European Minerals Corporation
TSX : EPM
AIM : EUM

European Minerals Corporation

August 15, 2007 02:00 ET

European Minerals Corporation: 2nd Quarter Results to 30 June 2007

LONDON, ENGLAND--(Marketwire - Aug. 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 six months ended June 30, 2007. All amounts are expressed in US dollars unless otherwise indicated.

Tony Williams Chairman of EMC commented today:

"Good progress continued to be made at our Varvarinskoye Project and we remain on target to commence the plant commissioning in Q4 2007 and thereafter to complete the evolution to become a commercial mining company."

HIGHLIGHTS

Financial

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

- As at June 30, 2007, the Company had assets of $210.2 million with gross cash balances totalling $29.8 million.

- Capital expenditures on the development of the Varvarinskoye Project amounted to approximately $17 million for the quarter.

- Consolidated pre-tax loss for the quarter of $3.8 million (2006 - $2.4 million) includes non-cash share option expense of $2.2 million (2006 - $2.8 million).

Operational

- The grinding mills were lifted onto their plinths and mechanical installation commenced.

- Mechanical installation of the mills progressing in line with plan.

- Assembly of the primary crusher completed.

- Construction and installation of all major tanks (leach, CIP, detox and water) and flotation cells and thickeners was completed.

- Pre-stripping the top soil and overburden from the central pit at the Varvarinskoye continued in line with schedule.

- Over 300,000 tonnes of ore stockpiled.

- Development of mine infrastructure progressing in line with plan.

- Continued enhancement of management and operating team at Varvarinskoye.

MANAGEMENT'S DISCUSSION AND ANALYSIS

A full Management's Discussion and Analysis of results for the quarter and six months ended June 30, 2007 ("MD&A") and Financial Statements for the Company for the quarter and six months ended June 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

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 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.

The quarter and six months ended June 30, 2007, continues a period of expansion and development for the Company. Management's focus continued to, and will continue to be to drive the development and construction of the plant and mining infrastructure at Varvarinskoye.

Management anticipates fiscal year 2007 will be the last full year of development and anticipates the commissioning of the plant at Varvarinskoye will commence in Q4 2007, followed by a ramp up to full commercial mining production which is targeted for Q1 2008.

Results for the quarter and six months ended June 30, 2007

The Company has incurred a loss for the quarter ended June 30, 2007 ("Q2 07") of $3.8 million compared to $2.4 million for the quarter ended June 30, 2006 ("Q2 06") representing an increase of $1.4 million. The Company's loss for the six months ended June 30, 2007 is $5.4 million compared to $3.1 million for the six months ended June 30, 2006.

The Company's revenues for the periods under review represent interest income on cash deposits held. Total revenues for Q2 07 were $0.5 million compared to $0.7 million for Q2 06. Revenues for the six months ended June 30, 2007 are $0.7 million compared to $0.7 million for the six months ended June 30, 2006. The year-on-year movement for the quarter of $0.2 million is attributable to the Company holding increased cash balances during the quarter ended June 30, 2007 compared the same period in the previous fiscal year.

Administration costs of $1.5 million have been recorded for Q2 07 compared to $0.8 million for Q2 06 representing an increase of $0.7 million. Administration costs for the six months ended June 30, 2007 are $2.6 million compared to $1.1 million for the six months ended June 30, 2006 representing an increase of $1.5 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 activities.

Stock based compensation (which is a non-cash expense) for Q2 07 was $2.2 million compared to $2.8 million for Q2 06. Stock based compensation for the six months ended June 30, 2007 was $2.4 million compared to $3.1 million for the six months ended June 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 six 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 Varvarinskoye Project is not yet in production, consequently the Company believes that its loss (and consequent loss per share) is not a useful measure of the Company's value.

LIQUIDITY AND CAPITAL RESOURCES

At June 30, 2007, the Company's main source of liquidity was unrestricted cash of $18 million (December 31, 2006 - $19.6 million). In addition to this, the Company had approximately $14.8 million of available debt facility (December 31, 2006 - $47.1million) to be utilized against the remaining capital expenditure on the Varvarinskoye Project, together with restricted cash of $11 million (December 31, 2006 - $15 million) allocable to potential cost over-runs.

