Results for 2006 - Delivering on promises



    WHITEHORSE, YT, March 22 /CNW Telbec/ - European Goldfields Limited
(AIM: EGU / TSX: EGU) ("European Goldfields" or the "Company") today reports
its results for the financial year ended 31 December 2006. Highlights of the
year are:

    
    Financial highlights:

    - Sales of US$52.4m in 2006, compared to $1.5m in 2005
    - Sales up 30% in Q4 over Q3 2006
    - Profit (before tax) of $12m in 2006, compared with a loss of $13.3m in
      2005
    - Operating cash flow increasing to $19.4m in 2006, up $26.3m over 2005
    - Annual net earnings reported for the first time; $3m in 2006
    - Working capital of $41.9m at 31 December 2006; funded beyond permitting
      of new projects

    Operational highlights:

    - Stratoni production targets exceeded for 2006
    - New economic mineralisation discovered at Stratoni
    - Off-take agreements signed for 70% of Olympias stockpile of gold
      concentrates - Expressions of interest received for the balance
    - Two technical feasibility studies for Skouries and Certej nearly
      completed in 2006
    - Permit-wide exploration underway in Greece - Twenty exploration targets
      identified
    - Albion Process Technology achieved 92% gold recovery on composite
      sample
    - Target exploration underway to extend Certej life-of-mine

    Commenting on the results, David Reading, Chief Executive Officer of
European Goldfields, said: "We are delighted to be reporting annual net
earnings for the first time in our history, and to have exceeded our
production target in 2006 for our Stratoni operations. Future growth will also
come from our other three major gold and base metals projects which have made
significant progress during 2006. These are well on track with feasibility
work completed and permitting progressing as planned. With rapidly increasing
cash flows and one of the largest proven gold and base metal reserves in
Europe, we remain on track to become a leading mid-tier producer over the next
few years."

    Conference Call & Webcast - 22 March 2007 at 10am EST / 2pm GMT

    European Goldfields will host a conference call on Thursday, 22 March 2007
at 10:00 a.m. EST / 2:00 pm GMT 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 (toll free): 1-800-731-5319
    From the U.K. & France (toll free): 00-800-0000-2288
    From Austria, Belgium, Denmark, Germany, Ireland, Iceland, Netherlands,
    Norway, Sweden, Switzerland and Italy: (toll free): 00-800-0022-8228

    A live audio webcast of the call will be available on:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=1758240

    For those unable to join the live conference call, a replay will be
available until Thursday, 29 March 2007 at midnight by dialing (toll free)  
1-877-289-8525 or 1-416-640-1917, Passcode 21221811#.


                           SELECTED FINANCIAL DATA

    -------------------------------------------------------------------------
                                  Three months ended              Year ended
                                         31 December             31 December
    (in thousands of            ---------------------------------------------
     US dollars, except             2006        2005        2006        2005
     per share amounts)                $           $           $           $
    -------------------------------------------------------------------------
    Statement of loss
     and deficit
    Sales                         19,870       1,464      52,438       1,521
    Gross profit                  10,669          97      27,252         154
    Profit/(loss)
     before income tax             6,616      (4,643)     12,008     (13,316)
    Profit/(loss)
     after income tax              4,349      (4,254)      7,184     (11,622)
    Non-controlling interest      (1,973)         55      (4,182)      1,212
    Profit/(loss)
     for the period                2,376      (4,309)      3,002     (10,410)
    Earnings/(loss) per share       0.02       (0.04)       0.03       (0.09)
    -------------------------------------------------------------------------

                                ---------------------------------------------
                                    31 December 2006        31 December 2005
    (in thousands of US dollars)                   $                       $
    -------------------------------------------------------------------------
    Balance sheet
    Working capital                           41,854                  33,765
    Total assets                             311,943                 266,618
    -------------------------------------------------------------------------

    European Goldfields' audited consolidated financial statements and
management's discussion and analysis for the years ended 31 December 2006 and
2005 are filed on SEDAR at www.sedar.com.


