Etruscan reports 2008 fourth quarter and annual results



    HALIFAX, Feb. 27 /CNW/ - Etruscan Resources Inc. (EET.TSX) has reported
its financial and operating results for the fourth quarter and year ended
November 30, 2008. The 2008 annual audited financial statements and
management's discussion and analysis are available on the SEDAR website at
www.sedar.com or at the Company's website at www.etruscan.com. All figures are
reported in Canadian dollars unless otherwise noted. The financial statements
have been prepared in accordance with Canadian GAAP.

    Highlights for the year ended November 30, 2008

    
    - The Youga Gold Mine located in Burkina Faso achieved commercial
      production and substantial completion, effective July 1, 2008 and
      produced 29,305 ounces for the five months ended November 30, 2008
    - Resource estimations were completed for three potential Youga satellite
      deposits containing 342,000 ounces of inferred mineral resource at an
      average grade of 2.1 grams per tonne and 83,000 ounces of indicated
      mineral resource at an average grade of 1.3 grams per tonne
    - A feasibility study was completed for the Agbaou Gold Project located
      in Côte d'Ivoire
    - A feasibility study was initiated by Resolute Mining Limited for the
      Finkolo Gold Project located in Mali
    - A rare earth element discovery was outlined on the Lofdal permit in
      Namibia
    - The Blue Gum Diamond Project located in South Africa recovered 12,600
      carats during the year but, due to the collapse of rough diamond prices
      during the fourth quarter, the operation was placed on care and
      maintenance during December, 2008
    

    Youga Gold Mine, Burkina Faso

    Commercial production was achieved at the Youga Gold Mine on July 1,
2008. Accordingly, the results of operations for 2008 include five months of
gold mining and processing. Prior to July 1, 2008 the operating and financing
costs associated with the Youga Gold Mine were capitalized as preproduction
costs.
    Gold production for the fourth quarter was 21,169 ounces at a cash
operating cost of US$480 per ounce. A total of 238,700 tonnes of ore were
milled during the quarter at an average mill feed grade of 3.19 grams per
tonne. Gold sales for the fourth quarter aggregated 18,970 ounces which
generated cash revenues of $16.3 million. A total of 11,790 ounces were
delivered into the US$700 per ounce hedge commitment and 7,180 ounces were
sold at spot prices for an average realized gold price for the quarter of
US$745 per ounce.
    Gold production for fiscal 2008 which comprises the five months of
commercial production ended November 30th aggregated 29,305 ounces at a cash
operating cost of US$598 per ounce. A total of 371,000 tonnes of ore were
milled during the period at an average mill feed grade of 2.93 grams per
tonne. The mill throughput represented 89% of forecast as certain aspects of
the operation continued to be optimized during the period. Gold sales for the
five month period aggregated 26,988 ounces which generated cash revenues of
$22.3 million. A total of 19,022 ounces were delivered into the $700 per ounce
hedge commitment and 7,966 ounces were sold at spot prices for an average
realized gold price for the five month period of $746 per ounce.
    Progress continued during the fourth quarter on the installation of the
grid power line from Ghana. The sub-station at Zebila in Ghana is nearing
completion and the line construction is continuing on both sides of the
border. Power to the plant and facilities is currently being supplied by the
onsite power plant. Conversion to grid power is scheduled for the second
quarter of 2009 with an expected reduction in operating costs of $200,000 per
month.
    The life-of-mine reserves at Youga as at December 31, 2008 updated by the
Company using a US$700 per ounce gold price are estimated at 6.8 million
tonnes with an average grade of 2.7 grams per tonne containing 596,000 ounces
of gold (previously reported at December 31, 2007 as 6.6 million tonnes with
an average grade of 2.7 grams per tonne using a US$525 gold price).
Additionally, 1.7 million tonnes have been classified as marginal ore with an
average grade of 0.69 grams per tonne. This material will be stockpiled
separately and considered for processing at the end of the mine life. This
material had been classified as waste in the 2006 feasibility study reserve
estimation.
    Gold production for fiscal 2009 is estimated to be between 80,000 and
90,000 ounces.
    A number of potential satellite gold deposits have already been
identified on the Youga mining permit within a three kilometer radius of the
existing plant and at the Ouaré gold deposit, located 35 kilometers northeast
of the Youga Gold Mine. Using a 1 gram per tonne cutoff grade, these newly
reported deposits contain 83,000 ounces of indicated mineral resource at an
average grade of 1.3 grams per tonne and 342,000 ounces of inferred mineral
resource at an average grade of 2.1 grams per tonne .
    During the fourth quarter the Company invested $0.4 million in
exploration activities in Burkina Faso. A total of $3.4 million was expended
during 2008 bringing the total investment to $5.7 million.

