European Goldfields Limited - Results for Q1 2010

WHITEHORSE, May 13 /CNW/ - European Goldfields Limited (AIM: EGU /TSX: EGU) ("European Goldfields" or the "Company") today reports its results for the quarter ended 31 March 2010. The financial statements, as well as the accompanying Management's Discussion & Analysis, are available for review at http://www.egoldfields.com/egoldfields/en/media/news and should be read in conjunction with this news release.

    
    Operational highlights:
        -  Final permit approved for grant of the PUZ at Certej
        -  Mandate for Certej project finance signed
        -  Expansion of Certej Project Team
        -  Olympias surface stockpile sold
        -  Olympias plant refurbishment well advanced
        -  Stratoni production up 11%

    Corporate activity:
        -  Increase in institutional shareholder base and traded free float

    Financial highlights:
        -  Sales of $10.4 million excluding gold sales
        -  Return to gross profit versus Q1 2009
        -  Working capital of $129 million
    

Commenting on the results, Martyn Konig, Executive Chairman and President of European Goldfields, said:

"2010 is a year of delivery for European Goldfields. We remain on course to reach our targets of securing final permits in both Greece and Romania within the year. During this quarter, we have demonstrated steady progress on permitting, engineering and financing and over the course of the next quarter we expect to demonstrate further progress as we build on our achievements this year."

    
                           SELECTED FINANCIAL DATA

                                                -----------------------------
                                                      Quarter ended 31 March
                                                -----------------------------
    (in thousands of US dollars, except                    2010         2009
     per share amounts)                                       $            $
    -------------------------------------------------------------------------
    Statement of profit and loss
    Sales                                                10,435       10,742
    Gross profit                                            679         (342)
    Loss before income tax                               (5,824)      (3,979)
    Income taxes                                           (438)         540
    Loss after income tax                                (6,262)      (3,439)
    Non-controlling interest                                (77)         183
    Loss for the period                                  (6,339)      (3,256)
    Loss per share                                        (0.03)       (0.02)
    -------------------------------------------------------------------------

                                                -----------------------------
                                                       31 March  31 December
                                                           2010         2009
    (in thousands of US dollars)                              $            $
    -------------------------------------------------------------------------
    Balance sheet
    Working capital                                     129,143      144,899
    Total assets                                        737,871      744,100
    -------------------------------------------------------------------------


                           OPERATIONAL HIGHLIGHTS

    ROMANIA
        -  Final permit approved for grant of the PUZ at Certej
        -  Mandate for Certej project finance signed
        -  Expansion of Certej Project Team
    

Final permit approved for grant of the PUZ at Certej - The last remaining approval required for the grant of the Zonal Urbanisation Plan ("PUZ") relating to Certej was recently issued by the Ministry of Environment. Formal public notice of this approval has been issued in Romania. The grant of the PUZ represents a significant milestone which takes European Goldfields one step closer to production. Certej contains 2.4 million reserve ounces of gold, plus 17.3 million reserve ounces of silver, and lies in an area which was a major gold producer historically and retains considerable future potential. The Company is well advanced in the next and final substantive part of the permitting process for Certej, which is the approval of the full Environmental Impact Study.

Romanian engineering group Cepromin are contracted to produce the documentation required for submission to the Romanian state in order to obtain the construction permit for Certej and work is well advanced with final site investigations being undertaken in parallel with the required detailed design packages.

Mandate for Certej project finance signed - A Mandate letter was signed on 30 March with a group of financial institutions to arrange and underwrite a US$125 million debt financing to be used to part fund the development costs of the Certej project. This has been signed on the basis of a term sheet which has been agreed between the Company and the mandate lead arrangers, each of which has received approval to proceed with the transaction through their respective initial credit processes.

This is an important further step in the development of the Certej project and in the Company's wider relationships with the debt capital markets. European Goldfields is very pleased to be working with this group of financial institutions all with extensive experience and excellent credentials in global mining finance.

Expansion of Certej Project team - The recent appointment of Alan Baker as Project Manager for the Certej gold-silver project in Romania is a valuable addition to the team. Alan takes responsibility for advancing the Certej project through the development process towards production using his vast experience in the mining sector. Over the past 30 years he has gained experience in project management and the design and construction of plant infrastructure and open pit operations. The build out of the Certej Project team will continue as the project progresses.