                         STRATONI OPERATIONS (GREECE)

    Highlights:

    - Production targets exceeded for 2006
    - Stratoni reserves increased by 23%
    - New economic mineralisation discovered at Stratoni
    - Strong community support achieved for Stratoni operations

    Production targets exceeded for 2006 - European Goldfields' 65%-owned
subsidiary Hellas Gold S.A. ("Hellas Gold") has milled a total of 179,950 wet
metric tonnes (wmt) of ore in 2006 at its Stratoni zinc-lead-silver plant in
Northern Greece, exceeding the production target of 170,000 wmt for the year.
    Hellas Gold completed seven shipments of concentrates from Stratoni in
Q4 2006, and 20 shipments for the whole of 2006. This translates into the
following sales of concentrates:

                                                   Q4 2006        Total 2006

    Zinc concentrate (tonnes)                       10,425            32,351
    - Containing payable: Zinc (tonnes)(*)           4,418            13,775

    Lead concentrate (tonnes)                        5,124            15,780
    - Containing payable: Lead (tonnes)(*)           3,329            10,467
                          Silver (oz)(*)           254,881           818,139

    (*) Net of smelter deductions

    Sales of contained metals increased by 38% for lead and 35% for silver in
Q4 2006 compared to Q3 2006, while decreasing by a marginal 6% for zinc.

    Production ramp-up in 2006 - Ore production rates from underground have
steadily increased from 400 to almost 900 tonnes per day during 2006. Ore
production is expected to continue to increase more rapidly than initially
anticipated, up to a maximum of 400,000 tonnes per year by the end of 2009.
    The successful ramp-up in production to date is a result of extensive
refurbishment of mine infrastructure undertaken in 2006. This included the
refurbishment and re-equipping of mine workings and equipment, installation of
key items such as a backfill pump to ensure tight fill in the upper levels,
and backfilling a large void inventory to provide working faces.
Rehabilitation work at the Stratoni mill was also essentially complete by
Q3 2006.
    In summary, Hellas Gold has redesigned the mine and is now operating at a
steady rate while completing the underground development required for 2007
production and the new decline to ramp-up production in 2008.
    Hellas Gold has also started an improved programme of detailed grade
control in Q3 2006. This has already increased the understanding of grade
distribution within the orebody and should improve mining efficiency and plant
recovery over time.
    Ongoing investment in the plant includes new pumps and commissioning of
the already installed on-stream analyser for improved recovery.

    Stratoni reserves increased by 23% - European Goldfields announced in
January 2007 an increase in reserves at Stratoni, which were reported as
follows under Canadian NI 43-101:

    -------------------------------------------------------------------------
                                      Silver            Lead            Zinc
    Reserve            '000t  Silver    (Moz)   Lead  ('000t)   Zinc  ('000t)
     Category             (*)   (g/t)     (*)     (%)     (*)     (%)     (*)
    -------------------------------------------------------------------------
    Proven             1,923     172   10.63     6.9      19     9.4      30
    -------------------------------------------------------------------------
    Probable             259     172    1.43     7.3     133    11.6     181
    -------------------------------------------------------------------------
    Total              2,182     172   12.06     6.9     152     9.7     211
    -------------------------------------------------------------------------
    (*) After deduction of ore extracted since the start of mining operations
        in Q4 2005.

