Placing of Common Shares
October 26 2004 - 3:03AM
UK Regulatory
RNS Number:4633E
European Goldfields Ltd
26 October 2004
For Immediate Release 26 October 2004
European Goldfields Limited
Acquisition of a controlling interest in Hellas Gold S.A.
#40 Million Placing of Common Shares
Special Meeting of Shareholders
European Goldfields Limited (AIM: EGU / TSX-V: EGU) ("European Goldfields" or
the "Company"), a resource company involved in the acquisition, exploration and
development of mineral properties in Romania, Greece and the Balkans, is pleased
to announce that it has conditionally agreed today to acquire an additional 35%
interest in Hellas Gold S.A. ("Hellas Gold"), increasing its total interest in
Hellas Gold to 65% (the "Acquisition").
Brief highlights of the Acquisition:
* European Goldfields is acquiring an additional 35% of Hellas Gold for a
total consideration of US$166.25 million, increasing its stake to 65%.
* Aktor S.A., Greece's largest construction company, will retain the
remaining 35% stake in Hellas Gold.
* The Acquisition will be funded through raising #40 million in cash by
issuing 29,629,630 million shares at #1.35 per new share, and by issuing
30,423,280 new Common Shares to the vendors at a deemed issue price of
#1.75 per share.
* Hellas Gold has been independently valued at US$500 million based on 10
year average commodity prices and the conversion of base metals to
equivalent gold ounces using only 50% of the factored gold acquisition
value.
* Following the completion of the Acquisition, European Goldfields will
have 110,993,713 shares in issue, giving European Goldfields a market
capitalisation of #149.8 million at the placing price.
David Reading, Chief Executive Officer of European Goldfields, said:
"In order for European Goldfields to evolve into a major resource development
and gold mining company, taking a controlling majority stake in Hellas Gold is a
key development for future growth. The Greek assets have substantial gold
equivalent proven and probable reserves, though this does not include the
significant exploration upside which our 70 year license provides to our
shareholders.
Once the acquisition has been completed, European Goldfields will update
existing feasibility studies on the Greek assets to permit up to date estimation
of the reserves. Upon completion of this review, we intend to commence a work
programme to develop the assets and produce a budget to meet financial
requirements through to production.
We are extremely pleased with our strong partnership with Aktor and the recent
support we have received for the project from the Greek government and local
community."
For Further Information:
IR/Media Contact:
David Grannell
London Office: +44 (0)20 7408 9534 e-mail: info@egoldfields.com
London Mobile: +44 (0)7703 190652 website: www.egoldfields.com
Buchanan Communications
Bobby Morse / Ben Willey +44 (0)20 7466 5000 e-mail: bobbym@buchanan.uk.com
Background detail to the Acquisition:
European Goldfields has conditionally agreed today to acquire an additional 35%
interest in Hellas Gold S.A. ("Hellas Gold"), increasing its total interest in
Hellas Gold to 65% (the "Acquisition").
The total purchase price for the shares of Hellas Gold is US$166.25 million to
be satisfied as to US$95.83 million by the issue of 30,423,280 new Common Shares
to the vendors at a deemed issue price of #1.75 (US$3.15) per share, a premium
of approximately 30 per cent. over the placing price.
The Company's partner, Aktor S.A. (the largest construction company in Greece),
will retain the remaining 35% interest in Hellas Gold, through a wholly-owned
subsidiary. The vendors are Mr. Dimitrios Koutras (14%) and certain companies
controlled by Mr. Frank Timis (21%). It is proposed that Mr. Koutras will become
a non-executive director of the Company following completion of the Acquisition.
Hellas Gold, a company incorporated in Greece, owns assets in Northern Greece
which comprise mining concessions over a total area of 317 km2, including three
near-production properties, two of which operated previously and benefit from
significant infrastructure in place such as base metal mining facilities and a
ship loading facility, and one of which has recently completed a feasibility
study. The assets are described as follows:
* Stratoni - a small polymetallic massive replacement-type deposit with
minor gold credits in the concentrate. Present proven and probable reserves
total 1.64 million tonnes of ore grading 7.6% lead, 10.2% zinc, and 179gAg/
t;
* Olympias - a similar polymetallic replacement deposit, but with high
gold grades. Proven and probable reserves, including stockpiled material
total 14.0 million tonnes of ore grading 3.9% lead, 5.1% zinc, 119.6gAg/t
and 8.6gAu/t; and
* Skouries - a copper-gold porphyry totaling 127.9 million tonnes probable
reserves of ore grading 0.88gAu/t and 0.55% copper.
Further, in its independent valuation report of Hellas Gold (the "Valuation
Report"), Behre Dolbear considers the prospects and exploration potential on the
317 km2 of mining concessions to be high and the discovery, over time, of an
equal amount of new mineralisation to that previously produced and discovered
likely.
The average price to be paid by the Company to acquire a 65% interest in Hellas
Gold (taking into account the price paid to acquire the Company's initial
fully-diluted 30%. interest in February 2004) reflects a total valuation of
Hellas Gold of approximately US$290 million, which represents a discount of
approximately 42% to the US$500 million valuation estimated by Behre Dolbear in
the valuation report announced on 29 September 2004. Furthermore, in the
Valuation Report, valuation methods have been applied conservatively in that:
- The commodity prices utilised were an average of 10-year historic prices and
first half 2004 prices; and
- Base metals have been converted into equivalent gold ounces by using only 50%
of the factored gold acquisition value for a specific property, based on the
property's net smelter return.
The Valuation Report is filed on SEDAR at www.sedar.com bearing the date of 4
October 2004 under the category "other".
