19th Mar 2008 07:10
European Goldfields Ltd19 March 2008 Immediate Release 19 March 2008 RESULTS FOR 2007 STRONG FINANCIAL PERFORMANCE $43.6M OPERATING CASH FLOW - $219M CASH BALANCE SOLID PLATFORM FOR GROWTH 19 March 2007 - European Goldfields Limited (AIM: EGU / TSX: EGU) ("EuropeanGoldfields" or the "Company") today reports its results for the financial yearended 31 December 2007. Highlights are: Financial highlights: • Sales of $86.4m, up 65% over 2006 • Operating cash flow of $43.6m, up 125% over 2006 • Profit (before tax) of $33.4m, up 178% over 2006 • Working capital of $226.4m at 31 December 2007; compared to $41.9m at 31 December 2006 • Earnings per share of $0.16, compared to $0.03 in 2006 Operational highlights: • Stratoni: Production up 27% versus 2006 - New reserves continue to replace mining depletion • Skouries: Fabrication of long lead time equipment has commenced • Olympias: Market created for gold concentrates - Six-fold increase in sales versus 2006 • Certej: Key feasibility studies completed to high accuracy level - Permitting process well underway • Exploration in Greece: Airborne survey outlines intrusive belt - rogress in target definition Corporate highlights: • Acquisition of an additional 30% interest in Hellas Gold, increasing stake to 95%; total cost of investment in Hellas Gold of $25 per gold equivalent reserve ounce • Reinforced strategic alliance with Aktor and its parent company Elliniki Technodomiki, consolidating the partnership for building of gold projects in Greece and South-East Europe • $180 million raised through equity financing and sale of Stratoni silver stream • Joint venture in Turkey with Ariana Resources, endorsing growth in South-East Europe • Added to S&P/TSX Global Gold Index in September 2007; S&P/TSX Composite Index in March 2008 Commenting on the results, David Reading, Chief Executive Officer of EuropeanGoldfields, said: "The year ended 31 December 2007 saw significant progress inthe stated growth strategy of building European Goldfields into a mid-tiermining company. In less than four years, shareholders in European Goldfieldshave benefited from a dramatic turnaround from being a loss-making explorationcompany into one which produced in 2007 over $23 million in net profits,generated $44 million in operating cash flow, and increased its ownership from30% to 95% of its Greek assets. In addition, European Goldfields hasapproximately $220 million of cash in the bank with net attributable reserves ofover 9Moz of gold and 72Moz of silver, 750,000 tonnes of copper, 664,000 tonnesof lead and 889,000 tonnes of zinc at the end of the financial year. The last 12months has provided a strong growth platform for the next phase of ourdevelopment." Conference Call & Webcast - 19 March 2008 at 10am ET / 2pm GMT - EuropeanGoldfields will host a conference call on Wednesday 19 March 2008 at 10:00 a.m.ET / 2:00 pm (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: - From North America: (Local) 416-644-3416 or (toll free): 1-800-732-9307 - 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=2190100 SELECTED FINANCIAL DATA Year ended 31 December ----------------------- ------------ -------------(in thousands of US dollars, 2007 2006except per share amounts) $ $------------------ ------------ -------------Statement of loss and deficitSales 86,405 52,438Gross profit 43,787 27,252Profit before income tax 33,435 12,008Profit after income tax 28,218 7,184Non-controlling interest (5,019) (4,182)Profit for the period 23,199 3,002Earnings per share 0.16 0.03------------------ ------------ ------------- ------------------ ------------ -------------(in thousands of US dollars) 31 December 31 December 2007 2006 $ $ ------------------ ------------ -------------Balance sheetWorking capital 226,431 41,854Total assets 782,131 311,943------------------ ------------ ------------- European Goldfields' audited consolidated financial statements and management'sdiscussion and analysis for the years ended 31 December 2007 and 2006 are filedon SEDAR at www.sedar.com. CORPORATE ACTIVITY Highlights: • Acquisition of an additional 30% interest in Hellas Gold, increasing stake to 95% • $180 million raised through equity financing and sale of Stratoni silver stream • Joint venture in Turkey with Ariana Resources, endorsing growth in South-East Europe Acquisition of an additional 30% interest in Hellas Gold - On 29 June 2007, theCompany completed the acquisition of an additional 30% interest in Hellas GoldS.A. ("Hellas Gold"), increasing its stake to 95%. The purchase price was agreedat $178 million, which incorporated a 15% discount to the "see-through value" ofHellas Gold. The purchase price was paid by the allotment to the vendor AktorS.A. ("Aktor") of 35,447,246 common shares, representing 19.9% of the issued andoutstanding shares of the Company on a diluted basis, and the balance of $8.4million in cash, 50% of which Aktor has agreed to re-invest into Hellas Gold asfunding towards maintaining its residual 5% shareholding interest in HellasGold. This transaction was, in