RESULTS FOR Q1 2008
CERTEJ EIS SUBMITTED
JOINT VENTURE IN TURKEY FINALISED
14 May 2008 - European Goldfields Limited (AIM: EGU / TSX: EGU) ("European Goldfields" or the "Company") today reports its results for the first quarter to 31 March 2008. Highlights are:
Financial highlights:
-
Profit (before tax) of $4.2m based upon 4 shipments, versus $5.7m and 5 shipments in Q1 2007
-
Working capital of $225.7m at 31 March 2008; compared to $45.2m at 31 March 2007
-
Earnings per share maintained at $0.02, compared to $0.02 in Q1 2007
Operational highlights:
-
Stratoni: Ore production on target - New reserves continue to replace mining depletion
-
Skouries: Fabrication of long lead time items progresses
-
Olympias: Decision taken to refurbish plant
-
Certej: Environmental Impact Study submitted
-
Exploration in Greece: Airborne survey outlines exciting new conductive zone at Piavitsa
Corporate highlights:
Commenting on the results, David Reading, Chief Executive Officer of European Goldfields, said: "The quarter ended 31 March 2008 saw a significant advance in the environmental permitting process at Certej, and European Goldfields' first entry into Turkey in a Joint Venture with Ariana Resources. We believe that Eastern Turkey is a highly prospective geological terrain and a logical next step in our strategy of expanding into the mineral belts of South East Europe. The increased reserve at Stratoni underpins our capital investment in the project. The exciting exploration results over the wider licence area in Greece highlight the considerable upside within our portfolio."
Conference Call & Webcast - 14 May 2008 at 10am ET / 3pm BST
European Goldfields will host a conference call on Wednesday 14 May 2008 at 10a.m. ET / 3pm (London, UK time) to update investors and analysts on its results. Participants may join the call by dialing one of the three following numbers, approximately 10 minutes before the start of the call:
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From North America: (Local) 416-644-3427 or (toll free): 1-800-588-4490
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From the UK, Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Netherlands, Norway, Sweden & Switzerland (toll free): 00-800-2288-3501
A live audio Webcast will be available on: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID"76340
For those unable to join the live conference call, a replay will be available until Wednesday 21 May 2008 at midnight by dialing (toll free) 1-800-289-8525 or 1-416-640-1917, Passcode 21271267#.
SELECTED FINANCIAL DATA
|
|
Three months ended 31 March
|
|
(in thousands of US dollars,
except per share amounts) |
2008
$ |
2007
$ |
|
Statement of loss and deficit |
|
|
|
Sales |
12,708 |
17,083 |
|
Gross profit |
4,849 |
10,139 |
|
Profit before income tax |
4,263 |
5,676 |
|
Profit after income tax |
3,642 |
3,957 |
|
Non-controlling interest |
(233) |
(1,848) |
|
Profit for the period |
3,409 |
2,109 |
|
Earnings per share |
0.02 |
0.02 |
|
(in thousands of US dollars) |
31 March 2008
$ |
31 March 2007
$ |
|
Balance sheet |
|
|
|
Working capital |
225.673 |
45,201 |
|
Total assets |
794,911 |
325,501 |
European Goldfields' unaudited consolidated financial statements and management's discussion and analysis for the three-months periods ended 31 March 2008 and 2007 are filed on SEDAR at www.sedar.com.
CORPORATE ACTIVITY
Highlights:
Joint venture completed with Ariana Resources - In April 2008, the Company signed definitive documentation governing a Joint Venture ("JV") with Ariana Resources plc (AIM: AAU) ("Ariana"). The transaction completed and the JV became effective in May after the transfer of Ariana's properties was confirmed by the General Directorate of Mining Affairs in Turkey. The JV involves the development of Ariana's current properties in the Greater Pontides region of north-eastern Turkey ("the AOI"), which include the Ardala copper-gold porphyry and fifteen other licences covering a total area of 229km2 and a Strategic Partnership within the AOI to define new opportunities for the JV. Upon completion, European Goldfields subscribed for 20% of the issued share capital of Ariana through a �929,000 private placement of shares and David Reading joined the board of Ariana as a n
on-executive director.
