12th Aug 2005 07:00
European Goldfields Ltd12 August 2005 Suite 200, Financial Plaza 204 Lambert Street Whitehorse, Yukon Canada Y1A 3T2 For Immediate Release 12 August 2005 EUROPEAN GOLDFIELDS LIMITED RESULTS FOR THE SECOND QUARTER 2005 LOSS DOWN 80% VS. Q2 2004 - PRODUCTION AT STRATONI IMMINENT European Goldfields Limited (AIM: EGU / TSX: EGU) today reported its results forthe second quarter to 30 June 2005. Highlights of the quarter are: Corporate: • Q2 2005 loss reduced by 80% to $0.72 million ($0.01 per share), from $3.58 million ($0.09 per share) in 2004. Loss for the first six months of 2005 reduced by 62% to $3.38 million ($0.03 per share), from $8.86 million ($0.23 per share) in 2004. • Self-funded beyond 2006, covering permitting process for major gold & base metals projects in Greece; $50 million in cash and cash equivalent at 30 June 2005; about to generate revenue from Stratoni and sale of Olympias surface concentrates. Greece: • 17% increase in reserves at Stratoni; environmental permits awarded for Stratoni & mining plan approved by Technical Committee formed by Greek government; final mining permit expected shortly; production ready to resume following completion of refurbishment work. • Finalising negotiation of off-take agreement for the sale of existing surface concentrates at Olympias (270,845 tonnes grading +20 g/t gold). • On track for completion of business plans for major gold & base metals projects; new mining schedules for Olympias completed; SRK in final stages of completing mining options for Skouries. Romania: • In-house pre-feasibility study on Certej completed; study confirms optimised pit and ability to produce high grade concentrates (18 to 20 g /t gold and up to 100 g/t silver); focus is now on securing an off-take agreement for the Certej concentrate and examining various opportunities to produce gold dore on site. • Drilling commenced within the newly acquired Cainel licence; focus is on either defining a stand-alone project or a satellite to "sweeten" the Certej concentrate. David Reading, CEO of European Goldfields, said: "European Goldfields has made considerable progress on all of its assets in thelast quarter - in Greece, Hellas Gold has made significant progress towardsobtaining its final mining permit for Stratoni whilst the in-housepre-feasibility study on Certej in Romania has underpinned the value of theproject. With the commencement of production in Greece next month, as well asthe expected sale of concentrates following soon after, European Goldfields isnow graduating to producer status and remains firmly on track for substantialgrowth with its major gold & base metals projects of Olympias and Skouries." UPDATE ON STRATONI MINING PERMIT - EXPECTED SHORTLY European Goldfields is pleased to announce that, following the award ofenvironmental permits announced on 30 March 2005, a Technical Committee ofeminent professors formed by the Greek government has now approved Hellas Gold'smining plan for the Stratoni deposit. The local prefecture has also approved theresumption of mining operations at Stratoni. The final mining permit is now with the Ministry of Development for finalsign-off. The Stratoni mine stands ready to resume production following therecent completion of refurbishment work on the underground infrastructure andplant. The permitting process in Greece is lengthy; however, Hellas Gold's applicationfor the Stratoni mining permit is following its normal course in accordance withstandard legal and political procedures. We are working in close collaborationwith the Greek government and our Greek partner, Aktor S.A., to secure the finalStratoni permit in a timely manner. Management expects the final mining permit for Stratoni to be issued shortly,well within the timeframe provided in Hellas Gold's contract with the GreekState. GREECE Stratoni -The Stratoni mine is now ready to resume production following therecent completion of refurbishment work on the underground infrastructure andplant. Production of ore is expected to reach 170,000 tonnes by the end of thefirst year of full scale production, steadily increasing thereafter. Based on historical production levels which reached 450,000 tonnes per year on acontinuous shift basis, Stratoni is expected to produce consistent grades of8-10% lead, 8-11% zinc and 200 g/t silver, with concentrator recoveriesconsistently high at around 90%. In parallel, a new 1,900-metre access tunnel (or adit) will be developed toprovide improved access to the Stratoni reserve and allow larger scale miningoperations