European Minerals Corporation
TSX : EPM
AIM : EUM

European Minerals Corporation

January 15, 2007 02:00 ET

European Minerals Corporation:Varvarinskoye - Updated Mineral Resource And Reserve Estimates And Mine Plan. High Grade Deep Drilling Results.

LONDON, ENGLAND--(CCNMatthews - Jan. 15, 2007) - European Minerals Corporation ("EMC" or the "Company")(TSX:EPM)(AIM:EUM) is pleased to announce updated resource and reserve estimates for its Varvarinskoye gold/copper project in Northern Kazakhstan. These December 2006 estimates form the basis for an updated mine plan that envisages commissioning in October 2007 as previously announced in the Company's news release dated October 18th, 2006. Details of high grade mineralised intercepts from diamond drilling at the base of the currently planned open pit are also provided.

Resources

Following revisions in the interpretation of the Varvarinskoye geological model Ravensgate, part of Passeres Group Pty Ltd. of Perth, Western Australia, undertook updated resource estimates under the definitions and guidelines specified in Canadian National Instrument 43-101. Grade and tonnage dilution factors requested by the independent engineers acting for the lenders of the project debt facility were also applied to the resource, resulting in a more conservative estimate of gold and copper grades.



Measured and Indicated Resources
3.916 million ounces gold, 450 million lbs copper
(123.2 million tonnes at 0.99 g/t gold, 0.53% copper)

Inferred Resources
0.550 million ounces gold, 46 million lbs copper
(16.64 million tonnes at 1.03 g/t gold, 0.41% copper)


Table 1 in the appendix provides a more detailed analysis of the mineral resource estimates.

Reserves

Orelogy Pty Limited ("Orelogy") of Perth, Western Australia have generated updated Proven and Probable Mineral Reserve estimates for the Varvarinskoye project based on the Measured and Indicated categories of the resource model using a gold price of US$525 per ounce and a copper price of US$1.30 per pound. Capital and operating costs used in the reserve modeling have been escalated to December 2006 levels from those utilised in the MDM Ferroman "Varvarinskoye Gold/Copper Project Bankable Feasibility Study" dated November 2004 (see the Company's press release dated November 10th, 2004).

The pit design using these parameters contains estimated Proven and Probable Mineral Reserves of 60.6 million tonnes containing 2.2 million ounces gold and 254 million lbs copper at a grade of 1.15 g/t gold including 17.1 million tonnes at a grade of 0.67% copper.

Table 2 in the appendix provides a more detailed analysis of the mineral reserve estimates.

Updated Mine Plan

The Company has prepared an updated mine plan reflecting the metal prices and operating costs used to calculate the updated Proven and Probable Mineral Reserves estimates. Key elements of the Company's updated Varvarinskoye mine plan, scheduled and optimized by Orelogy, are as follows:

- Production rate: 4.2 million tonnes of ore per year

- Waste: ore ratio 4.5 : 1

- Mine life: 17 years (first and last years are partial production years)

- Recovered gold: 1.8 million ounces (life of mine)



Recovered copper: 200 million lbs (life of mine)

Gold (oz) Copper (lbs)

Average annual production: Years 1 -- 3 149,000 26 million
Life of mine 120,000 13 million


- Capital costs: US$145 million (includes working capital and pre-production stripping costs)

- Capitalised Financing and insurance charges: US$13 million

- Cash operating costs per ounce of gold net of copper credits: (copper at US $1.30/lb)



Years 1 -- 3 US$127 per ounce

Life of mine US$261 per ounce


Project Economics

The updated mine plan uses a Base Case gold price of US$525 per ounce and copper price of US$1.30 per pound. Hedging of 443,000 ounces of gold at approximately US$574 per ounce has been incorporated into this updated mine plan (see the Company's press release dated December 6th, 2005). The cashflow (Net Present Value 0%) of this case is US$328 million (excluding taxes, royalty and financing costs). This compares to a cashflow (Net Present Value 0%) of US$301 million (excluding taxes, royalty and financing costs) calculated in November 2004 at metal prices of US$375 per ounce of gold and US$1.00 per pound of copper (see the Company's press release dated November 10th, 2004).

In the 2 years between the respective cashflows detailed above, there have been significant increases in operational and equipment costs in the global mining industry. At Varvarinskoye the projected operation costs increase is approximately 40% per tonne of ore milled. In the same period there have been significant rises in metal prices which, if realised by the Company, will offset these increased costs.

