7th Feb 2006 07:01
European Goldfields Ltd07 February 2006 For Immediate Release 7 February 2006 EUROPEAN GOLDFIELDS LIMITED BUSINESS PLANS SUBMITTED FOR GREEK GOLD PROJECTS European Goldfields Limited (AIM: EGU / TSX: EGU) is pleased to announce thatits 65%-owned subsidiary Hellas Gold S.A. has submitted business plans to theGreek State for its major gold and base metal projects in Northern Greece. Thissubmission represents a significant milestone in obtaining the permits for theSkouries and Olympias projects. The business plans focus on a phased approach to the development of the projectswith emphasis on achieving full production at the Skouries gold-copper porphyrydeposit as soon as possible, and the phasing of the Olympiasgold-lead-zinc-silver deposit. This approach minimises financial risk by thephased injection of capital. The principal revenue stream in the early phaseswill be through the sale of concentrates. Commenting on the announcement, David Reading, Chief Executive Officer ofEuropean Goldfields, said: "The Hellas Gold team has successfully delivered thebusiness plans on time to the Greek government for the major gold and basemetals projects of Skouries and Olympias. Having had significant input from bothAktor, our Greek partner, and the local communities, the business plans focus onimplementing a modern and sustainable gold mining industry to the region. Thesebusiness plans represent a significant milestone in obtaining the permits forSkouries and Olympias." Skouries is planned as an 8 Mtpa operation with an open pit of at least 6 years,followed by underground mining which will produce some 750,000t of copper and3.6M oz of gold over a 20 year mine life. Feasibility work continues in order tooptimise the open pit depth and finalise the underground mine design. The startof production is planned for 2008. Production from the Olympias deposit is expected to commence in 2008 with thesale of concentrates in the early stages. Three phases are planned withproduction in the first two years of 250,000 tpa ramping up to 400,000 tpa inPhase 2 and finally 900,000 tpa in Phase 3. This allows the staged developmentof a new decline and construction of a gold plant which will be completed forthe final phase. In addition to underground reserves, Olympias benefits fromexisting surface stockpiles of concentrates (270,000 tonnes grading +20 g/tgold) which Hellas Gold intends to sell as soon as possible to generate earlycash flow. Mining operations at Stratoni recommenced in October 2005, producing lead/silverand zinc concentrates. The continuing exploitation at Stratoni features rampingup of throughput over the next four years to an annual production of 400,000tonnes. Favourable off-take agreements have been secured for the sale ofconcentrates until 2008. Exploration in 2006 will concentrate on expanding the Stratoni reserves throughfocussed drilling between the two known deposits and around the peripheries ofthe existing reserves. Additional exploration for further major Olympias andSkouries style deposits within Hellas Gold's highly prospective licence areaswill commence upon receipt of the gold permits, focusing on known targetsoutside inhabited areas. The business plans have been prepared based on extensive research by EuropeanGoldfields, Hellas Gold and several internationally renowned consultantsincluding Outokumpu, Aker Kvaerner Engineering Services, SRK, Golder Associates,Hazen Research, SGS Lakefield Research, Brook Hunt and CRU. SKOURIES The Skouries deposit is a typical gold-copper porphyry deposit which forms anear vertical pipe and is located 35 km by road from the Stratoni port inNorthern Greece. Skouries is located on a high plateau with no habitation in theimmediate vicinity. The total measured and indicated resource at Skouries is 191.2 Mt grading 0.82 g/t gold and 0.55% copper. The probable reserve currently stands at 130 Mtgrading 0.9 g/t gold and 0.6% copper. However, European Goldfields plans topublish increased reserves in the first half of 2006 reflecting a deeper openpit, more efficient underground mining and improved long term metal priceforecasts. SRK have re-evaluated the Skouries deposit and shown that favourable economicscan be obtained by operating a medium depth open pit followed by undergroundmining at an annual production rate of 8 Mtpa. The mining at Skouries is phased with the open pit mined at full rate for thefirst six years and the underground mining development starting in the fourthyear of operation. A continuous feed of 8 Mtpa to the mill is ensured by the useof stockpiled open pit ore. The current model uses a 300m deep pit followed byan underground operation, which the SRK study shows to give the best economicreturn. However, a deeper pit is being investigated to facilitate the phasing ofcapital and also the phased use and rehabilitation of tailings and wastedisposal areas. The metallurgy at