European Goldfields Limited - Results for Q3 2011

WHITEHORSE, Nov. 10, 2011 /CNW/ - European Goldfields Limited (TSX: EGU) (AIM: EGU) ("European Goldfields" or the "Company") today reports its results for the quarter ended 30 September 2011.  The financial statements, as well as the accompanying management's discussion and analysis should be read in conjunction with this news release and are available for review at



  • US$750 million debt package arranged
  • All projects fully financed
  • Additional funding for exploration


  • Formal approval of Environmental Impact Study
  • Invitation to Bid issued for construction of Skouries plant
  • Olympias mill start-up on schedule for Q2 2012


  • Cross-border public consultation complete
  • Technical Analysis Committee due to reconvene to issue formal decision on environmental permit


  • Preparation work for Piavitsa drill programme complete
  • Drilling at Salinbas, Turkey, confirms mineralisation


  • Sales of US$16.0 million
  • Gross profit of US$4.8 million
  • Working capital US$23.1 million
  • Terms signed with Qatar Holding for US$600 million Loan Facility

Mark Rachovides, Executive Vice President, commented:

"We are very pleased to announce that during the quarter the Company entered into Heads of Terms with Qatar Holding for a US$600m loan facility, placing the company in a unique position and fully financed to production.  Documentation for the transaction is progressing on schedule, and we expect to have completed all of the regulatory formalities and sought shareholder approval of the financing package by the end of the year.  Following our recent permitting approvals and reserve update and with build out schedules firmly in place, this comprehensive and flexible solution allows us to drive construction and development of our gold projects forward at pace.  We also have the financing flexibility to accelerate our exploration programmes, starting at Piavitsa, and thus unlock the resource potential of our area of operation."


  Quarter ended 30 September
(in thousands of US dollars,
except per share amounts)
Statement of profit and loss    
Sales 16,015 9,204
Gross profit 4,803 548
Profit/(loss) before income tax (9,785) (2,601)
Income taxes (1,316) (37)
Profit/(loss) after income tax (11,101) (2,638)
Non-controlling interest 72 141
Profit/(loss) for the period (11,029) (2,497)
Earnings/(loss) per share (0.06) (0.01)
(in thousands of US dollars) 30 Sept 2011
31 Dec 2010
Balance sheet    
Working capital 23,141 75,887
Total assets 498,608 507,293

The Company's Stratoni base metal operation had another strong quarter, generating revenues of $16.0 million and gross profits of $4.8 million, driven by strong sales and metal prices.  After overheads and other expenses, the Company recorded a loss before tax of $9.8 million for the three month period to 30 September 2011, compared to a loss before tax of $2.6 million for the three month period to 30 September 2010. Working capital balances fell to $23.1 million, but after the period end this was increased by the receipt of $14.7 million (€10.8 million) of recoverable taxes paid to Hellas Gold by the Greek Government.



Financing - On 1 October, the Company announced Heads of Terms with Qatar Holding LLC ("Qatar Holding") for the provision of a US$600 million 7 year Senior Secured Loan Facility.  The Company also proposes to offer unsecured Loan Notes for US$150 million to be made available to certain existing shareholders on the same economic terms as the Facility.  This US$750 million debt package will provide all the required capital for the Company's current project development, with additional funding for exploration.  In addition, the Company will issue 50.5 million warrants pro-rata to Qatar Holding and the subscribers to the Loan Notes. The financing package is subject to shareholder approval and the Company will be distributing the Proxy Circular and Proxy Form to shareholders shortly, with the meeting scheduled to take place in December.  The Company is also pleased to welcome Qatar Holding as a major shareholder in the Company further to their recent acquisition of 18,202,687 Common Shares.

Management - The Company recently announced that the Executive Chairman and President, Martyn Konig has taken a medical leave of absence as he recovers from a sudden illness. The Board is delighted to report that he is already making excellent progress in his recovery and looks forward to his return to the Company in the near future.  Mr. Fred Vinton has been appointed as acting Non-Executive Chairman with effect from 9 November 2011.


The Company is pleased to report that the prevailing economic and political uncertainty has not impacted either the Stratoni operation or the progress of Skouries and Olympias.  With a full financing package arranged the Company remains on track for first gold production in Q2 2012.

Skouries - During the quarter a formal Invitation to Bid has been issued for the processing plant construction package and key conditions of the contracts agreed, with responses expected to be received by mid-November. The earthworks and civil tender documentation and scope of work have been compiled and the contract prepared.  The invitations to established vendors for the remaining process equipment packages have been prepared and are being issued to ensure delivery times are within the project schedule. The recruitment process for key owner's team personnel continues to advance.

Olympias - Refurbishment continues at site and the adit has now been repaired to over 1,650m: the old timber support has been replaced with shotcrete and the adit has been enlarged to accommodate larger vehicles.  Sandblasting of the mill steel structures is complete and refurbishment of the existing conveyor belts will commence shortly. The earthworks and civils are also complete, and the buildings are being finished in preparation for plant commissioning and production of gold concentrate in 2012.  A full review of existing cement silos was carried out with replacements and repairs done as necessary.  Improved guarding and infrastructure has been put in place facilitating easier and safer access to site. All outstanding equipment required for the re-commissioning of the flotation plant has been ordered with the last deliveries scheduled to take place in Q1 2012 with start-up occurring in Q2 2012.