to be effected by the end of Q2 2006. The new adit is expected toraise mine output with a minimal increase of labour, while removing thenecessity to build a large underground maintenance facility. In May 2005, HellasGold signed a fixed priced "turn-key" contract with Aktor S.A., EuropeanGoldfields' partner in Greece, for the construction of the adit. The new mining method at Stratoni will result in more efficient and mechanised"cut and fill" operations designed to excavate from the base of the reserveupwards, with fill being placed on the floor. In addition to existing underground access and tailings facilities, Stratonialready benefits from recently refurbished and fully operational infrastructuresuch as a mill and flotation plant, offices and a laboratory together with aport loading facility for vessels of up to 8,000 tonnes, all located on thecoast at Stratoni. The Stratoni plant is capable of producing 650,000 tonnes ROMper year. Stratoni concentrates are considered metallurgically 'clean' with littledeleterious material. This has ensured that in the past they have been easilysold and attract little by way of penalties. Hellas Gold is currently innegotiation with various potential buyers in order to ensure the most beneficialcontract going forward. In September 2004, two shipments of lead and zinc concentrates of US$3.4 millionin value were sold from Stratoni through the refurbished port facility. The new, more efficient mining method adopted by Hellas Gold at Stratoni hasresulted in a 17% increase in reserves which has been reported as follows on 30June 2005: Reserve '000t Ag Ag Pb Pb Zn ZnCategory g/t Moz % '000t % '000tProven 1,061 191 6.50 8.0 85 10.0 106Probable 862 189 5.24 8.1 70 11.7 101Total 1,923 190 11.74 8.1 155 10.8 207 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 later this year. 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 Mavres Petres and Madem Lakkos. The new Stratoni aditis ideally placed to allow the exploration of this prospective area, whichremains largely unexplored. In addition, further exploration potential exists to the west of Mavres Petreswhere the upper marble horizon is known to continue. Previous explorationdrilling (seven holes for 2,008 metres along two lines) 800 metres west ofMavres Petres at the Piavitsa target returned encouraging results, being a zoneof massive sulphide mineralisation grading 3 to 14 g/t gold and combined leadand zinc ranging between 1% and 20% over true widths of 2 metres to 7 metres. Finally, the new adit will provide access to conduct further drilling of thecurrent inferred resources in order to upgrade these to measured and indicatedresources and allow them to be converted into additional reserves. Olympias & Skouries - Hellas Gold is on schedule for completion of all studiesrelated to producing new business plans for its major gold & base metalsprojects of Olympias and Skouries. Hellas Gold intends to submit our newbusiness plans for Olympias and Skouries to the Greek government in Q4 2005,followed by updated feasibility studies in Q1 2006. By contract, the Greek Stateis committed to review the business plans within two months of submission, andissue all necessary environmental, mining and development permits within 10months. Olympias - The Olympias deposit is located 8 km north of the Stratoni mine.Olympias is a polymetallic deposit containing 14 Mt proven & probable reservesgrading 8.6 g/t gold, 120 g/t silver, 3.9% lead and 5.2% zinc. Olympias benefitsfrom extensive mining and plant infrastructure already in place, and a portfacility nearby at Stratoni. European Goldfields is finalising negotiations of an off-take agreement with amajor gold producer for the sale of existing surface concentrates at Olympias,representing 270,845 tonnes grading +20 g/t gold. Also, new mining schedules for Olympias have now been completed. The mining ofthe Olympias deposit will be undertaken in various phases commencing with theprocessing of surface tailings followed by exploitation of the Eastern zone andthen finally an expansion of the underground infrastructure in order to increaseproduction capacity. Initially, a surface tailings stockpile of 2.4 Mt grading3.4 g/t gold will be re-concentrated over a three-year period followed by miningof the high grade, Eastern deposit (1.3 Mt grading 16 g/t gold, 13% lead pluszinc and 191 g/t silver) at a rate of 400,000 tonnes per annum, and finallyexpansion of the mine to a rate of 750,000 tonnes of ROM per year to exploit thetotal reserve. In-house studies are currently in