EGU.L Regulatory News (EGU)

19 Mar 2009 07:00



MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEAR ENDED 31 DECEMBER 2008

The following discussion and analysis, prepared as at 19 March 2009, is intended to assist in the understanding and assessment of the trends and significant changes in the results of operations and financial conditions of European Goldfields Limited (the "Company"). Historical results may not indicate future performance. Forward-looking statements are subject to a variety of factors that could cause actual results to differ materially from those contemplated by these statements. The following discussion and analysis should be read in conjunction with the Company's audited consolidated financial statements for the years ended 31 December 2008 and 2007 and accompanying notes (the "Consolidated Financial Statements").

Additional information relating to the Company, including the Company's Annual Information Form, is available on the Canadian System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com. Except as otherwise noted, all dollar amounts in the following discussion and analysis and the Consolidated Financial Statements are stated in United States dollars.

Overview

The Company, a company incorporated under the Yukon Business Corporations Act, is a resource company involved in the acquisition, exploration and development of mineral properties in Greece, Romania and South-East Europe.

The Company's Common Shares are listed on the AIM Market of London Stock Exchange plc and on the Toronto Stock Exchange (TSX) under the symbol "EGU".

Greece - European Goldfields holds a 95% interest in Hellas Gold S.A. Hellas Gold owns three major gold and base metal deposits in Northern Greece. The deposits are the polymetallic operation at Stratoni, the Olympias project which contains gold, zinc, lead and silver, and the Skouries copper/gold porphyry project. Hellas Gold commenced production at Stratoni in September 2005 and commenced selling an existing stockpile of gold concentrates from Olympias in July 2006. Hellas Gold is applying for permits to develop the Skouries and Olympias projects.

Romania - European Goldfields owns 80% of the Certej gold/silver project in Romania. In July 2008, the National Agency of Mineral Resources approved the technical feasibility study in support of its permit application and issued a new mining permit for the Certej project. 

  Results of operations

The Company's results of operations for the year and three-month period ended 31 December 2008 were comprised primarily of activities related to the results of operations of the Company's 95%-owned subsidiary Hellas Gold in Greece and the Company's exploration and development program in Romania. Hellas Gold's operational results for the eight most recently completed quarters are summarised in the following tables:

Stratoni Mine (Greece)
	2008 Q4	2008 Q3	2008 Q2	2008 Q1	2007 Q4	2007 Q3	2007 Q2	2007 Q1
Inventory (start of period)
Ore mined (wet tonnes)	6,489	1,003	2,816	-	4,868	4,603	843	2,499
Zinc concentrate (tonnes)	2,078	5,660	2,745	1,689	2,797	2	3,524	37
Lead/silver concentrate (tonnes)	1,294	1,238	2,213	49	2,042	2,150	1,846	214
Production
Ore mined (wet tonnes)	70,468	69,847	73,137	58,208	50,643	56,075	53,088	55,069
Ore milled (tonnes)	73,320	63,040	73,280	53,675	53,813	54,499	48,179	55,258
- Average grade: Zinc (%)	8.80	8.82	10.37	9.37	9.00	8.42	11.57	11.39
Lead (%)	6.54	6.40	6.21	5.35	8.12	7.55	9.14	7.38
Silver (g/t)	167	160	155	134	206	186	232	180
Zinc concentrate (tonnes)	12,106	10,451	14,139	9,427	9,082	8,506	10,485	11,731
- Containing: Zinc (tonnes)	5,914	5,132	7,004	4,644	4,425	4,194	5,170	5,760
Lead concentrate (tonnes)	6,750	5,531	6,443	4,035	6,012	5,586	5,955	5,406
- Containing: Lead (tonnes)	4,434	3,726	4,201	2,653	4,021	3,781	4,109	3,744
Silver (oz)	336,336	280,305	316,354	207,215	316,837	297,059	328,879	288,023
Sales
Zinc concentrate (tonnes)	11,210	14,033	11,224	8,371	10,191	5,710	14,007	8,244
- Containing payable: Zinc (tonnes)*	4,591	5,818	4,633	3,454	4,209	2,364	5,855	3,463
Lead concentrate (tonnes)	7,556	5,475	7,418	1,872	8,004	5,694	5,651	3,774
- Containing payable: Lead (tonnes)*	4,775	3,495	4,628	1,188	5,082	3,759	3,636	2,486
Silver (oz)*	363,205	263,464	355,298	95,582	399,272	297,321	285,349	190,292
Cash operating cost per tonne milled ($)	145	164	161	164	175	144	135	138
Cash operating cost per tonne milled (€)	109	109	103	110	121	105	100	104
Inventory (end of period)
Ore mined (wet tonnes)	1,778	6,489	1,003	2,816	-	4,868	4,603	843
Zinc concentrate (tonnes)	2,975	2,078	5,660	2,745	1,689	2,797	2	3,524
Lead/silver concentrate (tonnes)	488	1,294	1,238	2,213	49	2,042	2,150	1,846
Financial information (in thousands of US dollars)
Sales ($)	8,465	13,250	13,000	10,097	18,483	16,634	22,866	14,215
Gross profit ($)	(7,060)	171	(198)	3,060	6,147	8,425	13,991	8,294
Capital expenditure ($)	3,543	2,496	2,086	3,111	3,779	12,142	4,673	1,564
Amortisation and depletion ($)	1,827	1,571	1,215	997	2,000	1,256	837	653