essence, a share swap in that approximately 95% of thepurchase price was paid to Aktor in common shares of the Company. Thisreinforces the Company's strategic alliance with Aktor and its parent companyElliniki Technodomiki TEB A.E. (ATHEX: ELTEX) ("El-Tech") and consolidates thepartnership for the building of gold projects in Greece and South-East Europe. El-Tech is a large Greek conglomerate with a market capitalisation in excess of$2 billion with investments in five fields: construction, concessions, energy,real estate, and mining and quarries. Aktor, Greece's largest constructioncompany, employs over 600 engineers, has extensive expertise in the constructionof large industrial projects and, due to its tunnelling expertise, possesses oneof the largest fleets of underground equipment in Europe. Furthermore, to demonstrate and confirm its long-term commitment to the Companyand its projects, Aktor has agreed not to sell the European Goldfields shares itreceived as consideration until the date on which gold production commences inGreece (or four years after the closing of the Acquisition, if earlier). $180 million raised through equity financing and sale of Stratoni silver stream- Concurrently with the Acquisition, the Company completed a treasury offeringof 27.6 million shares, for total gross proceeds of Cdn$138 million. TheAcquisition combined with the treasury offering resulted in a 50% increase inthe Company's market capitalisation. Also, 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 extractedduring the mine-life within an area of some 7 km(2) around its zinc-lead-silverStratoni mine in northern Greece (the "Silver Wheaton Transaction"). Silverproduction at Stratoni is a by-product of its lead-zinc operations. The sale was made in consideration of a prepayment to Hellas Gold of $57.5million in cash, plus a fee per ounce of payable silver to be delivered toSilver Wheaton of the lesser of $3.90 (subject to an inflationary adjustmentbeginning after year three) and the prevailing market price per ounce. TheStratoni proven and probable silver reserve contained approximately 12 Moz ofsilver. The Silver Wheaton Transaction does not apply to any additional silver resourceswithin Hellas Gold's 317 km(2) of mining and exploration licences in northernGreece, for example silver resources at the Company's other mines of Olympiasand Certej which contain 66 Moz of proven and probable silver reserves, exceptfor a right of first refusal granted to Silver Wheaton on similar futuretransactions over the Company's silver assets. Joint venture in Turkey with Ariana Resources, endorsing growth in South-EastEurope - In February 2008, the Company signed a Heads of Agreement with ArianaResources plc (AIM: AAU) ("Ariana") for the joint development of Ariana'sproperties in North-eastern Turkey, which includes the Ardala copper-goldporphyry and eleven other licences covering a total area of 168 km2. These projects are located in the Pontides region of Turkey, a highlyprospective geological terrain containing several major deposits. The ArdalaCu-Au porphyry has been the subject of reconnaissance drilling around theperiphery of a porphyry intrusion, which identified encouraging grades of copperand gold. It has a 600m x 700m surface exposure centered on a magnetic high of1,000m x 1,000m extent. Copper-gold mineralisation has also been identified onother properties in the vicinity of Ardala within granitoids and in thesurrounding country rocks. Under the agreement, European Goldfields will initially own 51% of theproperties transferred by Ariana into the joint venture. European Goldfieldswill then fund all development costs of these initial properties and any futureproperties located within a defined area in North-eastern Turkey untilcompletion of a Bankable Feasibility Study, at which time European Goldfields'interest in each relevant project will increase to between 80% and 90%,respectively. In addition, European Goldfields has agreed to subscribe for new shares inAriana at 5 pence per share in a private placement, resulting in EuropeanGoldfields owning 20% of the outstanding shares in Ariana following theplacement, for a total consideration of approximately £890,000. Ariana also holds properties in Western Turkey where exploration of epithermalvein systems has drill tested a number of targets and defined other targets forfurther investigation. Ariana has also developed an extensive remote sensingdatabase covering the most prospective parts of Turkey. Completion of the joint venture and the placing is expected by mid-April 2008,conditional upon satisfactory due diligence and the signing of definitiveagreements. STRATONI OPERATIONS (GREECE) Highlights: • Production up by 27% versus 2006 • New reserves continue to replace mining depletion • Focus on development to ramp up production • Exploration continues to define new resources Production up by 27% versus 2006 - The Stratoni mine consists of alead-zinc-silver deposit and lies approximately 4 km from the coastal town ofStratoni in northern Greece. The Company's 