    Agbaou Gold Project, Cote d'Ivoire

    The Agbaou Gold Project is located on the Oumé-Fêtêkro gold belt in Côte
d'Ivoire, approximately 200 kilometers northwest of the port city of Abidjan.
    The feasibility study of the Agbaou Gold Project was completed by MDM
Engineering International Ltd. and Coffey Mining Pty Ltd. in November 2008. A
copy of the feasibility study is available on SEDAR at www.sedar.com. Using a
gold price of $850 per ounce, the base case scenario in the feasibility study
concludes that the Agbaou Gold Project will produce an average of 82,000
ounces of gold per year at a cash operating cost of US$507 per ounce over a
6.3 year mine life. The feasibility study is based on probable reserves of 7.4
million tonnes of ore with an average grade of 2.4 grams per tonne containing
566,000 ounces. Pit optimizations were carried out using a US$750 per ounce
gold price. The study proposes open pit mining of three pits using an owner
operated mining fleet with the ore to be processed through a conventional
gravity-CIL (carbon-in-leach) plant with a design capacity of 1.2 million
tonnes per annum. The average gold recovery is 91% and the strip ratio is 8:1.
Initial capital costs for the Agbaou Gold Project are estimated to be US$106
million (excluding working capital) and were based on the purchase of all new
equipment at prevailing prices in mid 2008 at the peak of the market. The
Company believes the economics of the Agbaou Gold Project can be improved as a
result of cost reductions due to the economic downturn and the Company intends
to revisit the costing.
    In 2008, the Company incurred $1.6 million on its feasibility activities
bringing the total investment in the Agbaou feasibility study to $2.2 million
(excluding resource drilling).

    Finkolo Gold Project, Mali

    The Finkolo Gold Project is located on the Syama gold belt, approximately
300 kilometers southeast of Bamako, the capital city of Mali. The Finkolo
permit is contiguous with Resolute Mining Limited's Syama permit, which hosts
the Syama gold mine.
    Resolute holds a 60% interest in the Finkolo Gold Project and acts as
operator and manager of the joint venture. Under the terms of the joint
venture agreement Resolute finances all costs of the joint venture until
completion of a feasibility study. The Company will reimburse Resolute for its
share of joint venture costs from 50% of its share of future project cash
flow.
    In 2007, Resolute completed an updated 43-101 compliant resource
estimation for the Tabakoroni deposit on the Finkolo permit based on drilling
to a vertical depth of approximately 120 meters from surface. At a 1.0 gram
per tonne cutoff grade, Resolute reported 4.62 million tonnes of measured and
indicated resource at 2.6 grams per tonne (382,000 ounces) and a further 4.54
million tonnes of inferred resource at 2.5 grams per tonne (364,000 ounces).
    Resolute has initiated a feasibility study that will determine the most
effective means of exploiting the deposit. This would include a determination
of the preferred treatment of the ore at either the existing Syama plant or
whether sufficient reserves and potential exists to support a stand-alone
operation. This will be carried out in conjunction with additional exploration
both at depth and along strike.