 

Sale of Gold-Bearing Concentrates from Existing Stockpile at Olympias (Greece)
	2008 Q4	2008 Q3	2008 Q2	2008 Q1	2007 Q4	2007 Q3	2007 Q2	2007 Q1
Sales
Gold concentrate (dmt)	18,566	12,710	22,479	9,778	21,385	28,393	12,686	17,090
Financial information (in thousands of US dollars)
Sales ($)	4,309	2,851	5,461	2,611	4,232	5,029	2,078	2,868
Gross profit ($)	2,995	1,222	3,668	1,789	1,279	2,848	958	1,845
Amortisation and depletion ($)	106	72	129	56	(134)	265	76	120

Lead and zinc prices troughed in Q4 2008, and Q4 base metal revenues were impacted accordingly. In addition, $1.6 million of prior quarter pricing adjustments were made, further depressing base metal revenues. Revenues from the sale of Olympias gold concentrates benefitted from higher tonnages sold compared to Q3.

Q4 unit operating costs of €109 per tonne remained the same as Q3. Benefits of the increase in throughput over Q3 were offset by higher repairs and maintenance costs incurred in the quarter. In dollar terms, the weakening euro reduced Q4 dollar costs by $19 to $145 per tonne from $164 per tonne in Q3.

Summary of quarterly results

The Company's financial results for the eight most recently completed quarters are summarised in the following table:

(in thousands of US dollars, except per share amounts)	2008 Q4 $	2008 Q3 $	2008 Q2 $	2008 Q1 $	2007 Q4 $	2007 Q3 $	2007 Q2 $	2007 Q1 $
Statement of profit and loss
Sales	12,774	16,101	18,461	12,708	22,715	21,663	24,944	17,083
Cost of sales	16,839	14,708	14,991	7,859	15,289	10,390	9,995	6,944
Gross profit	(4,065)	1,393	3,470	4,849	7,426	11,273	14,949	10,139
Interest income	1,164	1,306	1,502	1,757	2,699	2,320	1,116	453
Foreign exchange gain/(loss)	(6,253)	(2,800)	(27)	2,674	(2,173)	6,494	(265)	(152)
Hedge contract profit	3,165	1,362	391	-	-	-	-	-
Share of loss in equity investment	(3)	(66)	(36)	-	-	-	-	-
Expenses	5,253	6,054	5,058	5,017	6,385	4,819	4,875	4,764
Profit/(loss) before income tax	(11,245)	(4,859)	242	4,263	1,567	15,268	10,925	5,676
Income taxes	17,067	(451)	644	(621)	2,062	(2,764)	(2,796)	(1,719)
Profit/(loss) after income tax	5,822	(5,310)	886	3,642	3,629	12,504	8,129	3,957
Non-controlling interest	519	267	(74)	(233)	(29)	(348)	(2,794)	(1,848)
Profit/(loss) for the period	6,341	(5,043)	812	3,409	3,600	12,156	5,335	2,109
Earnings/(loss) per share	0.04	(0.03)	0.00	0.02	0.02	0.07	0.04	0.02
Balance sheet (end of period)
Working capital	192,675	208,609	216,822	225,673	226,431	224,289	211,637	45,201
Total assets	766,095	775,369	796,537	794,911	782,131	744,998	729,774	325,501
Non current liabilities	155,727	183,881	185,897	184,635	182,092	168,170	165,125	56,671
Statement of cash flows
Deferred exploration and development costs - Romania	1,981	1,420	1,092	1,603	2,133	1,658	1,248	696
Plant and equipment - Greece	12,998	2,971	3,065	7,147	3,779	12,142	4,673	1,577
Deferred development costs - Greece	545	519	656	769	915	491	520	421