Skouries is straight forward. The mine will feed a processplant designed for a nominal throughput of 24,000 tpd. The concentrator willcomprise gyratory crushing for open pit and underground ore, single stream SAGand ball mill grinding. Approximately 30% of gold will be recovered by a gravitycircuit to produce dore on site. A high quality saleable gold/copper bearingconcentrate will also be produced by conventional froth flotation, thickeningand filtration. Extensive test work carried out by Lakefield Research and others has shownaverage recoveries of 83.9% gold and 90.6% copper. Concentrate grades of atleast 26% copper and averaging 27 g/t gold are expected. Concentrates will be trucked to Hellas Gold's port storage facility at Stratoniwhich is some 35 km away by road from the Skouries plant site. Golder Associates have incorporated the latest paste production technology in atailings management facility that minimises land take and embankment height andprovides increased stability. Paste tailings also allow process water to bereturned directly to the process plant, reducing pumping costs and the quantityof make-up water needed. Studies have shown that the tailings are inert with lowpermeability. The use of paste tailings also allows sequential rehabilitation ofthe tailings management facility to minimise active tailings areas. Skouries is a robust project at copper prices of $1.06/lb and gold at $400/oz. OLYMPIAS Olympias is a polymetallic deposit located 8 km north of the Stratoni mine.Olympias benefits from extensive mining and plant infrastructure already inplace and a port facility nearby at Stratoni. The total surface and underground measured and indicated resource at Olympias is14.5 Mt grading 9.3 g/t gold, 129 g/t silver, 4.2% lead and 5.6% zinc. The totalproven and probable reserve currently stands at 14 Mt grading 8.6 g/t gold, 120g/t silver, 3.9% lead and 5.2% zinc. Development at Olympias will progress in three phases to allow refurbishment andconstruction of infrastructure and the subsequent construction of new centralprocessing facilities at Stratoni. This staged approach also allows the phasingof capital investment. • Phase 1 is expected to commence in 2008 with low capital investment for the start of underground mining operations in areas around the existing shaft. Ore is expected to be extracted at a rate of 250,000 tpa for the first two years. Revenue during Phase 1 will be generated from the sale of lead/silver, zinc and auriferous pyrite/arsenopyrite concentrates. • Phase 2 will consist of the expansion of the underground infrastructure in order to increase production. This infrastructure upgrade includes a new decline from the base of the Olympias deposit to the Stratoni mine area. Ore will be extracted at a rate of 400,000 tpa for the four years of Phase 2. Revenue during Phase 2 will be generated from the sale of concentrates for all metals. • In Phase 3, production will be at a rate of 900,000 tpa with the new decline used to convey the ore to a new centralised concentrator, gold plant and tailings management facility at a brown field site located in the Stratoni mine area. The mining in all phases will use drift and fill methods. In areas of wideorebody, a double lift drift and fill method called "mini bench" has beendesigned. The drift and fill method is well tested at Olympias and is alsoflexible, allowing headings to change direction with changing ore geometry. Thisuse of drift and fill methods minimises surface rock waste and tailings byutilising underground backfill methods. Gold concentrates will be sold through off-take agreements along with the lead/silver and zinc concentrates. Unsold gold concentrate produced in Phases 1 and 2will be stockpiled for subsequent treatment through the gold plant. In Phase 3,all of the gold concentrate will be processed to gold and silver bullion at thenew gold processing plant. The phasing of the project allows time for optimisation and development on themetallurgical process for treating the auriferous arsenopyrite/pyriteconcentrates. Pilot scale test work has shown that flash smelting is atechnically viable process option for extracting the gold and silver to bullion,although more proving research and development work is required. R&D work willalso focus on optimising the process for treating the Olympias concentrates.Also, a pre-feasibility level study was completed in 2005 for treating the goldconcentrate comprising roasting, pressure oxidation and leaching. The Olympias project is self sustaining over the initial phases with the sale ofconcentrates, and the high recoveries for the on-site gold processing areconsidered promising for the latter phase. In addition to underground reserves, Olympias benefits from existing surfacestockpiles of concentrates (270,000 tonnes grading +20 g/t gold) which HellasGold intends to sell as soon as possible to generate early cash