8th Nov 2007 07:01
European Goldfields Ltd08 November 2007 European Goldfields Limited Interim Consolidated Financial Statements (Unaudited) For the Three- and Nine-Month Periods Ended 30 September 2007 and 2006 Disclosure of auditor review of interim consolidated financial statements The interim consolidated financial statements of the Company for the three- andnine-month periods ended 30 September 2007 and 2006 have not been reviewed bythe auditors of the Company. European Goldfields Limited 30 Sept. 31Consolidated Balance Sheets DecemberAs at 30 September 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 211,571 34,587Accounts receivable 26,649 14,945Prepaid expenses 1,165 1,270Inventory 4 4,963 854 --------- --------- 244,348 51,656 --------- --------- Non current assetsProperty, plant and equipment 5 45,053 27,007Deferred exploration and development costs 6Greek production stage mineral properties 28,522 14,677Greek development stage mineral properties 384,809 182,157 --------- --------- 413,331 196,834Romanian development stage mineral properties 35,909 31,782 --------- --------- 449,240 228,616 --------- --------- Restricted investment 7 4,000 3,926 Future tax asset 2,357 738 --------- --------- 744,998 311,943 --------- --------- Liabilities Current liabilitiesAccounts payable and accrued liabilities 12,625 9,802Income taxes payable 7,434 - --------- --------- 20,059 9,802 --------- --------- Non current liabilitiesFuture tax liability 8 104,039 48,150Non-controlling interest 6,849 20,422Asset retirement obligation 9 6,614 6,031Deferred revenue 10 57,517 - --------- --------- 175,019 74,603 --------- ---------Shareholders' equityCapital stock 11 533,108 246,890Contributed surplus 11 7,337 7,135Other comprehensive income 20,639 4,276Deficit (11,164) (30,763) --------- --------- 549,920 227,538 --------- --------- --------- --------- 744,998 311,943 --------- --------- 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 3 months ended 9 months ended Consolidated Statements of 30 Sept. 30 Sept.Profit and LossFor the three- andnine-month periods ended 30September 2007 and 2006(Unaudited - Prepared byManagement)(in thousands of US Dollars,except per share amounts) Note 2007 2006 2007 2006 $ $ $ $IncomeSales 21,663 15,211 63,690 32,568Cost of sales (8,870) (6,507) (24,123) (14,067)Depletion of assetretirement obligation (127) (170) (325) (436)Depreciation and depletion (1,393) (576) (2,881) (1,482) -------- -------- -------- --------Gross profit 11,273 7,958 36,361 16,583 -------- -------- -------- -------- Other incomeInterest income 2,320 485 3,889 1,052Foreign exchangegain/(loss) 6,494 (67) 6,077 151 -------- -------- -------- -------- 8,814 418 9,966 1,203 -------- -------- -------- -------- ExpensesCorporate administrativeand overhead expenses 869 643 2,600 1,645Equity-based compensationexpense 603 669 1,509 2,100Hellas Gold administrativeand overhead expenses 2,128 1,743 6,660 3,543Hellas Gold watertreatment expenses 1,070 756 3,250 2,142(non-operating mines)Hellas Gold old adit andequipment maintenance(Stratoni mine) - 269 - 2,295Accretion of assetretirement obligation 31 29 91 83Amortisation 118 165 349 586 -------- -------- -------- -------- 4,819 4,274 14,459 12,394 -------- -------- -------- -------- -------- -------- -------- --------Profit for the periodbefore income tax 15,268 4,102 31,868 5,392 Income taxesCurrent taxes (3,829) - (7,072) -Future taxes 1,065 (1,118) (207) (2,557) -------- -------- -------- -------- (2,764) (1,118) (7,279) (2,557) -------- -------- -------- -------- -------- -------- -------- --------Profit for the periodafter income tax 12,504 2,984 24,589 2,835 Non-controlling interest (348) (1,509) (4,990) (2,209) -------- -------- -------- --------Profit for the period 12,156 1,475 19,599 626 Deficit - Beginning ofperiod (23,320) (34,614) (30,763) (33,765) -------- -------- -------- -------- Deficit - End of period (11,164) (33,139) (11,164) (33,139) -------- -------- -------- -------- Earnings per share 17Basic 0.07 0.01 0.14 0.01Diluted 0.07 0.01 0.14 0.01 Weighted average number ofshares (in thousands)Basic 178,860 113,777 137,570 113,786Diluted 180,444 114,481 139,032 114,539 The accompanying notes are an integral part of these interim consolidated financial statements. European Goldfields Capital Contributed Other Deficit TotalLimited Stock