8th Aug 2007 07:00
European Goldfields Ltd08 August 2007 Immediate Release 8 August 2007 European Goldfields Limited Interim Consolidated Financial Statements (Unaudited) For the Three- and Six-Month Periods Ended 30 June 2007 and 2006 Disclosure of auditor review of interim consolidated financial statements The interim consolidated financial statements of the Company for the three- andsix-month periods ended 30 June 2007 and 2006 have not been reviewed by theauditors of the Company. European Goldfields Limited 30 June 31 December Consolidated Balance SheetsAs at 30 June 2007 and 31 December 2006(Unaudited - Prepared by Management)(in thousands of US Dollars, except per shareamounts) 2007 2006 $ $Assets Note Unaudited Audited Current assetsCash and cash equivalents 221,596 34,587Accounts receivable 17,993 14,945Prepaid expenses 1,467 1,270Inventory 4 2,762 854 --------- --------- 243,818 51,656 --------- --------- Non current assetsPlant and equipment 5 41,208 27,007Deferred exploration and development costs 6Greek production stage mineral properties 28,866 14,677Greek development stage mineral properties 374,962 182,157 --------- --------- 403,828 196,834Romanian development stage mineral properties 34,666 31,782 --------- --------- 438,494 228,616 --------- --------- Restricted investment 7 4,000 3,926 Future tax asset 2,254 738 --------- --------- 729,774 311,943 --------- --------- Liabilities Current liabilitiesAccounts payable and accrued liabilities 32,181 9,802 Non current liabilitiesFuture tax liability 8 102,390 48,150Non-controlling interest 5,845 20,422Asset retirement obligation 9 6,249 6,031Deferred revenue 10 56,486 - --------- --------- 170,970 74,603 --------- ---------Shareholders' equityCapital stock 11 532,252 246,890Contributed surplus 11 8,365 7,135Other comprehensive income 9,326 4,276Deficit (23,320) (30,763) --------- --------- 526,623 227,538 --------- --------- --------- --------- 729,774 311,943 --------- --------- The accompanying notes are an integral part of these interim consolidated financial statements. Approved by the Board of Directors (s) Timothy Morgan-Wynne (s) Jeffrey O'LearyTimothy Morgan-Wynne, Director Jeffrey O'Leary, Director European Goldfields Limited Consolidated Statements of Profit and Loss For the three-month periods ended 30 June 2007 and 2006 (Unaudited - Prepared by Management) (in thousands of US Dollars, except per share amounts) 3 months ended 30 June 6 months ended 30 June Note 2007 2006 2007 2006 $ $ $ $ IncomeSales 24,944 8,274 42,027 17,357Cost of sales (9,082) (3,228) (15,253) (7,558)Depletion of assetretirement obligation (78) (266) (198) (266)Depreciation and depletion (835) (450) (1,488) (908) -------- -------- -------- --------Gross profit 14,949 4,330 25,088 8,625 -------- -------- -------- -------- Other income -------- -------- -------- --------Interest income 1,116 267 1,569 567 -------- -------- -------- -------- ExpensesCorporate administrative andoverhead expenses 884 467 1,731 1,002Equity-based compensationexpense 450 758 906 1,431Foreign exchange loss/(gain) 265 (201) 417 (217)Hellas Gold administrativeand overhead expenses 2,320 1,056 4,532 1,800Hellas Gold water treatmentexpenses (non-operating mines) 1,078 893 2,180 1,386Hellas Gold old adit andequipment maintenance(Stratoni mine) - 1,124 - 2,026Accretion of assetretirement obligation 31 28 60 54Amortisation 112 220 231 421 -------- -------- -------- -------- 5,140 4,345 10,057 7,903 -------- -------- -------- -------- -------- -------- -------- --------Profit for the period beforeincome tax 10,925 252 16,600 1,289 Income taxesCurrent taxes (2,082) - (3,243) -Future taxes (714) (563) (1,272) (1,439) -------- -------- -------- -------- (2,796) (563) (4,515) (1,439) -------- -------- -------- -------- -------- -------- -------- --------Profit/(loss) for the periodafter income tax 8,129 (311) 12,085 (150) Non-controlling interest (2,794) (225) (4,642) (700) -------- -------- -------- --------Profit/(loss) for the period 5,335 (536) 7,443 (850) Deficit - Beginning ofperiod (28,655) (34,079) (30,763) (33,765) -------- -------- -------- -------- Deficit - End of period (23,320) (34,615) (23,320) (34,615) -------- -------- -------- -------- Earnings/(loss) per share 17Basic 0.04 0.00 0.06 (0.01)Diluted 0.04 0.00 0.06 (0.01) Weighted average number ofshares (in thousands)Basic 122,957 113,847 119,426 112,673Diluted 124,652 113,847 121,105 112,673 The accompanying notes are an integral part of these interim consolidated financial statements. European Goldfields LimitedConsolidated Statements of EquityAs at 30 June 2007 and 2006(Unaudited - Prepared byManagement)(in thousands of US Dollars, except Otherper share amounts) Contributed Comprehensive Capital Surplus Income Deficit Total $ $ $ $ $ --------- --------- ---------- -------- --------Balance - 31 December 2005 240,234 6,197 (12,843) (33,765) 199,823 --------- --------- ---------- -------- --------Equity-basedcompensation cost - 2,429 - - 2,429Restricted shareunits vested 435 (435) - - -Share optionsexercised or exchanged 3,827 (1,375) - - 2,452Movement incumulative translation adjustment - - 12,093 - 12,093Loss for the period - - - (850) (850) --------- --------- ---------- -------- -------- 4,262 619 12,093 (850) 16,124 --------- --------- ---------- -------- -------- --------- --------- ---------- -------- --------Balance - 30 June 2006 244,496 6,816 (750) (34,615) 215,947 --------- --------- ---------- -------- --------Equity-basedcompensation cost - 2,670 - - 2,670Restricted shareunits vested 1,636 (1,636) - - -Share optionsexercised or exchanged 758 (715) - - 43Movement incumulative translationadjustment - - 5,026 - 5,026Profit for the period - - - 3,852 3,852 --------- --------- ---------- -------- -------- 2,394 319 5,026 3,852 11,591 --------- --------- ---------- -------- -------- --------- --------- ---------- -------- --------Balance - 31 December 2006 246,890 7,135 4,276 (30,763) 227,538 --------- --------- ---------- -------- -------- Equity-basedcompensation cost - 2,261 - - 2,261Shares issued forequity financing 130,059 - 130,059Shares issued asconsideration foracquisition 161,424 - - - 161,424Share issue costs (7,152) - (7,152)Restricted shareunits vested 850 (850) - - -Share optionsexercised or exchanged 181 (181) - - -Movement incumulative translationadjustment - - 5,050 - 5,050Profit for the period - - - 7,443 7,443 --------- --------- ---------- -------- -------- 285,362 1,230 5,050 7,443 299,085 --------- --------- ---------- -------- -------- --------- --------- ---------- -------- --------Balance - 30 June 2007 532,252 8,365 9,326 (23,320) 526,623 --------- --------- ---------- -------- -------- The accompanying notes are an integral part of these interim consolidated financial statements. European Goldfields Limited Consolidated Statements of Cash Flows For the three- and six-month periods ended 30 June 2007 and 2006 (Unaudited - Prepared by Management) (in thousands of US Dollars, except per share amounts) 3 months ended 30 June 6 months ended 30 June 2007 2006 2007 2006 $ $ $ $NoteCash flows from operatingactivitiesProfit/(loss) for the period 5,335 (536) 7,443 (850)Foreign exchange loss 290 170 486 143Amortisation 651 458 1,070 876Equity-based compensationexpense 450 782 906 1,505Accretion of assetretirement obligation 31 28 60 54Current taxation 2,083 - 3,244 -Future tax asset recognised 713 563 1,272 1,439Non-controlling interest 2,794 225 4,642 700Deferred revenue recognised (1,014) - (1,014) -Depletion of mineralproperties 373 440 846 677 --------- --------- --------- --------- 11,706 2,130 18,955 4,544 --------- --------- --------- --------- Net changes in non-cashworking capital 13 1,489 1,001 (3,351) 92 --------- --------- --------- --------- 13,195 3,131 15,604 4,636 --------- --------- --------- --------- Cash flows from investingactivitiesDeferred exploration anddevelop. costs - Romania (1,248) (992) (1,944) (1,840)Plant and equipment - Greece (4,673) (1,599) (6,250) (2,167)Deferred development costs -Greece (520) (999) (941) (1,475)Purchase of equipment (24) (25) (35) (68)Restricted investment 56 12 28 12 --------- --------- --------- --------- (6,409) (3,603) (9,142) (5,538) --------- --------- --------- --------- Cash flows from financingactivitiesProceeds from equityfinancing 130,059 - 130,059 -Deferred revenue 57,500 - 57,500 -Proceeds from exercise ofshare options - 2,391 - 2,452Share issue costs (7,152) - (7,152) - --------- --------- --------- --------- 180,407 2,391 180,407 2,452 --------- --------- --------- --------- Effect of foreign currencytranslation on cash 444 827 140 1,000 --------- --------- --------- --------- Increase in