progress to define the optimumcapital mining investment for long-term expansion of the production levels atOlympias. Hellas Gold and European Goldfields have commissioned Outokumpu and AkerKvaerner to undertake metallurgical studies to define viable process options forthe Olympias deposit. This work will be completed later this year when adecision will be made regarding the preferred option to be taken to produce anupdated feasibility study. Cognizance has been taken of the historical issuesrelating to previous feasibility studies and permitting. Concerted and focusedefforts have been made to engage all potential stakeholders and interestedparties in the decision process. In addition to the mining and metallurgical work, studies are also in progressinvolving Greek consultants and Hellas Gold personnel in order to define thebest site for tailings management facilities and to complete the environmentalbase line studies. A centralised processing and tailings facility is preferredinvolving both the Stratoni and Olympias projects. An effort will be made in thecurrent studies to minimise surface rock waste and tailings by utilisingunderground fill methods. The environmental base line and tailings studies arecurrently in progress. Skouries - The Skouries deposit is a typical gold-copper porphyry deposit whichforms a near vertical pipe and is located 17 km southwest of Olympias. Skouriesis located on a high plateau with no habitation in the immediate vicinity andhas both potential for open pit and subsequent underground exploitation.Skouries has 130 Mt probable reserves grading 0.9 g/t gold and 0.6% copper. Due to their extensive historical knowledge of the project, Steffen, Robertsonand Kirsten (SRK) have been retained to advise and assist European Goldfieldsand Hellas Gold on completion of mining options for the Skouries project, whichare in the final stages of completion. SRK have undertaken a comprehensive review of all previous feasibility work, andfinancial scoping models have been outlined for various mining scenarios basedon the current resources. This work has indicated that the most appropriatemining solution would include a combination of open pit and underground methodsto optimise the production rates and allow maximum flexibility for moreselective exploitation. The SRK study will also investigate options for backfillof mining excavations with rock waste and, where appropriate, tailings in orderto minimise surface land use. The Skouries plant facility will generate saleable gold and copper/goldconcentrates and its capacity is the subject of new investigations by AkerKvaerner aimed at updating the capital and operating costs of an appropriatelysized process plant in order to dovetail with the mining production plan. Additional technical studies on the Skouries deposit will focus on updating theenvironmental baseline work within the project area and determining theappropriate site for the tailings management facility. This work is beingundertaken by Greek consultancy groups (ADK and Enveco SA) in collaboration withHellas Gold personnel. Finally, further metallurgical test work on oxide material from sample rejectsof previous diamond cores at Skouries confirms the copper and gold recoveriesoutlined in the original Aker Kvaerner feasibility study. For instance, goldrecovery is expected to be over 80% after the first year of production with thegravity and flotation circuits that will be used. ROMANIA Certej - In July 2005, European Goldfields announced that it had completed anin-house pre-feasibility study on its 80%-owned Certej project in the SouthernApuseni Mountains of Romania. All the technical and financial components of afull pre-feasibility study have now been successfully completed. The study hasresulted in: • Confirmation that a concentrate can be produced with high grades of 18 to 20 g/t gold and up to 100 g/t silver • An optimised open pit with low strip ratios • The definition of sites for infrastructure and tailings disposal • A clear understanding of all work required to complete an environmental impact assessment and achieve all necessary permitting. The initial indications from the financial evaluation work show that the projectwould support the necessary capital investment at realistic, long-term metalprices for gold and silver, assuming a sustainable market can be established forthe sale of concentrates. A flotation testwork programme has confirmed that a gold bearing pyriteconcentrate can be produced with high grades of 18 to 20 g/t gold and up to 100g/t silver. It is