Surplus Comprehensive Consolidated IncomeStatements of EquityAs at 30 September 2007 and 2006(Unaudited - Prepared by Management)(in thousands of USDollars, except pershare amounts) $ $ $ $ $ --------- --------- ---------- -------- --------Balance - 31 240,234 6,197 (12,843) (33,765) 199,823December 2005 --------- --------- ---------- -------- -------- Equity-based - 3,976 - - 3,976compensation costRestricted share 435 (435) - - -units vestedShare optionsexercised or 3,901 (1,449) - - 2,452exchangedMovement incumulative - - 11,024 - 11,024translationadjustmentProfit for the - - - 626 626period --------- --------- ---------- -------- -------- 4,336 2,092 11,024 626 18,078 --------- --------- ---------- -------- -------- --------- --------- ---------- -------- --------Balance - 30 244,570 8,289 (1,819) (33,139) 217,901September 2006 --------- --------- ---------- -------- -------- Equity-based - 1,123 - - 1,123compensation costRestricted share 1,636 (1,636) - - -units vestedShare optionsexercised or 684 (641) - - 43exchangedMovement incumulative - - 6,095 - 6,095translationadjustmentProfit for the - - - 2,376 2,376period --------- --------- ---------- -------- -------- 2,320 (1,154) 6,095 2,376 9,637 --------- --------- ---------- -------- -------- --------- --------- ---------- -------- --------Balance - 31 246,890 7,135 4,276 (30,763) 227,538December 2006 --------- --------- ---------- -------- -------- Equity-based - 1,940 - - 1,940compensation costShares issued forequity 130,059 - - - 130,059financingShares issued asconsideration 161,424 - - - 161,424for acquisitionShare issue costs (7,055) - - - (7,055)Restricted share 850 (850) - - -units vestedShare optionsexercised or 940 (888) - - 52exchangedMovement incumulative - - 16,363 - 16,363translationadjustmentProfit for the - - - 19,599 19,599period --------- --------- ---------- -------- -------- 286,218 202 16,363 19,599 322,382 --------- --------- ---------- -------- -------- --------- --------- ---------- -------- --------Balance - 30 533,108 7,337 20,639 (11,164) 549,920September 2007 --------- --------- ---------- -------- -------- The accompanying notes are an integral part of these interim consolidated financial statements. European Goldfields Limited 3 months ended 9 months ended Consolidated Statements 30 Sept. 30 Sept. of Cash Flows For the three- and nine-month periods ended30 September 2007 and 2006(Unaudited - Prepared byManagement)(in thousands of US Dollars, 2007 2006 2007 2006except per share amounts) $ $ $ $ NoteCash flows from operatingactivitiesProfit for the period 12,156 1,475 19,599 626Foreign exchange(gain)/loss (6,563) 132 (6,077) 274Amortisation 545 568 1,615 1,444Equity-based compensationexpense 603 642 1,509 2,147Accretion of assetretirement obligation 31 29 91 83Current taxation 3,828 - 7,072 -Future tax assetrecognised (1,065) 1,118 207 2,557Non-controlling interest 348 1,509 4,990 2,209Deferred revenuerecognised (1,151) - (2,165) -Depletion of mineralproperties 1,095 383 1,941 1,060Other non-cash items 565 - - - --------- --------- --------- --------- 10,392 5,856 28,782 10,400 --------- --------- --------- --------- Net changes in non-cashworking capital 13 (6,904) (4,615) (12,438) (4,524) --------- --------- --------- --------- 3,488 1,241 16,344 5,876 --------- --------- --------- --------- Cash flows from investingactivitiesDeferred exploration anddevelop. costs - Romania (1,658) (598) (3,602) (2,438)Plant and equipment -Greece (12,142) (1,268) (17,827) (3,435)Deferred development costs- Greece (491) (462) (1,432) (1,937)Purchase of equipment (26) (6) (61) (74)Further acquisition inHellas Gold (9,003) - (9,003) -Restricted investment - 6 28 18 --------- --------- --------- --------- (23,320) (2,328) (31,897) (7,866) --------- --------- --------- --------- Cash flows from financingactivitiesProceeds from equityfinancing - - 130,059 -Deferred revenue - - 59,683 -Proceeds from exercise ofshare options 52 - 52 2,452Share issue costs 97 - (7,055) - --------- --------- --------- --------- 149 - 182,739 2,452 --------- --------- --------- --------- Effect of foreign currencytranslation on cash 9,658 (189) 9,798 811 --------- --------- --------- --------- (Decrease)/increase incash and cash equivalents (10,025) (1,276) 176,984 1,273 Cash and cash equivalents- Beginning of period 221,596 33,085 34,587 30,536 --------- --------- --------- --------- Cash and cash equivalents- End of period 211,571 31,809 211,571 31,809 --------- --------- --------- --------- The accompanying notes are an integral part of these interim consolidated financial statements. European Goldfields Limited 3 months ended 9 months ended Consolidated Statements of 30 Sept. 30 Sept. Comprehensive IncomeFor the three- andnine-month periods ended 30September 2007 and 2006(Unaudited - Prepared byManagement)(in thousands of US Dollars,except per share amounts) 2007 2006 2007 2006 $ $ $ $ Profit for the period 12,156 1,475 19,599 626 Other comprehensive incomein the periodCurrency translationadjustment 11,312 (1,069) 4,560 11,024 -------- -------- -------- --------Comprehensive income 23,468 406 24,159 11,650 -------- -------- -------- -------- European Goldfields LimitedNotes to Consolidated Financial StatementsFor the three- and nine-month periods ended 30 September 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 an additional 30% 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 201,314,074Future tax liabilities (50,182,299) ----------- 170,427,792 ----------- Purchase consideration: $ ----------- Cash paid 8,418,351 Shares issued (35,447,246 common shares) 161,424,562Transaction costs 584,879 -----------Purchase price 170,427,792 ----------- 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 Sept. 31 December 2007 2006 $ $ Ore mined 544 225Metal concentrates 3,265 154Material and supplies 1,154 475 --------- ----------- 4,963 854 --------- ----------- 5. Property, plant and equipment Plant and Vehicles Mine Leasehold Total equipment development, improvements land and buildings $ $ $ $ $ Cost - 2007 At 31 December 2006 13,220 1,236 15,609 256 30,321 Additions 14,530 352 3,006 - 17,888Disposals (14) (8) - - (22)Currency translationadjustment 1,031 80 1,272 - 2,383 -------- -------- -------- -------- --------At 30September 2007 28,767 1,660 19,887 256 50,570 -------- -------- -------- -------- -------- Accumulatedamortisation - 2007 At 31 December 2006 1,681 685 888 58 3,312 Provision forthe period 896 234 717 19 1,866Disposals (10) (8) - - (18)Currency translationadjustment 168 59 130 - 357 -------- -------- -------- -------- --------At 30September 2007 2,735 970 1,735 77 5,517 -------- -------- -------- -------- -------- -------- -------- -------- -------- --------Net book valueat 30 September 2007 26,032 690 18,152 179 45,053 -------- -------- -------- -------- -------- 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 14,440 110,573 76,302 201,315Deferred development costs 238 76 1,105 1,419Depletion of mineral properties (1,713) (460) - (2,173)Currency translation adjustment 880 8,942 6,114 15,936 --------- ----------- --------- --------- --------- ----------- --------- ---------Balance - 30 September 2007 28,522 227,209 157,600 413,331 --------- ----------- --------- --------- 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- Voia Cainel Total Craciunesti $ $ $ $ $ ------- -------- -------- ------- --------Balance - 31 December2006 26,862 3,064 844 1,012 31,782 ------- -------- -------- ------- -------- Drilling and assaying 824 1 1 6 832Geosciences and tech.consulting 1,061 30 40 - 1,131Samplers, miners andsurveying 45 - - - 45Project management 943 11 24 1 979Project overhead 960 15 95 9 1,079Amortisation 47 5 1 8 61 ------- -------- -------- ------- -------- 3,880 62 161 24 4,127 ------- -------- -------- ------- --------Balance - 30 September2007 30,742 3,126 1,005 1,036 35,909 ------- -------- -------- ------- -------- 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 September 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 Sept. 31 December 2007 2006 $ $ ---------- ----------Mineral properties 100,393 45,674Plant and equipment 675 244Exploration and development expenditure 2,740 2,232Accrued expenses 231 - ---------- ---------- 104,039 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 September 2007 and 31 December 2006: 30 Sept. 31 December 2007 2006 $ $ --------- ----------Asset retirement obligation - Beginning of period 6,031 5,307Currency translation adjustment 492 613Accretion expense 91 111 --------- ----------Asset retirement obligation - End of period 6,614 6,031 --------- ---------- As at 30 September 2007, the undiscounted amount of estimated cash flowsrequired to settle