cash and cashequivalents 187,637 2,746 187,009 2,550 Cash and cash equivalents -Beginning of period 33,959 30,340 34,587 30,536 --------- --------- --------- --------- Cash and cash equivalents -End of period 221,596 33,086 221,596 33,086 --------- --------- --------- --------- The accompanying notes are an integral part of these interim consolidated financial statements. European Goldfields Limited Consolidated Statements of Comprehensive Income For the three- and six-monthperiods ended 30 June 2007 and 2006 (Unaudited - Prepared by Management) (in thousands of US Dollars, except per share amounts) 3 months ended 30 June 6 months ended 30 June 2007 2006 2007 2006 $ $ $ $ Profit/(loss) for the period 5,335 (536) 7,443 (850) Other comprehensive income inthe periodCurrency translationadjustment 3,336 9,161 1,714 12,093 -------- -------- -------- --------Comprehensive income 8,671 8,625 9,157 11,243 -------- -------- -------- -------- European Goldfields LimitedNotes to Consolidated Financial StatementsFor the three- and six-month periods ended 30 June 2007 and 2006(Unaudited - Prepared by Management)(in thousands of US Dollars, except per share amounts) 1. Nature of operations European Goldfields Limited (the "Company"), a company incorporated under theYukon Business Corporations Act, is a resource company involved in theacquisition, exploration and development of mineral properties in Greece,Romania and South-East Europe. The Company's common shares are listed on the AIM Market of the London StockExchange and on the Toronto Stock Exchange (TSX) under the symbol "EGU". Greece - The Company holds a 95% interest in Hellas Gold S.A ("Hellas Gold").Hellas Gold owns three major gold and base metal deposits in Northern Greece.The deposits are the polymetallic operation at Stratoni, the Olympias projectwhich contain gold, zinc, lead and silver, and the Skouries copper/gold porphyryproject. Hellas Gold commenced production at Stratoni in September 2005 andcommenced selling an existing stockpile of gold concentrates from Olympias inJuly 2006. Hellas Gold is applying for permits to develop the Skouries andOlympias projects. Romania - The Company owns 80% of the Certej gold/silver project in Romania. TheCompany submitted in March 2007 a technical feasibility study to the Romaniangovernment in support of a permit application to develop the project. The underlying value of the deferred exploration and development costs formineral properties is dependent upon the existence and economic recovery ofreserves in the future, and the ability to raise long-term financing to completethe development of the properties. For the coming year, the Company believes it has adequate funds available tomeet its corporate and administrative obligations and its planned expenditureson its mineral properties. These consolidated financial statements have been prepared on a going concernbasis, which assumes the Company will be able to realise assets and dischargeliabilities in the normal course of business for the foreseeable future. Theseconsolidated financial statements do not include the adjustments that would benecessary should the Company be unable to continue as a going concern. 2. Significant accounting policies These interim consolidated financial statements have been prepared on the goingconcern basis in accordance with accounting principles generally accepted inCanada ("Canadian GAAP") using the same accounting policies as those disclosedin Note 2 to the Company's audited consolidated financial statements for theyears ended 31 December 2006 and 2005. These interim consolidated financial statements should be read in conjunctionwith the Company's audited consolidated financial statements for the years ended31 December 2006 and 2005. Effective 1 January 2007, the Company adopted the revised CICA Section 1506"Accounting Changes", which requires that: a voluntary change in accountingprinciples can be made if, and only if, the changes result in more reliable andrelevant information, changes in accounting policies are accompanied withdisclosures of prior period amounts and justification for the change, and forchanges in estimates, the nature and amount of the change should be disclosed.The Company has not made any voluntary change in accounting principles since theadoption of the revised standard. Financial