flow. STRATONI Stratoni consists of a stratabound lead-zinc-silver replacement deposit and liesabout 4 km from the coastal town of Stratoni and just to the west of the villageof Stratoniki. The total measured and indicated resource at Stratoni is 2.221 Mt grading 11.4%zinc, 8.6% lead and 202 g/t silver. The total proven and probable reserve is1.923Mt grading 10.8% zinc, 8.1% lead and 190 g/t silver. In addition to existing underground access and tailings facilities, Stratonibenefits from recently refurbished and fully operational mill and flotationplant, offices and a laboratory, together with a port loading facility forvessels of up to 8,000 tonnes capacity, all located near the coast at Stratoni. In September 2005, Hellas Gold was awarded all necessary environmental andmining permits to commence mining operations at Stratoni. The mining method atStratoni is conventional cut and fill which is ideally suited to this high gradeorebody as it minimises dilution and maximises recovery allowing headings tochange direction with changing ore geometry. During the last two months of 2005, the focus was on preparing and re-equippingproduction areas and filling previously mined stopes to provide the productionfaces necessary to achieve the target production for the first year of operation. In this period, 16,000 wmt of ore were treated at the mill with an additional11,000 wmt stockpiled for treatment in January 2006. Work on a new 1,900 metre access decline to the base of the orebody hascommenced. The decline is being developed to provide improved ore handling andaccess to the Stratoni reserve o allow larger scale and more efficient miningoperations. In parallel with developing the decline, new accesses to the orewill be made to enable ramping up of production from 2007 onward. The yearlyproduction schedule is as follows: - Year 2006:170,000 tonnes - Year 2007:250,000 tonnes - Year 2008:300,000 tonnes - Year 2009:375,000 tonnes - Year 2010:400,000 tonnes - Year 2011:400,000 tonnes The Stratoni concentrator commenced production of lead/silver and zincconcentrates in September 2005. To date, the concentrator has treated 32,000tonnes of ore with recoveries in excess of 90% lead, zinc and silver to therespective concentrates. Historic production resulted in consistent ore gradesof 8-10% lead, 8-11% zinc and 200 g/t silver, with concentrator metal recoveriesconsistently high at around 90%. All concentrates are shipped by sea usingHellas Gold's Stratoni sea port facilities. Hellas Gold commenced production in an environment of strong metal demand anddepleting global stockpiles, especially for zinc; Stratoni is the only lead andzinc start-up in 2005. Hellas Gold has entered into off-take agreements for the sale of lead/silver andzinc concentrates produced at Stratoni in which it is agreed to sellapproximately 90% of concentrates produced until 2007, and 65% of lead/silverand 25% of zinc production in 2008. The agreements provide for fixed penaltiesand treatment charges for the contract term. Hellas Gold intends to sell excessproduction on the spot market. The first shipment of concentrates was completedin December 2005. Stratoni is an financially robust project, especially at current metal pricesand under the favourable off-take agreements secured for the project. EXPLORATION Stratoni has a mine life of six years based on current reserves, but the depositis open in all directions and there is good potential to expand the resource andreserve base. Hellas Gold intends to initiate an aggressive explorationprogramme, with drilling expected to start in Q2 2006. The Stratoni mine comprises two deposits that are about 2 km apart, the MavresPetres deposit to the west and the Madem Lakkos to the east. Both deposits arehosted by marble units. The exploration programme will mainly focus on the areasof high potential between the two deposits outside inhabited areas, whichremains largely unexplored. The new Stratoni decline is ideally placed to allowthe exploration of this prospective area, and the rapid access to andexploitation of any new discoveries. Drilling will be conducted using fannedholes from 200 metre spaced drill cubbies along the decline. Drilling will alsobe conducted in order to upgrade current inferred resources around theperipheries of defined reserves, and to investigate western extensions to themineralisation. Hellas Gold is also carrying out the compilation of all data which will becombined with satellite imagery interpretation into a single digital database toassist with building geological models. Priority targets have been identified byhistoric exploration, including the massive sulphide target at Piavitsa 800metres to the west of the Mavres Petres reserves at Stratoni, and thecopper-gold porphyry target at Fisoka 2.5 kilometres south of the Stratoni mine. Previous drilling at Piavitsa in 1998 along two lines identified a zone ofmassive