the obligation was $7,147 (31 December 2006 - $6,639). Theestimated cash flow has been discounted using a credit adjusted risk free rateof 5.04%. The expected 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. In April 2007, Hellas Gold entered in an agreement with MRI Trading AG ofSwitzerland for the sale of 25,000 wet metric tones of gold bearing pyriteconcentrate. Hellas Gold received a prepayment ofUS$2.18 million in cash. The following table reconciles movements on deferred revenue associated with theMRI prepayment and the Silver Wheaton Transaction: 30 Sept. 31 December 2007 2006 $ $Deferred revenue - Beginning of period - -Additions 59,683 -Revenue recognised (2,166) - ---------- ----------Deferred revenue - End of period 57,517 - ---------- ---------- During the nine-month period ended 30 September 2007, Hellas Gold deliveredconcentrate containing 565,391 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 418,963 940Shares issued for equity financing 27,600,000 130,059Shares issued as consideration for acquisition 35,447,246 161,424Share issue costs - (7,055) --------- ---------- 63,701,209 286,218 --------- ---------- --------- ----------Balance - 30 September 2007 178,503,057 533,108 --------- ---------- As at 30 September 2007, the Company had 35,447,246 common shares held in escrowor in respect of which trading restrictions applied. Contributed surplus: 30 Sept. 31 December 2007 2006 $ $ Equity-based compensation expense 6,759 6,557Broker warrants 578 578 ---------- ---------- 7,337 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 (26,775,459 shares asat 30 September 2007). As at 30 September 2007, the following share options were outstanding: Number of Exercise Options price C$Expiry date2009 250,000 2.802009 250,000 4.202009 395,000 3.072009 75,000 3.152010 414,999 2.002010 25,000 2.112010 150,000 2.402011 66,666 3.252011 600,000 3.852011 200,000 4.102012 75,000 5.472012 250,000 5.662012 150,000 5.712012 270,000 5.87 --------- --------- 3,171,665 3.80 --------- --------- During the nine-month period ended 30 September 2007, share options weregranted, exercised and cancelled as follows: Number of Weighted Options average exercise price C$ --------- ---------Balance - 31 December 2006 3,213,665 3.06 --------- --------- Options granted 745,000 5.73Options exchanged for shares (737,000) 2.62Options cancelled (50,000) 2.50 --------- ---------Balance - 30 September 2007 3,171,665 3.80 --------- --------- Of the 3,171,665 share options outstanding as at 30 September 2007, 2,059,999were fully vested and had a weighted average exercise price of C$3.10 per share. The weighted average grant date fair value of the 745,000 share options grantedduring the nine-month period ended 30 September 2007 (2006 - 900,000) was C$5,73(2006 - C$2.01). For outstanding share options which were not fully vestedduring the nine-month period ended 30 September 2007, the Company incurred atotal equity-based compensation cost of $960 (2006 - $1,100) of which $806 (2006- $878) has been recognised as an expense in the income statement and $154 (2006- $222) has been capitalised to deferred exploration and development costs. Restricted Share Unit Plan The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorisingthe directors, based on recommendations received from the CompensationCommittee, to grant Restricted Share Units ("RSUs") to designated directors,officers, employees and consultants. The RSUs are "phantom" shares that rise andfall in value based on the value of the Company's common shares and are redeemedfor actual common shares on the vesting dates determined by the Board ofDirectors when the RSUs are granted. The RSUs vest on the dates below howeverupon a change of control of the Company they would typically become100% vested. The maximum number of common shares of the Company which may bereserved for issuance for all purposes under the RSU Plan shall not exceed 2.5%of the common shares issued and outstanding from time to time (4,462,516 sharesas at 30 September 2007). As at 30 September 2007, the following RSUs were outstanding: Vesting date Number of Grant date RSUs fair value of underlying shares C$ 31 December 2007 350,000 2.1931 December 2007 175,000 4.0431 December 2007 30,000 5.3631 May 2008 75,000 3.2430 June 2008 55,000 5.7430 June 2009 55,000 5.74 --------- --------- 740,000 