    Lofdal Exploration Permit, Namibia

    In Namibia, Southern Africa, Etruscan currently holds interests in 22
prospecting licenses covering over 17,000 square kilometers. Etruscan has
undertaken initial reconnaissance surveys to identify early stage target areas
for follow-up exploration programs.
    Geological mapping and prospecting have outlined a large number of rare
earth element (REEs) enriched carbonatite dykes associated with an alkaline
intrusive complex on its Lofdal permit in northern Namibia. Analytical results
from outcrop samples and six drill holes indicate that both light rare earth
elements and heavy rare earth elements occur at Lofdal in sufficient total
concentrations (0.5% to 6.0%) to be of potential economic significance. REEs
constitute a group of 16 elements and industry standards are to report rare
earth deposit grades as the sum of the total concentration of all rare earth
elements present plus yttrium which is typically an important accessory
(TREE+Y). REEs are essential for a number of wide-ranging applications
including many high-tech applications from long-lasting rechargeable batteries
to new light emitting diodes.
    During the fourth quarter, the Company invested $0.7 million in
exploration activities in Namibia. A total of $2.7 million was expended during
2008 bringing the total investment to $4.7 million.

    Blue Gum Diamond Project, South Africa

    During the first quarter of 2008, the Company's 52% owned subsidiary,
Etruscan Diamonds Limited, recommenced mining and processing operations at the
Tirisano Diamond Mine located on the Blue Gum property in the alluvial diamond
district of Ventersdorp in South Africa. The gravel from the mine was being
processed at the Tirisano DMS (dense media separation) plant and through four
16 foot pans installed near the DMS plant. The objective was to achieve a
monthly throughput of 100,000 cubic meters of gravel per month from the two
facilities with 40,000 cubic meters coming from the DMS plant and 60,000 cubic
meters from the pan plant.
    Etruscan Diamonds continued to make progress ramping up processing
operations at the Blue Gum Diamond Project during the second and third
quarters of 2008. However, the ramp up was negatively impacted by the global
economic crisis which resulted in a substantial reduction in both the demand
for rough diamonds and the rough diamond price. In an effort to reduce costs,
during the month of November, Etruscan Diamonds scaled back staff and
operations at Blue Gum to process 60,000 cubic meters per month through the
pan plants only and suspended processing at the DMS plant. Due to uncertainty
in the timing of the recovery of the price and demand for rough diamonds,
subsequent to November 30, 2008, Etruscan Diamonds reduced the work force at
the Blue Gum Project to a skeleton staff to allow the Project to be placed on
care and maintenance. The Blue Gum Project remains on care and maintenance.
    Production for the year ended November 30, 2008 was approximately 483,000
cubic meters yielding 12,600 carats for an overall grade of 2.61 carats per
hundred cubic meters and a rough tender average value of US$512 per carat.
Production at the Blue Gum Project for the three month period ending November
30, 2008 was approximately 156,000 cubic meters yielding 4,250 carats for an
overall grade of 2.7 carats per hundred cubic meters and a rough tender
average value of US$381 per carat. All costs associated with the Blue Gum
operation, net of diamond revenues realized, have been capitalized given
commercial production has not yet been achieved. The amount capitalized in
2008 was $13 million bringing the total net investment in the Blue Gum Project
to $31.6 million.
    Company management believes that the geological foundation of the Blue
Gum Project remains strong. During 2008, Etruscan Diamonds received a National
Instrument 43-101 compliant independent resource update on the Blue Gum
Project. The independent resource update prepared by Dr. Tania Marshall of
Explorations Unlimited as of June 30, 2008 estimated that the Blue Gum Project
contains 25.5 million cubic meters of indicated diamond resource and 15.3
million cubic meters of inferred diamond resources at grades ranging from 1.77
to 2.85 carats per hundred cubic meters of gravel. This represents almost a
24% increase in the indicated resource from the previous resource calculation
in January 2008. A copy of the resource update is available on SEDAR at
www.sedar.com.

