European Minerals Corporation
TSX : EPM
AIM : EUM

European Minerals Corporation

November 15, 2007 02:00 ET

European Minerals Corporation: 3rd Quarter Results to 30 September 2007

LONDON, ENGLAND--(Marketwire - Nov. 15, 2007) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISTRIBUTION IN THE UNITED STATES.

European Minerals Corporation ("EMC" or the "Company") - (TSX:EPM)(AIM:EUM) - an international mineral exploration and development company focused on identifying, acquiring and developing resource projects, today reports its results for the quarter and nine months ended September 30, 2007. All amounts are expressed in US dollars unless otherwise indicated.

Tony Williams Chairman of EMC commented today:

"The first ore will be introduced to the Varvarinskoye Plant imminently and the first gold produced before the end of December 2007. This represents a major step forward in the Company's evolution from an explorer to a commercial mining operation."

QUARTER HIGHLIGHTS

Financial

- The Company's focus continued to be the development of the Varvarinskoye gold and copper mine.

- As at September 30, 2007, the Company had assets of $227.7 million with gross cash balances totalling $26 million.

- Capital expenditures on the development of the Varvarinskoye Project amounted to approximately $21 million for the quarter.

- Consolidated pre-tax loss for the quarter was $1.0 million (2006 - $2.1 million) which includes non-cash share option expense of $0.4 million (2006 - $ 1.0 million).

Operational

- President of Kazakhstan visited the Mine Site

- Plant Commissioning has Commenced (since quarter end)

- Stockpiling of Ore is on Target

- Drilling for Additional Mineralization is underway

MANAGEMENT'S DISCUSSION AND ANALYSIS

A full Management's Discussion and Analysis of results for the quarter and nine months ended September 30, 2007 ("MD&A") and Financial Statements for the Company for the quarter and nine months ended September 30, 2007 ("Financials") are available on SEDAR at www.sedar.com. These documents can also be obtained on application to the Company. The following information has been extracted from the MD&A and the Financials.

FINANCIAL RESULTS

Description

EMC is a mineral exploration and development company focused on identifying, acquiring and developing resource projects. The Company's principal asset is the Varvarinskoye Gold-Copper deposit ("Varvarinskoye" or "Varvarinskoye Project") located in the Republic of Kazakhstan and held by a wholly-owned subsidiary of the Company, JSC Varvarinskoye ("JSCV"). The Company is currently in the process of completing the development of the mine and plant facilities at Varvarinskoye.

Management anticipates that the "hot" commissioning of the plant will commence in mid-November 2007 with a consequential ramp-up to commercial mining production during Q1 2008. See "Varvarinskoye Project-Progress Update" for further detail.

The Company's shares are traded on the Toronto Stock Exchange and on the Alternative Investment Market of the London Stock Exchange under the symbols "EPM" and "EUM" respectively.

Results for the quarter and nine months ended September 30, 2007

The Company has incurred a loss for the quarter ended September 30, 2007 ("Q3 07") of approximately $1.0 million compared to $2.1 million for the quarter ended September 30, 2006 ("Q3 06") representing a decrease of $1.1 million. The Company's loss for the nine months ended September 30, 2007 is $6.0 million compared to $5.2 million for the nine months ended September 30, 2006.

The Company's revenues for the periods under review represent interest income on cash deposits held. Total revenues for Q3 07 were $0.4 million compared to $0.6 million for Q3 06. Revenues for the nine months ended September 30, 2007 were $1.1 million compared to $1.4 million for the nine months ended September 30, 2006. The year-on-year decrease for the quarter and the nine month period is attributable to the Company holding decreased cash balances.

Administration costs of $1.2 million have been recorded for Q3 07 compared to $0.6 million for Q3 06 representing an increase of $0.6 million. Administration costs for the nine months ended September 30, 2007 were $3.9 million compared to $1.7 million for the nine months ended September 30, 2006 representing an increase of $2.2 million. These increases are in line with Management's expectations and reflect the cost of increasing the Company's management team and an increased level of corporate activity.

Stock based compensation (which is a non-cash expense) for Q3 07 was $0.4 million compared to $1.0 million for Q3 06. Stock based compensation for the nine months ended September 30, 2007 was $2.9 million compared to $4.0 million for the nine months ended September 30, 2006. Appropriate option awards are considered to be an integral component in attracting and retaining key staff.