sulphide mineralisation grading 3 to 14 g/t gold, 58 to 198 g/t silverand combined lead and zinc ranging between 1% and 20% over true widths of 2metres to 7 metres. At Fisoka, a total of 26 diamond cores were drilled into thetarget area between 1972 and 1982, and these returned grades of 0.3 to 0.5%copper and 0.2 to 0.9 g/t gold over true widths of 10 metres to 72 metres. Once the permits are granted for Skouries and Olympias, exploration focusing onthese priority targets will commence in parallel with targeted geophysical andgeochemical surveys along the main structural belts that host the mineralisationidentified to date on Hellas Gold's licence areas. The overall objective of thisexploration programme is to generate drill targets for the potential discoveryof major new massive sulphide and porphyry deposits. THE WAY FORWARD The submission of the business plans represents a significant milestone inobtaining the necessary environmental and mining permits to develop the majorgold and base metals projects of Olympias and Skouries. Hellas Gold is now focused on completing a full environmental impact study to besubmitted to the Greek State in Q3 2006. On approval, the environmental permitsfor Skouries and Olympias will be issued. Hellas Gold will then submit to the Greek State a technical report on theSkouries and Olympias projects. This will be based on feasibility studies on theprojects which Hellas Gold is currently updating. The mining permits will beissued on approval of the technical reports. By contract, the Greek State is committed to review the business plans withintwo months of submission, and issue environmental and mining permits forSkouries and Olympias within 10 months of receiving all necessary studies andreports for the projects. Resources & Reserves Parameters For additional information on the resource and reserve estimates for theCompany's projects, please refer to the Company's Resources & ReservesDeclaration at www.egoldfields.com/goldfields/resources.jsp. The quantity and grade of the Piavitsa and Fisoka targets are conceptual innature, there has been insufficient exploration yet to define a mineral resourceon the properties and it is uncertain if further exploration will result indiscovery of a mineral resource on the properties. For further information please contact: European Goldfields:David Reading, Chief Executive OfficerDavid Grannell, Chief Financial OfficerOffice: +44 (0)20 7408 9534 e-mail: [email protected]: +44 (0)7703 190 652 website: www.egoldfields.com Buchanan Communications:Bobby Morse / Ben Willey e-mail:[email protected]: +44 (0)20 7466 5000Mobile: +44 (0)7802 875 227 The Sherbourne GroupForbes West e-mail:[email protected]: +1 416 203 2200 Forward-looking Statements Certain information included in this document, including any information as tothe Company's future financial or operating performance and other statementsthat express management's expectations or estimates of future performance,constitute "forward-looking statements." The words "expect", "will", "intend","estimate" and similar expressions identify forward-looking statements.Forward-looking statements are necessarily based upon a number of estimates andassumptions that, while considered reasonable by management, are inherentlysubject to significant business, economic and competitive uncertainties andcontingencies. The Company cautions the reader that such forward-lookingstatements involve known and unknown risks, uncertainties and other factors thatmay cause the actual financial results, performance or achievements of theCompany to be materially different from its estimated future results,performance or achievements expressed or implied by those forward-lookingstatements and the forward-looking statements are not guarantees of futureperformance. These risks, uncertainties and other factors include, but are notlimited to: changes in the worldwide price of gold, base metals or certain othercommodities (such as fuel and electricity) and currencies; ability tosuccessfully integrate acquired assets; legislative, political or economicdevelopments in the jurisdictions in which the Company carries on business;operating or technical difficulties in connection with mining or developmentactivities; the speculative nature of gold and base metals exploration anddevelopment, including the risks of diminishing quantities or grades ofreserves; and the risks involved in the exploration, development and miningbusiness. These factors are discussed in greater detail in the Company'sManagement's Discussion & Analysis for the year ended 31 December 2004 filed onSEDAR at www.sedar.com. The Company disclaims any intention or obligation toupdate or revise any forward-looking statements whether as a result of newinformation, future events or otherwise. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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