    Operating Results

    Etruscan's consolidated net loss for the fourth quarter was $22.2 million
or $0.17 per share compared to a net loss of $19.1 million or $0.17 for the
fourth quarter 2007. The fourth quarter 2008 loss includes the net loss and
write-down of the diamond operations of $17.9 million or $0.14 per share. The
fourth quarter 2007 loss includes a loss on the financial derivative
instrument of $20.1 million or $0.18 per share.
    Etruscan's consolidated net loss for the year ended November 30, 2008 was
$42.7 million or $0.34 per share compared to a net loss of $35.8 million or
$0.33 per share in 2007 and a net loss of $10.5 million or $0.12 per share in
2006. In 2008, the loss includes the net loss and write-down of the diamond
operations of $17.9 million or $0.14 per share. In 2007, the loss includes a
loss on the financial derivative of $34.1 million or $0.32 per share.
    The Youga Gold Mine generated cashflow from operations of $4.1 million
for the fourth quarter of 2008 and cash flow of $2.2 million for the five
month commercial production period.
    The Company's gold revenues for the last five months of 2008 were $24.8
million or US$833 per ounce of gold sold. The non-cash revenue adjustment
related to the financial derivative for this period aggregated $2.6 million
(US$87 per ounce) for net cash revenue received of $22.3 million (US$746 per
ounce).
    Mine operations expenses aggregated $15 million and mine administration
expenses aggregated $4.4 million for the last five months of 2008. Cash
operating costs for this period after giving effect to an inventory adjustment
for a reduction of $3 million were US$598 per ounce of gold produced.
Amortization expenses for the five month period aggregated $5.4 million.
    General and administrative expenses increased to $6.5 million in 2008
from $5.9 million in 2007. These increases are attributed to the increased
level of activities. Financing costs related to the Youga Gold Mine aggregated
$2.5 million for the five months of commercial production with an additional
$0.4 million prior to commencement of commercial production. Non-cash stock
based compensation expense aggregated $1.5 million in 2008 compared to $2.3
million in 2007.
    The Company incurred a foreign currency loss of $10.3 million in 2008
compared to gains of $2.4 million in 2007. The current year loss is directly
attributable to the significant weakening of the Canadian dollar against the
US dollar during the last six months of 2008. The largest component of the
foreign currency loss relates to the long term debt associated with the Youga
Project which is denominated in US dollars. In the prior year the Company had
recorded a gain of $3.8 million on the Youga debt.
    The Company earned interest revenue of $0.6 million in 2008. In 2007, the
Company recorded gains on the sale of investments of $1.7 million and earned
interest revenue of $0.6 million.
    In 2008 the Company wrote-down its expenditures on most of its diamond
exploration properties resulting in a write-down of $1.1 million. The Company
also wrote-down its expenditures on its Mali exploration properties by $1.6
million which includes six properties in Mali South and 10 properties in Mali
West. In 2008 the Company commenced exploration activities in Benin, however,
by the end of the year there were no significant results and the Company
elected to close its Benin operations and has written-down its mineral
property expenditure by $0.4 million. In 2007, the Company wrote off its
expenditures on six diamond properties in South Africa for a total write-off
of $0.5 million.
    The Company has recorded an unrealized gain on the Youga financial
derivative instrument (gold hedge) of $7.2 million ($0.06 per share) in fiscal
2008. In 2007 the Company recorded an unrealized loss on the derivative of
$33.5 million (($0.31 per share). Generally accepted accounting principles
(GAAP) require non-hedging financial derivative instruments, those which do
not qualify for hedge accounting, to be recorded at fair value (marked to
market) on the balance sheet date and the resulting gains or losses are to be
included in earnings for the period. The Company and its independent advisors
have determined that while the Youga gold hedge constitutes an effective
economic hedge for the Youga Gold Mine; it does not, however, meet the
requirements for hedge accounting under GAAP. The marked to market revaluation
of the Youga gold hedge as at November 30, 2008 was negative $26.3 million.
The unrealized marked to market amount represents the theoretical value on
cancellation of the gold option contracts based on market values as at
November 30, 2008. As such it does not represent an estimate of further gains
or losses nor does it represent an economic obligation for the Company as long
as it is expected to meet its delivery obligations as they fall due.
Furthermore, over future operating periods as the Youga hedge commitment is
fully settled with physical delivery of gold, the financial derivative
liability will be reduced to zero and a corresponding increase in gold revenue
will be recorded.

