile of gold concentrates from Olympias 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. The
Company submitted in March 2007 a technical feasibility study to the Romanian
government in support of a permit application to develop the project.
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. Significant accounting policies
These interim consolidated financial statements have been prepared on the going
concern basis in accordance with accounting principles generally accepted in
Canada ("Canadian GAAP") using the same accounting policies as those disclosed
in Note 2 to the Company's audited consolidated financial statements for the
years ended 31 December 2006 and 2005.
These interim consolidated financial statements should be read in conjunction
with the Company's audited consolidated financial statements for the years ended
31 December 2006 and 2005.
Effective 1 January 2007, the Company adopted the revised CICA Section 1506
"Accounting Changes", which requires that: a voluntary change in accounting
principles can be made if, and only if, the changes result in more reliable and
relevant information, changes in accounting policies are accompanied with
disclosures of prior period amounts and justification for the change, and for
changes in estimates, the nature and amount of the change should be disclosed.
The Company has not made any voluntary change in accounting principles since the
adoption of the revised standard.
Financial Instruments - Recognition and Measurement, Section 3855 - This
standard prescribes when a financial asset, financial liability, or
non-financial derivative is to be recognised on the balance sheet and whether
fair value or cost-based methods are used to measure the recorded amounts. It
also specifies how financial instrument gains and losses are to be presented.
Effective 1 January 2007, the Company's cash equivalents, temporary investments
and investments in marketable securities have been classified as
available-for-sale and are recorded at fair value on the balance sheet. Fair
values are determined directly by reference to published price quotations in an
active market. Changes in the fair value of these instruments are reflected in
other comprehensive income and included in shareholders' equity on the balance
sheet.
All derivatives are to be recorded on the balance sheet at fair value.
Mark-to-market adjustments on these instruments will be included in net profit,
unless the instruments are designated as part of a cash flow hedge relationship.
In accordance with the standard's transitional provisions, the Company realised
as separate assets and liabilities only embedded derivatives acquired or
substantively modified on or after 1 January 2003.
All other financial instruments will be recorded at cost or amortised cost,
subject to impairment reviews. The criteria for assessing on other than
temporary impairment remain unchanged. Transaction costs incurred to acquire
financial instruments are included in the underlying balance. The Company has
determined that the adoption of Section 3855 had no effect on these financial
statements.
Hedges, Section 3865 - This standard is applicable when a company chooses to
designate a hedging relationship for accounting purposes. It builds on the
previous AcG-13 "Hedging Relationships" and Section 1650 "Foreign Currency
Translation", by specifying how hedge accounting is applied and what disclosures
are necessary when it is applied. The Company has determined that the adoption
of Section 3865 had no effect on these financial statements.
Comprehensive Income, Section 1530 - This standard requires the presentation of
a statement of comprehensive income and its components. Comprehensive income
includes both net earnings and other comprehensive income. Other comprehensive
income includes holding gains and losses on available-for-sale investments,
gains and losses on certain derivative instruments and foreign currency gains
and losses relating to self-sustaining foreign operations, all of which are not
included in the calculation of net earnings until realised.
Deferred revenue - The Company received a prepayment from Silver Wheaton
(Caymans) Ltd. for the sale of all of the silver metal to be produced from ore
extracted during the mine-life within an area of some 7 km(2) around its
zinc-lead-silver Stratoni mine in northern Greece. The prepayment, which is
accounted for as deferred revenue, is recognised as sales revenue on the basis
of proportion of settlements during the period to expected total settlements.
3. Business combination - Acquisition of additional interest in Hellas Gold
In June 2007, the Company completed the acquisition of additional shares in
Hellas Gold, increasing its total interest from 65% to 95%. The total
consideration paid by the Company for the purchased shares was satisfied as
follows:
(a) The issue of 35,447,246 common shares of the Company; and
(b) $8.42 million paid in cash to the vendor.
Transaction costs of $0.59 million were also accounted for as part of the
acquisition.
A summary of the accounting treatment of fair value of net assets acquired and
consideration paid is as follows:
$
-----------
Net assets 19,296,017
Mineral properties 201,319,263
Future tax liabilities (50,182,299)
-----------
170,432,981
-----------
Purchase consideration: $
-----------
-----------
Cash paid 8,418,351
Shares issued (35,447,246 common shares) 161,424,562
Transaction costs 590,068
-----------
Purchase price 170,432,981
-----------
For accounting purposes, the Company has used an average share price based upon
5 days prior and post the announcement of the transaction, to value the share
element of the purchase consideration.