    
    GREECE
        -  Sale of Olympias gold stockpile complete
        -  Olympias plant refurbishment well advanced
        -  Stratoni production up 11%
    

Sale of Olympias gold stockpile complete - Hellas Gold has fully depleted the surface stockpile of pyrite gold concentrate at Olympias. Sales of Olympias gold concentrate will resume once Hellas Gold receives the permits to process 2.4Mt of stockpiled tailings arising from the previous operations at Olympias and when plant rehabilitation is completed.

Olympias plant refurbishment well advanced - Hellas Gold has signed an Engineering and Refurbishment Contract with the engineering group Renewable, an engineering consultancy based in Athens. Work on the design and procurement lists for the Olympias mill and flotation plant refurbishment is well advanced in preparation for the retreatment of gold-bearing tailings. The tailings total 2.4 million tonnes grading 3.4 g/t Au and extensive test work indicates they will yield some 350,000 tonnes of gold bearing concentrate grading 20 to 23 g/t. Quotes have been received for the majority of the major equipment required for refurbishment and improvements to existing infrastructure are underway including the re-surfacing of the access road and site preparation.

Stratoni production up 11% - The Company's cash flow positive mining operations at Stratoni continue to demonstrate European Goldfields' permitting and environmental capabilities and commitment to the highest levels of social responsibility.

The Company's 95% owned subsidiary Hellas Gold mined a total of 63,294 wet tonnes in Q1 2010 (Q1 2009 - 56,892). This exceeds the budgeted production by some 11%. This was in spite of an extreme rainfall event in early February that did not materially impact either facilities or production. Hellas Gold and Aktor were the major contributors to successful efforts in assisting the local community and effected rapid repairs to both local infrastructure and dwellings.

    
                                                      Q1 2010        Q1 2009
    Production
    Ore mined (wet tonnes)                             63,294         56,892
    Sales
    Zinc concentrate (tonnes)                           8,830         10,286
    - Containing payable: Zinc (tonnes)*              3,633          4,144
    Lead concentrate (tonnes)                           3,759          3,762
    - Containing payable: Lead (tonnes)*              2,385          2,347
                          Silver (oz)*              178,184        183,504
    Inventory (end of period)
    Ore mined (wet tonnes)                             14,089          4,010
    Zinc concentrate (tonnes)                           2,839            621
    Lead/silver concentrate (tonnes)                    1,105          1,393
    * Net of smelter payable deductions


                             CORPORATE ACTIVITY
    

Increase in Institutional Shareholder Base and Traded Free Float - On 8 April 2010 a number of major institutional investors bought 6,684,641 common shares in the Company from Mr. Dimitrios Koutras, a Non-Executive Director of European Goldfields, in the London market at a price of (pnds stlg)4.35 per share. This transaction reflects strong investor appetite for the Company resulting from recent progress in its permitting processes. Mr. Koutras now owns 10,408,715 common shares in the Company representing approximately 5.7% of the total issued common shares.

The shares sold by Mr. Koutras were purchased in the market in November 2008 at a time when European Goldfields needed to demonstrate the support of its management and directors. Accordingly, in selling the shares on 8 April 2010, Mr. Koutras' position in the Company reverts back to his core long term holding level in European Goldfields. The Company's management is particularly pleased that this sale has facilitated a further broadening of the Company's investor base. The Company is also pleased to report that Mr. Koutras remains fully committed to European Goldfields and expects no further reduction in his holding in the Company.Aktor Constructions International, European Goldfields' largest shareholder with 35,447,246 common shares, or approximately 19.4% of the total issued common shares, is also fully supportive of the Company and does not have any plans to reduce its current position.

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 will 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.

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 2009, 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 please see the Company's new website at www.egoldfields.com

For further information: European Goldfields: Sally Schofield, VP Investor Relations, e-mail: [email protected], Tel: [phone]; Buchanan Communications: Bobby Morse/Katharine Sutton, e-mail: [email protected], Tel: [phone]; RBC Capital Markets: Josh Critchley, e-mail: [email protected]; Matthew Coakes, e-mail: [email protected], Tel: [phone]