Factors that have caused fluctuations in the Company's quarterly and nine month results include the timing of expenditures on exploration and development activities, stock option grants, income taxes and the write-offs of mineral property costs previously capitalized.

The Company's functional currency is US dollars. The Company's expenses are denominated in US Dollars, British Pounds, Kazakh Tenge and South African Rand. The majority of the Company's cash balances were held in US dollars for the quarter and nine months ended September 30, 2007 and the weakening US dollar in Q3 resulted in exchange gains arising when non US dollar cash balances were translated.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2007, the Company's main source of liquidity was unrestricted cash of $18 million (December 31, 2006 - $19.6 million). At September 30, 2007, the Company had $3.8 million remaining of the debt facility negotiated to finance the completion of the Varvarinskoye Project (December 31, 2006 - $47.1 million), together with restricted cash of $8 million (December 31, 2006 - $16.2 million) allocable to potential cost over-runs in the capital spend on the Varvarinskoye Project.

At September 30, 2007, the Company's consolidated working capital, which comprises cash, accounts receivable and prepaids, less accounts payable, was $7.3 million compared to $8.3 million at December 31, 2006, representing a decrease of $1.0 million. The decrease in working capital arose as a result of decreased cash resources of $1.5 million in the nine months to September 30, 2007 together with a decrease in accounts payable and accrued liabilities of $0.6 million and a decrease in debtors and prepaids of $0.1 million.

In December 2006, the Company concluded negotiations on a debt facility of $61 million to finance the remaining capital spend on the Varvarinskoye Project. At September 30, 2007, the Company had restricted cash of $8 million (December 31, 2006 - $16.2 million), which comprised funds not available for general or other purposes. These funds are set aside as part of the covenants relating to the debt facility. Of this total at September 30, 2007, $7.8 million (December 31, 2006- $15 million) had been allocated to cover potential cost over-runs in the completion of the Varvarinskoye Project and $0.2 million (December 31, 2006 - $1.2 million) was held to cover certain other costs to be incurred in relation to the debt facility.

During the nine months ended September 30, 2007, net amounts totalling $7.2 million were released from restricted funds to meet certain project obligations where the actual cost had exceeded the original budget and $1.0 million released to meet certain costs incurred in relation to the debt facility.

As at September 30, 2007, the Company had capital commitments with respect to the Varvarinskoye Project of approximately $12.7 million. As at September 30, 2007, the Company had project funds (comprising unutilized debt facility and restricted cash allocable to the project) totalling approximately $11.1 million in addition to unrestricted cash. Management believes the Company has sufficient funds to complete the capital programme at the Varvarinskoye Project.

In connection with and as a condition of drawdown under the debt facility, EMC also implemented the hedging facility on December 19, 2006. The hedging facility is in the form of a monthly US dollar, flat forward gold sale over 8 years. The Company has sold 443,000 ounces of gold with a locked in price of $574.25 per ounce for the entire period. The hedging facility is un-margined with deliveries of gold into the hedge scheduled to commence in Q1 2008. The hedge represents approximately 50% of the estimated production during its term, but only approximately 20% of the current proven and probable reserves of gold calculated by Orelogy (refer to the Company's Press Release dated January 15, 2007).

Project capital spend during the nine months ended September 30, 2007 was $56 million (December 31, 2006 - $80.3 million). This represents amounts spent on the Varvarinskoye Project and comprises capitalized development costs of $46.9 million, capitalized interest and finance charges of $4.5 million, $0.7 million relating to asset retirement obligations and property, plant and equipment of $3.9 million.

REVIEW OF OPERATIONS

Varvarinskoye Project - Progress Update

Q3 2007 continued a period of expansion and development for the Company and Management's focus was to complete the development and construction of the process plant and mining infrastructure at Varvarinskoye in readiness for the commencement of the phased commissioning of the plant.

By the end of the quarter the process plant building and mine infrastructure had been virtually completed, the ore crushing and conveying circuit was 90% complete. All four grinding mills had been mechanically installed. The copper/gold circuit flotation cells and thickeners had also been fully installed. The gold elution circuit and plant compressed air services and the gold circuit mills had been mechanically commissioned. All tank work had been completed and hydraulic testing commenced. Tailings dam earthwork had been completed together with all delivery and return water pipelines to and from the tailings dam.