Instruments - Recognition and Measurement, Section 3855 - Thisstandard prescribes when a financial asset, financial liability, ornon-financial derivative is to be recognised on the balance sheet and whetherfair value or cost-based methods are used to measure the recorded amounts. Italso specifies how financial instrument gains and losses are to be presented. Effective 1 January 2007, the Company's cash equivalents, temporary investmentsand investments in marketable securities have been classified asavailable-for-sale and are recorded at fair value on the balance sheet. Fairvalues are determined directly by reference to published price quotations in anactive market. Changes in the fair value of these instruments are reflected inother comprehensive income and included in shareholders' equity on the balancesheet. All derivatives are to be recorded on the balance sheet at fair value.Mark-to-market adjustments on these instruments will be included in net profit,unless the instruments are designated as part of a cash flow hedge relationship.In accordance with the standard's transitional provisions, the Company realisedas separate assets and liabilities only embedded derivatives acquired orsubstantively modified on or after 1 January 2003. All other financial instruments will be recorded at cost or amortised cost,subject to impairment reviews. The criteria for assessing on other thantemporary impairment remain unchanged. Transaction costs incurred to acquirefinancial instruments are included in the underlying balance. The Company hasdetermined that the adoption of Section 3855 had no effect on these financialstatements. Hedges, Section 3865 - This standard is applicable when a company chooses todesignate a hedging relationship for accounting purposes. It builds on theprevious AcG-13 "Hedging Relationships" and Section 1650 "Foreign CurrencyTranslation", by specifying how hedge accounting is applied and what disclosuresare necessary when it is applied. The Company has determined that the adoptionof Section 3865 had no effect on these financial statements. Comprehensive Income, Section 1530 - This standard requires the presentation ofa statement of comprehensive income and its components. Comprehensive incomeincludes both net earnings and other comprehensive income. Other comprehensiveincome includes holding gains and losses on available-for-sale investments,gains and losses on certain derivative instruments and foreign currency gainsand losses relating to self-sustaining foreign operations, all of which are notincluded in the calculation of net earnings until realised. Deferred revenue - The Company received a prepayment from Silver Wheaton(Caymans) Ltd. for the sale of all of the silver metal to be produced from oreextracted during the mine-life within an area of some 7 km(2) around itszinc-lead-silver Stratoni mine in northern Greece. The prepayment, which isaccounted for as deferred revenue, is recognised as sales revenue on the basisof proportion of settlements during the period to expected total settlements. 3. Business combination - Acquisition of additional interest in Hellas Gold In June 2007, the Company completed the acquisition of additional shares inHellas Gold, increasing its total interest from 65% to 95%. The totalconsideration paid by the Company for the purchased shares was satisfied asfollows: (a) The issue of 35,447,246 common shares of the Company; and (b) $8.42 million paid in cash to the vendor. Transaction costs of $0.59 million were also accounted for as part of theacquisition. A summary of the accounting treatment of fair value of net assets acquired andconsideration paid is as follows: $ -----------Net assets 19,296,017Mineral properties 201,319,263Future tax liabilities (50,182,299) ----------- 170,432,981 ----------- Purchase consideration: $ ----------- ----------- Cash paid 8,418,351 Shares issued (35,447,246 common shares) 161,424,562Transaction costs 590,068 -----------Purchase price 170,432,981 ----------- For accounting purposes, the Company has used an average share price based upon5 days prior and post the announcement of the transaction, to value the shareelement of the purchase consideration. 