95%-owned subsidiary Hellas Goldmined a total of 214,875 wet tonnes in 2007 (2006 - 176,691) at its Stratonimine. Hellas Gold completed 26 shipments in 2007 (2006 - 20). This translatesinto an increase of 27% in tonnes of base metal concentrates sold. Sales fromStratoni were as follows: 2007 2006ProductionOre mined (wet tonnes) 214,875 176,691SalesZinc concentrate (tonnes) 38,152 32,351 - Containing payable: Zinc (tonnes)* 15,891 13,775Lead concentrate (tonnes) 23,123 15,780 - Containing payable: Lead (tonnes)* 14,963 10,467Silver (oz)* 1,172,234 818,139Inventory (end of period)Ore mined (wet tonnes) - 2,499Zinc concentrate (tonnes) 1,689 37Lead/silver concentrate (tonnes) 49 214 * Net of smelter payable deductions On average, mined and processed lead and zinc grades in 2007 have been 16.2% and3.6% respectively higher than reserve grades. In 2007, zinc and leadconcentrates sales increased by 18% (to 38,152 tonnes) and 46% (to 23,123tonnes), respectively. New reserves continue to replace mining depletion - European Goldfields ispleased to announce an increase in reserves at Stratoni, which can now bereported as follows under Canadian National Instrument 43-101 as at 31 December2007: Reserve Category '000t* Ag Ag Pb Pb Zn Zn g/t Moz* % '000t* % '000t*Proven 1,904 193.3 11.8 7.3 139 9.1 173Probable 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 Q42005 until 31 December 2007. Total reserve tonnes have increased by 11% over the previous reserves publishedin January 2007, accounting for deduction of ore since then. The additionaltonnes are from the upper-west part of the orebody, which remains open alongstrike. In addition, the grade of lead and silver has been increased in thereserve, based on the underground sampling programme which has allowed accuratemodeling of higher grade zones. This has resulted in an increase of 20% in leadmetal, 10% in zinc metal and 25% in silver metal over the previous reserveestimate published in January 2007, accounting for deduction of ore since then. The new reserve will add an extra year to Stratoni's life of mine and theimproved grades will result in better revenues. Since the Stratoni mine resumedproduction in September 2005, Hellas Gold has essentially managed to replacemining depletion by new reserves. The new reserve has allowed Hellas Gold to adjust its yearly ore productionschedule 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 estimatefor the Stratoni orebody, which results from a new optimised geological modelbased on revised geological mapping. Patrick Forward, General Manager, Exploration of European Goldfields, was theQualified Person under Canadian National Instrument 43-101 responsible forpreparing the updated resource and reserve estimates for the Stratoni depositquoted above. A technical report from Patrick Forward will be filed on SEDAR(www.sedar.com) within the next forty-five days. Focus on development to ramp up production - Ore production rates fromunderground have steadily increased from an average of 727 tonnes per day in2006 to 885 tonnes per day in 2007, and the mine now operates effectively atover 900 tonnes per day. The rate of ore production is expected to continue toincrease and reach 290,000 tonnes in 2008. Actual ore production for 2007 has been approximately 13% lower than theoriginally forecasted 250,000 tonnes due in part to poor ground conditions inthe upper area of the mine. As a result, development of the main internal rampand cross-cut accesses in the upper parts of the mine was slower than expectedand face availability was reduced over most of the year. For the same reason,forecast ore production for 2008 has been reduced from the originally forecasted350,000 tonnes to 290,000 tonnes. The excavation of a new decline to the base of the Mavres Petres orebody is nowessentially completed. Connection of the decline to the bottom of the main rampwill improve material movement and ventilation and enable the introduction ofequipment as a support mechanism to ameliorate poor ground conditions. Thecompletion of the decline and the development of the internal ramp and stopeaccesses to the higher, more extensive, levels of the orebody, expected toprovide additional reserves to the west, are now the main focus to ensure aramp-up in production to 400,000 tonnes of ore per year. Continued commitment to the environment and the community - Hellas Gold'scommitment to the environment continues in conjunction with investments insocial initiatives for the benefit of local communities in what is essentiallyan under-developed region of Greece. For example, Hellas Gold (i) constructed anew water treatment plant to ensure capacity to treat all mine water underextreme conditions; (ii) installed two filter presses to produce a solid cakerequiring less surface storage space for fine tailings and water treatment plantsludge; (iii) is backfilling voids at the old Madem Lakkos mine workings withcoarse tailings (49,000 m3 of voids filled to date), which reduces storage spaceon surface and mine water pumping from underground;and (iv) improving