Good progress continued in preparing the pit for commercial mining activity. By September 30, 2007 the pre-strip material had been removed on schedule and blasting in the pit and stockpiling of ore continued. By the end of the quarter approximately 700,000 tonnes of ore had been stockpiled. Since then Management has achieved its target of having over one million tonnes of ore of various types on the stockpile prior to the commencement of "hot" commissioning.

On September 14, 2007, President Nazarbayev of Kazakhstan visited Varvarinskoye. President Nazarbayev's first action on site was to initiate a blast of about 50,000 tonnes of ore in the Varvarinskoye main pit. President Nazarbayev then visited the Varvarinskoye process plant where he was enthusiastically received by JSCV employees.

President Nazarbayev addressed the workforce and spoke eloquently about the positive impact that the Varvarinskoye project would have on this region of Kustanai Oblast and how the successful development of Varvarinskoye reflected the strategic economic policies that the Kazakh Government are pursuing. President Nazarbayev then agreed to start the mills on the Varvarinskoye copper/gold circuit.

During the quarter the Company continued to enhance its management and operating team at Varvarinskoye with the appointments of Kazakh national and expatriate managers. Management is confident that the team at Varvarinskoye has the knowledge and experience to complete construction of the project and, thereafter, to establish commercial mining. Despite the various delays arising in relation to certain equipment deliveries and the replacement of the project contractor in the year ended December 31, 2006, the Project has remained on target.

Mechanical commissioning commenced during October and was completed in November. This "cold" commissioning phase was managed by the Company's in-house commissioning team, which has considerable regional and cold weather experience. The commissioning team has been on site since early October 2007, initially training the Company's process plant operators and assisting the construction team in preparation for the "cold" commissioning of the process plant.

The Company plans to begin introducing ore into the process plant by mid November 2007 and this will mark the commencement of "hot" commissioning. This phase of the staged commissioning will continue through the winter months with the objective of gradually building up the daily throughput tonnage until the process plant reaches its design rate of 4.2 million tonnes of ore per annum. The Company expects to achieve this initial annual throughput rate during Q2 2008, assuming no delays are experienced due to winter commissioning. The commencement of the "hot" commissioning stage by mid November 2007 should result in a first gold pour before the end of December 2007.

Management anticipates fiscal year 2007 will be the last full year of development and anticipates the commissioning of the plant at Varvarinskoye, which commenced after the period end, will be followed by a ramp up to commercial mining production, which is targeted for Q1 2008.

Varvarinskoye Exploration

During September two diamond drilling rigs were mobilized at Varvarinskoye to undertake drilling to delineate additional mineralization within the current mining limits and beneath the planned pit bottom. Results from this drilling will be reported as they become available.

In addition, a 2,500 metre drilling programme will commence shortly to test various gold and copper geological anomalies within the 220 sq km exploration licence which surrounds the 3 sq km Varvarinskoye mining licence.

Qualified Person

William G. Kennedy, the Company's President and Chief Executive Officer and a "qualified person" (as such term is defined in Canadian National Instrument 43-101), is responsible for the technical information in this MD&A.

OTHER PROJECTS AND EXPLORATION

During the nine months ended September 30, 2007, Management continued to investigate the sourcing of additional exploration and development projects with a focus on properties in Eastern Europe and plans to continue these efforts.

Consistent with the Company's policy on expensing costs relating to non-specific projects, these expenditures have been written-off in the period in which they are incurred.

OUTLOOK

With the commencement of plant commissioning following the end of the quarter, the Company has made a significant step towards becoming a gold producer.

Management plans to begin introducing ore into the process plant by mid November 2007 and this will mark the commencement of "hot" commissioning. This phase of the staged commissioning will continue through the winter months with the objective of gradually building up the daily throughput tonnage until the process plant reaches its design rate of 4.2 million tonnes of ore per annum. The Company expects to achieve this initial annual throughput rate during Q2 2008, assuming no delays are experienced due to winter commissioning.

The commencement of the "hot" commissioning stage by mid November 2007 should result in a first gold pour before the end of December 2007.

The Company has continued to strengthen its staffing in the United Kingdom and in Kazakhstan to ensure that the appropriate human resource base is in place to manage the transition from an exploration to a mining company. Management believes the Company has sufficient working capital resources both to complete the capital programme at Varvarinskoye and, assuming no delays are experienced during the commissioning process, to support the Company's operations until the commencement of commercial production at Varvarinskoye.