4. Inventory
This balance comprises the following:
30 June 31 December
2007 2006
$ $
Ore mined 456 225
Metal concentrates 1,226 154
Material and supplies 1,080 475
--------- -----------
2,762 854
--------- -----------
5. Plant and equipment
Exploration /
office Land and Leasehold
equipment Vehicles buildings improvements Total
$ $ $ $ $
Cost - 2007
At 31 December 2006 13,220 1,236 15,609 256 30,321
Additions 12,385 - 2,357 - 14,742
Disposals (14) (8) - - (22)
Currency
translation
adjustment 334 26 410 - 770
-------- -------- -------- ---------- --------
At 30 June 2007 25,925 1,254 18,376 256 45,811
-------- -------- -------- ---------- --------
Accumulated amortisation - 2007
At 31 December 2006 1,681 685 888 58 3,312
Provision for the period 607 146 441 13 1,207
Disposals (10) (8) - - (18)
Currency
translation
adjustment 49 18 35 - 102
-------- -------- -------- ---------- --------
At 30 June 2007 2,327 841 1,364 71 4,603
-------- -------- -------- ---------- --------
-------- -------- -------- ---------- --------
Net book value
at 30 June 2007 23,598 414 17,011 185 41,208
-------- -------- -------- ---------- --------
6. Deferred exploration and development costs
Greek mineral properties:
Stratoni Olympias Skouries Total
$ $ $ $
--------- ----------- --------- ---------
Balance - 31 December 2006 14,677 108,078 74,079 196,834
--------- ----------- --------- ---------
Acquisition of mineral property 14,440 110,575 76,304 201,319
Deferred development costs 168 295 957 1,420
Depletion of mineral properties (704) (195) - (899)
Currency translation adjustment 285 2,892 1,977 5,154
--------- ----------- --------- ---------
14,189 113,567 79,238 206,994
--------- ----------- --------- ---------
Balance - 31 June 2007 28,866 221,645 153,317 403,828
--------- ----------- --------- ---------
The Stratoni, Skouries and Olympias properties are held by the Company's
95%-owned subsidiary, Hellas Gold. In September 2005, the Stratoni property
commenced production.
Romanian mineral properties:
Certej Baita-Craciunes Voia Cainel Total
ti
$ $ $ $ $
------- -------- -------- -------- --------
Balance - 31 December
2006 26,862 3,064 844 1,012 31,782
------- -------- -------- -------- --------
Drilling and assaying 519 1 1 - 521
Geosciences and tech.
consulting 398 18 25 - 441
Samplers, miners and
surveying 30 - - - 30
Project management 680 8 12 - 700
Project overhead 1,066 17 67 - 1,150
Amortisation 32 4 1 5 42
------- -------- -------- -------- --------
2,725 48 106 5 2,884
------- -------- -------- -------- --------
Balance - 31 June 2007 29,587 3,112 950 1,017 34,666
------- -------- -------- -------- --------
The Certej exploitation licence 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.
Individual property spending commitments for each of the Company's Romanian
licences have been met as at 30 June 2007.
7. Restricted investment
The balance consists of an amount of $4,000 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.
8. Future tax liability
The following table reflects future income tax liabilities:
30 June 31 December
2007 2006
$ $
--------- ----------
Mineral properties 98,130 45,674
Plant and equipment 550 244
Exploration and development expenditure 2,645 2,232
Accrued expenses 1,065 -
--------- ----------
102,390 48,150
--------- ----------
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.
9. 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 as at 30 June 2007 and 31 December 2006:
30 June 31 December
2007 2006
$ $
--------- ----------
Asset retirement obligation - Beginning of period 6,031 5,307
Currency translation adjustment 158 613
Accretion expense 60 111
--------- ----------
Asset retirement obligation - End of period 6,249 6,031
--------- ----------
As at 30 June 2007, the undiscounted amount of estimated cash flows required to
settle the obligation was $6,826 (31 December 2006 - $6,639). 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.
10. Deferred revenue
In April 2007, Hellas Gold agreed to sell to Silver Wheaton (Caymans) Ltd.
("Silver Wheaton") all of the silver metal to be produced from ore extracted
during the mine-life within an area of some 7 km(2) around its zinc-lead-silver
Stratoni mine in northern Greece (the "Silver Wheaton Transaction"). The sale
was made in consideration of a prepayment to Hellas Gold of US$57.5 million in
cash, plus a fee per ounce of payable silver to be delivered to Silver Wheaton
of the lesser of US$3.90 (subject to an inflationary adjustment beginning after
year three) and the prevailing market price per ounce. The current Stratoni
proven and probable silver reserve contains approximately 12 million ounces of
silver. The following table reconciles deferred revenue associated with the
Silver Wheaton Transaction:
30 June 31 December
2007 2006
$ $
Deferred revenue - Beginning of period - -
Additions 57,500 -
Revenue recognised (1,014) -
---------- ----------
Deferred revenue - End of period 56,486 -
---------- ----------
During the three-month period ended 30 June 2007, Hellas Gold delivered
concentrate containing 276,334 ounces (2006 - Nil) of silver to Silver Wheaton.