At June 30, 2007, the Company's consolidated working capital comprising cash, accounts receivable and prepaids, less accounts payable was $9.9 million compared to $8.3 million at December 31, 2006, representing an increase of $1.6 million. The increase in working capital arose as a result of decreased cash resources of $1.4 million in the six months to June 30, 2007 together with a decrease in accounts payable and accrued liabilities of $3.2 million and a decrease in debtors and prepaids of $0.2 million.

Included in the working capital calculation at June 30, 2007 are liabilities relating to the Varvarinskoye Project of approximately $6.5 million and cash balances of approximately $6 million drawn from the debt facility but not expended at the period end.

In December 2006, the Company concluded negotiations on a debt facility of $61 million to finance the remaining capital spend on the Varvarinskoye Project. The Company's spending incurred on its Varvarinskoye Project and its working capital requirements during the quarter and six months ended June 30, 2007 have been financed mainly from drawing down from this debt facility.

At June 30, 2007, the Company had restricted cash of $11.7 million (December 31, 2006 - $16.2 million). Restricted cash comprises 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 June 30, 2007, $11.0 million (December 31, 2006- $15 million) had been allocated to cover potential cost over runs in the completion of the Varvarinskoye Project and $0.7 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 six months ended June 30, 2007, net amounts totalling $4 million were released from restricted funds to meet certain project obligations where the actual cost had exceeded the original plan and $0.5 million released to meet certain costs incurred in relation to the debt facility.

As at June 30, 2007, the Company had capital commitments with respect to the Varvarinskoye Project of approximately $23 million. As at June 30, 2007, the Company had project funds (comprising unutilized debt facility and restricted cash allocable to the project) totalling approximately $26 million.

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 and has locked in a guaranteed 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 the first quarter of 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 six months ended June 30, 2007 was $35.3 million (fiscal 2006 - $80.3 million). This represents amounts spent on the Varvarinskoye Project and comprises capitalized development costs of $27.0 million, capitalized interest and finance charges of $3.0 million, $0.4 million relating to asset retirement obligations and property, plant and equipment of $4.9 million.

REVIEW OF OPERATIONS

Varvarinskoye Project

Q2 2007 continued a period of expansion and development for the Company. Management's focus continued, and will continue to be, to drive the development and construction of the process plant and mining infrastructure at Varvarinskoye in preparation for the commencement of the plant commissioning in Q4 2007.

Following the severe winter weather experienced in Q1 2007, the onset of spring in Q2 2007 enabled the Company to intensify the development program at Varvarinskoye and continue to progress within plan. By the end of the quarter, the Company had over 350 employees working on the process plant construction and mine development. In addition, local subcontractors had engaged approximately 200 employees. Staff was working on a double shift basis to take advantage of the extended daylight and working hours.

During the quarter the shipment of key equipment and materials from suppliers continued. Most remaining key items should be delivered to site during Q3 2007. Civil engineering work on the water storage and tailings dams has been largely completed. Work on various infrastructure buildings is nearing completion and the accommodation camp has been completed and is now occupied.

Good progress was also made in the preparation of the pit for commercial mining activity. By June 30, 2007 the pre-strip material had been removed on schedule and blasting in the pit and stockpiling of ore had commenced. The Company currently plans to have approximately one million tonnes of ore on the stockpiles when the process plant commences commissioning.

Development and construction highlights for the quarter include:

Process Plant

- All four grinding mills were lifted onto their plinths

- Mechanical installation of the mills progressing in line with plan.

- Assembly of the primary crusher completed

- Construction and installation of all major tanks (leach, CIP, detox and water) and flotation cells and thickeners was completed.

- All major concrete work completed.

Mining

- Over 300,000 tonnes of ore stockpiled.

- Open pit development and overburden stripping progressing as planned.

General Site

- Continued work on installation of electrical systems, conveyors and general site infrastructure are all progressing according to schedule.

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 the construction phase 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, Management believes progress on the Project has been excellent.

Management anticipates fiscal year 2007 will be the last full year of development and anticipates the commissioning of the plant at Varvarinskoye will commence in Q4 2007, followed by a ramp up to full commercial mining production which is targeted for Q1 2008.

Varvarinskoye Exploration

During the quarter and period ended June 30, 2007, no exploration work was undertaken on the licence area surrounding the core Varvarinskoye deposit. Exploration on the licence area has commenced since the end of the period. The Company is committed to an annual spend of at least $1 million in exploring the licence area. Management believes this could lead to the discovery of other mineralized bodies.

