European Minerals Corporation
TSX : EPM
AIM : EUM

European Minerals Corporation

March 31, 2006 01:01 ET

European Minerals Corporation Announces 2005 Results

LONDON, ENGLAND--(CCNMatthews - March 31, 2006) -

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) - a gold-copper exploration and development company, today reports its results for the twelve months ended December 31, 2005. All amounts are expressed in US dollars unless otherwise indicated.

HIGHLIGHTS

Financial

- As at December 31, 2005, the Company had assets of $106.4 million, including non-restricted cash of $9.5 million.

- No operating revenues during the year as the Company continued to focus its efforts on the development of the Varvarinskoye gold and copper mine.

- Consolidated loss for the year was $4.6 million. The loss included expenditures of $5.8 million offset by interest income of $1.2 million. This compares with expenditures of $2.6 million offset by interest income of $120,000, for 2004.

- Capital expenditures on the development of the Varvarinskoye Project amounted to approximately $59.3 million.

- Approximately Cdn$103.5 million (approximately $85 million) raised by way of an equity financing. In March 2006, post balance sheet event of a further equity financing closed that raised approximately Cdn$80.9 million (approximately $70 million) in aggregate.

- Acquisition of the remaining 14% of the Varvarinskoye Project to give the Company 100% control.

Operational

- Work on pre-stripping the top soil and overburden from the central pit at the Project continued in 2005. A purpose built mine fleet workshop is currently under construction and will be complete in mid - 2006.

- In addition to the pre-stripping, earthworks on the construction of the tailings dam was started and will be completed on target in late 2006.

- Construction of the process plant and infrastructure commenced in July 2005. The very severe winter experienced in northern Kazakhstan and Russia meant that there was a virtual construction-site shutdown from December 2005 to February 2006.

- During the year the Company continued to build up its management and operating team for the project. Several key appointments of Kazakh national and expatriate managers were made in 2005.

- In December 2005, EMC concluded a copper/gold concentrate sales contract with Trafigura Beheer BV, a major commodity sales and trading organization.

Tony Williams Chairman of EMC commented today:

"We are delighted with the current progress at Varvarinskoye. Given the circumstances that led to the change of project engineer, our team, as well as our Kazakh sub-contractors and our new project engineers, SENET, have performed magnificently and deserve the gratitude of all shareholders. We are on our way to significant metal production in 2007 and remain confident that our first gold will be produced on schedule."

MANAGEMENT'S DISCUSSION AND ANALYSIS

A full Management's Discussion and Analysis document ("MD&A") is available on SEDAR at www.sedar.com. The document can also be obtained on application to the Company.

The following has been extracted from the MD&A.

FINANCIAL REVIEW

The Company has yet to generate any operating revenues and therefore losses have been incurred throughout this period.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

The Company's principal source of income during the year was from interest on bank deposits which amounted to $1.2 million compared to $120,000 in 2004. This level of interest income reflects the higher average cash balances as a result of the completed Offering.

The consolidated net loss for 2005 amounted to $4.6 million ($0.03 per share) compared to $2.5 million ($0.04 per share) for 2004. The consolidated net loss included expenditures on administration costs of $1.6 million (2004 - $1.1 million), legal and professional costs of $595,000 (2004 - $791,000), foreign exchange losses of $1.7 million (2004 - $Nil), stock-based compensation of $0.6 million (2004 - $134,000) and resource project costs of $1.1 million (2004 - $377,000).

The higher level of administration expenses is indicative of additional costs in this area as a result of the Company continuing to develop its corporate administration as the Varvarinskoye Project gets underway. The Company also incurred higher resource project costs as it wrote-off costs attributable to exploration work that was undertaken in the Balkans.

LIQUIDITY AND CAPITAL RESOURCES

In management's view, the most meaningful information concerning the Company relates to its current liquidity and solvency since it is not currently generating any income from its mineral projects.

The Company raises capital for its operations through the issuance of its common shares, proceeds received from the exercise of options and share purchase warrants and the issuance of debt. Although the Company has been successful in the past in raising capital, there can be no assurance that any funding required by the Company in the future will be made available to it and, if such funding is available, that it will be offered on reasonable terms or that the Company will be able to secure such funding through third-party financing or joint ventures. Furthermore, there is no assurance that the Company will be able to secure new mineral properties or projects or that they can be secured on competitive terms.

On April 11, 2005, the Company completed an offering ("Offering") which consisted of 138 million units (the "Units") at a price of Cdn$0.75 (Pounds Sterling 0.33) per unit, raising gross proceeds of approximately Cdn$103.5 million (approximately $85 million). Each Unit is comprised of one common share in the capital of EMC and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder to acquire one common share until April 11, 2010 at a price of Cdn$1.20 per share.

In November 2005, the Company entered into a debt facility (the "Debt Facility") in the amount of $75.4 million with Investec Bank (UK) Limited, Investec Bank Limited and Nedbank Limited (the "Lenders") to fund the debt portion of the construction of the Varvarinskoye Project. In connection with and as a condition of drawdown under the Debt Facility, EMC also implemented a gold hedging facility (the "Hedging Facility") for the period of the Debt Facility. The hedge is in the form of a monthly US dollar, flat forward gold sale over the 8-year term of the Debt Facility.