The Company's latest mine plan for Varvarinskoye (including metal prices and operating costs used to calculate the updated estimates of mineral resources and reserves scheduled and optimized by Orelogy and applying the assumptions and parameters as detailed in its Press Release of January 15, 2007) anticipates annual gold production of 149,000 ounces in years one to three of the project at an estimated cash cost, after copper credits, of $127 per ounce. Over the estimated 17 year mine life average annual gold production is estimated to be 120,000 ounces per annum at an estimated cash cost, after copper credits, of $261 per ounce.

Management believes that achieving these mine plan targets will create a strong foundation to build the Company's future development.



European Minerals Corporation
Unaudited Consolidated Statements of Operations and Deficit
For the quarter and period ended September 30, 2007 and 2006
(in thousands of US dollars)

-------------------------------------------------------------------------
For the three For the nine
months ended months ended
September 30, September 30,
2007 2006 2007 2006
$ $ $ $

Income
Interest 429 636 1,123 1,372
------------------------------------

Expenses
Investor relations 172 105 371 204
Administration 1,243 573 3,870 1,697
Legal and professional fees 211 143 499 380
Stock-based compensation 417 952 2,861 4,024
Foreign exchange loss (gain) (723) 322 (432) (753)
Project and development expenditure 74 644 343 987
-------------------------------------

1,394 2,739 7,512 6,539
-------------------------------------

Net loss before income tax recovery (965) (2,103) (6,389) (5,167)
Income tax recovery - - 300 -
--------------------------------------

Net loss for the period (965) (2,103) (6,089) (5,167)

Deficit - Beginning of period (75,848)(65,189) (70,724) (62,125)
--------------------------------------

Deficit - End of period (76,813)(67,292) (76,813) (67,292)
--------------------------------------
--------------------------------------

Basic and diluted loss
per common share $(0.00) $(0.01) $(0.02) $(0.02)
--------------------------------------
--------------------------------------

Weighted average number of
shares ('000s) 279,764 277,436 279,717 253,348
--------------------------------------
--------------------------------------



European Minerals Corporation
Unaudited Consolidated Balance Sheets
As at September 30, 2007 and December 31, 2006
(in thousands of US dollars)

------------------------------------------------------------------------

30 September 31 December
2007 2006
$ $

Assets

Current assets
Cash and cash equivalents 18,040 19,554
Restricted cash 207 1,249
Accounts receivable and prepaid expenses 395 474
-----------------------
18,642 21,277
Restricted cash 7,844 15,000
Varvarinskoye property, plant and equipment 195,457 139,137
Net investment in oil and gas residual interests 1,693 1,693
Advances held by contractor's bank 4,081 4,003
-----------------------
227,717 181,110
-----------------------
-----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 10,437 11,706
-----------------------
10,437 11,706
Convertible debt 6,192 15
Long-term debt 38,929 672
Future income taxes 1,972 2,272
Asset retirement obligations 3,783 3,052
-----------------------
61,313 17,717
-----------------------
Shareholders' Equity
Share capital 181,068 174,985
Equity component of convertible debt 170 15
Share purchase warrants 47,384 46,346
Share purchase options 13,100 9,599
Share purchase units - 2,376
Contributed surplus 1,495 796
Deficit (76,813) (70,724)
-----------------------
166,404 163,393
-----------------------
227,717 181,110
-----------------------
-----------------------

Approved by the Board of Directors

A J Williams Director W G Kennedy Director



European Minerals Corporation
Unaudited Consolidated Statements of Cash Flows
For the quarter and period ended September 30, 2007 and 2006
(in thousands of US dollars)

---------------------------------------------------------------------------

For the three For the nine
months ended months ended
September 30, September 30,
2007 2006 2007 2006
$ $ $ $

Cash (used for)provided from
Operating activities
Net loss for the period
after income tax recovery (965) (2,103) (6,089) (5,167)
Adjustment to reconcile net loss to
cash flow from operating activities
Stock-based compensation 418 952 2,862 4,024
Unrealized foreign exchange (291) 1,006 - (69)
Future income tax recovery - - (300) -
Changes in non-cash working capital
Decrease (increase) in advances held
by contractors' bank, accounts
receivable and prepaid expenses (242) (461) 1 (11,772)
Increase (decrease) in accounts
payable and accrued liabilities (889) 1,834 (847) 7,259
--------------------------------------
Cash (used for) provided from
operating activities (1,969) 1,228 (4,373) (5,725)
--------------------------------------

