STRONG BALANCE SHEET, NO DEBT
STRONG PRODUCTION PERFORMANCE
CERTEJ COMPLETES FEASIBILITY STUDY - NEW MINING PERMIT AWARDED
WHITEHORSE, YT, March 19 /CNW/ - European Goldfields Limited (AIM: EGU /
TSX: EGU) ("European Goldfields" or the "Company") today reports its results
for the financial year ended 31 December 2008. The financial statements, as
well as the accompanying management's discussion and analysis, are available
for review at http://www.egoldfields.com/goldfields/reports.jsp and should be
read in conjunction with this news release.
Financial highlights:
- Sales of $60 million reflecting lower metal prices
- Operating profit of $5.6 million
- Working capital of $193 million
- Profit (after tax) of $5.5 million
- Capex of $37 million underwrites future projects
- Greek corporate tax rate reduced to 20%
Operational highlights:
- Stratoni: Mine production up 26% versus 2007. Focus on cost reduction
and productivity efficiencies
- Skouries: Continued progress on engineering - mill shells and other
major components ready for shipment
- Olympias: Continued sale of gold concentrates - submission of EIS for
re-treatment of tailings
- Certej: Definitive Feasibility Study completed, life of mine extended -
new mining permit awarded - permitting process well advanced
Corporate highlights:
- European Goldfields added to S&P/TSX Composite Index
- Chairman increases personal shareholding
- Cameron Mingay and Martyn Konig appointed as Non-Executive Directors
- Joint Venture in Turkey with Ariana Resources underway
- Total project reserves now exceed 10 million ounces of Gold
Commenting on the results, David Reading, Chief Executive Officer of
European Goldfields, said: "We continue to build a successful European mining
company. Despite the market downturn during 2008 we made significant progress
during the year in project development in Greece and permitting in Romania.
With the proven support of our partners and stakeholders, excellent
infrastructure and a strong and growing reserve base, we are delivering robust
projects through a realistic and phased development programme. Though we are
benefiting from the falling costs of building our mines, we remain focused on
preserving our substantial cash balances and continuing to develop our
business into a mid-tier mining group. In summary the company is well
positioned to overcome the current down turn and grow our business. This
position is endorsed by our significant capital spend in 2008 and our strong
balance sheet."
Conference Call & Webcast - European Goldfields will host a conference
call on Thursday 19 March 2009 at 10:00 a.m. ET / 2:00 pm (London, UK time) to
update investors and analysts on its results.
Participants may join the call by dialing the following numbers,
approximately 10 minutes before its start.
- From North America: (toll free) 1 866 793 4279
- From the UK, Austria, Belgium, Denmark, France, Germany, Ireland,
Italy, Netherlands, Norway, Sweden & Switzerland: +44 (0)20 8609 1435
or (toll free from the UK) 0808 109 1498
- Participant pass code: 887754 followed by the number sign
A live audio webcast will be available on:
http://mediaserve.buchanan.uk.com/webcasts/room8audio/lrframes.htm
A replay of the webcast will be available on:
http://mediaserve.buchanan.uk.com/webcasts/eg190309/lrframes.htm
SELECTED FINANCIAL DATA
--------------------------
Year ended 31 December
--------------------------
(in thousands of US dollars, 2008 2007
except per share amounts) $ $
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Statement of profit and loss
Sales 60,044 86,405
Gross profit 5,647 43,787
(Loss)/Profit before income tax (11,599) 33,435
Income taxes 16,639 (5,217)
Profit after income tax 5,040 28,218
Non-controlling interest 479 (5,019)
Profit for the period 5,519 23,199
Earnings per share 0.03 0.16
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--------------------------
31 December 31 December
2008 2007
(in thousands of US dollars) $ $
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Balance sheet
Working capital 192,675 226,431
Total assets 766,095 782,131
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European Goldfields' audited consolidated financial statements and
management's discussion and analysis for the years ended 31 December 2008 and
2007 are filed on SEDAR at www.sedar.com.
Annual revenues fell as a direct result of the fall in zinc and lead
prices during 2008, particularly in the second half of the year. From July
2008, the Company's lead hedging programme became effective and generated
income of US$4.9 million for the year. Working capital declined as the Company
continued its capital expenditure programmes at its operating mine and
development projects.
