EGU.L Regulatory News (EGU)

22 Mar 2007 08:57

European Goldfields Ltd22 March 2007 Immediate Release 22 March 2007 European Goldfields Limited The following table is a correction to that which appeared in RNS number 4744T,which was released at 7am this morning. Profit / (Loss) for the three monthsended 31st December 2005 was US$ (4,309,000). SELECTED FINANCIAL DATA Three months ended 31 December Year ended 31 December -------------------- --------------------(in thousands of 2006 2005 2006 2005US dollars,except per share $ $ $ $amounts) ----------- ----------- ----------- --------------------------Statement of lossand deficitSales 19,870 1,464 52,438 1,521Gross profit 10,669 97 27,252 154Profit/(loss) 6,616 (4,643) 12,008 (13,316)before income taxProfit/(loss) 4,349 (4,254) 7,184 (11,622)after income taxNon-controlling (1,973) 55 (4,182) 1,212interestProfit/(loss) for 2,376 (4,309) 3,002 (10,410)the periodEarnings/(loss) 0.02 (0.04) 0.03 (0.09)per share ----------- ----------- ----------- -------------------------- RESULTS FOR 2006 - DELIVERING ON PROMISES 22 March 2007 - European Goldfields Limited (AIM: EGU / TSX: EGU) ("EuropeanGoldfields" or the "Company") today reports its results for the financial yearended 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 EuropeanGoldfields, said: "We are delighted to be reporting annual net earnings for thefirst time in our history, and to have exceeded our production target in 2006for our Stratoni operations. Future growth will also come from our other threemajor gold and base metals projects which have made significant progress during2006. These are well on track with feasibility work completed and permittingprogressing as planned. With rapidly increasing cash flows and one of thelargest proven gold and base metal reserves in Europe, we remain on track tobecome 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 at10:00 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): 1-800-731-5319From the U.K. & France (toll free): 00-800-0000-2288From 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 availableuntil Thursday, 29 March 2007 at midnight by dialing (toll free) 1-877-289-8525or 1-416-640-1917, Passcode 21221811#. SELECTED FINANCIAL DATA Three months ended 31 December Year ended 31 December -------------------- --------------------(in thousands of 2006 2005 2006 2005US dollars,except per share $ $ $ $amounts) ----------- ----------- ----------- --------------------------Statement of lossand deficitSales 19,870 1,464 52,438 1,521Gross profit 10,669 97 27,252 154Profit/(loss) 6,616 (4,643) 12,008 (13,316)before income taxProfit/(loss) 4,349 (4,254) 7,184 (11,622)after income taxNon-controlling (1,973) 55 (4,182) 1,212interestProfit/(loss) for 2,376 (4,309) 3,002 (10,410)the periodEarnings/(loss) 0.02 (0.04) 0.03 (0.09)per share ----------- ----------- ----------- --------------------------(in thousands of US dollars) 31 December 31 December 2006 2005 $ $ ------------------ ------------ -------------Balance sheetWorking capital 41,854 33,765Total assets 311,943 266,618------------------ ------------ ------------- European Goldfields' audited consolidated financial statements and management'sdiscussion and analysis for the years ended 31 December 2006 and 2005 are filedon 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 subsidiaryHellas 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 salesof 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 Q42006 compared to Q3 2006, while decreasing by a marginal 6% for zinc. Production ramp-up in 2006 - Ore production rates from underground have steadilyincreased from 400 to almost 900 tonnes per day during 2006. Ore production isexpected to continue to increase more rapidly than initially anticipated, up toa maximum of 400,000 tonnes per year by the end of 2009. The successful ramp-up in production to date is a result of extensiverefurbishment of mine infrastructure undertaken in 2006. This included therefurbishment and re-equipping of mine workings and equipment, installation ofkey items such as a backfill pump to ensure tight fill in the upper levels, andbackfilling a large void inventory to provide working faces. Rehabilitation workat the Stratoni mill was also essentially complete by Q3 2006. In summary, Hellas Gold has redesigned the mine and is now operating at a steadyrate while completing the underground development required for 2007 productionand the new decline to ramp-up production in 2008. Hellas Gold has also started an improved programme of detailed grade control inQ3 2006. This has already increased the understanding of grade distributionwithin the orebody and should improve mining efficiency and plant recovery overtime. Ongoing investment in the plant includes new pumps and commissioning of thealready installed on-stream analyser for improved recovery. Stratoni reserves increased by 23% - European Goldfields announced in January2007 an increase in reserves at Stratoni, which were reported as follows underCanadian NI 43-101: Reserve '000t* Silver Silver Lead Lead Zinc ZincCategory (g/t) (Moz)* (%) ('000t)* (%) ('000t)* Proven 1,923 172 10.63 6.9 19 9.4 30Probable 