Selected financial information

The Company's financial results for the years ended 31 December 2008, 2007 and 2006, and the three-month periods ended 31 December 2008 and 2007 are summarised in the following table:

Years ended 31 December			Three-months ended 31 December
(in thousands of US dollars)	2008 $	2007 $	2006 $	2008 $	2007 $
Statement of profit and loss
Sales	60,044	86,405	52,438	12,774	22,715
Cost of sales	54,397	42,618	25,186	16,839	15,289
Gross profit	5,647	43,787	27,252	(4,065)	7,426
Interest Income	5,729	6,588	1,445	1,164	2,699
Hedge contract profit	4,918	-	-	3,165	-
Foreign exchange gain/(loss)	(6,406)	3,904	(752)	(6,253)	(2,173)
Share of loss in equity investment	105	-	-	3	-
Expenses	21,382	20,844	15,937	5,253	6,385
Profit/(loss) before income tax	(11,599)	33,435	12,008	(11,245)	1,567
Income taxes	16,639	(5,217)	(4,824)	17,067	2,062
Profit/(loss) after income tax	5,040	28,218	7,184	5,822	3,629
Non-controlling interest	479	(5,019)	(4,182)	519	(29)
Profit for the period	5,519	23,199	3,002	6,341	3,600
Earnings per share	0.03	0.16	0.03	0.04	0.02
Balance sheet (end of period)
Working capital	192,675	226,431	41,854	192,675	226,431
Total assets	766,095	782,131	311,943	766,095	782,131
Non current liabilities	155,727	182,092	54,181	155,727	182,092
Statement of cash flows
Deferred exploration and development costs - Romania	6,096	5,735	3,294	1,981	2,133
Plant and equipment - Greece	26,181	21,606	7,579	12,998	3,779
Deferred development costs - Greece	2,489	2,347	4,032	545	915

The breakdown of deferred exploration and development costs per mineral property for the years ended 31 December 2008, 2007 and 2006, and the three-month periods ended 31 December 2008 and 2007 is as follows:

	Years ended 31 December						Three-month periods ended 31 December
	2008		2007		2006		2008		2007
(in thousands of US dollars)	$	%	$	%	$	%	$	%	$	%
Romanian mineral properties
Certej	5,674	93	5,305	92	2,965	90	1,806	91	1,935	91
Other	422	7	430	8	329	10	175	9	198	9
	6,096	100	5,735	100	3,294	100	1,981	100	2,133	100
Greek mineral properties
Stratoni	492	20	1,006	43	64	2	(22)	(4)	766	84
Skouries	1,541	62	1,173	50	2,806	70	396	73	58	6
Olympias	362	14	168	7	1,162	28	77	14	91	10
Other	94	4	-	-	-	-	94	17	-	-
	2,489	100	2,347	100	4,032	100	545	100	915	100
Total	8,585		8,082		7,326		2,526		3,048

The Certej exploitation licence and the Baita-Craciunesti exploration licence are held by the Company's 80%-owned subsidiary, Deva Gold S.A. ("Deva Gold"). Minvest S.A. (a Romanian state owned mining company), together with three private Romanian companies, hold the remaining 20% interest in Deva Gold. The Company is required to fund 100% of all costs related to the exploration and development of these properties. As a result, the Company is entitled to the refund of such costs (plus interest) out of future cash flows generated by Deva Gold, prior to any dividends being distributed to shareholders. The Voia and Cainel exploration licences are held by the Company's wholly-owned subsidiary, European Goldfields Deva SRL.