the lighting and transport facilities in the localcommunities as well as other social improvements. This responsible approach tothe environment and local communities demonstrates the Company's commitment tosustainable development. Exploration continues to define new resources - Stratoni benefits from inferredresources comprising some 639,000 tonnes grading 7.7% lead, 9.9% zinc and 203.4g/t silver. These inferred resources are currently being mined at the margin,confirming expected grades. Drilling on 25m centres is planned in 2008 in theupper west and lower east parts of the orebody which account for some 85% of theinferred resources. The drill programme is designed to convert the inferredresources to the measured and indicated categories, which can be immediatelyconverted to proven and probable reserves as the areas are adjacent to currentmine infrastructure. New mineralisation has been encountered during the excavation of the new declinerunning 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 witha weighted average grade of 0.7 to 14.8% Pb, 1.3 to 22.1% Zn and 16 to 307g/tAg. A drill programme designed to define indicated and measured resources alongat least 200 metres of strike and 75 metres of dip has commenced with resultsexpected in the second quarter of 2008. The new decline will enable immediateaccess for mining of any new discovery in this area. Drilling in 2008 of inferred resources and of the newly identified zone isexpected to add an additional three years in total to the mine reserves, andwith the zones open further along strike, particularly to the west wheresuitable host marbles and feeder structures are known to exist, additionalfurther reserves are expected to be defined in the future. SKOURIES PROJECT (GREECE) Highlights: • Fabrication of long lead time equipment has commenced • Low cost production due to low strip ratio and high grade gold-copper core at depth Fabrication of long lead time equipment has commenced - In June 2007, HellasGold signed a €30 million contract with Outotec Minerals OY ("Outotec") for thesupply of a large technology package for the Company's 95%-owned Skouriesgold-copper project, which is located 35 km by road from the Stratoni port innorthern Greece. Outotec has already delivered a basic engineering package to Hellas Gold for thegrinding mills, flotation equipment, process control and paste thickeners.Fabrication of the SAG and ball mills has commenced and they are due ex works inthe third quarter of 2009. Low cost production due to low strip ratio and high grade gold-copper core atdepth - The Company has completed the key technical studies for the fullfeasibility study on Skouries. These studies include: • A cost and definition study for the process plant and associated infrastructure, undertaken by Aker Kvaerner Engineering Services • A cost and definition study for underground mechanical and electrical utilities, undertaken by Scott Wilson Mining • The design of the tailings management facility, undertaken by Golder Associates • A study of hydrogeology and creek boundaries by the Greek Institute of Geology & Mineral Exploration (IGME), to be used in the development of a new hydrogeological model • A reserves estimate, undertaken by SRK Consulting • A basic engineering package by Outotec for the grinding mills, flotation equipment, process control and paste thickeners Basic and detailed engineering for the process plant and associatedinfrastructure is being conducted by the firm ENOIA of Athens, Greece. Mining studies carried out to date confirm that Skouries can be mined as a lowstrip open pit operation and as a highly productive underground mine. This wouldproduce annually up to 43,000 tonnes of copper and 220,000 oz of gold over amine life of over 20 years. Ore production is shown to be sustainable based onthe detailed mine design carried out by independent external consultants andbenchmarking with other comparable mines. Extensive testwork completed by the independent external consultants has shownaverage recoveries of 84% gold and 91% copper can be achieved. Concentrategrades of approximately 26% copper and averaging 26 g/t gold are expected. The concentrates will be trucked to Hellas Gold's port storage facility atStratoni, which will be approximately 15 km away by road from the proposedSkouries plant site. Skouries is located on a high plateau with no habitation inthe vicinity. The design of the tailings management facility ("TMF") incorporates the latestpaste production technology in a phased TMF that will minimise land take andembankment height and provides increased tailings stability. The study showsthat the paste tailings are inert. The use of paste tailings and a phased TMFalso allows sequential rehabilitation of the tailings management facility tominimise active tailings areas. Management believes that, based on technical studies to date and taking intoaccount a stronger Euro versus the US dollar, the project will requireapproximately $300 million in initial capital expenditure for the process plantand associated infrastructure, the