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 Q42005. Total reserve tonnes have increased by 23% over the reserves published prior tothe start of operations at Stratoni in Q4 2005, accounting for deduction of oresince then. The new reserve will add an extra year to Stratoni's life of mine, a20% 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 greaterquantities of metal to be produced over the total life of mine and theramping-up of production going forward. The new reserve has allowed Hellas Gold to ramp-up its planned yearly oreproduction 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 estimatefor the Stratoni orebody, which results from a new optimised geological modelbased on revised geological mapping, additional data from underground sampling,and a more reliable understanding of the orebody after a full year of mining atStratoni. A better understanding of the orebody has also allowed Hellas Gold to defineincreased 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 programmeat Stratoni, which is expected to increase life of mine by another two years atleast. Initial drilling results are expected in Q1 2007. An important objectiveof the drilling programme is to upgrade existing inferred resources to fullCanadian NI 43-101 compliant reserves. Development underway for continued production ramp-up in 2007 - A ramp to accessthe upper parts of the mine has been commenced, along with infrastructure toconnect the upper part of the mine with existing ore bins to improve orehandling and ventilation. This infrastructure will provide access to new workingends in the upper part of the mine to ensure the ramp-up in production continuesin 2007. Significant progress has also been made on the new decline to the Mavres Petresorebody, which is now approximately 1,100 metres in and advancing at over 5m perday on average. The new decline is not necessary for mining in 2007 but becomescritical for the future production ramp-up involving the deeper portions of theorebody, as well as providing better ventilation. Tailings strategy outlined - In order to ensure tailings storage capacity forthe life of mine, a global strategy for the management of tailings has beendeveloped by Hellas Gold. Additional tailings storage space has been created byremoving coarse tailings material from existing storage facilities to backfillold mine workings.Dried fine material has also been moved from the existing tailings ponds andplaced in the voids created by removing the coarse tailings. Followingsuccessful trials, two filter presses have been bought and will be commissionedin Q2 2007. The filter press at the mill will be used for processing the currentproduction of fine tailings and water treatment sludge to allow the maximumutilisation of the space created at the existing facility. The second filterpress will eventually be installed close to the new water treatment plant, butwill initially be used to treat the wet tailings and water treatment sludge fordried cake storage. Current production of coarse tailings from production willbe used for backfill of current workings. Water management programme adopted - To reduce future water pumping andtreatment costs, Hellas Gold commenced backfilling of the old Madem Lakkos mineworkings. A total of 13,000m3 of void has been filled so far. In addition, asecond water treatment plant at the Stratoni mine site will be commissioned in2007 to improve efficiency and provide capacity for extreme rainfall events. Thenew plant will include the second filter press to allow dry storage of treatmentresidue as filter cake. New economic mineralisation discovered at Stratoni - In October 2006, EuropeanGoldfields began an exploration drilling programme at Stratoni. Stratoni alreadyhas well-defined reserves over a six-year life of mine. Six areas targeted bythe drilling are obvious extensions to known mineralisation, in addition to moreconceptual targets between the two main Stratoni deposits. The two targets being investigated first are known extensions to previouslymined areas of the Stratoni (Madem Lakkos) deposit, where production grades of9.0 to 10.7% lead, 9.0 to 9.6% zinc and 160.0 to185.3 g/t silver are recorded. The programme is aimed at drilling out resourcesin these areas of known economic mineralisation. Drilling into the known extensions of the upper part of the eastern deposit atStratoni (Madem Lakkos) has confirmed the geological model with mineralisationoccurring in the fold hinge of an antiform in the upper levels. Mine workingsthat were not recorded in the old mine plans have been shown to be moreextensive than previously thought. A second deeper target at Madem Lakkos willbe drilled in Q2 of this year. The drilling programme will also investigate inferred resources which formextensions to the western deposit at Stratoni (Mavres Petres). The drillingprogramme is designed to upgrade these inferred resources to the measured andindicated categories. These inferred resources are extrapolations from the knownreserves and comprise some 555,000 tonnes grading 7.3% lead, 10.2% zinc and 181g/t silver. Economic mineralisation has been encountered in the new decline running