11. 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 2006 114,801,848 246,890
--------- ----------
Restricted share units vested 235,000 850
Share options exercised 102,773 181
Shares issued for equity financing 27,600,000 130,059
Shares issued as consideration for acquisition 35,447,246 161,424
Share issue costs - (7,152)
--------- ----------
63,385,019 285,362
--------- ----------
--------- ----------
Balance - 30 June 2007 178,186,867 532,252
--------- ----------
As at 30 June 2007, the Company had 35,447,246 common shares held in escrow or
in respect of which trading restrictions applied.
Contributed surplus:
30 June 31 December
2007 2006
$ $
Equity-based compensation expense 7,787 6,557
Broker warrants 578 578
---------- ----------
8,365 7,135
---------- ----------
12. Share options and restricted share units
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. The
maximum number of common shares of the Company which may be reserved for
issuance for all purposes under the Share Option Plan shall not exceed 15% of
the common shares issued and outstanding from time to time (26,728,030 shares as
at 30 June 2007).
As at 30 June 2007, the following share options were outstanding:
Number of Exercise
Options price
C$
Expiry date
2009 325,000 2.80
2009 120,000 3.20
2009 250,000 4.20
2009 535,000 3.07
2009 75,000 3.15
2010 576,999 2.00
2010 50,000 2.11
2010 150,000 2.40
2011 100,000 3.25
2011 600,000 3.85
2011 200,000 4.10
2012 75,000 5.47
2012 250,000 5.66
--------- ---------
3,306,999 3.36
--------- ---------
During the six-month period ended 30 June 2007, share options were granted,
exercised and cancelled as follows:
Number of Weighted
Options average
exercise
price
C$
--------- ---------
Balance - 31 December 2006 3,213,665 3.06
--------- ---------
Options granted 325,000 5.62
Options exchanged for shares (181,666) 2.32
Options cancelled (50,000) 2.50
--------- ---------
Balance - 30 June 2007 3,306,999 3.36
--------- ---------
Of the 3,306,999 share options outstanding as at 30 June 2007, 2,581,999 were
fully vested and had a weighted average exercise price of C$3.02 per share.
The weighted average grant date fair value of the 325,000 share options granted
during the six-month period ended 30 June 2007 (2006 - 800,000) was C$5.62 (2006
- C$3.91). For outstanding share options which were not fully vested during the
six-month period ended 30 June 2007, the Company incurred a total equity-based
compensation cost of $532 (2006 - $675) of which $431 (2006 - $613) has been
recognised as an expense in the income statement and $100 (2006 - $62) has been
capitalised to deferred exploration and development costs.
Restricted Share Unit Plan
The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorising
the directors, based on recommendations received from the Compensation
Committee, to grant Restricted Share Units ("RSUs") to designated directors,
officers, employees and consultants. The RSUs are "phantom" shares that rise and
fall in value based on the value of the Company's common shares and are redeemed
for actual common shares on the vesting dates determined by the Board of
Directors when the RSUs are granted. The RSUs vest on the dates below however
upon a change of control of the Company they would typically become 100% vested.
The maximum number of common shares of the Company which may be reserved for
issuance for all purposes under the RSU Plan shall not exceed 2.5% of the common
shares issued and outstanding from time to time (4,454,672 shares as at 30 June
2007).
As at 30 June 2007, the following RSUs were outstanding:
Vesting date Number of Grant date
RSUs fair value of
underlying
shares
C$
1 July 2007 * 250,000 4.04
31 August 2007 ** 50,000 5.36
31 December 2007 350,000 2.19
31 December 2007 175,000 4.04
31 December 2007 *** 60,000 3.24
31 December 2007 30,000 5.36
31 May 2008 75,000 3.24
--------- ---------
990,000 3.38
--------- ---------
* Or earlier if certain operational milestones are achieved. Vesting conditional
upon such milestones being achieved by 1 July 2007.
** Provided certain operational milestones are achieved by 31 August 2007.
*** Provided certain operational milestones are achieved by 1 July 2007.
During the six-month period ended 30 June 2007, RSUs were granted, vested and
cancelled as follows:
--------- ---------
Number of Weighted
RSUs average
grant date
fair value of
underlying
shares
C$
--------- ---------
Balance - 31 December 2006 1,105,000 3.26
--------- ---------
RSUs granted 180,000 5.36
RSUs vested (235,000) 4.14
RSUs cancelled (60,000) 4.04
--------- ---------
Balance - 30 June 2007 990,000 3.38
--------- ---------
The weighted average grant date fair value of underlying shares of the 180,000
RSUs granted during the six-month period ended 30 June 2007 (2006 - 1,065,000)
was C$5.36 (2006 - C$3.88). For outstanding RSUs which were not fully vested
during the six-month period ended 30 June 2007, the Company incurred a total
equity-based compensation cost of $1,736 (2006 - $1,797) of which $475 (2006 -
$893) has been recognised as an expense in the income statement and $1,262 (2006
- Nil) has been capitalised to deferred exploration and development costs.
