RNS Number:2333H
European Goldfields Ltd
08 November 2007
European Goldfields Limited
Interim Consolidated Financial Statements
(Unaudited)
For the Three- and Nine-Month Periods Ended
30 September 2007 and 2006
Disclosure of auditor review of interim consolidated financial statements
The interim consolidated financial statements of the Company for the three- and
nine-month periods ended 30 September 2007 and 2006 have not been reviewed by
the auditors of the Company.
European Goldfields Limited 30 Sept. 31
Consolidated Balance Sheets December
As at 30 September 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 211,571 34,587
Accounts receivable 26,649 14,945
Prepaid expenses 1,165 1,270
Inventory 4 4,963 854
--------- ---------
244,348 51,656
--------- ---------
Non current assets
Property, plant and equipment 5 45,053 27,007
Deferred exploration and development costs 6
Greek production stage mineral properties 28,522 14,677
Greek development stage mineral properties 384,809 182,157
--------- ---------
413,331 196,834
Romanian development stage mineral properties 35,909 31,782
--------- ---------
449,240 228,616
--------- ---------
Restricted investment 7 4,000 3,926
Future tax asset 2,357 738
--------- ---------
744,998 311,943
--------- ---------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 12,625 9,802
Income taxes payable 7,434 -
--------- ---------
20,059 9,802
--------- ---------
Non current liabilities
Future tax liability 8 104,039 48,150
Non-controlling interest 6,849 20,422
Asset retirement obligation 9 6,614 6,031
Deferred revenue 10 57,517 -
--------- ---------
175,019 74,603
--------- ---------
Shareholders' equity
Capital stock 11 533,108 246,890
Contributed surplus 11 7,337 7,135
Other comprehensive income 20,639 4,276
Deficit (11,164) (30,763)
--------- ---------
549,920 227,538
--------- ---------
--------- ---------
744,998 311,943
--------- ---------
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 3 months ended 9 months ended
Consolidated Statements of 30 Sept. 30 Sept.
Profit and Loss
For the three- and
nine-month periods ended 30
September 2007 and 2006
(Unaudited - Prepared by
Management)
(in thousands of US Dollars,
except per share amounts)
Note 2007 2006 2007 2006
$ $ $ $
Income
Sales 21,663 15,211 63,690 32,568
Cost of sales (8,870) (6,507) (24,123) (14,067)
Depletion of asset
retirement obligation (127) (170) (325) (436)
Depreciation and depletion (1,393) (576) (2,881) (1,482)
-------- -------- -------- --------
Gross profit 11,273 7,958 36,361 16,583
-------- -------- -------- --------
Other income
Interest income 2,320 485 3,889 1,052
Foreign exchange
gain/(loss) 6,494 (67) 6,077 151
-------- -------- -------- --------
8,814 418 9,966 1,203
-------- -------- -------- --------
Expenses
Corporate administrative
and overhead expenses 869 643 2,600 1,645
Equity-based compensation
expense 603 669 1,509 2,100
Hellas Gold administrative
and overhead expenses 2,128 1,743 6,660 3,543
Hellas Gold water
treatment expenses 1,070 756 3,250 2,142
(non-operating mines)
Hellas Gold old adit and
equipment maintenance
(Stratoni mine) - 269 - 2,295
Accretion of asset
retirement obligation 31 29 91 83
Amortisation 118 165 349 586
-------- -------- -------- --------
4,819 4,274 14,459 12,394
-------- -------- -------- --------
-------- -------- -------- --------
Profit for the period
before income tax 15,268 4,102 31,868 5,392
Income taxes
Current taxes (3,829) - (7,072) -
Future taxes 1,065 (1,118) (207) (2,557)
-------- -------- -------- --------
(2,764) (1,118) (7,279) (2,557)
-------- -------- -------- --------
-------- -------- -------- --------
Profit for the period
after income tax 12,504 2,984 24,589 2,835
Non-controlling interest (348) (1,509) (4,990) (2,209)
-------- -------- -------- --------
Profit for the period 12,156 1,475 19,599 626
Deficit - Beginning of
period (23,320) (34,614) (30,763) (33,765)
-------- -------- -------- --------
Deficit - End of period (11,164) (33,139) (11,164) (33,139)
-------- -------- -------- --------
Earnings per share 17
Basic 0.07 0.01 0.14 0.01
Diluted 0.07 0.01 0.14 0.01
Weighted average number of
shares (in thousands)
Basic 178,860 113,777 137,570 113,786
Diluted 180,444 114,481 139,032 114,539
The accompanying notes are an integral part of these interim consolidated
financial statements.
