RNS Number:1512F
European Goldfields Ltd
12 November 2004
Level 3, 11 Berkeley Street
London W1J 8DS
United Kingdom
Phone: +44 (20) 7408 9534
Fax: +44 (20) 7408 9535
European Goldfields Limited
Third Quarter 2004
Interim Consolidated Financial Statements (Unaudited)
Disclosure of auditor review of interim consolidated financial statements
The interim consolidated financial statements of the Company for the three-month
and nine-month periods ended 30 September 2004 and 2003 have not been reviewed
by the auditors of the Company.
European Goldfields Limited
Consolidated Balance Sheets
As at 30 September 2004 and 31 December 2003
(Unaudited - Prepared by Management)
(Canadian Dollars)
30 September 30 December
2004 2003
$ $
(Unaudited) (Audited)
Assets
Note
Current assets
Cash and cash equivalents 36,554,571 19,409,354
Short-term investments - 4,000,000
Accounts receivable, prepaid expenses and 1,757,066 2,591,094
supplies ---------- ----------
38,311,637 26,000,448
Non current assets
Equity investment 5 33,386,819 -
Plant and equipment 3 979,566 629,790
Mineral properties and deferred 4 37,279,269 32,855,048
exploration costs ---------- ----------
109,957,291 59,485,286
---------- ----------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 1,551,151 918,668
Convertible loan notes - 18,536,832
---------- ----------
1,551,151 19,455,500
Shareholders' equity
Capital stock and warrants 6 122,846,566 42,840,058
Contributed surplus 6 6,205,250 3,169,918
Deficit (20,645,676) (5,980,190)
---------- ----------
108,406,140 40,029,786
---------- ----------
109,957,291 59,485,286
---------- ----------
Approved by the Board of Directors
David Grannell Glenn Featherby
Director Director
European Goldfields Limited
Consolidated Statements of Loss and Deficit
For the three-month and nine-month periods ended 30 September 2004 and 2003
(Unaudited - Prepared by Management)
(Canadian Dollars)
3 months ended 9 months ended
30 September 30 September
2004 2003 2004 2003
$ $ $ $
Note
General and administrative
expenses
Administrative and overhead 1,047,740 250,818 2,758,379 702,262
costs
Audit, accounting, legal and 409,734 155,437 1,607,833 739,275
other professional fees
AIM Listing expense - - 737,432 -
Capital raising costs - - - 1,488,825 -
Convertible loan notes
Share option compensation 222,306 - 4,068,315 -
expense
Milestone share compensation 336,000 - 1,962,000 -
expense
Foreign exchange loss 1,726,062 22,370 1,006,335 22,371
Interest income (189,152) (22,694) (293,239) (198,246)
Business development - New 26,432 - 604,243 -
project evaluation
Amortisation 19,822 3,246 28,436 7,767
Share of (profit)/loss 5 (725,584) - 630,108 -
in equity investment -------- -------- -------- --------
Loss for the period before 2,873,360 409,177 14,598,667 1,273,429
income tax
Income taxes 33,408 - 66,819 -
-------- -------- -------- --------
Loss for the period 2,906,768 409,177 14,665,486 1,273,429
Deficit - Beginning of 17,738,908 3,413,059 5,980,190 2,548,807
period -------- -------- -------- --------
Deficit - End of period 20,645,676 3,822,236 20,645,676 3,822,236
-------- -------- -------- --------
Loss per share 9 0.07 0.01 0.34 0.06
-------- -------- -------- --------
The accompanying notes are an integral part of these consolidated financial
statements.