4. Inventory This balance comprises the following: 30 June 31 December 2007 2006 $ $Ore mined 456 225Metal concentrates 1,226 154Material and supplies 1,080 475 --------- ----------- 2,762 854 --------- ----------- 5. Plant and equipment Exploration / office Land and Leasehold equipment Vehicles buildings improvements Total $ $ $ $ $Cost - 2007 At 31 December 2006 13,220 1,236 15,609 256 30,321 Additions 12,385 - 2,357 - 14,742Disposals (14) (8) - - (22)Currencytranslationadjustment 334 26 410 - 770 -------- -------- -------- ---------- --------At 30 June 2007 25,925 1,254 18,376 256 45,811 -------- -------- -------- ---------- -------- Accumulated amortisation - 2007 At 31 December 2006 1,681 685 888 58 3,312 Provision for the period 607 146 441 13 1,207Disposals (10) (8) - - (18)Currencytranslationadjustment 49 18 35 - 102 -------- -------- -------- ---------- --------At 30 June 2007 2,327 841 1,364 71 4,603 -------- -------- -------- ---------- -------- -------- -------- -------- ---------- --------Net book valueat 30 June 2007 23,598 414 17,011 185 41,208 -------- -------- -------- ---------- -------- 6. Deferred exploration and development costs Greek mineral properties: Stratoni Olympias Skouries Total $ $ $ $ --------- ----------- --------- ---------Balance - 31 December 2006 14,677 108,078 74,079 196,834 --------- ----------- --------- --------- Acquisition of mineral property 14,440 110,575 76,304 201,319Deferred development costs 168 295 957 1,420Depletion of mineral properties (704) (195) - (899)Currency translation adjustment 285 2,892 1,977 5,154 --------- ----------- --------- --------- 14,189 113,567 79,238 206,994 --------- ----------- --------- ---------Balance - 31 June 2007 28,866 221,645 153,317 403,828 --------- ----------- --------- --------- The Stratoni, Skouries and Olympias properties are held by the Company's95%-owned subsidiary, Hellas Gold. In September 2005, the Stratoni propertycommenced production. Romanian mineral properties: Certej Baita-Craciunes Voia Cainel Total ti $ $ $ $ $ ------- -------- -------- -------- --------Balance - 31 December2006 26,862 3,064 844 1,012 31,782 ------- -------- -------- -------- -------- Drilling and assaying 519 1 1 - 521Geosciences and tech.consulting 398 18 25 - 441Samplers, miners andsurveying 30 - - - 30Project management 680 8 12 - 700Project overhead 1,066 17 67 - 1,150Amortisation 32 4 1 5 42 ------- -------- -------- -------- -------- 2,725 48 106 5 2,884 ------- -------- -------- -------- --------Balance - 31 June 2007 29,587 3,112 950 1,017 34,666 ------- -------- -------- -------- -------- The Certej exploitation licence and the Baita-Craciunesti exploration licenceare held by the Company's 80%-owned subsidiary, Deva Gold. Minvest S.A. (aRomanian state owned mining company), together with three private Romaniancompanies, hold the remaining 20% interest in Deva Gold and the Company holdsthe pre-emptive right to acquire such 20% interest. The Company is required tofund 100% of all costs related to the exploration and development of theseproperties. As a result, the Company is entitled to the refund of such costs(plus interest) out of future cash flows generated by Deva Gold, prior to anydividends being distributed to shareholders. The Voia and Cainel explorationlicences are held by the Company's wholly-owned subsidiary, European GoldfieldsDeva SRL. Individual property spending commitments for each of the Company's Romanianlicences have been met as at 30 June 2007. 7. Restricted investment The balance consists of an amount of $4,000 pledged by Hellas Gold to theNational Bank of Greece as collateral for a letter of guarantee issued by theNational Bank of Greece to the Greek Ministry of Development to guarantee HellasGold's environmental commitments under its mining permit at Stratoni. The letterof guarantee expires on 31 December 2010. The investment bears a rate ofinterest of Euribor plus 0.8% per annum. 8. Future tax liability The following table reflects future income tax liabilities: 30 June 31 December 2007 2006 $ $ --------- ----------Mineral properties 98,130 45,674Plant and equipment 550 244Exploration and development expenditure 2,645 2,232Accrued expenses 1,065 - --------- ---------- 102,390 48,150 --------- ---------- The tax liability arises as a result of the increase in value placed on themineral properties held by Hellas Gold on acquisition by the Company. Thisfuture tax liability will reverse as the corresponding mineral properties areamortised. 