The Company recorded a loss (before tax) of $11.60 million for the year ended 31 December 2008, compared to a profit (before tax) of $33.44 million for the year ended 31 December 2007. The Company recorded a net profit (after tax and non-controlling interest) of $5.52 million ($0.03 per share) for the year ended 31 December 2008, compared to a net profit of $23.20 million ($0.16 per share) for the year ended 31 December 2007.

The Company recorded a loss (before tax) of $11.25 million for the three-month period ended 31 December 2008, compared to a profit (before tax) of $1.57 million for the three-month period ended 31 December 2007. The Company recorded a net profit (after tax and non-controlling interest) of $6.34 million ($0.04 per share) for the three-month period ended 31 December 2008, compared to a net profit of $3.60 million ($0.02 per share) for the three-month period ended 31 December 2007.

The following factors have contributed to the above:

 

Liquidity and capital resources

As at 31 December 2008, the Company had cash and cash equivalents of $170.30 million, compared to $218.84 million as at 31 December 2007, and working capital of $192.68 million, compared to $226.43 million as at 31 December 2007.

The decrease in cash and cash equivalents as at 31 December 2008, compared to the balances as at 31 December 2007, resulted primarily from capital expenditure in Greece ($26.18 million), payment of taxation ($10.33 million), the effect of foreign currency translation on cash ($6.29 million), deferred exploration and development costs in Romania ($6.1 million), the purchase of land ($2.71 million), investment in an associate ($2.69 million), operating cash flow ($1.66 million) and deferred development costs in Greece ($2.49 million), offset by changes in working capital balances ($2.00 million), advanced sales proceeds from offtakers ($3.56 million) and release of restricted investment ($4.90 million).

The following table sets forth the Company's contractual obligations including payments due for each of the next five years and thereafter:

Payments due by period
(in thousands of US dollars)
Contractual obligations	Total	Less than 1 year	2 - 3 years	4 - 5 years	After 5 years
Operating lease (London office)	945	180	360	360	45
Operating lease (Athens office)	1,157	145	289	289	434
Outotec OT - Processing Plant	32,722	32,722	-	-	-
Total contractual obligations	34,824	33,047	649	649	479

In 2009, the Company expects to spend a total of $51 million in capital expenditures to fund the development of its project portfolio. This amount comprises $5 million at its existing operation at Stratoni to complete the expansion of the internal underground infrastructure at Mavres Petres and upgrade the mill, $10 million at Olympias as part of the refurbishment of the mine and process plant, and $30 million at Skouries as the Company expects to continue to spend on long lead time equipment and engineering studies. At Certej, the Company expects to spend $6 million as it progresses through the final stages of environmental permitting, advances through the basic and detailed engineering phases and continues exploration around Certej. In addition to its capital expenditure programme, the Company expects to spend $3 million in exploration over the wider licence area in Greece and Turkey, $9 million on Hellas Gold administrative and overhead and water treatment expenses, and $5 million on corporate administrative and overhead expenses. The Company expects to fund all such costs from existing cash balances and operating cash flow generated from its Hellas Gold operations.

Transactions with related parties

During the year ended 31 December 2008, Hellas Gold incurred costs of $41.85 million (2007 - $27.89 million) for management, technical and engineering services received from a related party, Aktor S.A., a 5% shareholder in Hellas Gold. As at 31 December 2008, Hellas Gold had accounts payable of $3.63 million (2007 - $2.13 million) to Aktor S.A. These expenditures were contracted in the normal course of operations and are recorded at the exchange amount agreed by the parties. 

Critical accounting estimates 

The consolidated financial statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in Canada ("Canadian GAAP"), which assumes the Company will be able to realise assets and discharge liabilities in the normal course of business for the foreseeable future. The consolidated financial statements do not include the adjustments that would be necessary should the Company be unable to continue as a going concern and reflect the following critical accounting estimates.

Deferred exploration and development costs - Acquisition costs of resource properties, together with direct exploration and development costs incurred thereon, are deferred and capitalised. Upon reaching commercial production, these capitalised costs are transferred from exploration properties to producing properties on the consolidated balance sheets and are amortised into operations using the unit-of-production method over the estimated useful life of the estimated related ore reserves.