European Goldfields Limited
Consolidated Statement of Changes in Equity
As at 30 September 2004 and 31 December 2003
(Unaudited - Prepared by Management)
(Canadian Dollars)
Capital Contributed Deficit Total
Stock Surplus $ $
$ $
Balance - 31 December 42,833,058 467,557 (2,548,807) 40,751,808
2002
Share options 7,000 - - 7,000
exercised
Loss for the period - - (1,273,429) (1,273,429)
--------- -------- --------- ---------
Balance - 30 September 42,840,058 467,557 (3,822,236) 39,485,379
2003
Share option - 1,395,272 - 1,395,272
compensation expense
Equity component of - 991,568 - 991,568
convertible loan
notes
Capital raising costs - - (92,913) - (92,913)
convertible loan
notes
Broker warrants - 408,434 - 408,434
expense
Loss for the period - - (2,157,954) (2,157,954)
--------- -------- --------- ---------
Balance - 31 December 42,840,058 3,169,918 (5,980,190) 40,029,786
2003
Shares issued on 19,528,400 - - 19,528,400
conversion of
convertible loan
Shares issued from non 47,951,413 - - 47,951,413
brokered private
placements
Share options 1,075,000 - - 1,075,000
exercised
Warrants exercised 9,797,425 - - 9,797,425
Milestone shares issued 1,962,000 - - 1,962,000
as compensation
Share issue costs (307,730) - - (307,730)
Transfer of broker
warrant related expense
to share issue cost
- (105,142) - (105,142)
Transfer of equity
component of
convertible loan note
to capital stock
- (991,568) - (991,568)
Transfer of capital
raising costs on
convertible loan
notes
- 92,913 - 92,913
Share option - 4,068,315 - 4,068,315
compensation expense
Transfer of share
option compensation
upon exercise of
options
- (29,186) - (29,186)
Loss for period - - (14,665,486) (14,665,486)
--------- -------- --------- ---------
Balance - 30 September 122,846,566 6,205,250 (20,645,676) 108,406,140
2004 --------- -------- --------- ---------
European Goldfields Limited
Consolidated Statements of Cash Flows
For the three-month and nine-month periods ended 30 September 2004 and 2003
(Unaudited - Prepared by Management)
(Canadian Dollars)
3 months ended 30 September 9 months ended 30 September
2004 2003 2004 2003
$ $ $ $
Note
Cash flows from operating
activities
Loss for the period (2,906,768) (409,177) (14,665,486) (1,273,429)
Amortisation 19,822 3,246 28,436 7,767
Capital raising costs - - - 1,488,825 -
Convertible loan notes
Share option compensation 222,306 - 4,068,315 -
expense
Milestone share 336,000 - 1,962,000 -
compensation expense
Loss on disposal of - - 3,041 -
equipment
Share of (profit)/ 5 (725,584) - 630,108 -
loss in equity
investment
Net changes in non-cash (8,267) (7,095) (458,777) (376,752)
working capital --------- --------- --------- ---------
(3,062,491) (413,026) (6,943,538) (1,642,414)
--------- --------- --------- ---------
Cash flows from investing
activities
Exploration (1,482,464) (1,345,316) (4,273,291) (4,205,775)
expenditures
Short term investment - - 4,000,000 -
Acquisition of - - (33,580,462) -
investment
Proceeds from disposal of - - 29,187 -
capital assets
Purchase of equipment (403,641) (16,431) (561,371) (119,587)
--------- --------- --------- ---------
(1,886,105) (1,361,727) (34,385,937) (4,325,362)
--------- --------- --------- ---------
Cash flows from financing
activities
Proceeds from exercise of - - 9,797,425 -
share purchase warrants
Proceeds from non - - 47,951,413 -
brokered private
placement
Capital raising costs -
Non brokered private
placement
(8,359) - (349,146) -
Proceeds from exercise of - 7,000 1,075,000 7,000
share options --------- --------- --------- ---------
(8,359) 7,000 58,474,692 7,000
--------- --------- --------- ---------
(Decrease)/Increase in (4,956,955) (1,767,773) 17,145,217 (5,960,776)
cash and cash
equivalents
Cash and cash equivalents 41,511,526 9,025,586 19,409,354 13,218,589
- Beginning of period --------- --------- --------- ---------
Cash and cash equivalents 36,554,571 7,275,813 36,554,571 7,275,813
- End of period --------- --------- --------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
European Goldfields Limited
Notes to Consolidated Financial Statements
For the nine months ended 30 September 2004 and 2003
(Unaudited - Prepared by Management)
(Canadian Dollars)
1. Nature of operations
European Goldfields Limited (the "Company") is in the process of exploring its
mineral properties in Romania and has not yet determined whether those
properties contain economic reserves. The underlying value of the mineral
properties and deferred exploration costs is dependent upon the existence and
economic recovery of such reserves in the future, and the ability to raise
long-term financing to complete the development of the properties.
The Company believes it has adequate funds available to meet its corporate and
administrative obligations for the coming year 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
The interim consolidated financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in Canada using the
same accounting policies as those disclosed in note 2 to the Company's audited
consolidated financial statements for the year ended 31 December 2003. The
directors consider that there are no material differences between amounts
reported under Canadian GAAP and those that would result from the application of
International Accounting Standards (IAS).
The Company adopted the following accounting policies during the year:
Basis of consolidation
Investments in companies and partnerships in which the Company does not have
joint control, but does have significant influence on them, are accounted for
using the equity method.
Goodwill represents the difference between the price the Company paid for the
business, using the purchase method of accounting, and the fair value of the net
tangible assets and identifiable intangible assets acquired. The Company will
test goodwill annually for impairment, rather than amortise goodwill over a
specific period.
These interim consolidated financial statements should be read in conjunction
with the Company's audited annual consolidated financial statements for the year
2003.