9. Asset retirement obligation Management has estimated the total future asset retirement obligation based onthe Company's net ownership interest in the Olympias, Skouries and Stratonimines and facilities. This includes all estimated costs to dismantle, remove,reclaim and abandon the facilities and the estimated time period during whichthese costs will be incurred in the future. The following table reconciles theasset retirement obligations as at 30 June 2007 and 31 December 2006: 30 June 31 December 2007 2006 $ $ --------- ----------Asset retirement obligation - Beginning of period 6,031 5,307Currency translation adjustment 158 613Accretion expense 60 111 --------- ----------Asset retirement obligation - End of period 6,249 6,031 --------- ---------- As at 30 June 2007, the undiscounted amount of estimated cash flows required tosettle the obligation was $6,826 (31 December 2006 - $6,639). The estimated cashflow has been discounted using a credit adjusted risk free rate of 5.04%. Theexpected period until settlement is six years. 10. Deferred revenue 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"). The salewas made in consideration of a prepayment to Hellas Gold of US$57.5 million incash, plus a fee per ounce of payable silver to be delivered to Silver Wheatonof the lesser of US$3.90 (subject to an inflationary adjustment beginning afteryear three) and the prevailing market price per ounce. The current Stratoniproven and probable silver reserve contains approximately 12 million ounces ofsilver. The following table reconciles deferred revenue associated with theSilver Wheaton Transaction: 30 June 31 December 2007 2006 $ $Deferred revenue - Beginning of period - -Additions 57,500 -Revenue recognised (1,014) - ---------- ----------Deferred revenue - End of period 56,486 - ---------- ---------- During the three-month period ended 30 June 2007, Hellas Gold deliveredconcentrate containing 276,334 ounces (2006 - Nil) of silver to Silver Wheaton. 11. Capital stock Authorised:- Unlimited number of common shares, without par value- Unlimited number of preferred shares, issuable in series, without par value Issued and outstanding (common shares - all fully paid): Number of Amount Shares $ --------- ----------Balance - 31 December 2006 114,801,848 246,890 --------- ---------- Restricted share units vested 235,000 850Share options exercised 102,773 181Shares issued for equity financing 27,600,000 130,059Shares issued as consideration for acquisition 35,447,246 161,424Share issue costs - (7,152) --------- ---------- 63,385,019 285,362 --------- ---------- --------- ----------Balance - 30 June 2007 178,186,867 532,252 --------- ---------- As at 30 June 2007, the Company had 35,447,246 common shares held in escrow orin respect of which trading restrictions applied. Contributed surplus: 30 June 31 December 2007 2006 $ $Equity-based compensation expense 7,787 6,557Broker warrants 578 578 ---------- ---------- 8,365 7,135 ---------- ---------- 12. Share options and restricted share units Share Option Plan The Company operates a Share Option Plan (together with its predecessor, the"Share Option Plan") authorising the directors to grant options to acquirecommon shares of the Company to the directors, officers, employees andconsultants of the Company and its subsidiaries, on terms that the Board ofDirectors may determine, within the limitations of the Share Option Plan. Themaximum number of common shares of the Company which may be reserved forissuance for all purposes under the Share Option Plan shall not exceed 15% ofthe common shares issued and outstanding from time to time (26,728,030 shares asat 30 June 2007). As at 30 June 2007, the following share options were outstanding: Number of Exercise Options price C$Expiry date 2009 325,000 2.80 2009 120,000 3.20 2009 250,000 4.20 2009 535,000 3.07 2009 75,000 3.15 2010 576,999 2.00 2010 50,000 2.11 2010 150,000 2.40 2011 100,000 3.25 2011 600,000 3.85 2011 200,000 4.10 2012 75,000 5.47 2012 250,000 5.66 --------- --------- 3,306,999 3.36 --------- --------- During the six-month period ended 30 June 2007, share options were granted,exercised and cancelled as follows: Number of Weighted Options average exercise price C$ --------- ---------Balance - 31 December 2006 3,213,665 3.06 --------- --------- Options granted 325,000 5.62Options exchanged for