tailings management facility, the open pitand other costs. Operating costs for the open pit mining are expected to be €1.28 per tonne, and€6.05 per tonne for the underground mining. This translates into a co-productoperating cost ranging between $250 and $300 per gold ounce, depending on fuelcost and exchange rate assumptions. The Company plans to publish the results ofthe final feasibility study on Skouries once the final Environmental ImpactStudy is completed. OLYMPIAS PROJECT (GREECE) Highlights: • Market created for gold concentrates - Six-fold increase in sales versus 2006 • Total of 395,000 oz of gold reserves still located on surface • Olympias development plan underway Market created for gold concentrates - Six-fold increase in sales versus 2006 -The Company's 95%-owned Olympias project benefits from an existing stockpile ofgold-bearing pyrite concentrates which represented, at 31 December 2007, areserve of approximately 172,000 tonnes grading 23.5 g/t gold (containing130,000 oz of gold), in addition to substantial underground reserves of gold,lead, zinc and silver. Hellas Gold completed 47 shipments in 2007 (2006 - 9). This translates into asix fold increase in tonnes of pyrite concentrates sold. Sales of pyriteconcentrates were as follows: 2007 2006SalesGold concentrate (dry tonnes) 79,554 11,338 Also, Hellas Gold received in 2007 payments totalling $6.8 million for the saleof an additional 69,979 dry tonnes of gold concentrates expected to berecognised in 2008 and future years, bringing the total of gold concentratessold or paid for in 2007 to 149,533 dry tonnes. Hellas Gold has now secured the sale of the entire stockpile to six differentpurchasers, thereby creating a market for gold concentrates which did not existprior to 2006. Total of 395,000 oz of gold reserves still located on surface - In addition thestockpile of gold concentrates, Hellas Gold plans to process 2.4Mt of stockpiledtailings arising from the previous operations at Olympias, which will produceapproximately 350,000 tonnes of concentrates (containing 238,000 oz of gold),and resume underground mining operations at Olympias producing more gold bearingpyrite concentrates for sale to existing and new off-take purchasers. Olympias benefits from extensive mining and plant infrastructure already inplace, including a concentrator plant, a shaft down to a depth of 400 metresbelow surface and a port facility nearby at Stratoni. International contractorOutotec Minerals OY inspected the facilities in July 2007 and concluded that theplant could be brought back into efficient operation quickly and at relativelymodest cost. Hellas Gold is ready to start reprocessing these tailings and refurbishing thesefacilities, and resume underground production as soon as permits are awarded. Olympias refurbishment plan underway - Olympias is a polymetallic (gold, lead,zinc and silver) deposit located 8 km north of the Stratoni mine in northernGreece. The Company's current plan is for development at Olympias to progress inthree phases to allow refurbishment and construction of infrastructure, arealistic ramp-up in production within the mine and the subsequent constructionof new gold processing facilities at Stratoni. This staged approach also allowsthe phasing of capital investment, as follows: • Phase 1 has already started, with the sale of the existing stockpile of gold-bearing pyrite concentrates located on surface at Olympias. Revenues from Phase 1 are intended to fund Phase 2. • Phase 2 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. • Phase 3 will consist of underground mining initially around the existing shaft and other infrastructure. Production of ore is expected to ramp up progressively from 200,000 to 900,000 tonnes per annum through the expansion of underground infrastructure, which will include a new decline from the base of the Olympias deposit for conveying the ore to a new centralised concentrator, gold plant and tailings management facility at a brown field site to be located in the Stratoni mine area. Revenue during Phase 3 will be generated from the sale of lead/silver and zinc concentrates and the sale of gold and silver bullion produced at the new gold processing plant. The phasing of the project allows time for optimisation and development of themetallurgical process for treating the auriferous arsenopyrite/pyriteconcentrates. The Olympias project is expected to be self-sustaining over the initial phaseswith the sale of concentrates and the high recoveries for the on-site goldprocessing are considered promising for the latter phase. PERMITTING PROCESS (SKOURIES & OLYMPIAS PROJECTS) Permitting process moving forward - In July 2007, the Company received a formalletter confirming that the Greek Ministry of Development had completed itsreview of the Company's business plan submitted in January 2006 for the jointdevelopment of the Skouries and Olympias gold and base metals projects inNorthern Greece. In the letter, the Ministry of Development also re-declared its positive opinionof the Company's preliminary