Results for Q3 2008 - Certej project continues to advance - Profit sustained at Stratoni
WHITEHORSE, YT, Nov. 11 /CNW Telbec/ - European Goldfields Limited (AIM:
EGU / TSX: EGU) ("European Goldfields" or the "Company") today reports its
results for the quarter to 30 September 2008. Highlights are:
Financial highlights:
- Working capital of $208.6 million as at 30 September 2008
- Stratoni operation remains cash flow positive despite significantly
lower metal prices
- Actively reducing costs and preserving cash
Operational highlights:
- Stratoni: Higher production levels sustained and costs contained
- Skouries: Ball mill shell complete and ready for shipment
- Olympias: Plans for Phase Two of the project approach completion
- Certej: New mining permit awarded
- Certej: Further drilling and pit re-evaluation indicate extension of
mine life to 15 years
- Certej: Project moves from feasibility to basic and detailed
engineering
- Exploration in Greece: EM survey highlights additional 4 target areas
Commenting on the results, David Reading, Chief Executive Officer of
European Goldfields, said:
"Our fundamental strengths remain key to our future success in the
economic downturn. We have a strong cash position, no debt and sustained
cash generation at our high grade zinc, lead and silver mine. Our
development projects remain robust even at lower metal prices. We have
the means both to deliver continued progress and develop new
opportunities in changing market conditions".
Conference Call & Webcast - 11 November 2008 at 10am ET / 3pm BST
European Goldfields will host a conference call on Tuesday 11 November
2008 at 10:00 a.m. ET / 3:00 pm (London, UK time) to update investors and
analysts on its results.
Participants may join the call by dialing one of the three following
numbers, approximately 10 minutes before the start of the call.
From North America: (Local) 416-644-3423 or (toll free): 1-800-731-6941
From the UK, Austria, Belgium, Denmark, France, Germany, Ireland, Italy,
Netherlands, Norway, Sweden & Switzerland (toll free): 00-800-2288-3501
A live audio webcast of the call will be available on:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2462900
For those unable to join the live conference call, a replay will be
available until Tuesday November 18, 2008 at midnight by dialing (toll free)
1-877-289-8525 or 1-416-640-1917, Passcode 21287694#.
SELECTED FINANCIAL DATA
-------------------------------------------
Three months ended 30 September
-------------------------------------------
(in thousands of US dollars, 2008 2007
except per share amounts) $ $
-------------------------------------------------------------------------
Statement of profit and loss
Sales 16,101 21,663
Gross profit 1,393 11,273
Profit/(loss) before income tax (4,859) 15,268
Profit/(loss) after income tax (5,310) 12,504
Non-controlling interest 267 (348)
Profit/(loss) for the period (5,043) 12,156
Earnings/(loss) per share (0.03) 0.07
-------------------------------------------------------------------------
-------------------------------------------
(in thousands of US dollars) 30 30
September September
2008 2007
$ $
-------------------------------------------------------------------------
Balance sheet
Working capital 208,609 224,289
Total assets 775,369 744,998
-------------------------------------------------------------------------
European Goldfields' unaudited consolidated financial statements and
management's discussion and analysis for the three-month periods ended 30
September 2008 and 2007 are filed on SEDAR at www.sedar.com.
Year on year revenues have decreased as a result of the fall in metal
prices, although this has been offset by the company's lead hedging programme
which became effective in 2008 and yielded additional income of $1.4 million
in Q3 2008. The company's working capital has declined slightly as a
consequence of continued capital expenditure as well as funding the
advancement of our Greek and Romanian projects.
STRATONI OPERATIONS (GREECE)
Highlights:
- Higher production levels sustained
- Unit operating costs contained
- Process plant operated at full capacity in August
Higher production levels sustained
The Company's 95% owned Stratoni lead-zinc-silver operation in Northern
Greece mined 69,847 wet tonnes of ore and processed 63,040 tonnes of ore in Q3
2008. Mining production, year to date, remains 4% over budget whilst zinc and
lead metal production has exceeded year to date target by over 7% and 1%
respectively. During Q3 Hellas Gold sold eight shipments of base metal
concentrates, five shipments of zinc and three of lead/silver.