Reference is made to the MDM Ferroman "Varvarinskoye Gold/Copper Project Bankable Feasibility Study" dated November 2004 filed on SEDAR (subject to the updated reserve and cost estimates referred to in this press release) for underlying factors and assumptions in respect of the Varvarinskoye mine plan.

Updated Financial Model

Based upon the updated mineral reserve estimates and mine plan utilising December 2006 operating and capital costs detailed above, the Company has developed a financial model of the Varvarinskoye project economics. Because the Varvarinskoye project is at an advanced stage of construction and is fully financed to completion, the financial model now incorporates the tax and royalty regimes in Kazakhstan and the terms of the project debt, including the hedging programme. Details of key economic indicators, post tax, royalty and financing costs, are tabulated below:-



Project Economics Post Tax, Royalty and Financing Costs

----------------------------------------------------------
Gold (unhedged ounces) 525 /1.30 600 / 2.00
/Copper Prices US$
----------------------------------------------------------
Project Cash Flow US$225 million US$374 million
----------------------------------------------------------
Net present value 5% US$113 million US$213 million
----------------------------------------------------------
Internal rate of return 20% 32%
----------------------------------------------------------
Payback in years for EMC 4.1 2.5
Equity contribution
----------------------------------------------------------
Cash operating cost per
ounce of gold net of
copper credits (i)

Years 1-3 US$127 US$9

Life of Mine US$261 US$189
----------------------------------------------------------
((i) Cash operating costs exclude taxes, royalties and financing costs)


Drilling Results at the base of the planned Open Pit

During 2005/2006 most of the Company's drilling focused on infill and condemnation drilling. However diamond drill hole VC32 was drilled to test for a possible down dip extension to deep mineralisation outlined in the Feasibility Resource Model. The hole was drilled to a depth of 352 metres and intersected 28.6 metres (266.9 to 295.5 metres) grading 13.23 g/t gold and 0.61% copper (true width calculated at 23.6 metres). This intercept is located close to the projected base of the main open pit and may continue to depth. Included within this interval is a high grade copper intercept of 12.3 metres averaging 11.66 g/t gold and 1.37% copper which contains a 0.85 metre intercept reporting 69.5g/t gold continuous with a 1.05 metre interval carrying 47.6g/t gold. A one metre intercept within the lower grade copper section reports 176g/t gold. The mineralisation is focused on a footwall limestone contact and is associated with skarn development -- a common control to mineralisation at Varvarinskoye and appears open to the North and at depth.

Drill core recovery in VC32 varied between 96% - 100% and 1 metre sample intervals were sent for assay. All assay values quoted are uncut. The assays of the VC32 drill samples were performed at CenterGeoAnalit Karaganda, a well established laboratory nationally accredited

in Kazakhstan. As part of usual Company procedures standard and blank samples were introduced into the samples submitted to the laboratory. Check samples were also undertaken at the OMAC laboratory in Galway, Ireland. These measures confirmed the accuracy of the Karaganda laboratory. Both laboratories are independent of the Company.

Such deeper intercepts at Varvarinskoye may represent high grade feeder structures to the main dispersed body of mineralisation and, in management's view, they could represent additional higher grade ore bodies that may be amenable to underground exploitation in due course. Further infill drilling within the open pit may encounter additional high grade mineralized zones.

The 2007 drilling programmes will focus on further quantification of these potential deeper additions to resources, as well as infill drilling, as mining progresses, with a view to upgrading inferred resources to the Measured/Indicated mineral resource categories.

Bert Kennedy, EMC Chief Executive Officer commented today "The geological, engineering and economic updates announced today confirm the integrity of the Varvarinskoye ore body, the project's feasibility and the robustness of Varvarinskoye's economics. We believe that the assumptions underlying the updated mineral resource and reserve estimates and the mine plan are conservative in today's metal mining industry and that additional mineral resources will be identified at Varvarinskoye. As mining proceeds we will also initiate a rigorous stockpiling plan to enable us to take advantage of metal prices higher than those used in the Base Case which should generate better economic returns.

The feasibility study at Varvarinskoye was completed in November 2004 and construction started in July 2005. The project is now about 70% constructed, fully financed and EMC owns 100% of the project equity as opposed to 86% at the feasibility stage.