environmental impact study ("PEIS") which hasalready been submitted, and formally requested the Ministry of Environment toissue its official approval of the PEIS. The letter also states that the Ministry of Development "is in agreement withthe development of the project described in the business plan, as thisinvestment is particularly beneficial to the national and local economy (...)and reflects the intent of the contract signed between the Greek State andHellas Gold". This letter is addressed to Hellas Gold and the Ministry of Environment andrepresents a statement of support for the projects based on detailed studiescompleted by appropriate technical and advisory bodies appointed by the Ministryof Development. This letter represents the foundation for the fulfilment of theCompany's business plan for Skouries and Olympias, in compliance with the Greekand EU legal framework. The business plan focuses on a phased approach to the development of theSkouries gold-copper porphyry deposit and the Olympias gold-lead-zinc-silverdeposit. The principal revenue stream in the early phases will be through thesale of concentrates. The Company's current plan is to develop Olympias in threephases to allow refurbishment of existing infrastructure and the subsequentconstruction of new gold processing facilities at Stratoni. Skouries willinitially be mined as a low strip open pit operation, followed by highlyproductive underground mining. The Company is currently finalising a full environmental impact study ("EIS")which is expected to be submitted to the Greek government in the second quarterof 2008, addressing any comments received on the PEIS which are expected withinthe next few weeks. On approval of the EIS, the environmental permits forSkouries and Olympias are expected to be issued. The Company will then submit to the Greek government a final technical report onthe Skouries and Olympias projects, which will restate the principles of thebusiness plan and take into account any conditions detailed in the environmentalpermit. The mining permits are expected to be issued on approval of thetechnical report by the Greek government. EXPLORATION IN GREECE Airborne survey outlines intrusive belt; progress in target definition - HellasGold holds 317 km(2) of highly prospective licences in northern Greece overwhich an airborne geophysical survey was completed by Fugro Airborne Surveys inDecember 2007. Twenty targets had already been identified from existing data;however, the survey represents the first systematic modern exploration ever beenconducted over the licence area. The survey comprises magnetics and radiometricsover the entire licence area and an electromagnetic ("EM") survey over thenorthern part of the licence area, which is host to massive sulphide targets. Early processing of the magnetics has defined an intrusive belt some 17 km by 6km in the South-East part of the licence area. This clearly defines knownporphyry deposits at Skouries and at the previously identified Fisoka target.Fisoka is shown by the geophysics to comprise three porphyry bodies. Thenorthern 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 hasshown that the central area shows the most intense veining with copper oxidesvisible at surface. Re-analysis of stream sediment sampling has shown that themore anomalous samples were in stream draining from the central area. Thesefactors indicate that the untested central and southern Fisoka porphyries offerthe best potential. Hellas Gold plans to drill test the central and southernFisoka porphyries later this year. The magnetics have also highlighted a series of strong anomalies, similar inmagnitude to Skouries, over a 3 km by 4.5 km area, which is believed torepresent a complex of intrusives some 3 km to the South-East of Skouries whichwill be investigated on the ground in the next few weeks. The raw EM data indicated conductors over the known massive sulphide orebodies,including the Olympias look-alike massive sulphide target at Piavitsa. Postprocessing of the EM will be used to confirm continuity of the Piavitsamineralisation along its 2 km strike length prior to drill testing in the secondhalf of 2008. The fully processed geophysics will also be used to prioritise the remainder ofthe twenty identified targets and develop new ones over the licence area. CERTEJ PROJECT (ROMANIA) Highlights: • Key feasibility studies completed to high accuracy level • Reserves increased by 20% - Life-of-mine extended by two years • Environmental Impact Study completed - Permitting process well underway • Continuing exploration programme Key feasibility studies completed to high accuracy level - European Goldfieldsis in the final stage of completing a full feasibility study for its 80%-ownedCertej project, located within a mining district in Romania known as the "GoldenQuadrilateral". In 2007, European Goldfields completed feasibility level studiesto a high level of accuracy of +/-15% on the open pit mine design, theprocessing plant and the tailings management facilities (TMFs). RSG Global Consulting Pty