envisaged that the project could mine and process 2.5 Mt perannum over approximately nine years. At the proposed production rates, thiswould yield approximately 225,000 tonnes of concentrate per year with a goldrecovery of about 87.5%. More recent metallurgical studies have highlighted thatthe concentrate produced in the early years of mining from the open pit willgrade over 25 g/t gold and up to 150 g/t silver with gold recovery in excess of90%. Additional metallurgical studies are in progress to endorse the currentassumptions and provide further details in order to optimise process design. The pre-feasibility study on Certej will be published as soon as currentresources can be converted into economic reserves, which is contingent onidentifying a long-term market for the high grade, gold / silver flotationconcentrate to be produced at Certej. European Goldfields continues to develop the metallurgical testwork programmewhich is directed at improving the Certej concentrate quality while maintaininghigh gold recovery, as well as conducting focused exploration programmes toexpand the resource base. The metallurgical work is also investigating thefeasibility of producing gold dore on site by a cost effective process design.An internal marketing study to explore potential buyers for the Certejconcentrate is also in progress. The objective is to accomplish all of this workwithin the next six months. Completion of a full feasibility study will requirean environmental impact assessment and more detailed engineering design. Ongoing exploration - Exploration work in Romania is now focused on defininghigher grade (+2.5 g/t gold) satellites within a 10 km radius of Certej whichwhen concentrated can sweeten the Certej material. As part of this strategy,drilling has commenced in July 2005 on the principal target within the newlyacquired Cainel license. Surface and underground sampling of accessible areashas returned grades of 1.0 to 5.6 g/t gold over widths of 1 to 14 metresconfirming the north - south veins and mineralized breccias. Unfortunately,access to sample the main mineralised system has not been possible due to thepartial collapse of old underground workings and thick surface colluvium.Historical data obtained from the Romanian state exploration was restricted tovein sampling only but obtained encouraging intercepts of 1 to 398 g/t gold overone metre widths. Plans of historic workings indicate that the strike of thesystem is 1 km and the main vein and splays in the Cainel zone occur over awidth of some 100 metres with a secondary splay to the east covering a 200 metrewidth. This target area will be assessed by a reconnaissance drilling programme. The drill programme comprises 20 holes for 2,310 metres of drilling (860 metresdiamond core and 1,450 metres reverse circulation). The programme will test thecontinuity of the main vein system, secondary splays and associated wallrockmineralisation along some 700 metres of strike with four, east - west drillfences. CORPORATE With the recent recruitment of Neil Hepworth from Rio Tinto (Neves Corvo Mine inPortugal), we have now completed our technical teams in Romania and Greece. Neilhas over 20 years' experience as a mining engineer and his expertise inunderground mining with backfill will complement our existing team at Stratoni. For further information please contact:European Goldfields:David Reading, Chief Executive OfficerDavid Grannell, Chief Financial Officer Office: +44 (0)20 7408 9534 e-mail: [email protected]: +44 (0)7703 190 652 website: www.egoldfields.com Buchanan Communications:Bobby Morse / Ben Willey Office: +44 (0)20 7466 5000 e-mail: [email protected]: +44 (0)7718 771 513 The Sherbourne GroupForbes West Office: +1 416 203 2200 e-mail: [email protected] Resource & Reserve Parameters Patrick Forward, General Manager, Exploration of European Goldfields, was theQualified Person responsible for reviewing this news release. For additional information on the resource and reserve estimates quoted above,please refer to the Company's Resources & Reserves Declaration atwww.egoldfields.com/goldfields/resources.jsp. The quantity and grade of the Piavitsa target are conceptual in nature, therehas been insufficient exploration yet to define a mineral resource on theproperty and it is uncertain if further exploration will result in discovery ofa mineral resource on the property. Forward-looking statements This news release contains certain forward-looking statements concerning theCompany's future operations, economic performances, financial condition