Capex of $37 million underwrites future projects
European Goldfields spent $37 million in 2008 on its portfolio of
projects, which underlines its commitment to bringing its project pipeline
into production. The new underground infrastructure at Stratoni is almost
complete, which is expected to yield further operating and efficiency benefits
from mid 2009. At Skouries, the fabrication of the SAG and ball mills by
Outotec made significant advances, along with the basic engineering and
project design, which will allow the project to be fast tracked upon the
receipt of permits. During the year, the company completed its feasibility
study on the Certej project and has subsequently increased its life to 16
years. All the Company's development projects now have a project lives of 16
to 20 years and competitive cash costs compared to the global gold industry.
Greek corporate tax rate reduced to 20%
In September 2008, the Greek Government enacted new legislation reducing
corporate tax rates from 25% in 2009 to 20% in 2014 by 1% per annum. The
Company was therefore required to restate its future tax liability arising
from its Greek Mineral Properties using the new lower forecast tax rates. This
resulted in a reduction of the future tax liability by $17.6 million, which
was recognised in the income statement as a credit to current tax in Q4 2008.
This change in future tax rates will also reduce the total tax burden on its
Greek operations and development projects by almost 20%.
CORPORATE ACTIVITY
Highlights:
- Chairman increases personal shareholding
- Added to S&P/TSX Composite Index
- New Non-Executive Directors
- Joint Venture finalised with Ariana Resources
- Total project reserves exceed 10 million ounces of Gold
In the last quarter of 2008 Mr Dimitrios Koutras, Non-Executive Chairman
of European Goldfields, made purchases in the London market such that he now
owns 17,408,715 common shares in the company amounting to approximately 9.7%
of total issued common shares.
The Company was also pleased to have been added to the S&P/TSX Composite
Index on 24 March 2008 and to have welcomed two new Non-Executive Directors in
Cameron Mingay and Martyn Konig.
Cameron Mingay, age 56, is a senior partner in the Cassels Brock &
Blackwell LLP, Securities Group. Cam's diverse practice covers the areas of
securities, corporate, mergers, acquisitions and divestitures, and natural
resource law. He also sits on the Boards of Directors of Allied Nevada Gold
Corp. and Silver Bear Resources Inc.
Martyn Konig, age 51, has 27 years experience in investment banking and
the commodity markets. Since 2005, Mr. Konig has served as Chief Executive
Officer of Blackfish Capital, including managing the Blackfish Capital
Resources Fund, a hedge fund focused on small/mid cap mining companies. He has
extensive experience in the natural resource sector, acting as CEO from
2004-2008 of AIM listed Latitude Resources Limited, a mining investment
company, prior to which he held senior management roles in resource finance
and commodity trading operations at various international investment banks.
Mr. Konig was a main Board Director of NM Rothschilds and Sons Ltd. for 15
years and held senior positions at Goldman Sachs and UBS. He is a Barrister
and Fellow of the Chartered Institute of Bankers, as well as a Non-Executive
Director of TSX listed Western Goldfields Inc.
In April 2008 the Company finalised its previously announced Joint
Venture ("JV") with Ariana Resources plc (AIM: AAU) ("Ariana"). The JV
involves the development of Ariana's properties in north-eastern Turkey, which
include the Ardala copper-gold porphyry and 15 other licences covering a total
area of 229km(2). The company has been active within Turkey since June 2008.
The increase in gold reserves at Certej to 2.41 million ounces resulted
in total project gold reserves now exceeding 10 million ounces.
STRATONI OPERATIONS (GREECE)
Highlights:
- Production up by 26% versus 2007
- Metal concentrate sales increased by 12%
- Record process plant performance
- Focus on productivity efficiencies and cost reduction
Production up by 26% versus 2007
The Stratoni mine consists of a lead-zinc-silver deposit and lies
approximately four km from the coastal town of Stratoni in northern Greece.