The JV is focused on the Greater Pontides region of Turkey, a highly prospective geological terrain containing several major deposits.
The JV will focus initially on the Ardala copper-gold porphyry project which has shown encouraging grades of copper and gold in previous exploration. It has a 600m x 700m surface exposure centred on a magnetic high of 1,000m x 1,000m extent. Copper-gold mineralisation has also been identified on other properties in the vicinity of Ardala within granitoids and in the surrounding country rocks.
European Goldfields now owns 51% of the JV company into which Ariana has transferred the relevant properties. European Goldfields is funding all development costs of these initial properties and any future properties located within the AOI until the delivery of the first Definitive Feasibility Study ("DFS"), at which time European Goldfields' interest in each relevant project will increase to 80% on current licences in the JV, or 90% on new areas generated by the JV.
A period of joint funding after DFS has been agreed, but if at any time during this period Ariana is diluted to below 5%, it will adopt a 1.5% Net Smelter Return ("NSR") on the project in question. Any project that falls short of a 0.5Moz Au (or equivalent) threshold, can be assigned back to Ariana, in which case European Goldfields will adopt a 1.5% NSR.
Ariana has also granted European Goldfields a right of first opportunity over projects located in Turkey but outside of the AOI, on terms that will be independent of the JV agreement. This right will not apply within an area surrounding and including their Sindirgi Project in western Turkey, as Ariana intends to develop projects within this area independently.
European Goldfields has subscribed for 18,571,016 new shares in Ariana at 5 pence per share in a private placement for a total cash consideration of �929,000, resulting in European Goldfields owning 20% of Ariana. As part of this subscription, European Goldfields has agreed certain rights to maintain its interest at the 20% level.
Added to S&P/TSX Composite Index in March 2008 - European Goldfields' shares were added to the S&P/TSX Composite Index, effective at the open of markets on Monday 24 March 2008.
STRATONI OPERATIONS (GREECE)
Highlights:
-
Ore production on target
-
New reserves continue to replace mining depletion
-
New decline complete, improving mine infrastructure
-
Exploration continues to define new resources
Ore production on target - The Stratoni mine consists of a lead-zinc-silver deposit and lies approximately 4 km from the coastal town of Stratoni in northern Greece. The Company's 95%-owned subsidiary Hellas Gold mined a total of 58,208 wet tonnes of ore in Q1 2008 (2007 - 55,069) at its Stratoni mine. Hellas Gold sold 4 shipments of base metal concentrates during Q1 (2007 - 5), yielding sales as follows:
|
|
Q1 2008 |
Q1 2007 |
|
Production |
|
|
|
Ore mined (wet tonnes) |
58,208 |
55,069 |
|
Sales |
|
|
|
Zinc concentrate (tonnes) |
8,371 |
8,244 |
|
- Containing payable: Zinc (tonnes)* |
3,454 |
3,463 |
|
Lead concentrate (tonnes) |
1,872 |
3,774 |
|
- Containing payable: Lead (tonnes)* |
1,188 |
2,486 |
|
Silver (oz)* |
95,582 |
190,292 |
|
Inventory (end of period) |
|
|
|
Ore mined (wet tonnes) |
2,816 |
843 |
|
Zinc concentrate (tonnes) |
2,745 |
3,524 |
|
Lead/silver concentrate (tonnes) |
2,213 |
1,846 |
* Net of smelter payable deductions,
before deduction of smelting and refining charges
Ore production rates from underground have increased from an average of 885 tonnes per day in 2007 to 930 tonnes per day in Q1 2008, and the mine now operates effectively at over 950 tonnes per day. The rate of ore production is expected to continue to increase and to produce 290,000 tonnes in 2008.