andfinancing plans. These statements are based on certain assumptions and analysesmade by the Company in light of the its experience and its perception ofhistorical trends, current conditions and expected future developments as wellas other factors the Company believes are appropriate in the circumstances.However, whether actual results and developments will conform to the Company'sexpectations and predictions is subject to a number of risks, uncertainties andassumptions. Consequently, all of the forward-looking statements made in thisnews release are qualified by these cautionary statements, and there can be noassurance that the results or developments anticipated by the Company will berealised or, even if substantially realised, that they will have the expectedconsequences to or effects on the Company and its subsidiaries or theirbusinesses or operations. The Company undertakes no obligation and do not intendto update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise, except as may be required underapplicable law. MANAGEMENT'S DISCUSSION & ANALYSIS FOR THE THREE- AND SIX-MONTH PERIODS ENDED 30 JUNE 2005 The following discussion and analysis, prepared as at 12 August 2005, isintended to assist in the understanding and assessment of the trends andsignificant changes in the results of operations and financial conditions ofEuropean Goldfields Limited (the "Company"). Historical results may not indicatefuture performance. Forward-looking statements are subject to a variety offactors that could cause actual results to differ materially from thosecontemplated by these statements. The following discussion and analysis shouldbe read in conjunction with the Company's unaudited consolidated financialstatements for the three- and six-month periods ended 30 June 2005 and 2004 andaccompanying notes (the "Consolidated Financial Statements"). Additional information relating to the Company is available on the CanadianSystem for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com.Except as otherwise noted, all dollar amounts in the following discussion andanalysis and the Consolidated Financial Statements are stated in United Statesdollars. Overview The Company, a company incorporated in the Yukon, Canada, is a resource companyinvolved in the acquisition, exploration and development of mineral propertiesin Greece, Romania and the Balkans. 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 65% interest in Hellas Gold S.A ("Hellas Gold").Hellas Gold owns assets in Northern Greece which include 70-year miningconcessions over a total area of 317 km2 and three polymetallic near-productiondeposits, known as Olympias, Stratoni and Skouries, which contain proven andprobable reserves. The Stratoni and Olympias deposits were previously inproduction and benefit from significant infrastructure which includesunderground mining development, two plants and a ship loading facility on theAegean Sea. Hellas Gold's assets also include potential revenue generatingstockpiles and tailings located on the surface. Romania - In Romania, the Company holds a 80% interest in Deva Gold S.A. and a100% interest in European Goldfields (Romania) SRL, which are in the process ofexploring their mineral properties in Romania and have not yet determinedwhether those properties contain economic reserves. Results of operations The Company's results of operations for the three- and six-month periods ended30 June 2005 were comprised primarily of activities related to the Company'sregional exploration programs in Romania and the results of operations of theCompany's 65%-owned subsidiary Hellas Gold. The Company continues to incurlosses and until commercial production commences and revenues are generated, theCompany will continue to do so. The Company's results of operations for the eight most recently completedquarters are summarised in the following table: 2005 2005 2004 2004 2004 2004 2003 2003(in thousands of US dollars Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3dollars, except per share amounts) $ $ $ $ $ $ $ $ Statement of loss and deficit Sales 57 - - - - - - -Interest income 326 326 279 143 60 18 28 16 Expenses 2,230 3,831 9,225 2,854 2,848 5,042 1,715 293Loss 723 2,652 8,134 2,190 3,580 5,279 1,687 277Loss per share 0.01 0.02 0.17 0.05 0.09 0.18 0.08 0.01 Balance sheet Working capital 49,544 57,285 63,480 29,045 31,117 14,413 5,058 5,433Total assets 298,948 300,689 304,758 86,879 83,517 67,875 45,943 29,929Non current liabilities 71,056 71,179 71,320 - - - - - Statement of cash flows Deferred exploration and