European Goldfields Limited
TSX : EGU
AIM : EGU

European Goldfields Limited

September 12, 2005 07:29 ET

European Goldfields Limited: All Mining Permits Awarded for Stratoni Mine-Production to Commence

WHITEHORSE, YUKON TERRITORIES--(CCNMatthews - Sept. 12, 2005) -

European Goldfields Graduating to Producer

European Goldfields Limited (TSX:EGU)(AIM:EGU) is pleased to announce that its 65%-owned subsidiary Hellas Gold S.A. has been awarded by the Greek state all necessary environmental and mining permits to commence mining operations at the Stratoni deposit.

David Reading, Chief Executive Officer of European Goldfields, said:

"The gaining of the Stratoni permits is a major milestone in the development of European Goldfields' strategy. We can now recommence mining operations in Stratoni and produce near-term cash flow from the Hellas Gold projects.

We have worked closely with the Greek Government and local community to gain these permits, and this successful outcome paves the ways for further development of our assets in Greece.

The cooperation with our Greek partner, Aktor S.A., has been crucial for obtaining the Stratoni permits and we look forward to working with them in securing permits for the Olympias and Skouries projects."

Improved Mining Efficiency

The Stratoni mine is now ready to resume production following the recent completion of refurbishment work on the underground infrastructure and plant. Production of ore is expected to reach 170,000 tonnes by the end of the first year of full scale production, steadily increasing thereafter.

Based on historical production levels which reached 450,000 tonnes per year on a continuous shift basis, Stratoni is expected to produce consistent grades of 8-10% lead, 8-11% zinc and 200 g/t silver, with concentrator recoveries consistently high at around 90%.

In parallel, a new 1,900-metre access tunnel (or adit) will be developed to provide improved access to the Stratoni reserve and allow larger scale mining operations to be effected by the end of Q2 2006. The new adit is expected to raise mine output with a minimal increase of labour, while removing the necessity to build a large underground maintenance facility. In May 2005, Hellas Gold signed a fixed priced "turn-key" contract with Aktor S.A., European Goldfields' partner in Greece, for the construction of the adit.

The new mining method at Stratoni will result in more efficient and mechanised "cut and fill" operations designed to excavate from the base of the reserve upwards, with fill being placed on the floor.

Fully Operational Infrastructure

In addition to existing underground access and tailings facilities, Stratoni already benefits from recently refurbished and fully operational infrastructure such as a mill and flotation plant, offices and a laboratory together with a port loading facility for vessels of up to 8,000 tonnes, all located on the coast at Stratoni. The Stratoni plant is capable of producing 650,000 tonnes ROM per year.

Strong Market for Concentrates

Stratoni concentrates are considered metallurgically 'clean' with little deleterious material. This has ensured that in the past they have been easily sold and attract little by way of penalties. Hellas Gold is currently in negotiation with various potential buyers in order to ensure the most beneficial contract going forward.

In September 2004, two shipments of lead and zinc concentrates of US$3.4 million in value were sold from Stratoni through the refurbished port facility.

17% Increase in Reserves

The new, more efficient mining method adopted by Hellas Gold at Stratoni has resulted in a 17% increase in reserves which has been reported as follows on 30 June 2005:



---------------------------------------------------------------------
Reserve '000t Ag Ag Pb Pb Zn Zn
Category g/t Moz % '000t % '000t
---------------------------------------------------------------------
Proven 1,061 191 6.50 8.0 85 10.0 106
---------------------------------------------------------------------
Probable 862 189 5.24 8.1 70 11.7 101
---------------------------------------------------------------------
Total 1,923 190 11.74 8.1 155 10.8 207
---------------------------------------------------------------------


Exploration Upside

Stratoni has a mine life of six years based on current reserves, but the deposit is open in all directions and there is good potential to expand the resource and reserve base. Hellas Gold intends to initiate an aggressive exploration programme later this year.

The Stratoni mine comprises two deposits that are about 2 km apart, the Mavres Petres deposit to the west and the Madem Lakkos to the east. Both deposits are hosted by marble units. The exploration programme will mainly focus on the areas of high potential between Mavres Petres and Madem Lakkos. The new Stratoni adit is ideally placed to allow the exploration of this prospective area, which remains largely unexplored.