Ltd ("RSG Global") completed a pit optimisation andpit design study, which included a geotechnical drilling programme designed byGolder Associates. The study resulted in a better conversion from resources toreserves and confirmed that the deposit will be mined with an open pit stripratio of 3.1:1. The project will involve the mining and processing of 3.0 million tonnes of oreper annum over at least eleven years. This is expected to yield approximately160,000 oz of gold and 820,000 oz of silver per year in dore, reflecting anaverage total process recovery of 81% for gold and approximately 75% for silver. The metallurgical process involves the production of a gold-bearing concentratefollowed by the production of gold and silver as dore on site by means of theAlbion Process. The Albion Process is a combination of ultra-fine grinding ofconcentrates and oxidative leaching at atmospheric pressure. The liberated goldand silver is then recovered as dore by the conventional Carbon in Leach (CIL)process. The second phase of the continuous Albion and CIL pilot plant trials have beencompleted and Aker Kvaerner Engineering Services has now finalised anengineering and cost study for the processing plant and associatedinfrastructure to an accuracy of +/- 15%. The residues from the flotation and gold plants will be disposed of in twoseparate but adjoining tailings management facilities (TMFs), which are ideallylocated and designed for this project. The EIS confirms that the Certej projectand its TMFs will have a negligible impact on the local water streams, flora andfauna. Golder Associates has completed a design and cost study for the TMFs. Reserves increased by 20% - Life-of-mine extended by two years - In October2007, European Goldfields announced a 20% increase in gold reserve ounces forthe Certej project, reported as follows under Canadian National Instrument43-101: Reserve Category Million Tonnes Au Au Ag Ag g/t Moz g/t Moz Probable 32.8 2.0 2.1 11.4 12.0 Note: Reserve based on pit optimisation using a gold price of $425/oz and asilver price of $7/oz. The new reserve results from a better conversion of resources into reserves,combined with increased resources. It is based on the generation of agold-bearing concentrate followed by the production of gold and silver as doreon site by means of the Albion Process. Environmental Impact Study completed - Permitting process well underway -InFebruary 2008, European Goldfields completed the final Environmental ImpactStudy (the "EIS") to develop the Certej project, which is expected to besubmitted to the Romanian environmental authorities in Timisoara by the end ofMarch 2008. This follows the submission of a Technical Feasibility Study to theRomanian authorities in March 2007 and the grant by the local county council ofa General Urbanisation Certificate in September 2006. This certificate confirmsthe designation of Certej as an industrial mining area and attests to the localcommunity's support for the project. European Goldfields already holds a mining permit for Certej, which is currentlybeing exploited on a small scale by way of an existing open pit. The EISaddresses a proposed increase in mine production at Certej and the processing ofore on site. The EIS has been carried out over a 12-month period in order to accumulate allthe required base line data during the different seasons. The EIS is a detailedmulti-discipline study comprising over 2,000 pages subdivided into a number ofvolumes assessing the environmental, social and health impacts of the project onthe mine area. The EIS was prepared with the contribution of several Romanian institutes ofinternational reputation, namely the National Institute of Research andDevelopment for Industrial Ecology (ECOIND), the National Institute of Researchand Development for Environment Protection (ICIM), the Technical University ofConstruction Bucharest and the Babes-Bolyai University of Cluj. The EIS wasprepared to the regulatory framework established by Romanian and EU legislation. The environmental permit and an updated mining permit are expected in Q4 2008following a standard public consultation process with local communities, whichis expected to start 45 days after submission of the EIS. Customary constructionand public utility permits are expected to follow by end-2008 when the detailedengineering design has been completed for the site plant. Continuing exploration programme - Ongoing exploration activities in adjacentconcessions to Certej are aimed at increasing satellite resources to provideextension to life of mine or higher grade feed to the Certej operation. Thiswill include step out exploration over satellite resources to investigate strikeand down dip potential. As part of an ongoing generative programme, satelliteimage and pilot geochemical programmes over known mineralisation are currentlybeing carried out. This will enable exploration to focus activities alongstructures that were active during the mineralising events. European Goldfields has pending applications for new exploration licences in the"Golden