OUTLOOK

Management anticipates that fiscal 2007 should see the completion of the Company's evolution from a developer to a producer.

Management expects the commissioning of the Varvarinskoye Plant will commence in Q4 2007 and thereafter production will be ramped up and Varvarinskoye established as a commercial gold mine. In tandem with this, Management will also seek to add value by undertaking further exploration of the Varvarinskoye licence area and continuing efforts to source other suitable projects.

The Company has continued to strengthen its Head Office and Varvarinskoye teams to ensure that the appropriate human resource base is in place to manage the Company through fiscal year 2007 when it is anticipated the transition from an exploration to a mining company will be largely completed.

Management believes the Company has sufficient working capital resources to complete the capital programme at Varvarinskoye.

The Company's latest mine plan for Varvarinskoye, reflecting the 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
Consolidated Statements of Operations and Deficit
For the quarter and period ended June 30, 2007 and 2006
(in thousands of U.S. dollars except shares and per share amounts)

-------------------------------------------------------------------------
For the three For the six
months ended months ended
June 30, June 30,
2007 2006 2007 2006
$ $ $ $

Income
Interest 463 666 694 737
------------------------------------

Expenses
Investor relations 141 50 199 98
Administration 1,474 835 2,617 1,126
Legal and professional fees 153 32 288 236
Stock-based compensation 2,232 2,809 2,444 3,072
Foreign exchange (gain) loss 201 (989) 291 (1,075)
Project and development expenditure 69 289 279 344
-------------------------------------

4,270 3,026 6,118 3,801
-------------------------------------

Net loss before income tax recovery (3,807) (2,360) (5,424) (3,064)
Income tax recovery - - 300 -
--------------------------------------

Net loss for the period (3,807) (2,360) (5,124) (3,064)

Deficit - Beginning of period (72,041)(62,829) (70,724) (62,125)
--------------------------------------

Deficit - End of period (75,848)(65,189) (75,848) (65,189)
--------------------------------------
--------------------------------------

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

Weighted average number of
shares ('000s) 279,672 276,101 279,320 241,104
--------------------------------------
--------------------------------------



European Minerals Corporation
Consolidated Balance Sheets
As at June 30, 2007 and December 31, 2006
(in thousands of U.S. dollars)

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

30 June 31 December
2007 2006
$ $

Assets

Current assets
Cash and cash equivalents 18,119 19,554
Restricted cash 714 1,249
Accounts receivable and prepaid expenses 243 474
-----------------------
19,076 21,277
Restricted cash 10,988 15,000
Varvarinskoye property, plant and equipment 174,522 139,137
Net investment in oil and gas residual interests 1,693 1,693
Advances held by contractor's bank 3,991 4,003
-----------------------
210,270 181,110
-----------------------
-----------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 8,459 11,706
-----------------------
8,459 11,706
Convertible debt 6,167 15
Long-term debt 27,338 672
Future income taxes 1,972 2,272
Asset retirement obligations 3,496 3,052
-----------------------
47,432 17,717
-----------------------
Shareholders' Equity
Share capital 175,896 174,985
Equity component of convertible debt 186 15
Share purchase warrants 46,450 46,346
Share purchase options 13,108 9,599
Share purchase units 2,163 2,376
Contributed surplus 883 796
Deficit (75,848) (70,724)
-----------------------
162,838 163,393
-----------------------
210,270 181,110
-----------------------
-----------------------



European Minerals Corporation
Consolidated Statements of Cash Flows
For the quarter and period ended June 30, 2007 and 2006
(in thousands of U.S. dollars)

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

For the three For the six
months ended months ended
June 30, June 30,
2007 2006 2007 2006
$ $ $ $

Cash (used for)provided from
Operating activities
Net loss for the period
after income tax recovery (3,807) (2,360) (5,124) (3,064)
Adjustment to reconcile net loss to
cash flow from operating activities
Stock-based compensation 2,231 2,809 2,444 3,072
Unrealized foreign exchange 201 (990) 291 (1,075)
Future income tax recovery - - (300) -
Changes in non-cash working capital
Decrease (increase) in advances held
by contractors' bank and accounts
receivable and prepaid expenses (138) 1,079 243 (11,312)
Increase (decrease) in accounts
payable and accrued liabilities (4,926) 4,224 (42) 5,427
--------------------------------------
Cash (used for) provided from
operating activities (6,439) 4,762 (2,404) (6,952)
--------------------------------------