New reserves continue to replace mining depletion - In March, European Goldfields announced an increase in reserves at Stratoni, reported under Canadian National Instrument 43-101 at 31 December 2007 as follows:
|
Reserve Category |
'000t* |
Ag
g/t |
Ag
Moz* |
Pb
% |
Pb
'000t* |
Zn
% |
Zn
'000t* |
|
Proven |
1,904 |
193.3 |
11.8 |
7.3 |
139 |
9.1 |
173 |
|
Probable |
313 |
190.0 |
1.9 |
7.5 |
24 |
11.2 |
35 |
|
Total |
2,217 |
192.9 |
13.7 |
7.3 |
163 |
9.4 |
208 |
* After depletion of ore extracted from the start of mining operations in Q4 2005 until 31 December 2007.
Total reserve tonnes have increased by 11% after mining depletion compared to the previous published estimate in January 2007. The additional tonnes are from the upper-west part of the orebody, which remains open along strike. In addition, the grade of lead and silver has been increased in the reserve, based on the underground sampling programme which has allowed accurate modelling of higher grade zones. This has resulted in an increase after mining depletion of 20% in lead metal, 10% in zinc metal and 25% in silver metal over the previous reserve estimate published in January 2007.
The new reserve will add an extra year to Stratoni's life of mine and the improved grades will result in better revenues. Since the Stratoni mine resumed production in September 2005, Hellas Gold has essentially managed to replace mining depletion by adding new reserves.
The new reserve has allowed Hellas Gold to adjust its yearly ore production schedule as follows:
- Year 2008: 290,000 tonnes
- Year 2009: 375,000 tonnes
- Year 2010: 400,000 tonnes
- Year 2011: 400,000 tonnes
- Year 2012: 400,000 tonnes
- Year 2013: 352,000 tonnes
This new reserve is based on an updated measured & indicated resource estimate for the Stratoni orebody, which results from a new optimised geological model based on revised geological mapping.
Patrick Forward, General Manager, Exploration, MAusIMM of European Goldfields, was the Qualified Person under Canadian National Instrument 43-101 responsible for preparing the updated resource and reserve estimates for the Stratoni deposit quoted above. A technical report from Patrick Forward has been filed on SEDAR (www.sedar.com).
New decline complete, improving mine infrastructure - The new decline to the base of the Mavres Petres orebody holed through to the main internal ramp in March 2008. Electrical, pumping and ventilation infrastructure are being installed in the decline and both it and the main internal ramp will become fully operational in May 2008. This connection will improve material supply, ventilation and enable the introduction of shotcrete equipment to ameliorate poor ground conditions. The decline will also enable access to the previously poorly ventilated and therefore inaccessible lower parts of the orebody. In addition, the continuing development of the internal ramp and stope accesses to the higher levels of the orebody, expected to provide further reserves to the west, are now the main focus to ensure a ramp-up in production to 400,000 tonnes of ore per year in the future.
Exploration continues to define new resources - Stratoni benefits from inferred resources comprising some 639,000 tonnes grading 7.7% lead, 9.9% zinc and 203.4 g/t silver. These inferred resources are currently being mined at the margin, confirming expected grades. Drilling on 25m centres is planned in 2008 in the upper west and lower east parts of the orebody which account for some 85% of the inferred resources. The drill programme is designed to convert the inferred resources to the measured and indicated categories, which can be immediately converted to proven and probable reserves as the areas are adjacent to current mine infrastructure.
New mineralisation has been encountered during the excavation of the new decline running between the existing reserve and mined-out areas at Madem Lakkos. Initial results indicate that the zone has an average width of 6.55 metres with a weighted average grade of 0.7 to 14.8% Pb, 1.3 to 22.1% Zn and 16 to 307g/t Ag. A drill programme designed to define indicated and measured resources along at least 200 metres of strike and 75 metres of dip has commenced with all results expected by the end of the second quarter of 2008. The new decline will enable immediate access for mining of any new discovery in this area.
Drilling in 2008 of inferred resources and of the newly identified zone is expected to add an additional three years in total to the mine reserves, and with the zones open further along strike, particularly to the west where suitable host marbles and feeder structures are known to exist, additional further reserves are expected to be defined in the future.