betweenthe existing reserve and mined-out areas at Madem Lakkos. The decline exposedsome 35 metres of strike length and a minimumof 4 metres width. The zone is located approximately half-way between the twopreviously known deposits at Stratoni. Average grades from panel sampling of6.2% lead, 11.2% zinc and 105 g/t silver compare favourably with currentreserves. The zone is open along strike, up and down dip and towards the hangingwall and is interpreted as a footwall zone to the main marble horizon. Inaddition to the intersected zone, there is a high potential for furthermineralisation where the zone intercepts the main marble both up dip and to theeast.A drill programme designed to define at least 200 metres of strike and 75 metresof dip extent will commence in April 2007. The new decline will enable immediateaccess for mining of any new discovery. Additional drilling will also be conducted from the new decline at regularintervals along the rest ofthe 1.5 kilometre zone between the existing reserve and mined-out areas at MademLakkos. The drilling programme aims to significantly increase reserves and life of mine.The existing environmental and mining permits for Stratoni will allow HellasGold to immediately exploit any new discoveries resulting from this drillingprogramme. 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 Olympiasproject benefits from an existing stockpile of gold concentrates representing areserve of approximately 258,000 tonnes grading 23.3 g/t gold (containing193,000 oz of gold), in addition to substantial underground reserves of gold,lead, zinc and silver. An additional 9,000 wet metric tonnes (wmt) ofconcentrates (containing 6,000 oz of gold) is also located at Hellas Gold's portfacility in Stratoni. In 2006, Hellas Gold secured the sale of a total of 184,000 wmt of Olympiasconcentrates (containing approximately 130,000 oz of gold) over a three yearperiod to four different off-takers - Shandong MIC BioGold Ltd (a subsidiary ofMichelago Limited of Australia), MRI Trading AG, a subsidiary of CelticResources Holdings Plc and Euromin S.A. - with expressions of interest to sellup to an additional 132,000 wmt of concentrates if the initial shipments aresuccessful. In Q4 2006, Hellas Gold completed six shipments of gold concentrates from theOlympias stockpile, representing half of the 12 shipments completed in 2006.This amounts to the shipment of 9,041 wet metric tonnes of gold concentrates inQ4 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 ofUS$500/oz. Skouries technical feasibility study nearly completed -Hellas Gold has completedmost technical studies for the final bankable feasibility study on its Skouriesproject in Northern Greece. Skouries is a typical gold-copper porphyry depositthat 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 insequence or concurrently, at a rate between 6 and 8M tonnes per annum. Thiswould produce annually approximately 40,000t of copper and 200,000 oz of goldover a mine life of over 20 years. This production rate is shown to besustainable based on the detailed mine design carried out by SRK Consulting andbenchmarking with other comparable mines. Other international consultantsinvolved in these mining studies are Scott Wilson Mining, Diogo Caupers andSteve Nicol. The metallurgy at Skouries is considered to be straight-forward. The mine willfeed 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 berecovered by a gravity circuit to produce dore on site. A highly-marketablecopper/gold concentrate will also be produced by conventional froth flotation,thickening and filtration. Extensive testwork completed by Lakefield Research and other consultants hasshown average recoveries of 84% gold and 91% copper can be achieved. Concentrategrades of approximately 26% copper and averaging 27g/t gold are expected. The concentrates will be trucked to Hellas Gold's port storage facility atStratoni, which will be approximately 15km away by road from the Skouries plantsite. Skouries is located on a high plateau with no habitation in the vicinity. The study by Golder Associates incorporates the latest paste productiontechnology in a phased tailings management facility (TMF) that will minimiseland take and embankment height and provides increased tailings stability. Thestudy shows that the paste tailings are inert. The use of paste tailings and aphased TMF also allows sequential rehabilitation of the tailings managementfacility to minimise active tailings areas. The technical studies indicate to date that the project will requireapproximately US$270 million in initial capital expenditure under the followingcategories: • $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 onSkouries once the final Environmental Impact Study (EIS) is completed in Q22007. The EIS is being carried out by the Greek consulting group Enveco. Hellas Gold has initiated discussions with Outokumpu Oy for the purchase of milland plant equipment and with Aktor S.A. for the construction of the plant andrelated infrastructure. Skouries reserves increased by 13% - In July 2006, European Goldfields announceda 13% increase in reserve tonnes for Hellas Gold's Skouries