Based on annual impairment reviews made by management, in the event that the long-term expectation is that the net carrying amount of these capitalised exploration and development costs will not be recovered such as would be indicated where:

- Producing properties:

- Exploration properties:

then the carrying amount is written down to fair value accordingly and the write-down amount charged to operations.

Impairment of long-lived assets - All long-lived assets and intangibles held and used by the Company are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If changes in circumstances indicate that the carrying amount of an asset that an entity expects to hold and use may not be recoverable, future cash flows expected to result from the use of the asset and its disposition must be estimated. If the undiscounted value of the future cash flows is less than the carrying amount of the asset, impairment is recognised based on the fair value of the assets. 

Asset retirement obligation - The fair value of the liability of an asset retirement obligation is recorded when it is legally incurred and the corresponding increase to the mineral property is depreciated over the life of the mineral property. The liability is adjusted over time to reflect an accretion element considered in the initial measurement at fair value and revisions to the timing or amount of original estimates and drawdowns as asset retirement expenditures are incurred. As at 31 December 2008 and 2007, the Company had an asset retirement obligation relating to its Stratoni property in Greece.

Revenue recognition - Revenues from the sale of concentrates are recognised and are measured at market prices when the rights and obligations of ownership pass to the customer. A number of the Company's concentrate products are sold under pricing arrangements where final prices are determined by quoted market prices in a period subsequent to the date of sale. These concentrates are provisionally priced at the time of sale based on forward prices for the expected date of the final settlement. The terms of the contracts result in non-hedge derivatives that do not qualify for hedge accounting treatment, because of the difference between the provisional price and the final settlement price. These embedded derivatives are adjusted to fair value through revenue each period until the date of final price determination. Subsequent variations in the price are recognised as revenue adjustments as they occur until the price is finalised.

Equity-based compensation - The Company operates a share option plan, a restricted share unit plan and a deferred phantom unit plan. The Company accounts for equity-based compensation granted under such plans using the fair value method of accounting. Under such method, the cost of equity-based compensation is estimated at fair value and is recognised in the profit and loss statement as an expense, or capitalised to deferred exploration and development costs when the compensation can be attributed to mineral properties. This cost is recognised over the relevant vesting period for grants to directors, officers and employees, and measured in full at the earlier of performance completed or vesting for grants to non-employees. Any consideration received by the Company on exercise of share options is credited to share capital.

Estimates, risks and uncertainties - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the period. Significant estimates and assumptions include those related to the recoverability of deferred exploration, development costs for mineral properties, asset retirement obligations and equity based compensation. While management believes that these estimates and assumptions are reasonable, actual results could vary significantly.

Significant changes in accounting policies

Capital Disclosures - Effective 1 January 2008, the Company adopted CICA Handbook, Section 1535, Capital disclosures. The new standard requires disclosures of qualitative and quantitative information that enables users of financial statements to evaluate the Company's objectives, policies and processes for managing capital.

Inventories - Effective 1 January 2008, the Company adopted the CICA Handbook Section 3031, Inventories. The new section requires inventories to be measured at the lower of cost and net realisable value and provides guidance on the cost methodology used to assign costs to inventory, disallows the use of last-in-first-out inventory costing methodology and requires that, when circumstances which previously caused inventories to be written down below cost no longer exist, the amount previously written down is to be reversed. Upon adoption, the impact to the financial statements arising was immaterial.

Standards of Financial Statement Presentation - Effective 1 January 2008, the Company adopted CICA Handbook Section 1400, General standards of Financial Statement Presentation. This section provides guidance related to management's assessment of the Company's ability to continue as a going concern. The additional requirement requires management to make an assessment of the Company's ability to continue as a going concern and to disclose any material uncertainties related to events or conditions that may cast significant doubt upon the entity's ability to continue as a going concern. The adoption of this standard had no impact on the Company's presentation of its financial position.

Financial Instruments Presentation and Disclosures - Effective 1 January 2008, the Company adopted CICA Handbook Sections 3862 - Financial instruments - disclosures, and 3863 - Financial instruments - Presentation. These new Sections are a replacement of and represent a revision and enhancement to Section 3861 - Financial instruments - Presentation and disclosure. Under the new standards, the Company is required to disclose information about the significance of financial instruments for its financial position and performance and qualitative and quantitative information about its exposure to risks arising from financial instruments, as well as management's objectives, policies and processes for managing such risks. The adoption of these standards did not have an impact on the classification and valuation of financial instruments. 