European Goldfields Capital Contributed Other Deficit Total
Limited Stock Surplus Comprehensive
Consolidated Income
Statements of Equity
As at 30 September
2007 and 2006
(Unaudited - Prepared
by Management)
(in thousands of US
Dollars, except per
share amounts) $ $ $ $ $
--------- --------- ---------- -------- --------
Balance - 31 240,234 6,197 (12,843) (33,765) 199,823
December 2005
--------- --------- ---------- -------- --------
Equity-based - 3,976 - - 3,976
compensation cost
Restricted share 435 (435) - - -
units vested
Share options
exercised or 3,901 (1,449) - - 2,452
exchanged
Movement in
cumulative - - 11,024 - 11,024
translation
adjustment
Profit for the - - - 626 626
period
--------- --------- ---------- -------- --------
4,336 2,092 11,024 626 18,078
--------- --------- ---------- -------- --------
--------- --------- ---------- -------- --------
Balance - 30 244,570 8,289 (1,819) (33,139) 217,901
September 2006
--------- --------- ---------- -------- --------
Equity-based - 1,123 - - 1,123
compensation cost
Restricted share 1,636 (1,636) - - -
units vested
Share options
exercised or 684 (641) - - 43
exchanged
Movement in
cumulative - - 6,095 - 6,095
translation
adjustment
Profit for the - - - 2,376 2,376
period
--------- --------- ---------- -------- --------
2,320 (1,154) 6,095 2,376 9,637
--------- --------- ---------- -------- --------
--------- --------- ---------- -------- --------
Balance - 31 246,890 7,135 4,276 (30,763) 227,538
December 2006
--------- --------- ---------- -------- --------
Equity-based - 1,940 - - 1,940
compensation cost
Shares issued for
equity 130,059 - - - 130,059
financing
Shares issued as
consideration 161,424 - - - 161,424
for acquisition
Share issue costs (7,055) - - - (7,055)
Restricted share 850 (850) - - -
units vested
Share options
exercised or 940 (888) - - 52
exchanged
Movement in
cumulative - - 16,363 - 16,363
translation
adjustment
Profit for the - - - 19,599 19,599
period
--------- --------- ---------- -------- --------
286,218 202 16,363 19,599 322,382
--------- --------- ---------- -------- --------
--------- --------- ---------- -------- --------
Balance - 30 533,108 7,337 20,639 (11,164) 549,920
September 2007
--------- --------- ---------- -------- --------
The accompanying notes are an integral part of these interim consolidated
financial statements.
European Goldfields Limited 3 months ended 9 months ended
Consolidated Statements 30 Sept. 30 Sept.
of Cash Flows
For the three- and
nine-month periods ended
30 September 2007 and 2006
(Unaudited - Prepared by
Management)
(in thousands of US Dollars, 2007 2006 2007 2006
except per share amounts) $ $ $ $
Note
Cash flows from operating
activities
Profit for the period 12,156 1,475 19,599 626
Foreign exchange
(gain)/loss (6,563) 132 (6,077) 274
Amortisation 545 568 1,615 1,444
Equity-based compensation
expense 603 642 1,509 2,147
Accretion of asset
retirement obligation 31 29 91 83
Current taxation 3,828 - 7,072 -
Future tax asset
recognised (1,065) 1,118 207 2,557
Non-controlling interest 348 1,509 4,990 2,209
Deferred revenue
recognised (1,151) - (2,165) -
Depletion of mineral
properties 1,095 383 1,941 1,060
Other non-cash items 565 - - -
--------- --------- --------- ---------
10,392 5,856 28,782 10,400
--------- --------- --------- ---------
Net changes in non-cash
working capital 13 (6,904) (4,615) (12,438) (4,524)
--------- --------- --------- ---------
3,488 1,241 16,344 5,876
--------- --------- --------- ---------
Cash flows from investing
activities
Deferred exploration and
develop. costs - Romania (1,658) (598) (3,602) (2,438)
Plant and equipment -
Greece (12,142) (1,268) (17,827) (3,435)
Deferred development costs
- Greece (491) (462) (1,432) (1,937)
Purchase of equipment (26) (6) (61) (74)
Further acquisition in
Hellas Gold (9,003) - (9,003) -
Restricted investment - 6 28 18
--------- --------- --------- ---------
(23,320) (2,328) (31,897) (7,866)
--------- --------- --------- ---------
Cash flows from financing
activities
Proceeds from equity
financing - - 130,059 -
Deferred revenue - - 59,683 -
Proceeds from exercise of
share options 52 - 52 2,452
Share issue costs 97 - (7,055) -
--------- --------- --------- ---------
149 - 182,739 2,452
--------- --------- --------- ---------
Effect of foreign currency
translation on cash 9,658 (189) 9,798 811
--------- --------- --------- ---------
(Decrease)/increase in
cash and cash equivalents (10,025) (1,276) 176,984 1,273
Cash and cash equivalents
- Beginning of period 221,596 33,085 34,587 30,536
--------- --------- --------- ---------
Cash and cash equivalents
- End of period 211,571 31,809 211,571 31,809
--------- --------- --------- ---------
The accompanying notes are an integral part of these interim consolidated
financial statements.