13. Supplementary cash flow information
30 June 30 June
2007 2006
$ $
--------- ---------
Changes in non-cash operating accounts:
Accounts receivable, prepaid expenses and supplies (3,245) (2,552)
Accounts payable 1,638 3,283
Inventory (1,744) (639)
--------- ---------
(3,351) 92
--------- ---------
Supplemental disclosure of non-cash transactions:
Share options and restricted share units issued for non-cash
consideration 2,261 -
Exercise of share options - Transfer from contributed
surplus to share capital (181) (1,375)
Vesting of restricted share units (850) (435)
14. Commitments
As at 30 June 2007, the Company had remaining spending commitments of $1,080
(2006 - $1,415) over the remaining term of its Voia exploration licence in
Romania which expires in March 2010.
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.
As at 30 June 2007, Hellas Gold had entered into off-take agreements pursuant to
which Hellas Gold agreed to sell the following quantities of metal concentrates
during the next three years:
1 Year 2-3 Years +3 Years
(dry metric tonnes)
-----------------------------------------
Zinc concentrates (Stratoni) 63,351 15,000 -
Lead/silver concentrates (Stratoni) 35,265 20,000 -
Gold concentrates (Olympias) 98,622 82,824 55,000
----------- ---------- ---------
197,238 117,824 55,000
----------- ---------- ---------
As at 30 June 2007, 22,234 dmt of zinc concentrates, 9,400 dmt of lead/silver
concentrates and 28,373 dmt of gold concentrates had been sold on account of the
2007 commitments.
15. Transactions with related parties
During the six-month period ended 30 June 2007, Hellas Gold incurred costs of
$13,856 (2006 - $8,303) for management, technical and engineering services
received from a related party, Aktor S.A., a 5% shareholder in Hellas Gold. As
at 30 June 2007, Hellas Gold had accounts payable of $4,053 (2006 - $4,195) 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.
16. 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:
30 June 31 December
2007 2006
$ $
--------- ---------
Revenue
Canada - -
Greece 24,944 52,438
Romania - -
United Kingdom - -
--------- ---------
24,944 52,438
--------- ---------
Plant and equipment and deferred exploration and
development costs
Canada - -
Greece 444,563 223,286
Romania 34,838 32,010
United Kingdom 301 325
--------- ---------
479,702 255,621
--------- ---------
Operating liabilities
Canada 9,760 226
Greece 21,212 7,625
Romania 272 304
United Kingdom 744 1,647
--------- ---------
31,988 9,802
--------- ---------
17. Earnings per share
The calculation of the basic and diluted earnings per share attributable to
holders of the Company's common shares is based as follows:
3 months ended 30 June 6 months ended 30 June
2007 2006 2007 2006
$ $ $ $
-------- -------- -------- --------
Earnings 5,335 (850) 7,443 (314)
Effect of dilutive potential - - - -
common shares -------- -------- -------- --------
Diluted
earnings 5,335 (850) 7,443 (314)
-------- -------- -------- --------
Weighted average number of
common shares for the purpose of
basic earnings per share 122,957 113,847 119,426 112,673
Incremental shares - Share
options 1,695 - 1,679 -
-------- -------- -------- --------
Weighted average number of
common shares for the purpose
of diluted earnings per share 124,652 113,847 121,105 112,673
-------- -------- -------- --------
18. Reclassification of comparative figures
Certain comparative figures have been reclassified to conform to the current
year's presentation.
19. Legal proceedings
In June 2005, certain residents of Stratoniki village submitted a request for
the annulment of the Greek government's joint ministerial decision approving the
environmental impact study for the Stratoni mine (the "JMD Approval"). In
November 2005, the same petitioners submitted a request for the annulment of the
decision of the Minister of Development approving the Technical Study for the
exploitation of the Mavres Petres mine that forms part of the Stratoni complex
(the "MOD Approval"). The JMD Approval and the MOD Approval are necessary for
the continued operation of the Stratoni mine. In both cases the petitioners
alleged a lack of legal basis for the approvals and potential harm to the
environment and their properties. The Greek government, supported by the
Company, the Association of Extractive Companies, and two workers' unions, has
taken a position that the approvals are valid. In December 2005 the petitioners
requested an injunction to stop work on the Stratoni project pending the hearing
of the requests for annulment, but the court rejected the request. A hearing on
both requests for annulment will be held in November 2007. The management of the
Company believes that both requests for annulment are unfounded and unlikely to
succeed.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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