Etruscan reports third quarter 2008 results

    HALIFAX, Oct. 15 /CNW/ - Etruscan Resources Inc. (EET.TSX) has reported
its financial and operating results for the nine months ended August 31, 2008.
The Q3 2008 unaudited financial statements and management's discussion and
analysis are available on the SEDAR website at or at the
Company's website at All figures are reported in Canadian
dollars unless otherwise noted.

    Highlights from third quarter 2008 operations include:

    - Youga Gold Mine achieved commercial production and produced
      8,136 ounces of gold during July and August
    - Exploration drilling on the Youga Gold Belt at Bitou returned
      significant results including 36 meters at 3.9 grams per tonne
    - Mining feasibility study for the Agbaou Gold Project in Cote d'Ivoire
    - Finkolo Gold Project (Tabakoroni deposit) in Mali proceeding to mining
      feasibility study
    - Geochemical surveys in southwestern Ghana identified several kilometer
      scale gold anomalies within 20 kilometers of the 60 million ounce
      Obausi Mine
    - Exploration drilling program initiated on four targets in northern
      Namibia targeting precious metals, base metals and rare earth elements
    - Blue Gum Diamond Project recovered 4,099 carats as the processing
      operation continued to ramp up to design capacity
    - Indicated resource at the Blue Gum Diamond Project increased by 24%
    - $12.5 million equity financing completed

    Youga Gold Mine, Burkina Faso

    Commercial production was achieved at the Youga Gold Mine in the third
quarter effective July 1, 2008. Accordingly, the results of operations for the
third quarter include two months of gold mining and processing. Prior to
July 1, 2008 the operating, finance and other costs associated with the Youga
Gold Mine were capitalized as preproduction costs.
    Gold production for the two months ended August 31, 2008 totaled
8,136 ounces at an estimated cash operating cost of US$899 per ounce. This
high cost per ounce figure is attributed primarily to the lower number of
ounces produced during ramp up to "steady state" production. Gold production
is expected to achieve forecast levels for the fourth quarter 2008 which would
bring the operating costs more in line with the life-of-mine average cash
operating cost of approximately US$450 per ounce. Actual gold production for
the month of September was 6,572 ounces which was in line with forecast. Gold
production for calendar 2008 is estimated to be 45,000 ounces.
    A review of operating costs was completed during the quarter which
resulted in the life-of-mine operating costs being increased from $396 per
ounce to $450 per ounce. This is in keeping with the significant increases in
capital and operating costs experienced by the mining industry as a whole
during the past year.
    Gold sales for the two months totaled 8,018 ounces which generated
revenue of $7.3 million or US$870 per ounce of gold sold. A total of
7,232 ounces were delivered into the $700 hedge commitment during the period
and 786 ounces were sold at spot prices. The non-cash revenue adjustment
related to the financial derivative for the two month period aggregated
$1.3 million (US$158 per ounce) for net revenue received of $6.0 million
(US$712 per ounce).
    The mill processed approximately 132,400 tonnes of ore during the two
month period at an average grade of 2.41 grams per tonne gold. The mill
throughput represented 80% of forecast as certain aspects of the operation
continued to be optimized during the period. The milling operation continued
to ramp up during September with 75,000 tonnes processed equating to 90% of
monthly forecast.
    During the quarter, the mining contractor mobilized additional gear to
site and mining operations commenced at the A2 West Zone 1 pit which has
mineable reserves of 0.5 million tonnes at an average grade of 3.0 grams per
tonne with a low strip ratio of 1.3 to 1. Prior to this, mining activities
were focused in the A2 Main pit which has mineable reserves of 4.1 million
tonnes with an average grade of 3.1 grams per tonne and a strip ratio of
6.8 to 1. Approximately 180,000 tonnes were mined from the two pits during
July and August.
    Mine operations expenses aggregated $5.9 million and mine administration
expenses aggregated $1.6 million for the two month period. Cash operating
costs for the quarter after giving effect to an inventory adjustment of
negative $0.8 million were US$899 per ounce of gold produced. Amortization and
accretion expenses for the two month period aggregated $1.5 million. Financing
costs related to the Youga Gold Mine aggregated $1.0 million for the two
months of commercial production.