European Goldfields Limited 3 months ended 9 months ended
Consolidated Statements of 30 Sept. 30 Sept.
Comprehensive Income
For the three- and
nine-month periods ended 30
September 2007 and 2006
(Unaudited - Prepared by
Management)
(in thousands of US Dollars,
except per share amounts) 2007 2006 2007 2006
$ $ $ $
Profit for the period 12,156 1,475 19,599 626
Other comprehensive income
in the period
Currency translation
adjustment 11,312 (1,069) 4,560 11,024
-------- -------- -------- --------
Comprehensive income 23,468 406 24,159 11,650
-------- -------- -------- --------
European Goldfields Limited
Notes to Consolidated Financial Statements
For the three- and nine-month periods ended 30 September 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 an additional 30% 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 201,314,074
Future tax liabilities (50,182,299)
-----------
170,427,792
-----------
Purchase consideration: $
-----------
Cash paid 8,418,351
Shares issued (35,447,246 common shares) 161,424,562
Transaction costs 584,879
-----------
Purchase price 170,427,792
-----------
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 Sept. 31 December
2007 2006
$ $
Ore mined 544 225
Metal concentrates 3,265 154
Material and supplies 1,154 475
--------- -----------
4,963 854
--------- -----------
5. Property, plant and equipment
Plant and Vehicles Mine Leasehold Total
equipment development, improvements
land and
buildings
$ $ $ $ $
Cost - 2007
At 31 December 2006 13,220 1,236 15,609 256 30,321
Additions 14,530 352 3,006 - 17,888
Disposals (14) (8) - - (22)
Currency translation
adjustment 1,031 80 1,272 - 2,383
-------- -------- -------- -------- --------
At 30
September 2007 28,767 1,660 19,887 256 50,570
-------- -------- -------- -------- --------
Accumulated
amortisation - 2007
At 31 December 2006 1,681 685 888 58 3,312
Provision for
the period 896 234 717 19 1,866
Disposals (10) (8) - - (18)
Currency translation
adjustment 168 59 130 - 357
-------- -------- -------- -------- --------
At 30
September 2007 2,735 970 1,735 77 5,517
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net book value
at 30 September 2007 26,032 690 18,152 179 45,053
-------- -------- -------- -------- --------
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 14,440 110,573 76,302 201,315
Deferred development costs 238 76 1,105 1,419
Depletion of mineral properties (1,713) (460) - (2,173)
Currency translation adjustment 880 8,942 6,114 15,936
--------- ----------- --------- ---------
--------- ----------- --------- ---------
Balance - 30 September 2007 28,522 227,209 157,600 413,331
--------- ----------- --------- ---------
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- Voia Cainel Total
Craciunesti
$ $ $ $ $
------- -------- -------- ------- --------
Balance - 31 December
2006 26,862 3,064 844 1,012 31,782
------- -------- -------- ------- --------
Drilling and assaying 824 1 1 6 832
Geosciences and tech.