Although the next several months will be very demanding for our management and employees, we are all determined to ensure that Varvarinskoye becomes a significant gold and copper producer in Kazakhstan by the end of the year."

Qualified Persons

The "qualified person" (as such term is defined in National Instrument 43-101) who compiled and is responsible for the updated mineral resource estimates for the Varvarinskoye project disclosed in this press release is Stephen Hyland, who is a Principal Consultant of Ravensgate. Mr. Andre Wulfse, who is a Principal Consultant of Ravensgate, and a "qualified person" (as such term is defined in National Instrument 43-101), has reviewed and approved the contents of this press release relating to such mineral resource estimates.

The "qualified person" (as such term is defined in National Instrument 43-101) who supervised the preparation of and is responsible for the updated mineral reserve estimates for the Varvarinskoye project disclosed in this press release is Stephen Craig, who is an employee of Orelogy. Mr. Craig has reviewed and approved the contents of this press release relating to such mineral reserve estimates and the updated Varvarinskoye mine plan.

Bert Kennedy, the Company's President and Chief Executive Officer, is the "qualified person" (as such term is defined in National Instrument 43-101) responsible for the technical and scientific information in this press release, other than the updated mineral resource and mineral reserve estimates for the Varvarinskoye project. Mr. Kennedy has verified the data disclosed in this press release, including sampling, analytical and test data underlying the drill results for hole VC32.

Forward-Looking Statements

This press 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 press release under the headings "Updated Mine Plan", "Project Economics" and "Updated Financial Model" regarding targets, estimates and/or assumptions in respect of future production, revenue, cash flow, costs and commodity prices. Such forward-looking statements also include, without limitation, statements contained in this press release regarding targets, estimates and/or assumptions in respect of mineral resources and reserves, timing of commencement of operations, potential mineralization, exploration results 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 of, and the commencement of operations at, the Company's Varvarinskoye Project caused by unavailability of equipment, labour or supplies, 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.

The mineral resource and mineral reserve figures disclosed in this press release are estimates and no assurances can be given that the indicated levels of minerals will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While the Company believes that the resource and reserve estimates disclosed in this press release are well established, by their nature resource and reserve estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. If such estimates are inaccurate or are reduced in the future, this could have a material adverse impact on the Company.

Inferred mineral resources are estimated on limited information not sufficient to verify geological and grade continuity or to allow technical and economic parameters to be applied. Inferred mineral resources are too speculative geologically to have economic considerations applied to them to enable them to be categorized as mineral reserves. There is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration.

Appendix 1

The key assumptions, parameters and methods used in the preparation of the following mineral resource and mineral reserve estimates are detailed in the MDM Ferroman "Varvarinskoye Gold/Copper Project Bankable Feasibility Study" dated November 2004 (see the Company's news release dated November 10th, 2004). The effective date for the following mineral resource and mineral reserve estimates is December 15th, 2006.



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TABLE 1 VARVARINSKOYE PROJECT
MINERAL RESOURCE ESTIMATES
--------------------------------------------------------------------
MEASURED MINERAL RESOURCES
@ 0.01 gpt Gold Cut-off
--------------------------------------------------------------------
Ore Type K Tonnes Gold gpt % Copper Oz Gold Lbs Copper
--------------------------------------------------------------------
HGCF 20,900 1.33 0.61 890,455 279,688,647
--------------------------------------------------------------------
HGCP 5,923 1.12 0.46 212,352 59,804,873
--------------------------------------------------------------------
LGCF 54,509 0.89 N/A 1,558,146 N/A
--------------------------------------------------------------------
LGCP 2,919 1.05 N/A 98,468 N/A
--------------------------------------------------------------------
TOTAL 84,252 1.02 0.57 2,759,420 339,493,520
--------------------------------------------------------------------

--------------------------------------------------------------------
INDICATED MINERAL RESOURCES
@ 0.01 gpt Gold Cut-off
--------------------------------------------------------------------
Ore Type K Tonnes Gold gpt % Copper Oz Gold Lbs Copper
--------------------------------------------------------------------
HGCF 10,474 1.06 0.42 355,305 96,057,671
--------------------------------------------------------------------
HGCP 1,127 0.88 0.62 31,867 15,311,584
--------------------------------------------------------------------
LGCF 26,387 0.88 N/A 743,256 N/A
--------------------------------------------------------------------
LGCP 912 0.91 N/A 26,637 N/A
--------------------------------------------------------------------
TOTAL 38,901 0.93 0.44 1,157,065 111,369,256
--------------------------------------------------------------------