development costs - Romania 893 860 2,462 1,171 943 1,394 1,097 1,088Deferred development costs - Greece 891 - - - - - - -Plant and equipment - Greece 2,453 1,582 - - - - - - The breakdown of deferred exploration and development costs per mineral propertyfor the three- and six-month periods ended 30 June 2005 and 2004 is as follows: Six-month periods ended Three-month periods ended 30 June 30 June 2005 2004 2005 2004 (in thousands of US dollars) $ (%) $ (%) $ (%) $ (%) Romanian mineral properties Certej 1,280 (73%) 1,964 (84%) 595 (67%) 780 (83%)Cainel 343 (20%) - (- %) 241 (27%) - (- %)Zlatna - (- %) 264 (11%) - (- %) 124 (13%)Voia 27 (1%) 81 (4%) 12 (1%) 36 (4%)Baita-Craciunesti 74 (4%) 27 (1%) 34 (4%) 1 (0%)Bolcana 28 (2%) 1 (0%) 11 (1%) 2 (0%) 1,752 (100%) 2,337 (100%) 893 (100%) 943 (100%) Greek mineral properties Stratoni 256 (29 %) - (- %) 256 (29 %) - (- %)Skouries 402 (45 %) - (- %) 402 (45 %) - (- %)Olympias 233 (26 %) - (- %) 233 (26 %) - (- %) 891 (100%) - (- %) 891 (100%) - (- %)Total 2,643 (100%) 2,337 (100%) 1,784 (100%) 943 (100%) The Company incurred a loss of $3.38 million ($0.03 per share) for the six-monthperiod ended 30 June 2005, compared to $8.86 million ($0.23 per share) for thesame period of 2004. The Company incurred a loss of $0.72 million ($0.01 pershare) for the three-month period ended 30 June 2005, compared to $3.58 million($0.09 per share) for the same period of 2004.The following factors havecontributed to this reduction in loss: • The Company recorded revenues of $0.06 million in the first half of 2005 and Q2 2005 for the sale of surface concentrates by Hellas Gold, compared to $Nil for the same periods of 2004. • The Company's corporate administrative and overhead expenses have decreased from $3.18 million in the first half of 2004 and $1.96 million in Q2 2004, to $1.58 million and $0.70 million, respectively, for the same periods of 2005, primarily as a result of the Company being less reliant on external consultants and professional advisors following recruitment of full-time employees in 2004. Also, in the first half of 2004, the Company incurred higher expenses for the listing of its common shares on the AIM Market of the London Stock Exchange, compared to expenses incurred in the same period of 2005 for the listing on the Toronto Stock Exchange. • In February 2004, the Company acquired an initial 37.97% interest in Hellas Gold. From 9 February 2004 to 30 June 2004, the Company's interest in Hellas Gold was accounted for as an equity investment. In November 2004, the Company completed the acquisition of shares in Hellas Gold, increasing its total interest from 37.97% to 55.70%, and assumed an obligation to subscribe to additional shares in Hellas Gold, resulting in an interest of 65% on a fully-diluted basis. The acquisition was accounted for as a purchase and the results of operations of Hellas Gold were included in the consolidated statements of loss and deficit from 30 November 2004, the effective date of the acquisition. Hellas Gold's operating, general and administrative expenses of $2.95 million in the first half of 2005 and $1.39 million in Q2 2005 were incorporated in the Company's consolidated statement of loss and deficit for the period, compared to the Company's share of loss in equity investment of $1.02 million and $0.77 million, respectively, for the same periods of 2004. • Effective 1 October 2004, the Company changed its functional currency from the Canadian dollar to the United States dollar. Nevertheless, during the first half of 2005, the Company retained significant cash balances in Euro in order to meet a Euro subscription obligation in Hellas Gold in Q1 2005. Hellas Gold also retained significant cash balances in Euro in order to meet operating, general and administrative expenses. Consequently, the Company recorded a foreign exchange loss of $0.93 million in the first half of 2005 and a small gain of $0.07 million in Q2 2005. The loss resulted from a strengthening of the United States dollar against the Euro as at 31 March 2005 compared to 31 December 2004. The Company realised a foreign exchange gain of $0.54 million in the first half of 2004 and $0.07 million in Q2 2004, mainly due to the weakening of the Canadian dollar against the Euro as at 30 June 2004 compared to 31 December 2003. • The Company's amortisation expense has increased to $0.33 million in the first half of 2005 and $0.08 million in Q2 2005, from $Nil for the same periods of 2004, primarily as a result of the Company acquiring significant assets through the