deposit, which werereported as follows: Reserve category '000t Gold Gold Copper Copper (g/t) (Moz) (%) ('000t) Proven 77,535 0.87 2.18 0.54 415Probable 68,667 0.78 1.73 0.55 374Total 146,202 0.83 3.91 0.54 789 The increase in reserves resulted from a new mine plan and schedule whichincludes the adoption of a deeper open pit, an optimised sub-level caveunderground mine design and improved long-term metal price forecasts. Theupdated 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 practicalpit design along with a detailed underground mine design based on relevant netsmelter return (NSR) cut-offs and practical mining constraints which takes intoaccount mining recoveries and dilution. Phasing of Olympias established - Development at Olympias will progress in threephases, which will allow the phasing of capital. Phase 1 will consist in HellasGold processing old tailings at Olympias, which will have the added benefit ofcleaning up the valley, together with underground refurbishment and limitedmining in the upper levels of the mine. These tailings contain 2,400,000 tonnesof material grading 3.4 g/t gold and 14.2 g/t silver, which could yield 385,000tonnes 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 otherinfrastructure, thereby minimising capital investment. Hellas Gold has recentlycompleted a mining schedule for Phase 2, which indicates that ore will beextracted 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 thesale of lead/silver, zinc and gold pyrite/arsenopyrite concentrates. Finally, Phase 3 will consist in the construction of infrastructure , includinga new gold processing facilities at Stratoni. Permitting process underway - In January 2006, Hellas Gold submitted a businessplan to the Greek State for the joint development of its major gold and basemetal projects of Skouries and Olympias. This submission represents asignificant milestone in obtaining the permits for these projects. The business plan focuses on a phased approach to the development of theprojects with emphasis on achieving full production at the Skouries gold-copperporphyry deposit as soon as possible, and the phasing of the Olympiasgold-lead-zinc-silver deposit. This approach minimises financial risk by thephased injection of capital. The principal revenue stream in the early phaseswill be through the sale of concentrates. In March 2006, Hellas Gold received an official response from the Greek Ministryof Development (the "Ministry") on the business plan. The response states thatthe 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 ofthe Greek economy. This response was received by Hellas Gold within thetimeframe 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. HellasGold is currently finalising a full environmental impact study (EIS) which isexpected to be submitted to the Greek government in Q2 2007, addressing anycomments made on the PEIS. On approval of the EIS, the environmental permits forSkouries and Olympias are expected to be issued. Hellas Gold will then submit to the Greek government a final technical report onthe Skouries and Olympias projects, which will restate the principles of thebusiness plan and take into account any conditions detailed in the environmentalpermit. The mining permits are expected to be issued on approval of thetechnical report by the Greek government. Permit-wide exploration underway - Twenty exploration targets identified -Hellas Gold holds 317 km(2) of highly prospective exploration licences innorthern Greece. Recent work by European Goldfields has highlighted a total oftwenty exploration targets, including six advance targets and extensions toknown deposits, seven targets of known mineralisation for follow-up work andseven conceptual targets. The geological context of the targets has beenidentified and a model for the emplacement of known mineralisation has now beendeveloped. The model indicates that there are more than 20 km of structural corridors thathave acted as mineralising pathways with marble hosted polymetallic massivesulphide mineralisation, including the Stratoni and Olympias deposits. The modelalso identifies a 10 km long intrusive belt which hosts the Skouries copper/goldporphyry. A programme of mapping, reinterpretation and modelling is underway on thePiavitsa advanced target. This polymetallic massive sulphide target comprises a 6 km mineralised structurewith a 3.5 km central zone expressed by old manganese oxide open pits. Withinthe zone, seven holes drilled by the previous owners over 1300 metres of strikelength and some 500 metres of known down dip extent define three mineralisedhorizons averaging 12 metres width including high grade zones averaging aroundsix 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 theinterpretation of geophysical surveys planned for later in the year. Pilot ground based geophysical programmes are being commissioned in order toassess the effectiveness of EM geophysical surveys over areas that areprospective for massive sulphide mineralisation. Once the results have beenconsidered, European Goldfields plans to fly airborne magnetic surveys over theentire licence block and airborne EM surveys over the massive sulphide