shares (181,666) 2.32Options cancelled (50,000) 2.50 --------- ---------Balance - 30 June 2007 3,306,999 3.36 --------- --------- Of the 3,306,999 share options outstanding as at 30 June 2007, 2,581,999 werefully vested and had a weighted average exercise price of C$3.02 per share. The weighted average grant date fair value of the 325,000 share options grantedduring the six-month period ended 30 June 2007 (2006 - 800,000) was C$5.62 (2006- C$3.91). For outstanding share options which were not fully vested during thesix-month period ended 30 June 2007, the Company incurred a total equity-basedcompensation cost of $532 (2006 - $675) of which $431 (2006 - $613) has beenrecognised as an expense in the income statement and $100 (2006 - $62) has beencapitalised to deferred exploration and development costs. Restricted Share Unit Plan The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorisingthe directors, based on recommendations received from the CompensationCommittee, to grant Restricted Share Units ("RSUs") to designated directors,officers, employees and consultants. The RSUs are "phantom" shares that rise andfall in value based on the value of the Company's common shares and are redeemedfor actual common shares on the vesting dates determined by the Board ofDirectors when the RSUs are granted. The RSUs vest on the dates below howeverupon a change of control of the Company they would typically become 100% vested.The maximum number of common shares of the Company which may be reserved forissuance for all purposes under the RSU Plan shall not exceed 2.5% of the commonshares issued and outstanding from time to time (4,454,672 shares as at 30 June2007). As at 30 June 2007, the following RSUs were outstanding: Vesting date Number of Grant date RSUs fair value of underlying shares C$ 1 July 2007 * 250,000 4.0431 August 2007 ** 50,000 5.3631 December 2007 350,000 2.1931 December 2007 175,000 4.0431 December 2007 *** 60,000 3.2431 December 2007 30,000 5.3631 May 2008 75,000 3.24 --------- --------- 990,000 3.38 --------- ---------* Or earlier if certain operational milestones are achieved. Vesting conditionalupon such milestones being achieved by 1 July 2007.** Provided certain operational milestones are achieved by 31 August 2007.*** Provided certain operational milestones are achieved by 1 July 2007. During the six-month period ended 30 June 2007, RSUs were granted, vested andcancelled as follows: --------- --------- Number of Weighted RSUs average grant date fair value of underlying shares C$ --------- ---------Balance - 31 December 2006 1,105,000 3.26 --------- --------- RSUs granted 180,000 5.36RSUs vested (235,000) 4.14RSUs cancelled (60,000) 4.04 --------- ---------Balance - 30 June 2007 990,000 3.38 --------- --------- The weighted average grant date fair value of underlying shares of the 180,000RSUs granted during the six-month period ended 30 June 2007 (2006 - 1,065,000)was C$5.36 (2006 - C$3.88). For outstanding RSUs which were not fully vestedduring the six-month period ended 30 June 2007, the Company incurred a totalequity-based compensation cost of $1,736 (2006 - $1,797) of which $475 (2006 -$893) has been recognised as an expense in the income statement and $1,262 (2006- Nil) has been capitalised to deferred exploration and development costs. 13. Supplementary cash flow information 30 June 30 June 2007 2006 $ $ --------- ---------Changes in non-cash operating accounts:Accounts receivable, prepaid expenses and supplies (3,245) (2,552)Accounts payable 1,638 3,283Inventory (1,744) (639) --------- --------- (3,351) 92 --------- --------- Supplemental disclosure of non-cash transactions:Share options and restricted share units issued for non-cashconsideration 2,261 -Exercise of share options - Transfer from contributed surplus to share capital (181) (1,375)Vesting of restricted share units (850) (435) 14. Commitments As at 30 June 2007, the Company had remaining spending commitments of $1,080(2006 - $1,415) over the remaining term of its Voia exploration licence inRomania which expires in March 2010. The Company has spending commitments of $187 per year (plus service charges andvalue added tax) for a term of ten years under the lease for its office inLondon, England, which commenced in April 2004. The rent will be reviewed on thefifth anniversary of the commencement of the