acquisition of a 65% interest in Hellas Gold in 2004. • In December 2003, the Company raised $15.09 million by way of a brokered private placement of convertible loan notes, for which the Company recorded a non-cash expense for financing costs of $1.12 million in the first half of 2004 and $Nil in Q2 2004, compared to $Nil for the same periods of 2005. • The Company recorded a non-cash stock-based compensation expense of $0.32 million in the first half of 2005 and $0.20 million in Q2 2005, compared to $4.12 million and $0.96 million, respectively, for the same periods of 2004. Such decrease reflects the fact that no share options or milestone shares were granted in the first half of 2005 compared to significant grants to newly hired employees in the same period of 2004. • The Company recorded a credit for future income taxes of $1.77 million in the first half of 2005 and $1.06 million in Q2 2005, compared to a debit of $0.03 million for the same periods of 2004. The credit has arisen due to the Company recognising a future tax asset for the losses carried forward in Hellas Gold. • The Company's interest income has increased to $0.62 million in the first half of 2005 and $0.33 million in Q2 2005, from $0.08 million and $0.06 million, respectively, for the same periods of 2004, primarily as a result of the Company holding significantly higher cash balances in the first half of 2005 following completion of private placements during 2004. Liquidity and capital resources As at 30 June 2005, the Company had cash and cash equivalents of $49.98 million,compared to $65.25 million as at 31 December 2004 and $30.89 million as at 30June 2004. As at 30 June 2005, the Company had working capital of $49.54 million, comparedto $63.48 million as at 31 December 2004 and $31.12 million as at 30 June 2004. The increase in cash and cash equivalents as at 30 June 2005, compared to thebalances as at 30 June 2004, resulted primarily from one private placements($76.73 million), the effects of foreign currency translation on cash ($1.10million), the exercise of warrants and options ($1.31 million), interest earned($1.10 million), a net increase in accounts payable vs. accounts receivable($1.10 million) and the redemption of short-term investments ($0.08 million),offset by the payment of the cash portion of the acquisition price for anadditional 35% interest in Hellas Gold ($36.67 million), operating losses($10.60 million), deferred exploration and development costs in Romania ($5.39million), capital raising costs ($4.38 million), capital expenditure in Greece($4.04 million), purchase of equipment ($0.30 million) and development costs inGreece ($0.90 million). The decrease in cash and cash equivalents as at 30 June 2005, compared to thebalances as at 31 December 2004, resulted primarily from operating losses ($4.48million), capital expenditure in Greece ($4.04 million), the effects of foreigncurrency translation on cash ($3.51 million), deferred exploration anddevelopment costs in Romania ($1.75 million), a net increase in accountsreceivable vs. accounts payable ($1.34 million), development costs in Greece($0.90 million), purchase of equipment ($0.08 million) and capital raising costs($0.01 million), partly offset by interest earned ($0.65 million) and theexercise of options ($0.17 million). During the six-month period ended 30 June 2005, the Company received totalproceeds of $0.17 million through the exercise of 75,000 common share options ata weighted average price of C$2.80 per share. The following table sets forth the Company's contractual obligations includingpayments due for each of the next five years and thereafter: Payments due by period (in thousands of US dollars)Contractual obligations Total Less than After 1 year 1 - 3 years 4 - 5 years 5 yearsOperating lease(London office) 994 61 373 373 187Exploration licence spendingcommitments (Voia,Romania) 1,490 - 1,490 - -Total contractual obligations 2,484 61 1,873 373 187 For the coming year, the Company believes it has adequate funds available tomeet its corporate and administrative obligations (estimated at $2.12 millionfor the remainder of 2005) and its planned expenditures on its mineralproperties (estimated at $2.81 million for Romania and at $4.20 million forGreece for the remainder of 2005). Change in functional and reporting currency Effective 1 October 2004, the Company changed its functional currency from theCanadian dollar to the United States dollar. In general, this change resultedfrom a combination of a gradual increase in the operational exposure