Investing activities
Expenditures on Varvarinskoye
property, plant and equipment (20,935) (18,133) (56,323) (52,799)
Restricted cash 3,651 1,111 8,198 4,274
Recovery of net investment in
oil and gas residual interests - - - 605
---------------------------------------
Cash used in investing activities (17,284) (17,022) (48,122) (47,920)
---------------------------------------

Financing activities
Common shares issued 5,338 - 6,249 64,910
Proceeds from exercise of stock
options - - - 49
Proceeds from exercise of warrants - - - 36
Proceeds from exercise of units - 257 - 2,303
Advances from convertible bonds
and long-term debt 13,837 - 44,733 -
Deferred financing costs - (25) - (2,615)
---------------------------------------
Cash provided by financing
activities 19,175 232 50,981 64,683
---------------------------------------

Increase(Decrease) in cash
and cash equivalents (78) (15,562) (1,514) 11,038
Cash and cash equivalents
- Beginning of period 18,118 36,074 19,554 9,474
---------------------------------------
Cash and cash equivalents
- End of period 18,040 20,512 18,040 20,512
---------------------------------------
---------------------------------------



European Minerals Corporation
Notes to Consolidated Financial Statements
For the quarter and period ended September 30, 2007
---------------------------------------------------------------------------


1. Continuing operations

European Minerals Corporation ("EMC" or the "Company") is a mineral exploration and development company focused on identifying, acquiring and developing resource projects. The Company's principal asset is the Varvarinskoye Gold-Copper deposit ("Varvarinskoye" or "Varvarinskoye Project") located in the Republic of Kazakhstan. The Company is currently in the process of completing the development of the mine and plant facilities at Varvarinskoye. The Company anticipates that the commissioning of the plant will commence in quarter four of fiscal year 2007 with a consequential ramp up to commercial mining production during quarter one of 2008. Since the end of the period commissioning has commenced.

The Company's shares are traded on the Toronto Stock Exchange and on the Alternative Investment Market of the London Stock Exchange.

As at September 30, 2007, the Company had forecast capital expenditures for the completion of the Varvarinskoye Project amounting to $12.7 million. During 2006 and in order to provide funding for the completion of the capital expenditure on the Varvarinskoye Project, the Company finalized a project debt facility (the "Facility"). As at September 30, 2007, the unutilized balance on this facility totalled $3.3 million. As at September 30, 2007, the Company also had restricted cash balances of $7.8 million to be utilized against any cost over-runs in the completion of the Varvarinskoye Project.

2. Summary of significant accounting policies

The consolidated financial statements have been prepared using Canadian generally accepted accounting principles ("GAAP") using the following significant policies:

Basis of Consolidation

The principal subsidiaries and investees of the Company as at September 30, 2007 are as follows:

- Three K Mining and Exploration Limited (registered in the British Virgin Islands)

- JSC Varvarinskoye (registered in the Republic of Kazakhstan)

The Company owns the entire issued share capital of the above entities. All intercompany balances and transactions are eliminated on consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes to the financial statements. Actual results may differ from those estimates.

Significant estimates used in the preparation of these consolidated financial statements include, but are not limited to, the recoverability of advances, the extent of proven and probable ore reserves and resources, determination of stock based compensation, the provision for future income taxes, and the estimated reclamation and closure cost obligations.

Foreign currencies

The Company's subsidiaries are integrated foreign operations. Revenues and expenses in foreign currencies are translated into United States dollars at the exchange rates on the dates of the transactions except for depreciation and amortization, which are recorded as historic rates. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary items are translated at historical rates. Differences arising on foreign currency translations are reflected in the consolidated statement of operations.

Cash and cash equivalents

Cash and cash equivalent balances include cash and short-term deposits with banks or other financial institutions that have an original maturity date of 90 days or less.

Mineral property interests

Mineral property interests represent capitalized expenditure related to the acquisition, exploration and development of mining properties, related plant and equipment and related borrowing costs. From the commencement of commercial operations, capitalized costs will be depreciated and depleted using a unit of production method over the estimated economic life of the mine to which they relate. Items of buildings, plant and equipment are recorded at cost and are depreciated on a straight line or diminishing balance basis over their useful estimated life as follows:



Buildings straight-line basis over periods from 3-20 years
Plant and equipment straight-line basis over periods from 3-20 years
Vehicles straight-line basis over 5 years
Office equipment,
furniture and fixtures diminishing balance basis at annual rates of
between 20% and 30%


Exploration and associated costs relating to properties for which there is no evidence of economically recoverable mineralization are expensed in the period incurred. Exploration costs relating to properties for which economically recoverable reserves are believed to exist are deferred until the project to which they relate is sold, abandoned, placed into production or becomes impaired.