    Total reserve tonnes have increased by 23% over the reserves published
prior to the start of operations at Stratoni in Q4 2005, accounting for
deduction of ore since then. The new reserve will add an extra year to
Stratoni's life of mine, a 20% increase over the remaining five-year mine life
under the prior reserve. A marginal reduction in grades is expected to be more
than offset by greater quantities of metal to be produced over the total life
of mine and the ramping-up of production going forward.
    The new reserve has allowed Hellas Gold to ramp-up its planned yearly ore
production schedule as follows:

    - Year 2006: 170,000 tonnes
    - Year 2007: 250,000 tonnes
    - Year 2008: 350,000 tonnes
    - Year 2009: 400,000 tonnes
    - Year 2010: 400,000 tonnes
    - Year 2011: 400,000 tonnes
    - Year 2012: 400,000 tonnes

    This new reserve is based on an updated measured & indicated resource
estimate for the Stratoni orebody, which results from a new optimised
geological model based on revised geological mapping, additional data from
underground sampling, and a more reliable understanding of the orebody after a
full year of mining at Stratoni.
    A better understanding of the orebody has also allowed Hellas Gold to
define increased inferred resources comprising some 555,000 tonnes grading
7.3% lead, 10.2% zinc and 181 g/t silver.
    In addition, Hellas Gold recently started a new exploration drilling
programme at Stratoni, which is expected to increase life of mine by another
two years at least. Initial drilling results are expected in Q1 2007. An
important objective of the drilling programme is to upgrade existing inferred
resources to full Canadian NI 43-101 compliant reserves.

    Development underway for continued production ramp-up in 2007 - A ramp to
access the upper parts of the mine has been commenced, along with
infrastructure to connect the upper part of the mine with existing ore bins to
improve ore handling and ventilation. This infrastructure will provide access
to new working ends in the upper part of the mine to ensure the ramp-up in
production continues in 2007.
    Significant progress has also been made on the new decline to the Mavres
Petres orebody, which is now approximately 1,100 metres in and advancing at
over 5m per day on average. The new decline is not necessary for mining in
2007 but becomes critical for the future production ramp-up involving the
deeper portions of the orebody, as well as providing better ventilation.

    Tailings strategy outlined - In order to ensure tailings storage capacity
for the life of mine, a global strategy for the management of tailings has
been developed by Hellas Gold. Additional tailings storage space has been
created by removing coarse tailings material from existing storage facilities
to backfill old mine workings. Dried fine material has also been moved from
the existing tailings ponds and placed in the voids created by removing the
coarse tailings. Following successful trials, two filter presses have been
bought and will be commissioned in Q2 2007. The filter press at the mill will
be used for processing the current production of fine tailings and water
treatment sludge to allow the maximum utilisation of the space created at the
existing facility. The second filter press will eventually be installed close
to the new water treatment plant, but will initially be used to treat the wet
tailings and water treatment sludge for dried cake storage. Current production
of coarse tailings from production will be used for backfill of current
workings.

    Water management programme adopted - To reduce future water pumping and
treatment costs, Hellas Gold commenced backfilling of the old Madem Lakkos
mine workings. A total of 13,000m(3) of void has been filled so far. In
addition, a second water treatment plant at the Stratoni mine site will be
commissioned in 2007 to improve efficiency and provide capacity for extreme
rainfall events. The new plant will include the second filter press to allow
dry storage of treatment residue as filter cake.