    Bitou Exploration Permits, Burkina Faso

    Exploration activities during the third quarter were focused on the Bitou
permits in southern Burkina Faso. The Bitou permits are located on the Youga
Gold Belt, 35 kilometers northeast of the Youga Gold Mine. A reverse
circulation drill program was completed to determine the resource potential of
the Ouaré Main Zone, with a total of 7,118 meters drilled in 93 holes. The
reverse circulation drill program returned significant results which were
highlighted by 36 meters of 3.9 grams per tonne gold in a step-out hole
located 675 meters east of the Ouaré Main Zone. The hole was stopped in the
mineralized zone. The most significant results from this drill program are
listed below:

    - 36 meters at 3.9 g/t (including 4 meters at 11.0 g/t)(*)
    - 12 meters at 4.8 g/t (including 2 meters at 11.1 g/t)
    - 10 meters at 4.4 g/t (including 6 meters at 6.2 g/t)
    - 12 meters at 3.9 g/t (including 4 meters at 9.0 g/t)
    - 28 meters at 3.8 g/t (including 6 meters at 7.0 g/t)
    - 54 meters at 2.4 g/t (including 4 meters at 17.6 g/t)
    - 14 meters at 2.3 g/t (including 6 meters at 4.0 g/t)

    (*) Hole BITRC-08-93 from 72 - 108 meters ended at 108 meters in

    Previous work on the Ouaré Main Zone, including trenching and reverse
circulation drilling, had identified significant mineralization with resource
potential over a strike length of 575 meters. The additional exploration work
by Etruscan has expanded this potential strike length to over two kilometers.
A resource estimation for Ouaré is expected to be completed during the fourth
quarter 2008.
    Additionally, several new gold targets on the Bitou permits were
confirmed in saprolite with single sample auger drilling, and ground
geophysical surveys were initiated to assist in tracking the mineralized
    During the third quarter the Company invested $0.8 million in exploration
activities in Burkina Faso. A total of $3 million was expended during the nine
months ended August 31, 2008 bringing the total investment to $5.3 million.

    Agbaou Gold Project, Cote d'Ivoire

    The Agbaou Gold Project is located on the Agbaou gold belt in Côte
d'Ivoire, approximately 200 kilometers northwest of the port city of Abidjan.
A 43-101 compliant resource estimation for the Agbaou Project was completed in
February 2008 by Coffey Mining Pty. Ltd. Using a 1.0 gram per tonne cut-off,
Coffey Mining concluded that the Agbaou Project contains indicated resources
of 10.5 million tonnes at an average grade of 2.6 grams per tonne
(871,000 ounces) of gold and inferred resources of 2.8 million tonnes at an
average grade of 2.5 grams per tonne (218,000 ounces) of gold.
    The Agbaou feasibility study advanced significantly over the quarter. The
remaining field work associated with the hydrogeological and environmental
programs was completed. The preparation of the study document was progressed
with several of the key sections completed including the resource and reserve
determination and mine design, and the metallurgy and plant design components.
Many of the capital and operating cost estimates were prepared as well as much
of the environmental impact statement. The study is expected to be completed
in the fourth quarter of October 2008. Etruscan will have an 85% interest in
any mining company established to mine at Agbaou with the remaining 15% held
by the State of Côte d'Ivoire.
    In the third quarter of 2008, the Company incurred $0.2 million on its
feasibility activities. A total of $0.725 million was expended in the nine
months ended August 31, 2008 bringing the total investment in the Agbaou
feasibility study to $1.3 million.