Quadrilateral" area of West-central Romania where the Certej deposit islocated. The applications cover complex geological terrains that hostsignificant epithermal, porphyry and volcanogenic massive sulphide (VMS)mineralisation. Remote sensing surveys and mapping are proposed over theconcessions combined with geochemical surveys using results of the abovementioned pilot studies in order to define the exact methodology. The aim of theprogramme is to generate high quality targets that represent significantmineralised systems that can be drill tested in 2009. Documents sent to shareholders Copies of the Company's Annual Report, Management's Discussion and Analysis andConsolidated Financial Statements for the year ended 31 December 2007, andcopies of the Notice of Meeting and Management Proxy Circular for the AnnualMeeting of shareholders of the Company to be held on 19 May 2008 have been sentto shareholders and filed on SEDAR at www.sedar.com Director's shareholding The Company approved the grant on 20 March 2008 of 40,000 restricted share units("RSUs") to Philip Johnson, a director of the Company, under the Company'sRestricted Share Unit Plan. Such RSUs will be redeemed into an equal number ofCommon Shares of the Company on 19 May 2008, from which the Company willwithhold 16,800 shares for tax purposes and sold in the public market. As aresult, Philip Johnson will hold 37,200 Common Shares of the Companyrepresenting 0.02% of the issued share capital of the Company. Resources & reserves parameters For additional information on the resource and reserve estimates quoted in thisnews release, please refer to the Company's Resources & Reserves Declaration atwww.egoldfields.com/goldfields/resources.jsp. Patrick Forward, General Manager,Exploration of the Company, was the Qualified Person under Canadian NationalInstrument 43-101 responsible for reviewing the disclosure of resource andreserve estimates quoted in this news release. Forward-looking statements Certain statements and information contained in this document, including anyinformation as to the Company's future financial or operating performance andother statements that express management's expectations or estimates of futureperformance, constitute forward-looking information under provisions of Canadianprovincial securities laws. When used in this document, the words "anticipate","expect", "will", "intend", "estimate", "forecast", "planned" and similarexpressions are intended to identify forward-looking statements or information.Forward-looking statements include, but are not limited to, the estimation ofmineral reserves and resources, the timing and amount of estimated futureproduction, costs and timing of development of new deposits, permitting timelines and expectations regarding metal recovery rates. Forward-lookingstatements are necessarily based upon a number of estimates and assumptionsthat, while considered reasonable by management, are inherently subject tosignificant business, economic and competitive uncertainties and contingencies.The Company cautions the reader that such forward-looking statements involveknown and unknown risks, uncertainties and other factors that may cause theactual financial results, performance or achievements of the Company to bematerially different from its estimated future results, performance orachievements expressed or implied by those forward-looking statements and theforward-looking statements are not guarantees of future performance. Theserisks, uncertainties and other factors include, but are not limited to: changesin the price of gold, base metals or certain other commodities (such as fuel andelectricity) and currencies; uncertainty of mineral reserves, resources, gradesand recovery estimates; uncertainty of future production, capital expendituresand other costs; currency fluctuations; financing and additional capitalrequirements; the successful and timely permitting of the Company's Skouries,Olympias and Certej projects; legislative, political, social 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; the risks normally involved in the exploration, development and miningbusiness; and risks associated with internal control over financial reporting.For a more detailed discussion of such risks and material factors or assumptionsunderlying these forward-looking statements, see the Company's Annual Information Form for the year ended 31 December 2007, filed on SEDAR atwww.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 newinformation, future events or otherwise, except as required by law. For further information please contact: European Goldfields: e-mail: [email protected] Reading, Chief Executive Officer Tel: +44 (0)20 7408 9534 Buchanan Communications: e-mail: [email protected] Morse / Ben Willey Tel: +44 (0)20 7466 5000 Renmark Financial Communication: e-mail: [email protected] Roy Tel: +1 514 939 3989 RBC Capital Markets: e-mail: [email protected] K Smith Tel: +44 (0)20 7029 7882 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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