    New economic mineralisation discovered at Stratoni - In October 2006,
European Goldfields began an exploration drilling programme at Stratoni.
Stratoni already has well-defined reserves over a six-year life of mine. Six
areas targeted by the drilling are obvious extensions to known mineralisation,
in addition to more conceptual targets between the two main Stratoni deposits.
    The two targets being investigated first are known extensions to
previously mined areas of the Stratoni (Madem Lakkos) deposit, where
production grades of 9.0 to 10.7% lead, 9.0 to 9.6% zinc and 160.0 to
185.3 g/t silver are recorded. The programme is aimed at drilling out
resources in these areas of known economic mineralisation.
    Drilling into the known extensions of the upper part of the eastern
deposit at Stratoni (Madem Lakkos) has confirmed the geological model with
mineralisation occurring in the fold hinge of an antiform in the upper levels.
Mine workings that were not recorded in the old mine plans have been shown to
be more extensive than previously thought. A second deeper target at Madem
Lakkos will be drilled in Q2 of this year.
    The drilling programme will also investigate inferred resources which form
extensions to the western deposit at Stratoni (Mavres Petres). The drilling
programme is designed to upgrade these inferred resources to the measured and
indicated categories. These inferred resources are extrapolations from the
known reserves and comprise some 555,000 tonnes grading 7.3% lead, 10.2% zinc
and 181 g/t silver.
    Economic mineralisation has been encountered in the new decline running
between the existing reserve and mined-out areas at Madem Lakkos. The decline
exposed some 35 metres of strike length and a minimum of 4 metres width. The
zone is located approximately half-way between the two previously known
deposits at Stratoni. Average grades from panel sampling of 6.2% lead, 11.2%
zinc and 105 g/t silver compare favourably with current reserves. The zone is
open along strike, up and down dip and towards the hanging wall and is
interpreted as a footwall zone to the main marble horizon. In addition to the
intersected zone, there is a high potential for further mineralisation where
the zone intercepts the main marble both up dip and to the east. A drill
programme designed to define at least 200 metres of strike and 75 metres of
dip extent will commence in April 2007. The new decline will enable immediate
access for mining of any new discovery.
    Additional drilling will also be conducted from the new decline at regular
intervals along the rest of the 1.5 kilometre zone between the existing
reserve and mined-out areas at Madem Lakkos.
    The drilling programme aims to significantly increase reserves and life of
mine. The existing environmental and mining permits for Stratoni will allow
Hellas Gold to immediately exploit any new discoveries resulting from this
drilling programme.


                    SKOURIES & OLYMPIAS PROJECTS (GREECE)

    Highlights:

    - Off-take agreements signed for 70% of Olympias stockpile of gold
      concentrates - Expressions of interest received for the balance
    - Skouries technical feasibility study nearly completed
    - Skouries reserves increased by 13%
    - Phasing of Olympias established
    - Permitting process underway
    - Permit-wide exploration underway - Twenty exploration targets
      identified

    Off-take agreements signed for 70% of Olympias stockpile of gold
concentrates - Expressions of interest received for the balance - Hellas
Gold's Olympias project benefits from an existing stockpile of gold
concentrates representing a reserve of approximately 258,000 tonnes grading
23.3 g/t gold (containing 193,000 oz of gold), in addition to substantial
underground reserves of gold, lead, zinc and silver. An additional
9,000 wet metric tonnes (wmt) of concentrates (containing 6,000 oz of gold) is
also located at Hellas Gold's port facility in Stratoni.
    In 2006, Hellas Gold secured the sale of a total of 184,000 wmt of
Olympias concentrates (containing approximately 130,000 oz of gold) over a
three year period to four different off-takers - Shandong MIC BioGold Ltd (a
subsidiary of Michelago Limited of Australia), MRI Trading AG, a subsidiary of
Celtic Resources Holdings Plc and Euromin S.A. - with expressions of interest
to sell up to an additional 132,000 wmt of concentrates if the initial
shipments are successful.
    In Q4 2006, Hellas Gold completed six shipments of gold concentrates from
the Olympias stockpile, representing half of the 12 shipments completed in
2006. This amounts to the shipment of 9,041 wet metric tonnes of gold
concentrates in Q4 2006 and 17,649 for the whole of 2006.
    The price payable for the concentrates varies with the prevailing gold
price. The agreements produce an attractive return for Hellas Gold at a gold
price of US$500/oz.

    Skouries technical feasibility study nearly completed - Hellas Gold has
completed most technical studies for the final bankable feasibility study on
its Skouries project in Northern Greece. Skouries is a typical gold-copper
porphyry deposit that forms a near vertical pipe. These studies include:

    - A cost and definition study for the process plant and associated
      infrastructure, undertaken by Aker Kvaerner Engineering Services
    - A cost and definition study for underground mechanical and electrical
      utilities, undertaken by Scott Wilson Mining
    - The design of the tailings management facility, undertaken by Golder
      Associates
    - A study of hydrogeology and creek boundaries by the Greek Institute of
      Geology & Mineral Exploration (IGME), to be used in the development of
      a new hydrogeological model
    - A reserves estimate, undertaken by SRK Consulting.