The Company's 95%-owned subsidiary Hellas Gold mined a total of 271,660 wet
tonnes in 2008 (2007 - 214,875). Hellas Gold completed 30 shipments in 2008
(2007 - 26). This translates into an increase of 12% in tonnes of base metal
concentrates sold. Sales from Stratoni were as follows:
2008 2007
Production
Ore mined (wet tonnes) 271,660 214,875
Sales
Zinc concentrate (tonnes) 44,838 38,152
- Containing payable: Zinc (tonnes)(x) 18,496 15,891
Lead concentrate (tonnes) 22,321 23,123
- Containing payable: Lead (tonnes)(x) 14,086 14,963
Silver (oz)(x) 1,077,550 1,172,234
Inventory (end of period)
Ore mined (wet tonnes) 1,778 -
Zinc concentrate (tonnes) 2,975 1,689
Lead/silver concentrate (tonnes) 488 49
(x) Net of smelter payable deductions
On average, mined and processed lead and zinc grades in 2008 have been
1.0% and 0.8% respectively lower than reserve grades reflecting the high
degree of accuracy of the geological model. In 2008, zinc and lead
concentrates sales increased by 18% and reduced by 4% respectively.
In the current metal price and general economic environment, Hellas Gold
will postpone any further ramp up in production levels until an improvement in
metal prices is sustained. Therefore, Stratoni mine production is expected to
remain at current levels, resulting in mine production of approximately
300,000 wet metric tonnes for 2009. This approach optimises the overall cost
base at the mine and focuses on the achievement of operating efficiencies with
the current levels of manpower. The operation also benefits from its lead
hedge programme which in 2009 has put options over 7,200 tonnes of lead at a
price of $2,500 per tonne.
Record process plant performance
Plant throughput was an annual record of 263,453 dry tonnes for 2008.
During August, a monthly record of 34,095 dry tonnes at almost 1,200 per day
was achieved. This represented equivalent annualised throughput of over
400,000 tpa during the period of full production. Zinc and lead metal
recoveries are being maintained over budget at a consistent 92%. The new
on-stream analyser will continue to optimise the metallurgical performance of
the operation.
Focus on efficiencies and development to ramp up production
Ore production rates from underground have steadily increased from an
average of 885 tonnes per day in 2007 to 1,100 tonnes per day in 2008, and the
mine now operates effectively at over 1,200 tonnes per day. The 2009 mine
budget focuses on productivity efficiencies and cost reduction.
The Decline connected during the year and the Upper Adit is 64% complete
and expected to connect mid 2009 to complete the main Mavres Petres
infrastructure. This will improve efficiencies and facilitate future ramp ups
in production due to improved access, ventilation and supply facilities.
The Decline has also enabled trialling of 'larger', more productive
stopes and these layouts are to be extended to suitable additional lower areas
of the orebody.
Second accesses from the Main Internal Ramp to an additional number of
levels are being prioritised in 2009 to provide more mining faces enhancing
both production and flexibility.
The Company is currently in the final stages of concluding a new and
revised mining contract for 2009 that delivers unit cost reductions to the
mine.
Long term tailings strategy
The fine and coarse tailings disposal strategy has been successfully
implemented during 2008. A key part of that strategy is the commissioning and
successful operation of the filter presses for dewatering fine tailings and
water treatment plant sludge for dry storage. Coarse tailings are disposed of
underground as part of backfilling activities reducing the required surface
disposal volumes by 65%. Fine tailings fraction and associated water residues
are filter pressed to produce dry cake for surface storage at significantly
reduced volumes.
Safety development
The Safety Department commenced working towards compliance with ISO18000
and intends to formally apply for review in 2009 and full accreditation in
2010.
Continued commitment to the environment and the community
Hellas Gold's responsibility to both the environment and local community
continues with the full implementation of the tailings plan noted above. The
backfilling programme has substantially reduced the ingress of water to
historical workings and reduced the volume of contaminated water generated.
The new water treatment plant at Stratoni will provide greater capacity for
the process plant as well as operational efficiencies. The new facility will
treat water from Mavres Petres, allowing the existing plant to treat water
from Madem Lakkos. The company also commenced a programme to enable 'small
business starts', the first being a plant nursery near Olympiada village.
Stratoni exploration
Exploration completed on the western and down-dip extensions of the
Mavres Petres orebody is expected to add to reserves at least replacing what
was mined in 2008. Final figures will be published in the near future.
SKOURIES PROJECT (GREECE)
Highlights:
- Fabrication of long lead time equipment - SAG and Ball mill shells
finished
- Continued progress on engineering
The Company's Skouries gold-copper project is located 35 km by road from
the Stratoni port in northern Greece.