    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. First gold pour at Syama is expected in October 2008 with
the commissioning of the oxide circuit. Current open-pit minable reserves at
Syama are estimated to be 1,725,000 ounces at an average grade of 3.6 grams
per tonne (June, 2007). An additional 2.4 million ounces of measured and
indicated resources lie beneath the current open-pit reserves and are
currently being evaluated for potential underground mining.
    Resolute holds a 60-per-cent 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 must finance all costs of the joint venture
until completion of a feasibility study and Etruscan will reimburse Resolute
from 50 per cent of its share of future project cash flow.
    Resolute completed an updated 43-101 compliant resource estimation
earlier this year for the Tabakoroni deposit on the Finkolo permit to a
vertical depth of approximately 120 meters from surface. At a
one-gram-per-tonne cut-off, 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
    Resolute is initiating a mining 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.

    Dominase and Kente Reconnaissance Licenses, Ghana

    Results from geochemical surveys in southwestern Ghana have identified
several kilometer scale gold anomalies in the Kumasi Sedimentary Basin along a
favourable trend that parallels the prolific Ashanti Volcanic Belt, within
20 kilometers of the 60 million ounce Obausi Mine. The surveys were carried
out over the 79 square kilometers Dominase Reconnaissance Licence and the
204 square kilometers Kente Reconnaissance Licence and comprise regional
stream sediment surveys on both permits, and wide spaced soil sampling on a
400 x 50 meter grid over Dominase.
    Over 175 stream sediment samples were collected over both permits and
returned several highly anomalous results in excess of 0.5 grams per tonne
gold, to a maximum of 1.4 grams per tonne gold. Over 3,900 soil samples have
been collected on Dominase which have confirmed widespread gold anomalies with
several samples in the 0.5 - 5.0 grams per tonne range. Follow up soil
sampling over the anomalies at a nominal 200 x 50 meter spacing is proceeding
on Dominase, and the regional soil sampling on Kente is in progress.
    These initial geochemical results are considered to be extremely
encouraging and point towards the emergence of a new gold belt. These permits
are being converted into prospecting licences and will be the focus of
exploration activities in Ghana in the next quarter.
    During the third quarter the Company invested $0.5 million in exploration
activities in Ghana. A total of $1.6 million was expended during the nine
months ended August 31, 2008 bringing the total investment to $5.1 million.

    Namibia Exploration Programs

    During the third quarter drilling was carried out on four targets in
northern Namibia on Etruscan's Kamanjab Project. The drilling targeted a
variety of commodities including gold, silver, base metals and rare earth
elements (REEs). These drill targets were selected following an extensive
period of exploration over very large tracts of ground, starting from a
grassroots level in late 2005 and represent four very different styles of
mineralization. The targets and their respective principal commodities are:

    - Lofdal Copper Mine (gold, copper, silver)
    - Noute-AK (gold, copper)
    - Lofdal-J (gold, silver, copper)
    - Lofdal Carbonatites (rare earth elements)

    Drill results from the first three targets did not return significant
results. Complete results from the rare earth targets are pending along with a
significant number of surface samples. A more complete update will be provided
upon receipt of all results. The Lofdal drill program consisted of 450 meters
in 6 holes, with additional drilling contingent on positive results. Results
from earlier exploration of the Lofdal carbonatites reported values up to
14.4 % ThO2, 0.63 % yttrium, 0.87 % cerium, 1.5% lanthanum and 0.74 %
neodymium. 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 third quarter, the Company invested $1 million in exploration
activities in Namibia. A total of $1.9 million was expended during the nine
months ended August 31, 2008 bringing the total investment to $4 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 is being
processed at the Tirisano DMS (dense media separation) plant and through four
16 foot pans installed near the DMS plant. The objective is 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. The operation is anticipated to recover over
2,500 carats per month at the forecasted monthly production rate of
100,000 cubic meters.
    During the quarter, 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.
    Etruscan Diamonds continued to make progress ramping up processing
operations at the Tirisano Mine during the quarter with production for the
three month period ending August 31, 2008 approximating 150,000 cubic meters
yielding 4,099 carats for an overall grade of 2.74 carats per hundred cubic
meters and a rough tender average value of US$589 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 during the third quarter was $2.5 million and $6.8 million
was capitalized for the nine months ended August 31, 2008 bringing the total
net investment in the Blue Gum Project to $26.6 million.
    Installation of a commercial scale pre-screening unit was completed
during the quarter which is expected to increase the pre-screening capacity.
This installation is critical to ensuring ramp up of the pan plants to the
steady state production rate of 60,000 cubic meters per month. Also, in order
to ensure uninterrupted power supply for operations, Etruscan Diamonds
purchased a 2.2 megawatt generator to provide backup power availability for
the entire mine site when grid power is unavailable.
    These capital items, as well as the excess of expenses over diamonds
revenues, were funded in part during the quarter by the proceeds of a rights
offering to the existing shareholders of Etruscan Diamonds. A total of
983,642 shares of Etruscan Diamonds Limited were issued at a price of $2.00
per share for net proceeds of approximately $2 million. Etruscan Resources
Inc. elected not to subscribe for its approximately one million share purchase
rights and these shares have been made available for issuance to third parties
by way of private placement. As of the date of this report, these shares had
not been subscribed to.
    During the month of September the Blue Gum operation processed
approximately 67,500 cubic meters yielding 1,899 carats for an average grade
for the month of 2.81 carats per hundred cubic meters. It is estimated that an
investment of $2 million will be required in the fourth quarter to further
develop the open pit at Tirisano to meet forecast production targets and to
continue ramp up activities. This investment is expected to be funded by a
combination of diamond revenues, additional bank financing, and/or the private
placement of the one million shares referred to above.