    Mining studies confirm that Skouries could be mined as a low strip open
pit (0.6:1) operation and as a highly productive underground mine, either in
sequence or concurrently, at a rate between 6 and 8M tonnes per annum. This
would produce annually approximately 40,000t of copper and 200,000 oz of gold
over a mine life of over 20 years. This production rate is shown to be
sustainable based on the detailed mine design carried out by SRK Consulting
and benchmarking with other comparable mines. Other international consultants
involved in these mining studies are Scott Wilson Mining, Diogo Caupers and
Steve Nicol.
    The metallurgy at Skouries is considered to be straight-forward. The mine
will feed a process plant designed for a nominal throughput of 21,000 tonnes
per day. The processing will comprise gyratory crushing for open pit and
underground ore, single-stream SAG and ball-mill grinding. Approximately 30%
of gold will be recovered by a gravity circuit to produce doré on site. A
highly-marketable copper/gold concentrate will also be produced by
conventional froth flotation, thickening and filtration.
    Extensive testwork completed by Lakefield Research and other consultants
has shown average recoveries of 84% gold and 91% copper can be achieved.
Concentrate grades of approximately 26% copper and averaging 27g/t gold are
expected.
    The concentrates will be trucked to Hellas Gold's port storage facility at
Stratoni, which will be approximately 15km away by road from the Skouries
plant site. Skouries is located on a high plateau with no habitation in the
vicinity.
    The study by Golder Associates incorporates the latest paste production
technology in a phased tailings management facility (TMF) that will minimise
land take and embankment height and provides increased tailings stability. The
study shows that the paste tailings are inert. The use of paste tailings and a
phased TMF also allows sequential rehabilitation of the tailings management
facility to minimise active tailings areas.
    The technical studies indicate to date that the project will require
approximately US$270 million in initial capital expenditure under the
following categories:

    - $188 million for the process plant and associated infrastructure
    - $53 million for the tailings management facility
    - $21 million for the open pit
    - $8 million for other costs

    Operating costs for the open pit mining are expected to be $1.28 per
tonne, and $6.05 per tonne for the underground mining.
    Hellas Gold plans to publish the results of the final feasibility study on
Skouries once the final Environmental Impact Study (EIS) is completed in
Q2 2007. The EIS is being carried out by the Greek consulting group Enveco.
    Hellas Gold has initiated discussions with Outokumpu Oy for the purchase
of mill and plant equipment and with Aktor S.A. for the construction of the
plant and related infrastructure.

    Skouries reserves increased by 13% - In July 2006, European Goldfields
announced a 13% increase in reserve tonnes for Hellas Gold's Skouries deposit,
which were reported as follows:

    -------------------------------------------------------------------------
                                                Gold    Gold  Copper  Copper
    Reserve category                   '000t    (g/t)   (Moz)     (%) ('000t)
    -------------------------------------------------------------------------
    Proven                            77,535    0.87    2.18    0.54     415
    -------------------------------------------------------------------------
    Probable                          68,667    0.78    1.73    0.55     374
    -------------------------------------------------------------------------
    Total                            146,202    0.83    3.91    0.54     789
    -------------------------------------------------------------------------

    The increase in reserves resulted from a new mine plan and schedule which
includes the adoption of a deeper open pit, an optimised sub-level cave
underground mine design and improved long-term metal price forecasts. The
updated reserve was estimated by SRK Consulting (UK) Ltd at a gold price of
$425/oz and a copper price of $1.1/lb.
    The updated reserve is based on a new pit optimisation and subsequent
practical pit design along with a detailed underground mine design based on
relevant net smelter return (NSR) cut-offs and practical mining constraints
which takes into account mining recoveries and dilution.