belts. The airborne surveys are planned for H2 2007 and are aimed at identifying newtarget areas and prioritising these with existing targets in preparation fordrilling 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 activelypursuing 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 dore on site using the Albion Process. The project is expected to involve the mining and processing of 3.0 Mt per annumover at least nine years. This would yield approximately 275,000 tonnes ofconcentrate per annum with high grades ranging realistically between 17 - 22 g/tgold and 85 - 165 g/t silver (depending on the source of the ore in thedeposit), with a flotation gold recovery of approximately 88%. This translatesinto an annual planned production of approximately 170,000 oz of contained goldin the concentrate. Albion Process Technology achieved 92% gold recovery on composite sample - Usingthe Albion Process to produce gold dore on site is expected to significantlyincrease project profitability and returns. Recent results using the AlbionProcess suggest recoveries from concentrates of approximately 92% for gold andup to 95% for silver. The Albion Process is a combination of ultra-fine grindingof concentrates and oxidatative leaching at atmospheric pressure. Hydrometallurgy Research Laboratories (HRL, a subsidiary of Xstrata PLC) iscompleting the Stage III pilot plant scale continuous testwork programme usingthe Albion Process, after which European Goldfields expects to publish CanadianNI 43-101 compliant reserves based on this process. HRL has already successfullycompleted Stages I and II of the metallurgical testwork programme. In October 2006, European Goldfields entered into licence agreements securingthe Albion Process Technology for the Certej project. The licence agreementswere 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 NI43-101 compliant reserves for the Certej deposit, based on the sale ofconcentrates option. The reserve estimation was carried out by independentconsultants RSG Global Pty Ltd ("RSG Global") and can be summarised as follows: Reserve category Million tonnes Gold Gold Siver Silver (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 aselected 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 metallurgicaltestwork, an in-house pre-feasibility study and subsequent pit optimisation andpit design work by RSG Global, which included a geotechnical drilling programmeand geotechnical pit design parameters completed by Golder Associates of the UK. The conversion of resources into reserves means that the project can support thenecessary 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 CountyCouncil has issued a General Urbanisation Certificate for the Certej project.The certificate confirms the designation of Certej as an industrial mining areaand confirms local community support for the project. This important milestoneis the first official step in the permitting process for Certej. Technical feasibility study submitted to Romanian government - EuropeanGoldfields has established a clear path to applying for permits to develop theCertej project. In 2006, European Goldfields completed the following studies insupport 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 bankablefeasibility study to be produced in Q2 2007 for project financing. Environmental impact study nearing completion - To complete its application forenvironmental and mining permits, European Goldfields plans to submit a finalEnvironmental Impact Study (EIS) to the Romanian government in Q3 2007, allowingan increase in production at Certej and the processing of ore on site. EuropeanGoldfields already holds a mining permit for Certej, which is currently beingexploited on a small scale by the Company's partner in Romania. The permits and a detailed urbanisation plan are expected by the end of 2007following a standard public consultation process with the local community.Customary construction and public utility permits are expected to follow bymid-2008 when the detailed engineering design has been completed for the siteplant. ECOIND and Cepromin, Romanian companies with proven track records inenvironmental research and permitting procedures, and the Technical Universityof Civil Engineering Bucharest have been employed to assist in preparing the TFSand the EIS. These studies also include significant input from internationalconsultants such as RSG Global, Golder Associate and Core Resources. Target exploration underway to extend Certej life-of-mine - Exploration inRomania will focus on extending the life-of-mine of the Certej project andincreasing the number of conceptual and regional targets for further explorationin the South Apuseni Mountain area. Certej life-of-mine extension work comprises drilling out inferred resources anddeeper, potentially high grade feeder zones, in-fill drilling and metallurgicaltestwork on satellite deposits, investigation of high grade vein deposits nearto the project that could sweeten the feed grade in the early project life andthe development of targets that could enhance the value of concentratesproduced, by the addition of copper rich material for example. Drilling