Summary production and sales were as follows:
Q3 2008 Q3 2007
Production
Ore mined (wet tonnes) 69,847 56,075
Ore processed (dry tonnes) 63,040 54,499
Zinc concentrate 10,451 8,506
- Containing: Zinc metal (tonnes) 5,132 4,194
Lead concentrate 5,531 5,586
- Containing: Lead metal (tonnes) 3,726 3,781
Silver (ounces) 280,305 297,059
Sales
Zinc concentrate (tonnes) 14,033 5,710
- Containing payable: Zinc (tonnes)(*) 5,818 2,364
Lead concentrate (tonnes) 5,475 5,694
- Containing payable: Lead (tonnes)(*) 3,495 3,759
Silver (oz)(*) 263,464 297,321
Inventory (end of period)
Ore mined (wet tonnes) 6,489 4,868
Zinc concentrate (tonnes) 2,078 2,797
Lead/Silver concentrate (tonnes) 1,294 2,042
(*) Net of smelter payable deductions,
before deduction of smelting and refining
charges
Ore production rates underground increased to 1,150 tonnes per day with
daily production rates in Q3 peaking at 1,400. An additional lower level has
been planned for 'large stope' drifting and the access designed accordingly.
Unit operating costs contained
Unit costs of (euro)109 per tonne were maintained at just below Q1 levels.
Since quarter end, the Euro has weakened considerably against the US Dollar,
which will lower Dollar operating costs and increase the mine's operating
margin. This exchange rate shift will help offset the impact of lower Dollar
commodity prices.
In the current market environment, Hellas Gold has already taken steps to
minimise all non-essential capital expenditure, with large amounts of budgeted
capital expenditure remaining unspent and uncommitted. As part of the annual
budget process, the management team is conducting a fundamental review of all
costs with a view to reducing any costs which neither contribute to productive
capacity nor represent an obligation under our existing mining permits.
Whilst further weak prices have been experienced since the period end, the
Company is benefitting from its lead hedging programme and will continue to do
so until the end of 2009. Including the lead hedge, Stratoni remains cash flow
positive at the operating level.
Process plant operated at full capacity in August
The plant continues to operate at around 1,200 tonnes per day and again
operated at full capacity in August. High metal recoveries have been
maintained and the plant continues to operate at high levels of efficiency.
SKOURIES PROJECT (GREECE)
Highlights:
- Ball Mill Shell ready for shipment
Continued progress on engineering
The basic engineering package for the Skouries project has been submitted
to the company by Outotec and the project design is being advanced. The
fabrication of the SAG and ball mills, also by Outotec, continues to be on
schedule: the ball mill shell has been completed and is ready for shipment,
the SAG mill shell will be completed in Q4 2008. The remaining components are
all due for delivery to site in Q3 2009.
Orders for the long lead items outside of Outotec's scope are being
prepared by the local engineering consultants, ENOIA, and include a primary
crusher, pebble crushers, transformers and switch gear. Detailed fabrication
engineering drawings for the flotation tank cells are well advanced in
readiness for order placement. Offers for fabrication of those cells in Greece
have been received and are under evaluation with the intention of placing
orders by year end.
The Greek civil engineering company, MHXME S.A, has been appointed to
carry out the civil design of the Skouries Project. Kion Architects of Athens
have been appointed to provide the architectural designs for the project.
Greek geotechnical consultants Omicron Kappa have completed the detailed
design of the open pit and submitted their engineering work for the roads
network, both of which are being reviewed.
A hydrogeological investigation has been completed and a draft report has
been received which is to be finalised by the end of November.
Continued progress on project engineering and design allows for the
scheduled start up of the Skouries project in late 2010.
OLYMPIAS PROJECT (GREECE)
Highlights:
- Plans for Phase Two of the Olympias project approach completion
Phase Two Planning
Mine schedules, plant refurbishment plans and cost studies for the second
phase of the Olympias project approach completion. In Q2 2008 the company
submitted an Environmental Impact Study ("EIS") to allow the early processing
of existing tailings, which will produce additional gold concentrate and allow
the rehabilitation of a significant area of the Olympias valley. It is planned
that this re-processing will commence in parallel with refurbishment of the
plant lines for run of mine production and the necessary underground
development to recommence production in Phase Two. The Company has received
expressions of interest for the detailed design phase from Greek engineering
companies which are currently being evaluating pending the outcome of the
Olympias EIS application.