    Phasing of Olympias established - Development at Olympias will progress in
three phases, which will allow the phasing of capital. Phase 1 will consist in
Hellas Gold processing old tailings at Olympias, which will have the added
benefit of cleaning up the valley, together with underground refurbishment and
limited mining in the upper levels of the mine. These tailings contain
2,400,000 tonnes of material grading 3.4 g/t gold and 14.2 g/t silver, which
could yield 385,000 tonnes of marketable concentrates grading 19.2 g/t gold
and 75.7 g/t silver.
    Phase 2 will consist in underground mining around the existing shaft and
other infrastructure, thereby minimising capital investment. Hellas Gold has
recently completed a mining schedule for Phase 2, which indicates that ore
will be extracted at a rate progressing between 200,000 and 400,000 tonnes per
annum, expected to commence in 2008. Revenue during Phase 2 will be generated
from the sale of lead/silver, zinc and gold pyrite/arsenopyrite concentrates.
    Finally, Phase 3 will consist in the construction of infrastructure,
including a new gold processing facilities at Stratoni.

    Permitting process underway - In January 2006, Hellas Gold submitted a
business plan to the Greek State for the joint development of its major gold
and base metal projects of Skouries and Olympias. This submission represents a
significant milestone in obtaining the permits for these projects.
    The business plan focuses on a phased approach to the development of the
projects with emphasis on achieving full production at the Skouries
gold-copper porphyry deposit as soon as possible, and the phasing of the
Olympias gold-lead-zinc-silver deposit. This approach minimises financial risk
by the phased injection of capital. The principal revenue stream in the early
phases will be through the sale of concentrates.
    In March 2006, Hellas Gold received an official response from the Greek
Ministry of Development (the "Ministry") on the business plan. The response
states that the Ministry is in agreement with the principles stated in the
business plan, and that the Ministry considers the business plan to be in the
best interests of the Greek economy. This response was received by Hellas Gold
within the timeframe provided for in its contract with the Greek State.
    In March 2006, Hellas Gold submitted a preliminary environmental impact
study (PEIS) to the Greek government, on which comments are expected shortly.
Hellas Gold is currently finalising a full environmental impact study (EIS)
which is expected to be submitted to the Greek government in Q2 2007,
addressing any comments made on the PEIS. On approval of the EIS, the
environmental permits for Skouries and Olympias are expected to be issued.
    Hellas Gold 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.

    Permit-wide exploration underway - Twenty exploration targets identified -
Hellas Gold holds 317 km2 of highly prospective exploration licences in
northern Greece. Recent work by European Goldfields has highlighted a total of
twenty exploration targets, including six advance targets and extensions to
known deposits, seven targets of known mineralisation for follow-up work and
seven conceptual targets. The geological context of the targets has been
identified and a model for the emplacement of known mineralisation has now
been developed.
    The model indicates that there are more than 20 km of structural corridors
that have acted as mineralising pathways with marble hosted polymetallic
massive sulphide mineralisation, including the Stratoni and Olympias deposits.
The model also identifies a 10 km long intrusive belt which hosts the Skouries
copper/gold porphyry.
    A programme of mapping, reinterpretation and modelling is underway on the
Piavitsa advanced target. This polymetallic massive sulphide target comprises
a 6 km mineralised structure with a 3.5 km central zone expressed by old
manganese oxide open pits. Within the zone, seven holes drilled by the
previous owners over 1300 metres of strike length and some 500 metres of known
down dip extent define three mineralised horizons averaging 12 metres width
including high grade zones averaging around six metres width. Grades within
the intercepts ranged from 0.3 to 22.2 g/t gold, 0 to 533 g/t silver, 0 to
26% zinc and 0 to 12% lead. The current programme is designed to better define
targets and assist in the interpretation of geophysical surveys planned for
later in the year.
    Pilot ground based geophysical programmes are being commissioned in order
to assess the effectiveness of EM geophysical surveys over areas that are
prospective for massive sulphide mineralisation. Once the results have been
considered, European Goldfields plans to fly airborne magnetic surveys over
the entire licence block and airborne EM surveys over the massive sulphide
belts. The airborne surveys are planned for H2 2007 and are aimed at
identifying new target areas and prioritising these with existing targets in
preparation for drilling in 2008.