toconvert inferred resources (currently treated as waste where they fall in theopen pit) to the indicated category has now commenced and will be completed intwo phases, the second phase being results dependant. Phase one comprises atotal of eight diamond drillholes and phase two comprises seven diamonddrillholes. European Goldfields has identified thirteen targets in total withinits current concessions and plans to carry out exploration work on six of themin 2007. The two most advanced targets, Teascu and Pitigus, are effectivelycontiguous to one another and are located some seven kilometres from Certej.In-house resource estimates on these two targets are expected by Q3 2007following in-fill drilling. European Goldfields is planning a major programme of airborne geophysics andregional mapping and geochemical surveys in order to generate and prioritiseregional and conceptual targets in the region. The results will be used tofurther develop the model built up during recent generative work whichhighlighted the importance of the overall structural framework in controllingintrusives and for the channeling, concentrating and trapping of mineralisation.Systematic investigation of these targets, including drilling, metallurgicaltestwork and resource definition, is planned for 2008. For further information please contact: European Goldfields: website: www.egoldfields.com David Reading, Chief Executive Officer e-mail: info@egoldfields.com Office: +44 (0)20 7408 9534 Buchanan Communications: e-mail: bobbym@buchanan.uk.com Bobby Morse / Ben Willey Office: +44 (0)20 7466 5000 Renmark Financial Communication: website: www.renmarkfinancial.com Neil G. Murray-Lyon e-mail: nmurraylyon@renmarkfinancial.com Office: +1 514 939 3989 Resources & reserves parameters For additional information on the resource and reserve estimates quoted in thisnews release, please refer to the Company's Resources & Reserves Declaration atwww.egoldfields.com/goldfields/resources.jsp. Patrick Forward, General Manager,Exploration of the Company, was the Qualified Person under Canadian NationalInstrument 43-101 responsible for reviewing the disclosure of resource andreserve estimates quoted in this news release. Forward-looking statements Certain statements and information contained in this document, including anyinformation as to the Company's future financial or operating performance andother statements that express management's expectations or estimates of futureperformance, constitute forward-looking information under provisions of Canadianprovincial securities laws. When used in this document, the words "anticipate","expect", "will", "intend", "estimate", "forecast", "planned" and similarexpressions are intended to identify forward-looking statements or information.Forward-looking statements include, but are not limited to, the estimation ofmineral reserves and resources, the timing and amount of estimated futureproduction, costs and timing of development of new deposits, permitting timelines and expectations regarding metal recovery rates. Forward-lookingstatements are necessarily based upon a number of estimates and assumptionsthat, while considered reasonable by management, are inherently subject tosignificant business, economic and competitive uncertainties and contingencies.The Company cautions the reader that such forward-looking statements involveknown and unknown risks, uncertainties and other factors that may cause theactual financial results, performance or achievements of the Company to bematerially different from its estimated future results, performance orachievements expressed or implied by those forward-looking statements and theforward-looking statements are not guarantees of future performance. Theserisks, uncertainties and other factors include, but are not limited to: changesin the price of gold, base metals or certain other commodities (such as fuel andelectricity) and currencies; uncertainty of mineral reserves, resources, gradesand recovery estimates; uncertainty of future production, capital expendituresand other costs; currency fluctuations; financing and additional capitalrequirements; the successful and timely permitting of the Company's Skouries,Olympias and Certej projects; legislative, political, social or economicdevelopments in the jurisdictions in which the Company carries on business;operating or technical difficulties in connection with mining or developmentactivities; the speculative nature of gold and base metals exploration anddevelopment, including the risks of diminishing quantities or grades ofreserves; the risks normally involved in the exploration, development and miningbusiness; and risks associated with internal control over financial reporting.For a more detailed discussion of such risks and material factors or assumptionsunderlying these forward-looking statements, see the Company's Annual Information Form for the year ended 31 December 2005, filed on SEDAR atwww.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 newinformation, future events or otherwise, except as required by law. This information is provided by RNS The company news service from the London Stock Exchange