The Company reviews and evaluates its mineral property interests at least annually or when events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is considered to exist if the total future undiscounted cash flows are less than the carrying amount of the assets. Estimated future undiscounted cash flows are prepared using estimated future production, commodity prices, operating and capital costs and reclamation and closure costs. The future cash flows are for the known ore reserve at the time. If the future undiscounted cash flows are less than the carrying value of the assets, the assets will be written down to fair value and the write-off charged to earnings.

Net investment in oil and gas residual interests

Sales proceeds and royalties received are recorded as a reduction to the carrying value of the Company's net investment in oil and gas residual interests.

Asset retirement obligation

The Company recognizes the estimated fair value of liabilities for asset retirement obligations, which include reclamation and closure costs, in the period they are incurred. A corresponding addition to the carrying value of the related asset is recorded and depreciated over the life of the asset. The amount of the liability is subject to re-measurement at each reporting period for changes in the estimated timing or amount of expenditures and is accreted over time to the estimated retirement obligation ultimately payable through charges to operations.

The estimates are based principally on legal and regulatory requirements. It is possible that the Company's estimates of its ultimate reclamation and closure liabilities could change as a result of changes in regulations, the extent of environmental remediation required, changes in technology and the means and cost of reclamation.

Convertible debt

Convertible debt has been segregated into debt and equity components. The financial liability component, representing the value allocated to the liability at the time of inception, is recorded as a long-term liability. The remaining component, representing the value ascribed to the holders' option to convert the principal amount into common shares, is classified in shareholders' equity as "Equity component of convertible debt".

These components have been measured at their respective fair values on the dates the debt was drawn down. The finance costs associated with the issue of the convertible debt are recorded as deferred financing costs and amortized over the period of the liability. Over the term of the debt obligation, accretion is recorded to bring the obligation to its face value over the period of the debt.

Income taxes

The Company follows the liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current period. Future income tax assets and liabilities are recognized for temporary differences between the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes. Future income tax assets are evaluated and if realization is not considered more likely than not, a valuation allowance is provided.

Incentive stock option plan

The Company uses the fair value method for accounting for stock based awards or grants to non-employees and employees, including those that are direct awards of stock, call for settlement in shares or cash or other assets, or are stock appreciation rights that call for settlement by the issuance of equity instruments. Under the fair value method, compensation expense attributed to the direct award of stock is measured at the fair value of the award at the grant date, using an option pricing model, and is recognized over the vesting period of the award. If and when the stock options are ultimately exercised, the applicable amounts of additional paid in capital and contributed surplus are credited to share capital.

Loss per share

Loss per share is calculated based on the weighted average number of common shares issued and outstanding during the year. Diluted loss per common share is calculated using the treasury stock method for outstanding stock options and warrants and the "if-converted" method for outstanding convertible bonds. Under the treasury stock method, common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options and warrants and are excluded from the computation if their effect is anti-dilutive. Under the "if-converted" method, the cost of convertible debt instruments is added to the numerator in the calculation, the debt is assumed to have been converted at the beginning of the period and the resulting increase in common shares is added to the denominator. In 2007 and 2006 the calculation would be anti-dilutive in which case basic and diluted earnings per share would be the same.

3. Significant differences from United States accounting principles

The United States generally accepted accounting principles ("U.S. GAAP") reconciliation is included solely for the purpose of the Company's filing on the Alternative Investment Market ("AIM") of the London Stock Exchange. The Company is currently also listed on the Toronto Stock Exchange and is not a registrant with the United States Securities and Exchange Commission.

The consolidated financial statements of the Company have been prepared in accordance with Canadian generally accepted accounting principles "Canadian GAAP" which differ, in certain material respects, from U.S. GAAP.