                           CERTEJ PROJECT (ROMANIA)

    Highlights:

    - Viability of two development options confirmed
    - Albion Process Technology achieved 92% gold recovery on composite
      sample
    - Resources converted into Canadian NI 43-101 compliant reserves
    - Urbanisation Certificate received - First milestone in the permitting
      process
    - Technical feasibility study submitted to Romanian government
    - Target exploration underway to extend life-of-mine

    Viability of two development options confirmed - European Goldfields is
actively pursuing two viable development options for its 80%-owned Certej
project:

    - the production and sale of high-grade gold/silver flotation
      concentrates
    - the production of gold doré on site using the Albion Process.

    The project is expected to involve the mining and processing of 3.0 Mt per
annum over at least nine years. This would yield approximately 275,000 tonnes
of concentrate per annum with high grades ranging realistically between 17 -
22 g/t gold and 85 - 165 g/t silver (depending on the source of the ore in the
deposit), with a flotation gold recovery of approximately 88%. This translates
into an annual planned production of approximately 170,000 oz of contained
gold in the concentrate.

    Albion Process Technology achieved 92% gold recovery on composite sample -
Using the Albion Process to produce gold doré on site is expected to
significantly increase project profitability and returns. Recent results using
the Albion Process suggest recoveries from concentrates of approximately 92%
for gold and up to 95% for silver. The Albion Process is a combination of
ultra-fine grinding of concentrates and oxidatative leaching at atmospheric
pressure.
    Hydrometallurgy Research Laboratories (HRL, a subsidiary of Xstrata PLC)
is completing the Stage III pilot plant scale continuous testwork programme
using the Albion Process, after which European Goldfields expects to publish
Canadian NI 43-101 compliant reserves based on this process. HRL has already
successfully completed Stages I and II of the metallurgical testwork
programme.
    In October 2006, European Goldfields entered into licence agreements
securing the Albion Process Technology for the Certej project. The licence
agreements were entered into with Xstrata Queensland Limited and Highlands
Frieda Limited, the co-owners of the technology.

    Resources converted into Canadian NI 43-101 compliant reserves - In April
2006, European Goldfields announced the conversion of resources into Canadian
NI 43-101 compliant reserves for the Certej deposit, based on the sale of
concentrates option. The reserve estimation was carried out by independent
consultants RSG Global Pty Ltd ("RSG Global") and can be summarised as
follows:

    -------------------------------------------------------------------------
                                     Million    Gold    Gold  Silver  Silver
    Reserve category                  tonnes    (g/t)   (Moz)   (g/t)   (Moz)
    -------------------------------------------------------------------------
    Probable                            27.7     2.0    1.76    11.6   10.35
    -------------------------------------------------------------------------
    Note: Lower cut-off grade of 0.8 g/t gold. Uniform conditioning and based
          on a selected mining unit model using 6.25 X 12.5 X 2.5 metre
          blocks.

    The reserve was estimated at a gold price of $425/oz and a silver price of
$7/oz. This estimation followed the completion of extensive metallurgical
testwork, an in-house pre-feasibility study and subsequent pit optimisation
and pit design work by RSG Global, which included a geotechnical drilling
programme and geotechnical pit design parameters completed by Golder
Associates of the UK.
    The conversion of resources into reserves means that the project can
support the necessary capital investment and produce a robust return at a gold
price of $425/oz and above.