SKOURIES PROJECT (GREECE)
Highlights:
Fabrication of long lead time equipment continues - In June 2007, Hellas Gold signed a ?30 million contract with Outotec Minerals OY ("Outotec") for the supply of a technology package for the Company's 95%-owned Skouries gold-copper project, which is located 35 km by road from the Stratoni port in northern Greece. A second contract was also signed whereby Outotec will provide specialist engineering skills during the detailed engineering, construction, and commissioning phases of the project and provide operator training.
Outotec has already delivered a basic engineering package to Hellas Gold for the grinding mills, flotation equipment, process control and paste thickeners. They have also provided engineering design data for the complete process plant and the required interfaces with the other project areas including mining, infrastructure and tailings treatment. Fabrication of the SAG and ball mills is well under way and the components are all due ex works by the third quarter of 2009. Representatives of European Goldfields recently visited the Besttechnica production facility in Bulgaria fabricating the SAG and ball mill shells. They saw that the SAG mill shell is almost complete, with the ball mill shell at an earlier stage of construction. Both mill shells will be complete by the end of July 2008.
Basic and detailed engineering for the process plant and associated infrastructure is being conducted by the firm ENOIA of Athens, Greece. ENOIA are currently optimising the overall project lay out and coordinating project activities both within and outside of Outotec's scope which includes design and procurement. This work is being managed by a team consisting of both Hellas Gold and European Goldfields personnel.
OLYMPIAS PROJECT (GREECE)
Highlights:
-
Further 25,000t advance sale to MRI
-
Olympias development plan underway - Decision taken to refurbish plant
Continued sale of gold concentrates - The Company's 95%-owned Olympias project benefits from an existing stockpile of gold-bearing pyrite concentrates which represented, at 31 December 2007, a reserve of approximately 172,000 tonnes grading 23.5 g/t gold (containing 130,000 oz of gold), in addition to substantial underground reserves of gold, lead, zinc and silver.
Hellas Gold sold 3 shipments in Q1 2008 (2007 - 11) as industrial action at Thessaloniki port prevented the export of the planned volume of gold concentrate. Port workers are currently working to rule in response to the current privatization process at Piraeus and Thessaloniki ports, creating significant delays in unloading container vessels. Submission of final privatization tenders are due later in May, after which normal working practices are expected to resume and the backlog of vessels is expected to clear. Sales of pyrite concentrates were therefore as follows:
|
|
2008 |
2007 |
|
Sales |
|
|
|
Gold concentrate (dry tonnes) |
9,778 |
17,090 |
Whilst actual shipments were delayed, interest in purchasing the Olympias material remains strong, and MRI exercised their option to purchase a further 25,000 tonnes of concentrate during Q1 2008. Proceeds from this sale were received in advance and the transaction was priced at $915 per ounce. Hellas Gold therefore received $3.6 million in March in relation to this sale.
Hellas Gold has now secured the sale of the entire stockpile to six different purchasers, thereby creating a market for gold concentrates which did not exist prior to 2007.
Olympias refurbishment plan underway - Olympias is a polymetallic (gold, lead, zinc and silver) deposit located 8 km north of the Stratoni mine in northern Greece. The Company's current plan is for development at Olympias to progress in three phases to allow refurbishment and construction of infrastructure, a realistic ramp-up in production within the mine and the subsequent construction of new gold processing facilities at Stratoni. Olympias benefits from extensive mining and plant infrastructure already in place, including a concentrator plant, a shaft down to a depth of 400 metres below surface and a port facility nearby at Stratoni. International contractor Outotec Minerals OY inspected the facilities in July 2007 and concluded that the plant could be brought back into efficient operation quickly and at relatively modest cost.
Therefore, Hellas Gold has taken the decision to start the refurbishment of the processing plant, allowing the Company to progress towards Phase 2 of the Olympias development plan. This Phase of development will consist of reprocessing old tailings at Olympias, which will have the added benefit of cleaning up the valley, together with underground refurbishment and limited mining in the upper levels of the mine. Revenue during Phase 2 will be generated from the sale of lead/silver, zinc and gold pyrite/arsenopyrite concentrates.