3. Plant and equipment
30 September 30 December
2004 2003
$ $
Field/Office equipment 685,807 455,972
Vehicles 560,417 560,417
Leasehold improvements 293,132 -
---------- ---------
1,539,356 1,016,389
Less: Accumulated amortisation 559,790 386,599
---------- ---------
979,566 629,790
---------- ---------
4. Mineral properties and deferred exploration costs
Certej Zlatna Bolcana Baita- Voia Total
Craciunesti
$ $ $ $ $ $
Balance - 31 21,587,477 5,556,601 2,730,276 2,629,781 350,913 32,855,048
December
2003
Drilling and 1,356,924 190,851 2,988 336,093 1,982 1,888,838
assaying
Geosciences 505,500 54,149 4,361 28,582 30,753 623,345
and technical
consulting
Samplers, 46,701 4,114 4,572 10,658 4,273 70,318
miners and
surveying
Project 804,511 (6,446) (612) (5,435) 2,508 794,526
management
Project 607,083 74,832 3,487 114,066 96,794 896,262
overhead
Amortisation 105,651 15,093 15,093 15,093 - 150,930
-------- -------- -------- -------- -------- --------
3,426,370 332,593 29,889 499,057 136,310 4,424,219
-------- -------- -------- -------- -------- --------
Balance - 30 25,013,847 5,889,194 2,760,165 3,128,838 487,223 37,279,267
September -------- -------- -------- -------- -------- --------
2004
Romanian mineral properties
The Company's 80% owned subsidiary, Deva Gold S.A. ("Deva Gold"), holds four
mineral resource properties in Romania. Exploitation licenses have been issued
to Deva Gold as titleholder for the Certej, Zlatna and Bolcana projects. An
exploration license has been issued to Deva Gold as titleholder for the
Baita-Craciunesti project. Minvest S.A., together with three private Romanian
companies, holds a 20% interest in Deva Gold and the Company holds the
pre-emptive right to acquire such 20% interest. The Company's 100% owned
subsidiary, European Goldfields (Romania) SRL, holds the Voia exploration
license.
The Company is required to fund 100% of all expenditure related to the
exploration and development of these properties. The Company holds a
preferential right to recover all funding plus interest from future cash flows
prior to the shareholders receiving dividends.
Individual property spending commitments for the Certej, Zlatna, Bolcana and
Baita-Craciunesti licenses have been met as at 31 December 2003.
5. Equity investment
30 September 30 December
2004 2003
$ $
Cost 30,177,000 -
Additions to investment 3,839,927 -
--------- ---------
34,016,927 -
Loss (630,108) -
--------- ---------
Balance at 30 September 2004 33,386,819 -
========= =========
The Company holds a 37.98% (30% on a fully-diluted basis) indirect investment in
Hellas Gold S.A. ("Hellas Gold"). Hellas Gold owns assets in Greece which
include mining concessions over a total area of 317 km2including two deposits
known as the Olympias and Skouries deposits, together with two existing
producing mines, known as the Stratoni Mine, base metal mining facilities and a
ship loading facility on the Aegean Sea.
The difference between the carrying value of the investment and the Company's
37.98% share of the net assets of Hellas Gold of $14,895,306 is represented by
goodwill. The goodwill will be tested for impairment on an annual basis.
Summary financial information of the equity investment converted at the quarter
end exchange rate is as follows:
30 September
2004
$
Current assets 19,427,744
Non current assets 17,513,836
Current liabilities (883,809)
---------
Net equity 36,057,771
=========
Sales 4,128,142
Interest income 232,138
Operating costs (6,019,332)
---------
Net loss (1,659,052)
=========
6. Capital stock
Authorised:
Unlimited number of non par value common shares
Unlimited number of non par value preferred shares, issuable in series
Issued and outstanding:
Number of Amount
shares $
Common shares
Balance - 31 December 2003 22,021,126 42,840,058
Shares issued on conversion of convertible loan 8,309,957 19,528,400
Shares issued from non brokered private placement 9,458,750 23,646,875
(a)
Shares issued from non brokered private placement 5,882,000 24,304,538
(b)
Share options exercised 650,000 1,075,000
Warrants exercised 3,918,970 9,797,425
Milestone shares issued as compensation 700,000 1,962,000
Share issue costs - (307,730)
--------- ---------
Balance - 30 September 2004 50,940,803 122,846,566
--------- ---------
a) In February 2004, the Company raised $23.6 million by way of non-brokered
private placement of 9,458,750 special warrants at a price of $2.50 per warrant.
The warrants were exercised, effective as of 12 February 2004, into a total of
9,458,750 common shares.
b) In May 2004, the Company completed a non-brokered private placing with
Commerzbank AG of 5,882,000 common shares at a price of $4.18 per shares for
total subscription proceeds of $24, 6 million.