Detailed plans for the development of underground infrastructure are being put in place to enable underground work to commence swiftly once contracts have been agreed in early 2012. This includes an additional decline to facilitate haulage and improve ventilation, pumping and electrical distribution whilst affording the opportunity to decommission the shaft for hoisting purposes.

A programme of testwork which will lead to a Feasibility Study of the Flash Smelter to improve the gold payability has been initiated with Outotec. One of the deliverables of this programme will be enhanced accuracy of the capital and operating costs of the smelter.

Production at Stratoni - Key operational data from Stratoni were as follows:

  Q3 2011 Q3 2010
Ore mined (wet tonnes) 57,414 54,093
Zinc concentrate (tonnes) 10,998 10,298
Containing: Zinc (tonnes)* 5,514 5,123
Lead concentrate (tonnes) 4,739 4,630
Containing: Lead (tonnes)* 3,448 3,307
      Silver (oz)* 263,661 249,717
Zinc concentrate (tonnes) 13,939 8,818
Containing payable: Zinc (tonnes)* 5,795 3,672
Lead concentrate (tonnes) 3,744 2,691
Containing payable: Lead (tonnes)* 2,579 1,798
      Silver (oz)* 192,377 135,361
Inventory (end of period)    
Ore mined (wet tonnes) 185 9,074
Zinc concentrate (tonnes) 4,017 4,143
Lead/silver concentrate (tonnes) 2,908 2,841

* Net of smelter payable deductions

The concentrator plant continued to work well during the quarter with steady operational efficiencies achieved.  Hellas Gold, mined a total of 57,414 wet tonnes of ore in Q3 2011 (2010 - 54,093) and completed seven shipments for the period.  Significant stockpiles of both lead and zinc concentrates remained accrued at the end of the quarter ready for shipment.


Certej Project - The Invitation to Bid ("ITB") for the process plant was modified and re-issued and positive responses received. The technical projects have been completed ready for submission when required by the Romanian authorities.

The Company has completed the cross-border public consultations with Serbia and Hungary as required by international agreements. Deva Gold management team were present to address all queries relating to the development and operation of the project. With this complete, the Technical Analysis Committee ("TAC") and the environmental authorities are due to reconvene during Q4 in anticipation of final environmental endorsement for the project by year end.


Piavitsa - In preparation for imminent mobilisation of drill rigs at Piavitsa, new drill core logging and storage areas have been prepared and a new sample preparation laboratory is in place.  The team has conducted soil and lithological sampling over the entire Piavitsa extensions and the area has been re-mapped with all information captured and modelled in GIS.

Tsikara - The Company has identified new targets and several potential porphyry centres over the volcanic complex.  Systematic mapping of the porphyry target areas has further indicated the presence of mineralisation including gold in grab samples of around 1.5 g/t.

Romania - Mapping, lithological sampling and trenching of potential extensions to known mineralisation has been completed in preparation for drill testing anticipated in 2012.

Turkey - Drilling at Salinbas has confirmed the presence of high-sulphidation epithermal gold mineralisation.  The drill programme is almost complete, results of which will be announced before year end.


The Company continues to work toward a policy of zero harm and is actively working to improve the culture of proactively taking responsibility for individuals' actions.  In this regard, the Company has launched a series of initiatives known on site as the "Golden Rules" which apply to the Mavres Petres mine site and also the Stratoni mill. The policy is actively supported both by on site management and at senior management level and will be rolled out across the other sites as work commences.

About European Goldfields

European Goldfields is a developer-producer with globally significant gold reserves located within the European Union. The Company generates cash flow from its 95% owned Stratoni operation, a high grade lead/zinc/silver mine in North-Eastern Greece. European Goldfields is expected to evolve into a mid-tier producer through responsible development of its project pipeline of gold and base metal deposits at Skouries and Olympias in Greece and Certej in Romania. The Company plans future growth through development of its highly prospective exploration portfolio in Greece, Romania and Turkey.

Patrick Forward supervised and prepared the scientific and technical information included in this press release. Mr. Forward is a "qualified person" for purposes of National Instrument 43-101. Mr. Forward is the Company's Vice President of Projects and Exploration.

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 conversion of mineral resources to mineral reserves, the timing and amount of estimated future production, costs and timing of development of the Skouries, Olympias and Certej projects, completion of various financing options and permitting time lines. 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 receipt in a timely fashion of any further permitting for the Company's 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 2010, filed on SEDAR at 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 please see the Company's website at



SOURCE European Goldfields Ltd.

For further information:

European Goldfields 
Steve Sharpe, SVP Business Development
Tel: +44 (0)20 7408 9534
        Liberum Capital Limited
Simon Atkinson
Tom Fyson
Tel: +44 (0)20 3100 2000
Carole Cable / Fiona Micallef-Eynaud
e-mail :
Tel: +44 (0)20 7404 5959
        Evolution Securities Limited
Tim Redfern
Neil Elliot
Tel: +44 (0)20 7071 4300

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