The phasing of the project allows time for optimisation and development of the metallurgical process for treating the auriferous arsenopyrite/pyrite concentrates.
The Olympias project is expected to be self-sustaining over the initial phases with the sale of concentrates and the high recoveries for the on-site gold processing are considered promising for the latter phase.
PERMITTING PROCESS (SKOURIES & OLYMPIAS PROJECTS)
Permitting process moving forward - In July 2007, the Company received a formal letter confirming that the Greek Ministry of Development had completed its review of the Company's business plan, and stating that the Ministry of Development "is in agreement with the development of the project described in the business plan, as this investment is particularly beneficial to the national and local economy . and reflects the intent of the contract signed between the Greek State and Hellas Gold". This represents a statement of support for the projects based on detailed studies completed by appropriate technical and advisory bodies appointed by the Ministry of Development.
In the letter, the Ministry of Development also re-declared its positive opinion of the Company's preliminary environmental impact study ("PEIS") which has already been submitted, and formally requested the Ministry of Environment to issue its official approval of the PEIS.
The final report on the PEIS by the Ministry of Environment has been delayed beyond previous expectations. This partly reflects the nature of the administrative process itself but also more recently, specific delays in other ministerial input into the final report. This is currently affecting a number of projects, public and private, in Greece. The Company has now confirmed that the process has been regularised to clear the backlog, and that progress has resumed. Once preliminary approval has been received from the Ministry of Environment, the Company will submit its full environmental impact study ("EIS"). On approval of the EIS, the environmental permits for Skouries and Olympias are expected to be issued.
The Company will then submit to the Greek government a final technical report on the Skouries and Olympias projects, which will restate the principles of the business plan and take into account any conditions detailed in the environmental permit. The mining permits are expected to be issued on approval of the technical report by the Greek government.
EXPLORATION IN GREECE
Airborne survey outlines intrusive belt and extensions to the Piavitsa target - Hellas Gold holds 317 km� of highly prospective licences in northern Greece over which an airborne geophysical survey was completed by Fugro Airborne Surveys in December 2007. The survey represents the first systematic modern exploration ever conducted over the licence area. The survey comprises magnetics and radiometrics over the entire licence area and an electromagnetic ("EM") survey over the northern part of the licence area. The objectives of the survey were to look for new porphyry targets like Skouries and massive sulphide targets such as Olympias and Stratoni. Twenty exploration targets have been defined from previous drilling and geological data prior to commencement of this survey.
Early processing of the magnetics has defined an intrusive belt some 17 km by 6 km in the South-East part of the licence area. This clearly defines known porphyry deposits at Skouries and at the previously identified Fisoka target. Fisoka is shown by the geophysics to comprise three porphyry bodies. The northern body was drilled historically with grades of between 0.4% and 0.65% copper over widths of 20 to 81 metres and no gold analyses. Ground truthing has shown that the central area shows the most intense veining with copper oxides visible at surface. Re-analysis of stream sediment sampling has shown that the more anomalous samples were in streams draining from the central area. These factors indicate that the untested central and southern Fisoka porphyries offer the best potential. Hellas Gold plans to drill test the central and southern Fisoka porphyries later this year.
The magnetics have also highlighted a series of strong anomalies, similar in magnitude to Skouries, over a 3 km by 4.5 km area, which is believed to represent a complex of intrusives some 3 km to the South-East of Skouries. Early ground investigation indicates that the anomalies are formed by five separate areas of potassic alteration with associated veining. The magnetic anomalies map the alteration well and soil geochemical surveys are planned in order to ascertain the mineral phases of each porphyry zone. This work is planned for later in 2008.