    Urbanisation Certificate received - First milestone in the permitting
process - In September 2006, European Goldfields announced that the Hunedoara
County Council has issued a General Urbanisation Certificate for the Certej
project. The certificate confirms the designation of Certej as an industrial
mining area and confirms local community support for the project. This
important milestone is the first official step in the permitting process for
Certej.

    Technical feasibility study submitted to Romanian government - European
Goldfields has established a clear path to applying for permits to develop the
Certej project. In 2006, European Goldfields completed the following studies
in support of its permit application:

    - all necessary Environmental Impact Assessments (Levels I and II)
    - a Social Impact Assessment Study
    - an Archaeological Study
    - a Technical Feasibility Study (TFS), submitted to the government in
      March 2007

    The TFS will provide the majority of technical analysis for a bankable
feasibility study to be produced in Q2 2007 for project financing.

    Environmental impact study nearing completion - To complete its
application for environmental and mining permits, European Goldfields plans to
submit a final Environmental Impact Study (EIS) to the Romanian government in
Q3 2007, allowing an increase in production at Certej and the processing of
ore on site. European Goldfields already holds a mining permit for Certej,
which is currently being exploited on a small scale by the Company's partner
in Romania.
    The permits and a detailed urbanisation plan are expected by the end of
2007 following a standard public consultation process with the local
community. Customary construction and public utility permits are expected to
follow by mid-2008 when the detailed engineering design has been completed for
the site plant.
    ECOIND and Cepromin, Romanian companies with proven track records in
environmental research and permitting procedures, and the Technical University
of Civil Engineering Bucharest have been employed to assist in preparing the
TFS and the EIS. These studies also include significant input from
international consultants such as RSG Global, Golder Associate and Core
Resources.

    Target exploration underway to extend Certej life-of-mine - Exploration in
Romania will focus on extending the life-of-mine of the Certej project and
increasing the number of conceptual and regional targets for further
exploration in the South Apuseni Mountain area.
    Certej life-of-mine extension work comprises drilling out inferred
resources and deeper, potentially high grade feeder zones, in-fill drilling
and metallurgical testwork on satellite deposits, investigation of high grade
vein deposits near to the project that could sweeten the feed grade in the
early project life and the development of targets that could enhance the value
of concentrates produced, by the addition of copper rich material for example.
Drilling to convert inferred resources (currently treated as waste where they
fall in the open pit) to the indicated category has now commenced and will be
completed in two phases, the second phase being results dependant. Phase one
comprises a total of eight diamond drillholes and phase two comprises seven
diamond drillholes. European Goldfields has identified thirteen targets in
total within its current concessions and plans to carry out exploration work
on six of them in 2007. The two most advanced targets, Teascu and Pitigus, are
effectively contiguous to one another and are located some seven kilometres
from Certej. In-house resource estimates on these two targets are expected by
Q3 2007 following in-fill drilling.
    European Goldfields is planning a major programme of airborne geophysics
and regional mapping and geochemical surveys in order to generate and
prioritise regional and conceptual targets in the region. The results will be
used to further develop the model built up during recent generative work which
highlighted the importance of the overall structural framework in controlling
intrusives and for the channeling, concentrating and trapping of
mineralisation. Systematic investigation of these targets, including drilling,
metallurgical testwork and resource definition, is planned for 2008.

    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 2005, 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:

For further information: please contact: European Goldfields: David
Reading, Chief Executive Officer, +44 (0)20 7408 9534, info@egoldfields.com,
www.egoldfields.com; Buchanan Communications: Bobby Morse; Ben Willey; +44
(0)20 7466 5000, bobbym@buchanan.uk.com; Renmark Financial Communication: Neil
G. Murray-Lyon, nmurraylyon@renmarkfinancial.com; Barbara Komorowski,
bkomorowski@renmarkfinancial.com; Media: Eva Jura, ejura@renmarkfinancial.com;
(514) 939-3989, Fax: (514) 939-3717, www.renmarkfinancial.com

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EUROPEAN GOLDFIELDS LTD.

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