3.39 --------- --------- During the nine-month period ended 30 September 2007, RSUs were granted, vestedand cancelled as follows: Number of Weighted average RSUs grant date fair value of underlying shares C$ -------- -----------Balance - 31 December 2006 1,105,000 3.26 -------- ----------- RSUs granted 290,000 5.50RSUs vested (235,000) 4.14RSUs cancelled (420,000) 4.08 -------- -----------Balance - 30 September 2007 740,000 3.39 -------- ----------- The weighted average grant date fair value of underlying shares of the 290,000RSUs granted during the nine-month period ended 30 September 2007 (2006 -1,335,000) was C$5.50 (2006 - C$3.75). For outstanding RSUs which were not fullyvested during the nine-month period ended 30 September 2007, the Companyincurred a total equity-based compensation cost of $988 (2006 - $2,561) of which$703 (2006 - $1,222) has been recognised as an expense in the income statementand $285 (2006 - $1,340) has been capitalised to deferred exploration anddevelopment costs. 13. Supplementary cash flow information 30 Sept. 30 Sept. 2007 2006 $ $ --------- ---------Changes in non-cash operating accounts:Accounts receivable, prepaid expenses and supplies (11,599) (7,133)Accounts payable 2,822 2,750Inventory (3,661) (141) --------- --------- (12,438) (4,524) --------- --------- Supplemental disclosure of non-cash transactions:Share options and restricted share units issued fornon-cash consideration 1,940 3,976Exercise of share options - Transfer from contributedsurplus (888) (1,449)to share capital --------- ---------Vesting of restricted share units (850) (435) 14. Commitments As at 30 September 2007, the Company had remaining spending commitments of $970(2006 - $1,242) 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 September 2007, Hellas Gold had entered into off-take agreementspursuant to which Hellas Gold agreed to sell the following quantities of metalconcentrates during the next three years: 2007 2008-2009 2010+ (dry metric tonnes) ----------------------------------------Zinc concentrates (Stratoni) 63,351 15,000 -Lead/silver concentrates (Stratoni) 35,265 20,000 -Gold concentrates (Olympias) 129,887 119,662 32,724 ----------- ---------- --------- 228,503 154,662 32,724 ----------- ---------- --------- As at 30 September 2007, 27,962 dmt of zinc concentrates, 15,119 dmt of lead/silver concentrates and 58,169 dmt of gold concentrates had been sold on accountof the 2007 commitments. 15. Transactions with related parties During the nine-month period ended 30 September 2007, Hellas Gold incurred costsof $20,884 (2006 - $12,972) for management, technical and engineering servicesreceived from a related party, Aktor S.A., a 5% shareholder in Hellas Gold. Asat 30 September 2007, Hellas Gold had accounts payable of $8,836 (2006 - $3,139)to Aktor S.A. These expenses were contracted in the normal course of operationsand 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 Sept. 31 December 2007 2006 $ $ --------- ---------RevenueCanada - -Greece 63,690 52,438Romania - -United Kingdom - - --------- --------- 63,690 52,438 --------- --------- Plant and equipment and deferred exploration anddevelopment costsCanada - -Greece 457,926 223,286Romania 36,086 32,010United Kingdom 281 325 --------- --------- 494,293 255,621 --------- --------- Operating liabilitiesCanada 100 226Greece 18,546 7,625Romania 220 304United Kingdom 1,193 1,647 --------- --------- 20,059 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 Sept. 9 months ended 30 Sept. 2007 2006 2007 2006 $ $ $ $ -------- -------- -------- --------Earnings 12,156 1,475 19,599 626Effect of dilutive potential - - - - common shares -------- -------- -------- --------Diluted earnings 12,156 1,475 19,599 626 -------- -------- -------- -------- Weighted average number of common shares for the purpose 178,860 113,777 137,570 113,786 of basic earnings per shareIncremental shares - Share options 1,584 704 1,462 753 -------- -------- -------- --------Weighted average number of common shares for the purpose of diluted earnings per share 180,444 114,481 139,032 114,539 -------- -------- -------- -------- 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 shortly. The management of the Companybelieves that both requests for annulment are unfounded and unlikely to succeed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
EGU.L