    Liquidity and Capital Resources

    The Company had a consolidated working capital deficiency at November 30,
2008 of $20.1 million as compared to a working capital surplus of $16.2
million at the end of 2007. Available cash at November 30, 2008 was $3.9
million with an additional $3.1 million held in the Youga debt service
account. Given the current financial situation, the Company has significantly
reduced its exploration budget for 2009 as compared to 2008 and has completed
a detailed review of corporate general and administrative expenditures. The
timing of recommencement and extent of drilling and other exploration
activities for 2009 is dependent upon accessing sufficient funding.
    In December 2008 the Company raised US$5 million by issuing senior
unsecured convertible notes to its largest shareholder, Conus Partners Inc. In
February 2009 the Company negotiated a $10.5 million private placement
financing, $5.8 of which closed on February 24, 2009 and the balance of which
is expected to be closed in March 2009.
    The combination of the aforementioned funds together with forecast
positive cash flow from the Youga Gold Mine, and potential amendments to the
Youga debt facility is expected to address the near term funding requirements
for Burkina Mining Company. The Company's current exploration and general and
administrative expenditures are approximately $900,000 per month. An
additional funding requirement in the order of $10 to $15 million is estimated
by management to be needed to address the balance of Etruscan's forecast
expenditures net of gold revenues for 2009. The expected sources of cash
include debt and equity financing, as well as strategic joint venture and
business combinations and the disposition of assets. Additionally, the Company
will undertake a further review of its exploration and general and
administrative expenditures with a view to reducing costs.

    Robert Harris, P.Eng., Vice President of Operations of Etruscan, is the
Qualified Person overseeing production and development in West Africa and
South Africa and has reviewed and approved this press release.

    K. Kirk Woodman P.Geo., Etruscan's Chief Project Geologist, is the
Qualified Person overseeing Etruscan's exploration programs in West Africa and
has reviewed and approved this press release.

    Etruscan Resources Inc. is a gold focused Canadian junior mining company
with dominant land positions in district scale gold belts covering more than
14,000 square kilometers in West Africa. Its principal mine development
projects include the Youga Gold Project in Burkina Faso (latest press release
dated December 4, 2008), the Agbaou Gold Project in Côte d'Ivoire (latest
press release dated December 18, 2008), and the Finkolo Gold Project in Mali
(latest press release dated July 2, 2008). Advanced and early stage
exploration projects are on-going in Burkina Faso, Mali, Côte d'Ivoire, Ghana
(see press release dated June 10, 2008) and Namibia (see press release dated
January 15, 2009). Etruscan also has a 52.1% interest in Etruscan Diamonds
Limited which has a dominant land position in the Ventersdorp Diamond District
located in South Africa (latest press release dated December 12, 2008). The
common shares of Etruscan are traded on the TSX Exchange under the symbol
"EET". More extensive information on Etruscan can be found on its home page at
http://www.etruscan.com

    This press release may contain certain forward-looking statements which
involve known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking
statements may include statements regarding exploration results and budgets,
mineral reserve and resource estimates, work programs, capital expenditures,
mine operating costs, production targets and timetables, future commercial
production, strategic plans, market price of precious metals or other
statements that are not statements of fact. Although the Company believes the
expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Various factors that may affect future results include, but are not limited
to: fluctuations in market prices of precious metals; foreign currency
exchange fluctuations; risks relating to mining exploration and development
including reserve estimation and costs and timing of commercial production;
requirements for additional financing; political and regulatory risks, and
other risks and uncertainties described in the Company's annual information
form filed with the Canadian Securities regulators on SEDAR (www.sedar.com).
Accordingly, readers should not place undue reliance on forward-looking
statements.

    NO REGULATORY AUTHORITY HAS APPROVED OR DISAPPROVED THE CONTENT OF THIS
    RELEASE




For further information:

For further information: Richard Gordon, Investor Relations, Etruscan,
(877) 465-3674, Fax (902) 832-6702, rgordon@etruscan.com

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ETRUSCAN RESOURCES INC.

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