consulting 1,061 30 40 - 1,131
Samplers, miners and
surveying 45 - - - 45
Project management 943 11 24 1 979
Project overhead 960 15 95 9 1,079
Amortisation 47 5 1 8 61
------- -------- -------- ------- --------
3,880 62 161 24 4,127
------- -------- -------- ------- --------
Balance - 30 September
2007 30,742 3,126 1,005 1,036 35,909
------- -------- -------- ------- --------
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 September 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 Sept. 31 December
2007 2006
$ $
---------- ----------
Mineral properties 100,393 45,674
Plant and equipment 675 244
Exploration and development expenditure 2,740 2,232
Accrued expenses 231 -
---------- ----------
104,039 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 September 2007 and 31 December 2006:
30 Sept. 31 December
2007 2006
$ $
--------- ----------
Asset retirement obligation - Beginning of period 6,031 5,307
Currency translation adjustment 492 613
Accretion expense 91 111
--------- ----------
Asset retirement obligation - End of period 6,614 6,031
--------- ----------
As at 30 September 2007, the undiscounted amount of estimated cash flows
required to settle the obligation was $7,147 (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.
In April 2007, Hellas Gold entered in an agreement with MRI Trading AG of
Switzerland for the sale of 25,000 wet metric tones of gold bearing pyrite
concentrate. Hellas Gold received a prepayment of
US$2.18 million in cash.
The following table reconciles movements on deferred revenue associated with the
MRI prepayment and the Silver Wheaton Transaction:
30 Sept. 31 December
2007 2006
$ $
Deferred revenue - Beginning of period - -
Additions 59,683 -
Revenue recognised (2,166) -
---------- ----------
Deferred revenue - End of period 57,517 -
---------- ----------
During the nine-month period ended 30 September 2007, Hellas Gold delivered
concentrate containing 565,391 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 418,963 940
Shares issued for equity financing 27,600,000 130,059
Shares issued as consideration for acquisition 35,447,246 161,424
Share issue costs - (7,055)
--------- ----------
63,701,209 286,218
--------- ----------
--------- ----------
Balance - 30 September 2007 178,503,057 533,108
--------- ----------
As at 30 September 2007, the Company had 35,447,246 common shares held in escrow
or in respect of which trading restrictions applied.
Contributed surplus:
30 Sept. 31 December
2007 2006
$ $
Equity-based compensation expense 6,759 6,557
Broker warrants 578 578
---------- ----------
7,337 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 (26,775,459 shares as
at 30 September 2007).
As at 30 September 2007, the following share options were outstanding:
Number of Exercise
Options price
C$
Expiry date
2009 250,000 2.80
2009 250,000 4.20
2009 395,000 3.07
2009 75,000 3.15
2010 414,999 2.00
2010 25,000 2.11
2010 150,000 2.40
2011 66,666 3.25
2011 600,000 3.85
2011 200,000 4.10
2012 75,000 5.47
2012 250,000 5.66
2012 150,000 5.71
2012 270,000 5.87
--------- ---------
3,171,665 3.80
--------- ---------
During the nine-month period ended 30 September 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 745,000 5.73
Options exchanged for shares (737,000) 2.62
Options cancelled (50,000) 2.50
--------- ---------
Balance - 30 September 2007 3,171,665 3.80
--------- ---------
Of the 3,171,665 share options outstanding as at 30 September 2007, 2,059,999
were fully vested and had a weighted average exercise price of C$3.10 per share.
The weighted average grant date fair value of the 745,000 share options granted
during the nine-month period ended 30 September 2007 (2006 - 900,000) was C$5,73
(2006 - C$2.01). For outstanding share options which were not fully vested
during the nine-month period ended 30 September 2007, the Company incurred a
total equity-based compensation cost of $960 (2006 - $1,100) of which $806 (2006
- $878) has been recognised as an expense in the income statement and $154 (2006
- $222) has been capitalised to deferred exploration and development costs.
Restricted Share Unit Plan
The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorising
the directors, based on recommendations received from the Compensation
Committee, to grant Restricted Share Units ("RSUs") to designated directors,
officers, employees and consultants. The RSUs are "phantom" shares that rise and
fall in value based on the value of the Company's common shares and are redeemed
for actual common shares on the vesting dates determined by the Board of
Directors when the RSUs are granted. The RSUs vest on the dates below however
upon a change of control of the Company they would typically become
100% vested. The maximum number of common shares of the Company which may be
reserved for issuance for all purposes under the RSU Plan shall not exceed 2.5%
of the common shares issued and outstanding from time to time (4,462,516 shares
as at 30 September 2007).