Change in functional currency - Hellas Gold completed a long term planning exercise on its Stratoni mine. As a stand alone business, Stratoni was shown to generate excess of US dollar revenues over Euro expenses for its life of mine. Hellas Gold also has a series of development projects which will increase the excess of US dollar revenues over Euro denominated costs. Also taken into consideration along with the net cash flows were the following factors:

Overall, it was deemed that the net exposure to the US dollar was greater than the exposure to the Euro, and that the functional currency of Hellas Gold should change to the US dollar. The change in functional currency was effective 1 January 2008 and applied prospectively.

International Financial Reporting Standards ("IFRS") - In 2006, the Canadian Accounting Standards Board ("AcSB") published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over an expected five year transitional period. In February 2008, the AcSB confirmed that publicly listed companies will be required to adopt IFRS for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011, and in April 2008, the AcSB issued for comment its Omnibus Exposure Draft, Adopting IFRS in Canada. Early adoption may be permitted, however it will require exemptive relief on a case by case basis from the Canadian Securities Administrators. 

The Company has begun assessing the adoption of IFRS and is in the process of completing its overall conversion plan. The plan assesses the possible benefits of early adoption, the key differences between IFRS and Canadian GAAP including disclosures as well as a timeline for implementation.

As part of the plan, the Company has appointed a team within the group finance function to assess and implement the conversion process, and key personnel have received IFRS training. The Company benefits from having members of the finance function at the subsidiary level who are already experienced in the preparation of IFRS accounts. The team has already identified the material differences between IFRS and Canadian GAAP, and the process of identifying other areas of potential differences is near completion. The Company has already been preparing a detailed reporting pack under IFRS on a quarterly basis. This IFRS pack includes accounting adjustments for all material differences between IFRS and Canadian GAAP, with the exception of IFRS 1. During 2009, the team will focus on preparation for the implementation of IFRS 1, and the increased level of IFRS disclosure compared to Canadian GAAP.

Disclosure controls and procedures & internal control over financial reporting

The Chief Executive Officer and the Chief Financial Officer of the Company (the "Certifying Officers") have established and maintained in the year ended 31 December 2008 disclosure controls and procedures ("DC&P") and internal control over financial reporting ("IFCR") for the Company.

The Certifying Officers have caused DC&P, as defined in National Instrument 52-109 ("NI 52-109"), to be designed under their supervision, to provide reasonable assurance that material information relating to the Company and its subsidiaries is made known to the Certifying Officers by others within those entities, as appropriate to allow decisions regarding required disclosure within the time periods specified by legislation, particularly during the period in which interim and annual filings are being prepared.

The Certifying Officers have evaluated the effectiveness of the Company's DC&P as at 31 December 2008. Based upon that evaluation, the Certifying Officers have concluded that the DC&P are adequate and effective for the year ended 31 December 2008.

The Certifying Officers have caused internal control over financial reporting, as defined in NI 52-109, to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Canadian GAAP.

As of December 31, 2008 the Certifying Officers assessed the effectiveness of the Company's internal control over financial reporting using the criteria contained in the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon that evaluation, the Certifying Officers concluded that the internal controls and procedures are adequate and effective for the year ended 31 December 2008.

During the year ended 31 December 2008, there has been no change in the Company's internal control over financial reporting that have materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

The Certifying Officers believe that disclosure controls and procedures and internal control systems can only provide reasonable assurance, and not absolute assurance, that such objectives are met.

Outstanding share data

The following represents all equity shares outstanding and the numbers of common shares into which all securities are convertible, exercisable or exchangeable as at 18 March 2009:

Common shares: 179,807,381

Common share options: 3,241,665

Restricted share units: 614,779

Common shares (fully-diluted): 183,663,825

Preferred shares: Nil

Outlook

Reference is made to the Company's news release dated 19 March 2009 which accompanies this Management's Discussion and Analysis.

Risks and uncertainties

The risks and uncertainties affecting the Company, its subsidiaries and their business are discussed in the Company's Annual Information Form for the year ended 31 December 2008, filed on SEDAR at www.sedar.com.

ENDFR KGGMFKLVGLZG