    In the third quarter of 2008, the Company completed a public offering of
common shares for net proceeds of $11.5 million. Pursuant to the financing a
total of 8,620,000 units were issued at a price of $1.45 per unit. Each unit
consisted of one common share and one-half of one common share purchase
warrant with each warrant entitling the holder to acquire a common share at a
price of $1.85 for a period of three years. The Company has assessed the fair
value of these warrants and allocated gross proceeds of $0.28 to each warrant.
In addition the Company issued an additional 509,500 over-allotment warrants
to the underwriters. The net proceeds allocated to the warrants is
$1.3 million. The warrants have been listed on the Toronto Stock Exchange and
trade under the symbol EET.WT.A.
    The Company had a working capital deficiency at August 31, 2008 of
$15.0 million as compared to a working capital surplus of $16.2 million at the
end of 2007. Available cash as at August 31, 2008 was $7.8 million. The
expected sources of cash for funding the Company's ongoing operations and
working capital deficiency include a combination of gold revenues, potential
additional debt or equity financing, as well as the disposition of assets as
well as a potential equity financing.

    Operating Results

    Etruscan's consolidated net income for the third quarter of 2008 was
$2.1 million or $0.02 per share compared to a net loss for the third quarter
of 2007 of $0.8 million or $0.01 per share. The third quarter results include
an unrealized gain on the financial derivative of $9.0 million ($0.07 per
share) and $0.5 million ($0.005 per share) for 2008 and 2007 respectively.
    Etruscan's consolidated net loss for the nine month period ended
August 31, 2008 was $20.5 million or $0.16 per share compared to a net loss of
$16.8 million or $0.16 for the prior year comparative period. The nine month
results include an unrealized loss on the financial derivative of $9.1 million
($0.07 per share) and $14.0 million ($0.14 per share) for 2008 and 2007
    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 August 31, 2008 was negative $36.3 million. The unrealized marked
to market amount represents the theoretical value on cancellation of the gold
option contracts based on market values as at August 31, 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.
    The financial statements have been prepared in accordance with Canadian
    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.

    About Etruscan Resources Inc.

    Etruscan Resources Inc. is a gold focused Canadian junior mining company
with dominant land positions in district scale gold belts covering more than
13,000 square kilometers in West Africa. Its principal mine development
projects include the Youga Gold Project in Burkina Faso (latest press release
dated October 8, 2008), the Agbaou Gold Project in Côte d'Ivoire (latest press
release dated February 21, 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 June 19,
2008). See press release dated May 6, 2008 for a comprehensive update of
explorations projects. 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 September 11, 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

    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 (
Accordingly, readers should not place undue reliance on forward-looking


For further information:

For further information: Richard Gordon, Investor Relations, (877)
465-3674, Fax (902) 832-6702,

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