Investing activities
Expenditures on Varvarinskoye
property, plant and equipment (13,004)(34,332) (35,385) (34,666)
Restricted cash 2,441 8,658 4,547 3,163
Recovery of net investment in
oil and gas residual interests - - - 605
---------------------------------------
Cash used in investing activities (10,563)(25,774) (30,838) (30,898)
---------------------------------------

Financing activities
Common shares issued - 8 - 64,910
Proceeds from exercise of stock
options 310 - 310 49
Proceeds from exercise of warrants 404 - 404 36
Proceeds from exercise of units 197 1,752 197 2,045
Advances from convertible bonds
and long-term debt 17,905 - 32,408 -
Deferred financing costs (740) (252) (1,512) (2,590)
---------------------------------------

Cash provided by financing
activities 18,386 1,508 31,807 64,450
---------------------------------------

Increase(Decrease) in cash
and cash equivalents 1,384 (19,504) (1,435) 26,600
Cash and cash equivalents
- Beginning of period 16,735 55,578 19,554 9,474
---------------------------------------
Cash and cash equivalents
- End of period 18,119 36,074 18,119 36,074
---------------------------------------
---------------------------------------



European Minerals Corporation
Notes to Consolidated Financial Statements
For the quarter and period ended June 30, 2007
---------------------------------------------------------------------------
(in thousands of US dollars)


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") 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 2007 with a consequential ramp up to commercial mining production during quarter one of 2008.

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

As at June 30, 2007, the Company had forecast capital expenditures for the completion of the Varvarinskoye Project amounting to $23 million. During fiscal year 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 June 30, 2007, the unutilized balance on this facility totalled $14.8 million. As at June 30, 2007, the Company also had restricted cash balances of $11.0 million to be utilized against any cost overruns arising on completion of the Varvarinskoye Project.

2. Summary of significant accounting policies

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

Basis of Consolidation

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

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

- JSC Varvarinskoye (registered in the Republic of Kazakhstan) ("JSCV")

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$000's, except per share amounts
--------------------------
30 June, 31 December,
2007 2006
$ $

Consolidated statements of operations
As reported in accordance with Canadian GAAP (5,124) (8,599)
Derivatives and hedging activities (c) (3,700) (69,600)
Future income taxes (c) 1,972 2,272
------------------------

Net loss and comprehensive loss under U.S. GAAP (6,852) (75,927)
------------------------
------------------------

Basic and diluted loss per common share under
U.S. GAAP (0.02) (0.29)
------------------------
------------------------

Consolidated balance sheet
Varvarinskoye property, plant and equipment
Under Canadian GAAP 178,512 139,137
Exploration expenditures (a) (4,786) (4,786)
------------------------
Under U.S. GAAP 173,726 134,351
------------------------
------------------------

Convertible bonds
Under Canadian GAAP (186) (15)
Convertible debt (b) 186 15
------------------------
- -
------------------------
------------------------

Unrealized derivatives losses
Under Canadian GAAP - -
Derivative and hedging activities (73,300) (69,600)
------------------------
Under U.S. GAAP (73,300) (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 162,838 163,393
Exploration expenditures (a) (4,786) (4,786)
Convertible debt (b) (186) (15)
Derivatives and hedging activities (c) (73,300) (69,600)
Future income taxes (c) (1,972) (2,272)
------------------------
Total shareholder's equity under U.S. GAAP 82,594 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 capitalised. 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 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, but are not limited to, statements contained in this MD&A under the headings "Outlook", regarding targets, estimates and/or assumptions in respect of future production, costs and commodity prices. Such forward-looking statements also include, without limitation, statements contained in this MD&A regarding targets, estimates and/or assumptions in respect of mineral resources and reserves, timing of commissioning of the plant, commencement of operations, commercial mining and production, 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; the mineral resource and mineral reserve figures disclosed are estimates and no assurances can be given that the indicated levels of minerals will be produced; 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 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.

Contact Information

  • European Minerals Corporation - United Kingdom
    Chairman/President and CEO
    Tony Williams/Bert Kennedy
    + 44 (0) 20 7529 7508

    OR

    Vanguard Shareholder Solution, Inc. - North America
    Keith Schaefer
    1-866-448-0780 (North America)
    Email: ir@vanguardsolutions.ca

    OR

    Canaccord Adams Limited
    Erin Needra/ Robin Birchall
    + 44 (0) 20 7050 6600