In addition, further exploration potential exists to the west of Mavres Petres where the upper marble horizon is known to continue. Previous exploration drilling (seven holes for 2,008 metres along two lines) 800 metres west of Mavres Petres at the Piavitsa target returned encouraging results, being a zone of massive sulphide mineralisation grading 3 to 14 g/t gold and combined lead and zinc ranging between 1% and 20% over true widths of 2 metres to 7 metres.

Finally, the new adit will provide access to conduct further drilling of the current inferred resources in order to upgrade these to measured and indicated resources and allow them to be converted into additional reserves.

Olympias and Skouries

Work is progressing according to plan to update feasibility studies and prepare new business plans for Hellas Gold's major gold and base metals projects of Olympias and Skouries, as previously reported on 30 June 2005.

Hellas Gold intends to submit new business plans for Olympias and Skouries to the Greek government in Q4 2005, followed by updated feasibility studies in Q1 2006.

By contract, the Greek State is committed to review the business plans within two months of submission, and issue all necessary environmental, mining and development permits within 10 months. The Stratoni permits were issued by the Greek State within this timeframe, which reaffirms management's belief that the Olympias and Skouries permits will be issued in a timely manner.

About European Goldfields

European Goldfields Limited is a resource company involved in the acquisition, exploration and development of mineral properties in Greece, Romania and the Balkans.

For additional information on the resource and reserve estimates quoted below, please refer to the Company's Resources & Reserves Declaration at www.egoldfields.com/goldfields/resources.jsp.

Greece - European Goldfields holds a 65% interest in Hellas Gold S.A. Hellas Gold owns assets in Northern Greece which consist of three near-production deposits within 70-year mining concessions covering a total area of 317 km2. The deposits include the polymetallic projects of Stratoni and Olympias which contain gold, lead, zinc and silver, and the copper-gold porphyry body referred to as Skouries. All three deposits have been well defined with over 200,000 metres of drilling and the completion of feasibility studies and later engineering studies.

The total proven and probable reserves of these assets are 17.2 Moz on a gold equivalent basis (65% attributable equals 11.2 Moz) from a measured and indicated resource base of 21.8 Moz gold equivalent (65% attributable equals 14.2 Moz). These assets represent some of the largest defined deposits in Europe. The three deposits are located within a 10 km radius of each other, making this effectively a gold and base metals centre. Furthermore, both Stratoni and Olympias were previously in production and have extensive existing mining and plant infrastructure and a ship loading facility on the Aegean Sea, making them near-production properties which require new permits. Hellas Gold's assets also include potential revenue generating stockpiles and tailings located on the surface.

Romania - European Goldfields holds five mineral properties located within the "Golden Quadrilateral" area of Romania, where it has recently completed an in-house pre-feasibility study underpinning the value of its 80%-owned Certej deposit. The Certej deposit hosts measured and indicated resources of 31.4 Mt grading 2.1 g/t gold and 11 g/t silver for 2.34 Moz of gold equivalent (80% attributable equals 1.88 Moz).

Resource & Reserve Parameters

Patrick Forward, General Manager, Exploration of European Goldfields, was the Qualified Person responsible for reviewing this news release.

The quantity and grade of the Piavitsa target are conceptual in nature, there has been insufficient exploration yet to define a mineral resource on the property and it is uncertain if further exploration will result in discovery of a mineral resource on the property.

Forward-looking statements

This news release contains certain forward-looking statements concerning the Company's future operations, economic performances, financial condition and financing plans. These statements are based on certain assumptions and analyses made by the Company in light of the its experience and its perception of historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate in the circumstances. However, whether actual results and developments will conform to the Company's expectations and predictions is subject to a number of risks, uncertainties and assumptions. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by the Company will be realised or, even if substantially realised, that they will have the expected consequences to or effects on the Company and its subsidiaries or their businesses or operations. The Company undertakes no obligation and do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.

Contact Information

  • European Goldfields
    David Reading, Chief Executive Officer
    +44 (0)20 7408 9534 (Office)
    +44 (0)7703 190 652 (Mobile)
    or
    European Goldfields
    David Grannell, Chief Financial Officer
    +44 (0)20 7408 9534 (Office)
    +44 (0)7703 190 652 (Mobile)
    info@egoldfields.com
    www.egoldfields.com
    or
    Buchanan Communications
    Bobby Morse / Ben Willey
    +44 (0)20 7466 5000 (Office)
    +44 (0)7802 875 227 (Mobile)
    bobbym@buchanan.uk.com
    or
    The Sherbourne Group
    Forbes West
    (416) 203 2200 (Office)
    forbes@sherbournegroup.ca