The parties agreed to complete the Acquisition on 29 November 2004 or such other
date as may be agreed to in writing between them. The Acquisition is
conditional, inter alia, upon completion of the Placing, the re-admission of the
Company's shares to trading on AIM (the "Admission") and the approval of the
disinterested shareholders of the Company which is to be sought at a Special
Meeting of Shareholders to be held on Friday, 26 November 2004. The Placing is
conditional, inter alia, upon approval of the Acquisition by the disinterested
shareholders of the Company and Admission occurring by no later than 8.00 a.m.
on 30 November 2004, or such later date (being no later than 8.00 a.m. on 31
December 2004) as Evolution Securities Limited ("Evolution Securities") and the
Company may decide. Final acceptance of the Acquisition and the Placing must be
obtained from the TSX Venture Exchange before these transactions can proceed.
As Mr. Timis beneficially owns, or exercises control or direction over, more
than 5% of the Company's Common Shares, the acquisition by the Company from Mr.
Timis of his interest in Hellas Gold is classified as a "related party
transaction" under the AIM Rules. Mr. Timis was a "related party" to the Company
under TSX Venture Exchange policies when the Company acquired its initial 30%
interest in Hellas Gold in February 2004.
On completion of the Acquisition, Mr. Timis and Mr. Koutras will own, directly
or indirectly, or exercise control or direction over 18.89% and 12.68%,
respectively, of the issued and outstanding shares of the Company.
The vendors have agreed (subject to certain exceptions) not to dispose of their
shares received as consideration for the Acquisition until the date on which the
Company publishes its audited consolidated financial statements for the year
ending 31 December 2005. Also, Mr. Timis has agreed (subject to certain
exceptions) not to dispose of his other shares in the Company for a period of 12
months following the date of the Admission.
Details on the Placing:
To fund the costs relating to the Acquisition and provide additional working
capital, the Company proposes to raise #40 million (before expenses) by the
issue of 29,629,630 Common Shares at a price of #1.35 per share (the "Placing").
The Placing has been fully underwritten by Evolution Securities.
The balance of the cash consideration required for the Acquisition will be
funded by the non-brokered private placement with Commerzbank A.G. completed in
May 2004, where 5,882,000 Common Shares at a price of #1.70 per share were
issued, for total subscription proceeds of #10,000,000.
Special Meeting of Shareholders
A Special Meeting of Shareholders of the Company will be held at the offices of
Bull, Housser & Tupper, 3000, Royal Centre, 1055 West Georgia Street Vancouver,
British Columbia Canada, on Friday, 26 November 2004 at 2:00 p.m. (Vancouver
time), for the purposes of, inter alia, considering and, if deemed appropriate,
approving the Acquisition. Notice of the Special Meeting of Shareholders is
included in the Company's AIM Admission document, which is also an Information
Circular in relation to Canadian securities legislation and the policies of the
TSX Venture Exchange, filed on SEDAR bearing the date of 26 October 2004 under
the category "other".
Other Projects - Romania
In addition to its 30% interest (on a fully-diluted basis) in Hellas Gold, the
Company has five mineral properties in Romania. Each of the Company's Romanian
projects is located in the "Golden Quadrilateral" area. The Company has
identified a number of extensively mineralised zones within its principal
properties and has completed regional exploration programmes, including
resistivity, induced polarisation, airborne geophysics, geological mapping, soil
geochemical surveys, trenching, rock chip and channel sampling and drilling,
throughout its licence areas. The Company's primary focus is to advance the
Certej deposit to a pre-feasibility stage.
At a gold cut-off grade of 1.0 g/t, the updated resource estimate consists of
34.7 million tonnes at a grade of 2.1 g/t gold and 10 g/t silver classified as
an indicated mineral resource. In addition, 10.1 million tonnes of material at a
grade of 1.7 g/t gold and 8 g/t silver was classified as inferred mineral
resources for the eastern and western domains. The resource estimate for the
central domain consists of 2.9 million tonnes of material at a grade of 1.6 g/t
gold and 11 g/t silver which has been classified as an inferred mineral
resource.
In-fill drilling of parts of the main Certej deposit was undertaken in late 2003
and early 2004. This reduced the drill intercept spacing in the in-filled areas
to some 40 metres. Analysis of the results of this drilling has indicated that
it would support or even improve the average grade of the selective mining unit
resource model. As a result a programme of further drilling has been undertaken
with the aim of providing further details of grade continuity in selected areas
of the deposit. Results to date continue to provide increased definition of
higher grade zones. A programme of metallurgical testwork is also being
undertaken, initially to establish a three dimensional gold recovery map. The
Company plans to review the geological model and undertake a revised estimation
of resources as part of an internal pre-feasibility study.
Appointment of Director
The Company is please to announce that its Chief Executive Officer, David
Reading, has been appointed as a Director of the Company.
Forward-Looking Statements
This news release contains certain forward-looking statements concerning the
Company's future operations, economic performances, financial conditions and
financing plans. These statements are based on certain assumptions and analyses
made by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors the Company believes are appropriate in the circumstances. However,
whether actual results and developments will conform with the Company's
expectations and predictions is subject to a number of risks, uncertainties and
assumptions. Consequently, all of the forward-looking statements made in this
news release are qualified by these cautionary statements, and there can be no
assurance that the results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected
consequences to or effects on the Company and its subsidiaries or their
businesses or operations. The Company undertakes no obligation and does not
intend to update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise, except as may be required under
applicable law.
Completion of the transaction is subject to a number of conditions, including
but not limited to, TSX Venture Exchange acceptance and disinterested
shareholder approval. The transaction cannot close until the required
shareholder approval is obtained. There can be no assurance that the transaction
will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Company's AIM Admission
document prepared in connection with the transaction, any information released
or received with respect to the transaction may not be accurate or complete and
should not be relied upon. Trading in the securities of the Company should be
considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed
transaction and has neither approved nor disapproved the contents of this news
release.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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