The raw EM data indicated conductors over the known massive sulphide orebodies, including the Olympias look-alike massive sulphide target at Piavitsa. Post processing of the EM has commenced and early results indicate conductors at Piavitsa continuing for up to 6 kilometres compared with the known 2 kilometre strike length previously identified from mapping and drilling. The eastern two kilometres of the anomaly coincides with the Piavitsa drilling which previously outlined massive sulfide zones with widths of 2 to 20 metres and grades of 0.3 to 22.2 g/t gold, 0 to 533 g/t silver, 0% to 26% zinc and 0% to 12% lead. The new EM data effectively extends the target area westwards for a further four kilometres. Drilling at Piavitsa is planned in the second half of 2008.
There are numerous other anomalies both from the magnetic survey along the porphyry belt and from the EM survey in the massive sulphide belt and the fully processed geophysics will also be used to prioritise new targets identified from this and the remainder of the twenty targets previously identified over the licence area.
CERTEJ PROJECT (ROMANIA)
Highlights:
Environmental Impact Study submitted - In March 2008, European Goldfields submitted the Environmental Impact Study to the Romanian environmental authorities to start the assessment of the environmental impact of the Certej Project.
European Goldfields already holds a mining permit for Certej, which is currently being exploited on a small scale by way of an existing open pit. The EIS and the Technical Feasibility Study address a proposed increase in mine production at Certej and the processing of ore on site.
The environmental permit and an updated mining permit are expected in Q4 2008 following a public consultation process with local communities, which is expected to start in June 2008. Customary construction and public utility permits are expected to follow by end-2008 when the detailed engineering design has been completed for the entire project.
This follows the submission of a Technical Feasibility Study to the Romanian authorities in March 2007 and the grant by the Hunedoara county council of a General Urbanisation Certificate in September 2006. This certificate confirms the designation of Certej as an industrial mining area and attests to the local community's support for the project.
International feasibility studies complete - European Goldfields has completed a full feasibility study for its 80%-owned Certej project. RSG Global Consulting Pty Ltd, Aker Solutions and Golder Associates have all completed their technical analysis and produced project estimates based upon international costing methodologies.
The Company is now working on incorporating the benefits of using local Romanian contractors into the draft cost estimates. In particular, the following initiatives are being explored:
-
Use of local fabrication and materials;
-
Incorporation of local earth moving rates;
-
Use of local EPCM contractors;
-
Synergies between Certej mining activities and the local road building programme in the Deva region.
For further information please contact:
Resources & reserves parameters
For additional information on the resource and reserve estimates quoted in this news release, please refer to the Company's Resources & Reserves Declaration at www.egoldfields.com/goldfields/resources.jsp. Patrick Forward, General Manager, Exploration of the Company, was the Qualified Person under Canadian National Instrument 43-101 responsible for reviewing the disclosure of resource and reserve estimates quoted in this news release.
Forward-looking statements
Certain statements and information contained in this document, including any information as to the Company's future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute forward-looking information under provisions of Canadian provincial securities laws. When used in this document, the words "anticipate", "expect", "will", "intend", "estimate", "forecast", "planned" and similar expressions are intended to identify forward-looking statements or information. Forward-looking statements include, but are not limited to, the estimation of mineral reserves and resources, the timing and amount of estimated future production, costs and timing of development of new deposits, permitting time lines and expectations regarding metal recovery rates. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable b
y management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the Company to be materially different from its estimated future results, performance or achievements expressed or implied by those forward-looking statements and the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: changes in the price of gold, base metals or certain other commodities (such as fuel and electricity) and currencies; uncertainty of mineral reserves, resources, grades and recovery estimates; uncertainty of future production, capital expenditures and other costs; currency fluctuations; financing and additional capital requirements; the succes
sful and timely permitting of the Company's Skouries, Olympias and Certej projects; legislative, political, social or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; the speculative nature of gold and base metals exploration and development, including the risks of diminishing quantities or grades of reserves; the risks normally involved in the exploration, development and mining business; and risks associated with internal control over financial reporting. For a more detailed discussion of such risks and material factors or assumptions underlying these forward-looking statements, see the Company's Annual Information Form for the year ended 31 December 2007, filed on SEDAR at www.sedar.com. The Company does not intend, and does not assume any obligation, to update or revise any
FORWARD-LOOKING STATEMENTS WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW.