Continued sale of gold concentrates
The Olympias project benefits from an existing stockpile of gold-bearing
pyrite concentrates which represented, at 31 December 2007, a reserve of
approximately 172,000 tonnes grading 23.5 g/t gold (containing 130,000 oz of
gold), in addition to substantial underground reserves of gold, lead, zinc and
silver.
Sales of pyrite concentrates in the quarter were as follows:
Q3 2008 Q3 2007
Sales
Gold concentrate (dry tonnes) 12,710 28,393
Hellas Gold has now secured the sale of the entire stockpile to at least
six different purchasers, thereby effectively creating a market for its gold
concentrates which did not exist prior to 2007.
Delays at the ports of Piraeus and Thessaloniki persist as a work to rule
remains in force by dock workers. The major shipping companies are re-routing
lines which has exacerbated the existing shortage of containers in both ports.
The company is working closely with local and international shipping companies
to address the issue and has met with some success.
PERMITTING PROCESS (SKOURIES & OLYMPIAS PROJECTS)
Progress in permitting process
The Company continues to receive the support of the Greek Ministry of
Development for its Business Plan and its preliminary environmental impact
study ("PEIS").
As reported previously, approval of the PEIS had been delayed due to
specific delays in other ministerial input into the final report. This
affected a large number of projects, public and private, in Greece. Progress
has continued and the remaining administrative procedures to finalise approval
are in process. A site visit by a team of specialists from the Ministry of
Culture took place in early October and it is not anticipated that this visit
will elicit any new concerns.
The political situation in Greece is widely reported and has slowed all
decision making but the Company remains confident of a positive outcome. It
has not been advised of any specific delays or new issues. The administrative
process has proven lengthier than first anticipated due to a scale of project
development that has not been permitted before. Previous permits issued in
Greece were all for individual projects, not a business plan.
Approval of the PEIS by the Ministry of Environment will be expressed as a
Project Pre-Approval from the Greek State with an invitation to the Company to
submit its final EIS to allow public consultation. On approval of the EIS, the
environmental permits for Skouries and Olympias will be issued.
The Company will then submit to the Greek government a final technical
report on the Skouries and Olympias projects, which will restate the
principles of the business plan and take into account any conditions detailed
in the environmental permit. The mining permits are expected to be issued on
approval of the technical report by the Greek government.
EXPLORATION IN GREECE
Geophysical survey highlights four additional targets
The completion of processing the airborne geophysical survey carried out
in late 2007 has revealed four new zones of conductive rocks with
electromagnetic ("EM") signatures typical for massive sulphides such as the
known mineralisation at Stratoni, Olympias and Piavitsa. All the zones are
located within the northern part of Hellas Gold's permit area in Greece, where
marble units host polymetallic massive sulphide. The new zones are distinct
from any known mineralisation and represent some 20 kilometres of potential
strike. Each anomalous area will now be investigated in the field with
mapping, geochemistry and possibly follow-up ground geophysics in order to
define future drill targets.
The EM survey had already successfully confirmed an anomaly extending
eight kilometres of strike at the Piavitsa massive sulphide target. Two
kilometres of this strike length have massive sulphide drill intercepts which
correspond exactly with the EM anomaly.
In total, the EM survey has now identified or confirmed a total of 28
kilometres of conductive anomalies, some of which host known mineralisation.
To put this in context, the massive sulphide reserves at Stratoni and Olympias
have a strike extent totalling two kilometres.
In addition, the magnetic component of the survey has already identified a
17 kilometre by six kilometre belt of porphyry intrusives over which a three
dimensional model has been completed defining two other major targets.
Follow-up reconnaissance mapping on the ground has confirmed the presence of
porphyry style mineralisation.
An EIS has been prepared which will allow drill testing of these exciting
targets later in the year or early 2009.