term to reflect any increase inrents in the market. As at 30 June 2007, Hellas Gold had entered into off-take agreements pursuant towhich Hellas Gold agreed to sell the following quantities of metal concentratesduring the next three years: 1 Year 2-3 Years +3 Years (dry metric tonnes) ----------------------------------------- Zinc concentrates (Stratoni) 63,351 15,000 -Lead/silver concentrates (Stratoni) 35,265 20,000 -Gold concentrates (Olympias) 98,622 82,824 55,000 ----------- ---------- --------- 197,238 117,824 55,000 ----------- ---------- --------- As at 30 June 2007, 22,234 dmt of zinc concentrates, 9,400 dmt of lead/silverconcentrates and 28,373 dmt of gold concentrates had been sold on account of the2007 commitments. 15. Transactions with related parties During the six-month period ended 30 June 2007, Hellas Gold incurred costs of$13,856 (2006 - $8,303) for management, technical and engineering servicesreceived from a related party, Aktor S.A., a 5% shareholder in Hellas Gold. As at 30 June 2007, Hellas Gold had accounts payable of $4,053 (2006 - $4,195) to Aktor S.A. These expenses were contracted in the normal course of operations and are recorded at the exchange amount agreed by the parties. 16. Segmented information The Company has one operating segment: the acquisition, exploration anddevelopment of precious and base metal mineral resources properties located inGreece and Romania. Geographic segmentation of plant and equipment and deferred exploration anddevelopment costs and operating liabilities is as follows: 30 June 31 December 2007 2006 $ $ --------- ---------RevenueCanada - -Greece 24,944 52,438Romania - -United Kingdom - - --------- --------- 24,944 52,438 --------- ---------Plant and equipment and deferred exploration anddevelopment costsCanada - -Greece 444,563 223,286Romania 34,838 32,010United Kingdom 301 325 --------- --------- 479,702 255,621 --------- --------- Operating liabilitiesCanada 9,760 226Greece 21,212 7,625Romania 272 304United Kingdom 744 1,647 --------- --------- 31,988 9,802 --------- --------- 17. Earnings per share The calculation of the basic and diluted earnings per share attributable toholders of the Company's common shares is based as follows: 3 months ended 30 June 6 months ended 30 June 2007 2006 2007 2006 $ $ $ $ -------- -------- -------- -------- Earnings 5,335 (850) 7,443 (314) Effect of dilutive potential - - - - common shares -------- -------- -------- -------- Diluted earnings 5,335 (850) 7,443 (314) -------- -------- -------- -------- Weighted average number ofcommon shares for the purpose of basic earnings per share 122,957 113,847 119,426 112,673 Incremental shares - Shareoptions 1,695 - 1,679 - -------- -------- -------- --------Weighted average number ofcommon shares for the purpose of diluted earnings per share 124,652 113,847 121,105 112,673 -------- -------- -------- -------- 18. Reclassification of comparative figures Certain comparative figures have been reclassified to conform to the currentyear's presentation. 19. Legal proceedings In June 2005, certain residents of Stratoniki village submitted a request forthe annulment of the Greek government's joint ministerial decision approving theenvironmental impact study for the Stratoni mine (the "JMD Approval"). InNovember 2005, the same petitioners submitted a request for the annulment of thedecision of the Minister of Development approving the Technical Study for theexploitation of the Mavres Petres mine that forms part of the Stratoni complex(the "MOD Approval"). The JMD Approval and the MOD Approval are necessary forthe continued operation of the Stratoni mine. In both cases the petitionersalleged a lack of legal basis for the approvals and potential harm to theenvironment and their properties. The Greek government, supported by theCompany, the Association of Extractive Companies, and two workers' unions, hastaken a position that the approvals are valid. In December 2005 the petitionersrequested an injunction to stop work on the Stratoni project pending the hearingof the requests for annulment, but the court rejected the request. A hearing onboth requests for annulment will be held in November 2007. The management of theCompany believes that both requests for annulment are unfounded and unlikely tosucceed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
EGU.L