US$000s, except per share amounts

30 September, 31 December,
2007 2006
$ $

Consolidated statements of operations
As reported in accordance with Canadian GAAP (6,089) (8,599)
Derivatives and hedging activities (c) (38,500) (69,600)
Future income taxes (c) 1,972 2,272
------------------------

Net loss and comprehensive loss under U.S. GAAP (42,617) (75,927)
------------------------
------------------------

Basic and diluted loss per common share under
U.S. GAAP (0.15) (0.29)
------------------------
------------------------

Consolidated balance sheet
Varvarinskoye property, plant and equipment
Under Canadian GAAP 195,457 139,137
Exploration expenditures (a) (4,786) (4,786)
------------------------
Under U.S. GAAP 190,671 134,351
------------------------
------------------------

Convertible bonds
Under Canadian GAAP (170) (15)
Convertible debt (b) 170 15
------------------------
- -
------------------------
------------------------

Unrealized derivatives losses
Under Canadian GAAP - -
Derivative and hedging activities (108,100) (69,600)
------------------------
Under U.S. GAAP (108,100) (69,600)
------------------------
------------------------

Future income taxes
Under Canadian GAAP (1,972) (2,272)
Derivatives and hedging activities 1,972 2,272
------------------------
Under U.S. GAAP - -
------------------------
------------------------

Total shareholders' equity
Under Canadian GAAP 166,804 163,393
Exploration expenditures (a) (4,786) (4,786)
Convertible debt (b) (170) (15)
Derivatives and hedging activities (c) (108,100) (69,600)
Future income taxes (c) (1,972) (2,272)
------------------------
Total shareholders' equity under U.S. GAAP 51,776 86,720
------------------------
------------------------


a) Resource Assets

Under Canadian GAAP, exploration costs relating to properties for which economically recoverable reserves are believed to exist are deferred until the project to which they relate is sold, abandoned, placed into production or becomes impaired. For U.S. GAAP purposes, the Company expenses all expenditures relating to unproven mineral properties as they are incurred. When proven and probable reserves are indicated by a bankable feasibility study for a property, subsequent exploration and development costs of the property are capitalized. The Company completed a bankable feasibility study in November 2004.

b) Convertible debt

Under U.S. GAAP, convertible debt instruments are classified as debt until converted to equity, whereas under Canadian GAAP, the long-term debt and equity components are determined and shown separately with the debt component being accreted over time to its face value by way of a charge to earnings.

c) Derivatives and hedging activities

U.S. GAAP requires that all derivatives be recorded on the balance sheet as either assets or liabilities at their fair value with changes in the fair value of derivatives adjusted for their related future income tax effect to the extent that such taxes are considered to be more likely than not to be realized, are recognized in the earnings of the current period unless specific hedge accounting criteria are met.

THIS PRESS RELEASE IS NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISTRIBUTION IN THE UNITED STATES.

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities of the Company in the United States. The securities of the Company have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This news release contains or refers to forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that the Company believes, expects or anticipates will or may occur in the future are forward-looking statements. Such forward-looking statements include statements contained in this news release regarding targets, estimates and/or assumptions in respect of future annual production of gold and copper, commodity prices, mineral resources and reserves, timing of commencement and completion of "hot" commissioning and commencement of operations, potential mineralization and future exploration, development and operational plans and objectives (including delineating additional mineral resources). These forward-looking statements reflect the current expectations or beliefs of the Company based on information currently available to the Company. Forward-looking statements are subject to a number of risks and uncertainties that may cause the actual results of the Company to differ materially from those discussed in the forward-looking statements, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on the Company. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: the grade and recovery of ore which is mined varying from estimates; capital and operating costs varying significantly from estimates; inflation; changes in exchange rates; fluctuations in commodity prices; delays in the development or commissioning of, and the commencement of operations at, the Company's Varvarinskoye Project caused by unavailability of equipment, labour or supplies, weather and climatic conditions, delays in the delivery and installation of plant and equipment or otherwise; termination or suspension of the Company's debt facility; uncertainty of the outcome of any litigation; inability to delineate additional mineral resources or reserves; and other factors. Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

Contact Information

  • European Minerals Corporation - United Kingdom
    Tony Williams
    Chairman
    + 44 (0) 20 7529 7508
    or
    European Minerals Corporation - United Kingdom
    Bert Kennedy
    President and CEO
    + 44 (0) 20 7529 7508
    or
    Canaccord Adams Limited
    Erin Needra / Robin Birchall
    + 44 (0) 20 7050 6600
    or
    Vanguard Shareholder Solution, Inc. - North America
    Keith Schaefer
    1-866-448-0780
    Email: ir@vanguardsolutions.ca