CERTEJ PROJECT (ROMANIA)
Highlights:
- New mining permit awarded
- Tailings site selection optimised in same valley as mine and plant
- Project progresses to basic and detailed engineering phases
- Potential to extend life of mine to 15 years
New mining permit awarded
An important milestone in the permitting process was achieved in July when
the National Agency of Mineral Resources ("NAMR") approved the Technical
Feasibility Report ("TFS"). Acceptance of the TFS is a key requirement, along
with the EIS, in order to apply for the Construction Permit. At the same time,
NAMR awarded a new mining permit incorporating the new Certej reserves.
A new Urbanisation Certificate for the Certej project was granted by
Hunodoara County Council in August. This is valid for two years and if
necessary an extension can be applied for. However it is expected that the
present certificate will be valid for the construction phase.
Following the new Tailings Management Facility ("TMF") site optimisation,
a revision of the Zonal Urbanisation Plan ("PUZ") was completed and submitted
in August 2008. The first meeting with the Technical Committee for the PUZ was
held in mid-September which went well and without opposition. A public
consultation meeting will take place this month and a final decision on the
PUZ is expected in November. The process is anticipated to proceed smoothly
due to strong local support at Certej. Once the PUZ approval is granted, the
submitted EIS will be reviewed by the Regional Department of the Environment
in Timisoara. This will culminate in a series of public meetings in Q1 2009
and once the EIS approval is received, Deva Gold will apply for the
Construction Permit.
Tailings site selection optimised in same valley as mine and plant
As part of the EIS requirements it was necessary to include three options
for the location of the TMFs. The three sites were evaluated with regards to
cost and environmental factors and based on these, the valley adjacent to the
Certej main infrastructure was selected. This site has the advantage of being
much closer to the process plant and in the same watershed as the rest of the
operation. It will have lower pumping costs, will avoid the need to excavate a
990 metre long tunnel (as required for the Voia site) and will utilise the
existing road network. The initial capital expenditure of the new TMF site
will be similar to that of the original site. The new site, which is in the
same water catchment area as the rest of the project, has strong community
support and will be easier to permit. Golder Associates (UK) are currently
working on a detailed design for the new site.
Project moves towards basic and detailed engineering phases
The Aker Kvaerner Cost & Definition Study and the subsequent in house
Definitive Feasibility Study ("DFS") demonstrated that the project was viable
and robust at a gold price of $650/oz. The DFS was completed at peak input
prices for steel and fuel. The steel industry has already been forced to start
reducing prices in the face of falling demand which, along with lower fuel
prices, will enhance project returns. The weaker Euro will also reduce
operating costs and capital costs in US Dollars. At current exchange rates,
the US Dollar capital requirement has fallen over 15% to approximately US$180
million.
The project has now moved into the engineering phase. Invitations to Bid
have been distributed to companies of international repute, all of whom have
expressed an interest in carrying out the basic and detailed engineering
design.
Potential to extend life of mine to 15 years
The potential to increase the life of the Certej project is being pursued.
The current reserve is defined at metal prices of $425 per ounce of gold and
$7 per ounce of silver. The open pit shell used to define the reserve has a
natural depth limit due to the shape of the orebody. Re-scheduling has shown
there is a significant quantity of material within the designed open pit that
would be economic at higher metal prices, which is expected to add an
additional three years to the existing mine life. Since this material was
mined as waste in the original pit schedule, the only requirement is for the
processing costs to be covered in order to add to the value of the project.
Drilling and surface channel sampling of the existing Certej open pit
dumps is nearing completion, with an estimate to be released in early 2009.
Additional dump material at Sacaramb, approximately four kilometres by road
from Certej processing plant, is currently considered to be economic and at
present this material will be factored into the operations schedule. It is
expected that the existing dumps at Certej and Sacaramb will add an additional
year of feed to the Certej project.
Drilling of the nearby limestone resource is complete and has confirmed
the suitability of the rock for neutralisation purposes in the gold recovery
process. Sufficient resources are available to supply the operation at
proposed production rates for more than 15 years.
Exploration
Data acquisition and geological modelling along the whole of the
Certej-Brad belt and adjacent zones has allowed European Goldfields to
identify prospective new targets for permit acquisition in this exciting area.