to theUnited States dollar and predominantly United States dollar based asset andinvestment base of the Company and from a gradual increase in the overallproportion of business activities conducted in United States dollars. Concurrentwith this change in functional currency, the Company adopted the United Statesdollar as its reporting currency. In accordance with accounting principlesgenerally accepted in Canada ("Canadian GAAP"), the change was effected bytranslating all assets and liabilities, at the end of the prior reportingperiods, at the existing United States/Canadian dollar foreign exchange spotrate, while income for those periods were translated at the average rate foreach period. Equity transactions have been translated at the historical rates,with opening equity on 30 June 2000, restated at the rate of exchange on thatdate. The resulting net translation adjustment has been credited to thecumulative translation adjustment account in the equity section of the balancesheet. Outstanding share data The following represents all equity shares outstanding and the number of commonshares into which all securities are convertible, exercisable or exchangeable: Preferred shares: Nil Common shares: 112,173,708Common share options: 3,167,500Restricted Share Units: NilCommon shares (fully-diluted): 115,341,208 Outlook Greece - On 30 March 2005, European Goldfields announced that Hellas Gold hasbeen awarded by the Greek state all environmental permits for mining operationsat the Stratoni deposit. Following normal procedure, a Technical Committeeformed by the Greek government has now approved Hellas Gold's mining plan forthe Stratoni deposit. Final approval to commence mining operations is expectedshortly.The Stratoni mine is now ready to resume production following the recentcompletion of refurbishment work on the underground infrastructure and plant.Production of ore is expected to reach 170,000 tonnes by the end of the firstyear of full scale production, steadily increasing thereafter. The Company is currently updating the feasibility studies and preparing newbusiness and environmental plans defining the way forward for Hellas Gold's goldand base metals projects of Olympias and Skouries. The Company intends to submitnew business plans for Olympias and Skouries to the Greek government in Q4 2005,followed by updated feasibility studies in Q1 2006. By contract, the Greek Stateis committed to review the business plans within two months of submission, andissue all necessary environmental, mining and development permits within 10months. The Company will also continue to look for new discoveries through focusedexploration programmes. Romania - In July 2005, the Company completed an in-house pre-feasibility studyon its 80%-owned Certej project. The study confirms that a concentrate can beproduced with high grades of 18 to 20 g/t gold and up to 100 g/t silver. Theinitial indications from the financial evaluation work show that the projectcould support the necessary capital investment at realistic, long-term metalprices for gold and silver, assuming a sustainable market can be established forthe sale of concentrates. The Company continues to develop the metallurgical testwork programme which isdirected at improving the Certej concentrate quality while maintaining high goldrecovery, as well as conducting focused exploration programmes to expand theresource base. The metallurgical work is also investigating the feasibility ofproducing gold dore on site by a cost effective process design. An internalmarketing study to explore potential buyers for the Certej concentrate is alsoin progress. The objective is to accomplish all of this work within the next sixmonths. Completion of a full feasibility study will require an environmentalimpact assessment and more detailed engineering design. The Company commenced drilling within its newly acquired Cainel licence, whichcovers an area of 31.3 km(2) and is located contiguous with the Certej property.Exploration work is focused on either defining a stand-alone project or asatellite to "sweeten" the Certej concentrate. Balkans - The Company also intends to continue growing its portfolio by newexploration discoveries and the pursuit of accretive, value enhancingacquisitions in Europe and the Balkans. Risks and uncertainties The risks and uncertainties affecting the Company are substantially unchangedfrom those disclosed in the Company's Management's Discussion & Analysis for theyear ended 31 December 2004. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
EGU.L