--------------------------------------------------------------------
MEASURED & INDICATED MINERAL RESOURCES
@ 0.01 gpt Gold Cut-off
--------------------------------------------------------------------
Ore Type K Tonnes Gold gpt % Copper Oz Gold Lbs Copper
--------------------------------------------------------------------
HGCF 31,374 1.24 0.54 1,245,759 375,746,318
--------------------------------------------------------------------
HGCP 7,050 1.08 0.48 244,218 75,116,458
--------------------------------------------------------------------
LGCF 80,896 0.89 N/A 2,301,401 N/A
--------------------------------------------------------------------
LGCP 3,832 1.02 N/A 125,106 N/A
--------------------------------------------------------------------
TOTAL 123,153 0.99 0.53 3,916,485 450,862,776
--------------------------------------------------------------------

--------------------------------------------------------------------
INFERRED MINERAL RESOURCES
@ 0.01 gpt Gold Cut-off
--------------------------------------------------------------------
Ore Type K Tonnes Gold gpt % Copper Oz Gold Lbs Copper
--------------------------------------------------------------------
HGCF 4,788 0.92 0.41 141,191 43,704,841
--------------------------------------------------------------------
HGCP 373 0.73 0.32 8,713 2,600,260
--------------------------------------------------------------------
LGCF 11,123 1.09 N/A 390,549 N/A
--------------------------------------------------------------------
LGCP 356 0.82 N/A 9,385 N/A
--------------------------------------------------------------------
TOTAL 16,640 1.03 0.41 549,839 46,305,101
--------------------------------------------------------------------

Note: - HGCF is High Grade Copper Feed -- flotation ore
HGCP is material stockpiled for treatment in the future
LGCF is Low Grade Copper Feed -- Gold leach ore
LGCP is Low Grade Copper Feed -- Gold leach ore from the
weathering zone


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TABLE 2 VARVARINSKOYE PROJECT MINERAL RESERVE ESTIMATES
-------------------------------------------------------
Contained Metal
-------------------------------------------------------
Ore Gold Copper Gold Million
K Tonnes gpt % K ozs lbs
Copper
-------------------------------------------------------
Category PROVEN MINERAL RESERVES
-------------------------------------------------------
HGCF 14,386 1.59 0.70 733 223
-------------------------------------------------------
LGCF 33,610 0.97 N/A 1,049 N/A
-------------------------------------------------------
LGCP 2,583 1.09 N/A 90 N/A
-------------------------------------------------------
TOTALS 50,579 1.15 0.70 1,872 223
-------------------------------------------------------

-------------------------------------------------------
Category PROBABLE MINERAL RESERVES
-------------------------------------------------------
HGCF 2,719 1.43 0.52 125 31
-------------------------------------------------------
LGCF 664 1.04 N/A 222 N/A
-------------------------------------------------------
LGCP 699 0.95 N/A 21 N/A
-------------------------------------------------------
TOTALS 10,058 1.15 0.52 369 31
-------------------------------------------------------

-------------------------------------------------------
Category PROVEN & PROBABLE MINERAL RESERVES
-------------------------------------------------------
HGCF 17,105 1.56 0.67 858 254
-------------------------------------------------------
LGCF 40,250 0.98 N/A 1,271 N/A
-------------------------------------------------------
LGCP 3,282 1.06 N/A 111 N/A
-------------------------------------------------------
TOTALS 60,637 1.15 0.67 2,241 254
-------------------------------------------------------

Note:- HGCF is High Grade Copper Feed -- flotation ore
LGCF is Low Grade Copper Feed -- Gold leach ore
LGCP is Low Grade Copper Feed -- Gold leach ore from
the weathering zone


Contact Information

  • United Kingdom
    European Minerals Corporation
    Tony Williams, Chairman
    Tel: +44 (0) 20 7529 7508
    or
    European Minerals Corporation
    Bert Kennedy, President & CEO
    Tel: +44 (0) 20 7529 7508
    or
    North America
    Vanguard Shareholder Solutions Inc.
    Keith Schaefer
    Tel: 1.866.448.0780
    ir@vanguardsolutions.ca