This belt hosts several known major epithermal and porphyry deposits, some of
which were major historic gold producers. The Company expects to be granted
the new prospecting permits by the end of 2008 and will commence a programme
of mapping, geochemistry and geophysics in order to test targets identified by
generative data interpretation, and to define new targets with more regional
work.
TURKEY
Significant progress has been made both in assessing the properties within
the JV and in identifying new areas for acquisition following four months of
exploration.
Mapping and lithological sampling of the advanced Ardala porphyry target
has confirmed the extents of the various porphyry types and alteration phases.
Further work is required to integrate historic drill data before a new
geological model is created prior to drill targets being identified. The
initial field programme will be completed by the end of the year.
Sampling and mapping work on the other JV concessions is ongoing together
with the generative programme that has so far identified several prospective
areas for new ground acquisition. A regional geological model for the Eastern
Pontides Belt of Turkey is being produced.
The Company continues to look for new opportunities in Turkey and the
exploration team has conducted a number of exploration site visits to various
portfolios, properties and deposits, both within the JV area of interest and
elsewhere in Turkey.
Resources & reserves parameters
For additional information on the resource and reserve estimates quoted in
this news release, please refer to the Company's Resources & Reserves
Declaration at www.egoldfields.com/goldfields/resources.jsp. Patrick Forward,
General Manager, Exploration of the Company, was the Qualified Person under
Canadian National Instrument 43-101 responsible for reviewing the disclosure
of resource and reserve estimates quoted in this news release.
Forward-looking statements
Certain statements and information contained in this document, including
any information as to the Company's future financial or operating performance
and other statements that express management's expectations or estimates of
future performance, constitute forward-looking information under provisions of
Canadian provincial securities laws. When used in this document, the words
"anticipate", "expect", "will", "intend", "estimate", "forecast", "planned"
and similar expressions are intended to identify forward-looking statements or
information. Forward-looking statements include, but are not limited to, the
estimation of mineral reserves and resources, the timing and amount of
estimated future production, costs and timing of development of new deposits,
permitting time lines and expectations regarding metal recovery rates.
Forward-looking statements are necessarily based upon a number of estimates
and assumptions that, while considered reasonable by management, are
inherently subject to significant business, economic and competitive
uncertainties and contingencies. The Company cautions the reader that such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual financial results, performance or
achievements of the Company to be materially different from its estimated
future results, performance or achievements expressed or implied by those
forward-looking statements and the forward-looking statements are not
guarantees of future performance. These risks, uncertainties and other factors
include, but are not limited to: changes in the price of gold, base metals or
certain other commodities (such as fuel and electricity) and currencies;
uncertainty of mineral reserves, resources, grades and recovery estimates;
uncertainty of future production, capital expenditures and other costs;
currency fluctuations; financing and additional capital requirements; the
successful and timely permitting of the Company's Skouries, Olympias and
Certej projects; legislative, political, social or economic developments in
the jurisdictions in which the Company carries on business; operating or
technical difficulties in connection with mining or development activities;
the speculative nature of gold and base metals exploration and development,
including the risks of diminishing quantities or grades of reserves; the risks
normally involved in the exploration, development and mining business; and
risks associated with internal control over financial reporting. For a more
detailed discussion of such risks and material factors or assumptions
underlying these forward-looking statements, see the Company's Annual
Information Form for the year ended 31 December 2007, filed on SEDAR at
www.sedar.com. The Company does not intend, and does not assume any
obligation, to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise, except as required by
law.
For further information: European Goldfields: David Reading, Chief
Executive Officer, info@egoldfields.com, +44 (0)20 7408 9534; Buchanan
Communications: Bobby Morse / Ben Willey, bobbym@buchanan.uk.com, +44 (0)20
7466 5000; Renmark Financial Communication: Henri Perron,
hperron@renmarkfinancial.com; John Boidman, jboidman@renmarkfinancial.com;
Media: Vanessa Napoli, vnapoli@renmarkfinancial.com; www.renmarkfinancial.com,
(514) 939-3989, Fax: (514) 939-3717; RBC Capital Markets: Andrew K Smith
Sarah Wharry, andrew.smith@rbccm.com, sarah.wharry@rbccm.com, +44 (0)20 7653
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