As at 30 September 2007, the following RSUs were outstanding:
Vesting date Number of Grant date
RSUs fair value of
underlying shares
C$
31 December 2007 350,000 2.19
31 December 2007 175,000 4.04
31 December 2007 30,000 5.36
31 May 2008 75,000 3.24
30 June 2008 55,000 5.74
30 June 2009 55,000 5.74
--------- ---------
740,000 3.39
--------- ---------
During the nine-month period ended 30 September 2007, RSUs were granted, vested
and cancelled as follows:
Number of Weighted average
RSUs grant date
fair value of
underlying shares
C$
-------- -----------
Balance - 31 December 2006 1,105,000 3.26
-------- -----------
RSUs granted 290,000 5.50
RSUs vested (235,000) 4.14
RSUs cancelled (420,000) 4.08
-------- -----------
Balance - 30 September 2007 740,000 3.39
-------- -----------
The weighted average grant date fair value of underlying shares of the 290,000
RSUs granted during the nine-month period ended 30 September 2007 (2006 -
1,335,000) was C$5.50 (2006 - C$3.75). For outstanding RSUs which were not fully
vested during the nine-month period ended 30 September 2007, the Company
incurred a total equity-based compensation cost of $988 (2006 - $2,561) of which
$703 (2006 - $1,222) has been recognised as an expense in the income statement
and $285 (2006 - $1,340) has been capitalised to deferred exploration and
development costs.
13. Supplementary cash flow information
30 Sept. 30 Sept.
2007 2006
$ $
--------- ---------
Changes in non-cash operating accounts:
Accounts receivable, prepaid expenses and supplies (11,599) (7,133)
Accounts payable 2,822 2,750
Inventory (3,661) (141)
--------- ---------
(12,438) (4,524)
--------- ---------
Supplemental disclosure of non-cash transactions:
Share options and restricted share units issued for
non-cash consideration 1,940 3,976
Exercise of share options - Transfer from contributed
surplus (888) (1,449)
to share capital
--------- ---------
Vesting of restricted share units (850) (435)
14. Commitments
As at 30 September 2007, the Company had remaining spending commitments of $970
(2006 - $1,242) 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 September 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:
2007 2008-2009 2010+
(dry metric tonnes)
----------------------------------------
Zinc concentrates (Stratoni) 63,351 15,000 -
Lead/silver concentrates (Stratoni) 35,265 20,000 -
Gold concentrates (Olympias) 129,887 119,662 32,724
----------- ---------- ---------
228,503 154,662 32,724
----------- ---------- ---------
As at 30 September 2007, 27,962 dmt of zinc concentrates, 15,119 dmt of lead/
silver concentrates and 58,169 dmt of gold concentrates had been sold on account
of the 2007 commitments.
15. Transactions with related parties
During the nine-month period ended 30 September 2007, Hellas Gold incurred costs
of $20,884 (2006 - $12,972) for management, technical and engineering services
received from a related party, Aktor S.A., a 5% shareholder in Hellas Gold. As
at 30 September 2007, Hellas Gold had accounts payable of $8,836 (2006 - $3,139)
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 Sept. 31 December
2007 2006
$ $
--------- ---------
Revenue
Canada - -
Greece 63,690 52,438
Romania - -
United Kingdom - -
--------- ---------
63,690 52,438
--------- ---------
Plant and equipment and deferred exploration and
development costs
Canada - -
Greece 457,926 223,286
Romania 36,086 32,010
United Kingdom 281 325
--------- ---------
494,293 255,621
--------- ---------
Operating liabilities
Canada 100 226
Greece 18,546 7,625
Romania 220 304
United Kingdom 1,193 1,647
--------- ---------
20,059 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 Sept. 9 months ended 30 Sept.
2007 2006 2007 2006
$ $ $ $
-------- -------- -------- --------
Earnings 12,156 1,475 19,599 626
Effect of dilutive potential - - - -
common shares
-------- -------- -------- --------
Diluted earnings 12,156 1,475 19,599 626
-------- -------- -------- --------
Weighted average number of
common shares for the purpose 178,860 113,777 137,570 113,786
of basic earnings per share
Incremental shares
- Share options 1,584 704 1,462 753
-------- -------- -------- --------
Weighted average number of
common shares for the purpose
of diluted earnings per share 180,444 114,481 139,032 114,539
-------- -------- -------- --------
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 shortly. 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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