Contributed surplus
30 September 30 December
2004 2003
$ $
Share option compensation expense 5,434,401 1,395,272
Equity component of convertible loan notes - 991,568
Capital raising costs - Convertible loan notes - (92,913)
Brokers warrants 770,849 875,991
--------- ---------
6,205,250 3,169,918
--------- ---------
7. Share options
The Company operates a Share Option Plan authorising the directors to grant
options to acquire common shares to the directors, officers, employees and
consultants of the Company. The exercise price of the options equals the closing
price on the day prior to the option grant.
As at 30 September 2004, outstanding share options were as follows:
Number of Exercise price
options $
Expiry date
2004 300,000 1.40
2004 50,000 2.04
2004 500,000 2.05
2004 75,000 2.20
2004 150,000 2.50
2005 15,000 1.40
2005 200,000 2.50
2005 500,000 2.80
2006 211,000 1.40
2006 64,000 2.50
2007 300,000 2.50
2008 175,000 2.20
2009 1,120,000 2.80
2009 265,000 3.20
2009 275,000 4.20
--------- ---------
4,200,000 2.59
========= =========
During the nine months ended 30 September 2004, share options were granted,
exercised and expired as follows:
Weighted
average
Number of exercise price
options $
Balance - 31 December 2003 2,690,000 1.96
Options granted - 2004 2,275,000 3.10
Options exercised - 2004 (650,000) 1.57
Options expired - 2004 (115,000) 3.10
--------- ---------
Balance - 30 September 2004 4,200,000 2.59
--------- ---------
As at 30 September 2004, 3,755,000 share options were fully exercisable at a
weighted average price of $2.53.
On 9 March 2004, the Company granted 1,225,000 fully vested share options to
directors and 485,000 share options (of which 50% vest in November 2004 and 50%
in August 2005) to employees and consultants, all of which are exercisable at
$2.80 per common share and expire five years from the date granted.
On 5 May 2004, the Company granted 250,000 fully vested share options to
directors and 50,000 share options (of which 50% vest in February 2005 and 50%
in November 2005) to employees, all of which are exercisable at $4.20 per common
share and expire five years from date granted.
On 16 June 2004, the Company granted 240,000 fully vested share options and
25,000 options (50% of which vest in March 2005 and 50% in December 2005) to
employees, all of which are exercisable at $3.20 per common share and expire
five years from the date granted.
The weighted average grant-date fair value of 2,275,000 share options granted
during the nine months ended 30 September 2004 was $4,068,315. A compensation
cost has been recognised in the income statement for these share options.
The fair value of the options granted has been estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions:
weighted average risk free interest rate of 4.0% (2003 - 4.3%); volatility
factor of the expected market price of the Company's shares of 66.3% (2003 -
93.4%); and a weighted average expected life of the options of 4 to 5 years
(2003 - 5 years).
8. Warrants
As at 30 September 2004, the following common share purchase warrants were
outstanding:
Numbers of Exercise price
warrants
Expiry date $
----------- ------------ ------------
Broker warrants June 12, 2005 415,498 2.35
----------- ------------ ------------
415,498 2.35
----------- ------------ ------------
During the nine months ended 30 September 2004, warrants were issued,
exercised and expired as follows:
Weighted
Average
Number of Exercise Price
Warrants $
Balance - 31 December 2003 4,655,498 2.49
Warrants granted - 2004 9,458,750 2.50
Warrants exercised - 2004 (13,377,720) 2.50
Warrants expired - 2004 (321,030) 2.50
--------- ---------
Balance - 30 September 2004 415,498 2.35
--------- ---------
9. Loss per share (LPS)
LPS is calculated based on the weighted average number of common shares issued
and outstanding during the year being 42,529,152 (September 2003 - 22,021,126).
Diluted per share amounts are calculated using the treasury stock method whereby
proceeds deemed to be received on the exercise of options and warrants in the
per share calculation are applied to reacquire common shares. The effect of
potential issuances of shares under options and warrants would be anti-dilutive,
and accordingly basic and diluted loss per share are the same.
10. Segmented information
The Company has one operating segment: the acquisition, exploration and
development of precious and base metal mineral resources properties located
principally in Romania.
Geographic segmentation of plant and equipment and deferred exploration
costs is as follows:
30 September 30 December
2004 2003
$ $
Canada 64,504 17,299
Romania 37,763,948 33,467,539
United Kingdom 430,383 -
--------- ---------
38,258,835 33,484,838
--------- ---------
11. Commitments
The Company has spending commitments totalling US$1,600,000 over the remaining
term of its Voia exploration licence which expires in March 2007.
The Company has spending commitments of #97,440 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 on 20 April 2004. The first rent payment is due
on 1 October 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.
12. Post Balance Sheet Event
On 26 October 2004, the Company conditionally agreed today to acquire an
additional 35% interest in 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. 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 Limited. 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.
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 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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