Notwithstanding the entering into of the Debt Facility, it has not been possible for the Company's subsidiary, JSC Varvarinskoye ("JSCV"), to make a drawdown thereunder as a result of the termination of the lump sum turnkey contract ("LSTK") with MDM Ferroman (Pty) Ltd ("MDM"), which resulted in JSCV not being able to meet one of the conditions precedent to the drawdown of the facility. The Company is in ongoing discussions with its Lenders regarding the Debt Facility for the Project. While the Lenders of the Debt Facility have indicated their continued support of the Company's actions, there is no assurance that the existing Debt Facility will not be modified or cancelled by the Lenders or the Company. It is an event of default under the Debt Facility if the contractor for the Project is not replaced within 28 days of termination of the LSTK which occurred on January 31, 2006. However, as of February 23, 2006, the Lenders have granted the Company an extension until May 1, 2006 to complete the first drawdown under the Debt Facility, a condition precedent of which is the replacement of the contractor.

In addition, certain funds of the Company, totalling $20 million, are held by the Lenders in secured accounts and the Company is not currently able to utilize such funds for its operations. If the Debt Facility is not immediately available, the Company believes that, under existing market conditions, it would be able to access alternative facilities to fund the debt portion of the Project.

If the Lenders were to terminate the Debt Facility, all fees already paid to the Lenders would be forfeit (being an aggregate of approximately $2.2 million). Also, the Lenders would be in a position to enforce their security over the assets of JSCV and furthermore the Lenders, as hedging counterparties under the Hedging Facility, would be entitled to terminate the hedges. The Company would be exposed for the full balance of any break costs associated with terminating the hedges (estimated, based on recent market prices for gold, to be approximately $21.6 million as at March 24, 2006).

On March 21, 2006, the Company closed its short form prospectus offering of 55,000,000 units (the "Financing"). The Financing was effected through an underwriting syndicate led by Canaccord Capital Corporation and included Pacific International Securities Inc. (the "Underwriters"). The underwriters' option was also exercised resulting in a total of 67,000,000 units being sold at Cdn$1.05 per unit for gross proceeds of approximately Cdn$70 million (approximately $60.8 million). Each unit consists of one common share of EMC and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of Cdn$1.55 per share until March 21, 2011.

On March 24, 2006, the Company issued 10,050,000 units following the full exercise of the over-allotment option granted to the Underwriters of the Financing. Following the exercise of the over-allotment option, the gross proceeds raised pursuant to the Financing was approximately Cdn$80.9 million (approximately $70 million) in aggregate.

Working Capital

The Company's unrestricted working capital amounted to approximately $5.7 million as at December 31, 2005, compared to approximately $7.8 million as at December 31, 2004, a 22% decrease. This decrease was mainly attributable to the increase in its unrestricted cash and receivables position ($5.4 million) offset by its increased payables and accrued liabilities ($7.6 million).

Currently, the Company's unrestricted working capital is approximately $56 million, including the net proceeds of the Financing. Management expects that working capital requirements to the end of 2006 will amount to approximately $80 million, comprised of capital expenditures of $75 million related to building the mine and $5 million for overhead and administrative costs. As the Company has met all its equity requirements under the terms of the Debt Facility, it expects that its 2006 expenditures will be met adequately with existing funds together with drawdowns under the Debt Facility.

As at December 31, 2005, the book value of resource assets amounted to approximately $59.7 million (2004 - $4.8 million) and relates to the Company's capitalised development expenditures of $49.6 million (2004 - $4.8 million), acquisitions of the Additional Interest of $9.7 million (2004 - $Nil) and asset retirement obligations of $470,000 (2004 - $Nil).

The Company currently estimates its overhead expenditures to be approximately $5 million for 2006. As a result of the SENET Review, the capital expenditures to place the Project into production are now estimated at $145 million (including the purchase of the mining fleet), with approximately $75 million estimated to be spent in 2006. The funds required for these expenditures are available from funds raised through the Offering, the Debt Facility (if drawn down) and the Financing.

REVIEW OF OPERATIONS

Varvarinskoye Project

During the year the company continued to focus its efforts on the development of the Varvarinskoye gold and copper mine.

Work on pre-stripping the top soil and overburden from the central pit at the Project continued in 2005. Two Kazakh mining contractors commenced this work in June and continued throughout the summer until the arrival and commissioning of the JSC Varvarinskoye owner-operated mining equipment. Currently the Company's earth moving fleet is comprised of four CAT777D haul trucks working with a RH120E and a CAT 385 hydraulic excavators, mining support equipment including CAT graders, bulldozers and front end loaders are also operating on site. Two CAT 777D trucks are on site awaiting assembly bringing the total mining fleet delivered to site at approximately 60%. Several other major items of equipment including three CAT 777D trucks, the second RH120E excavator and a DM30 blast hole drilling rig necessary for hard rock mining are either in transit to site or about to be dispatched from the manufacturers' factories. During the site build-up phase of the mining fleet, operator training programmes were successfully initiated over the winter period and based on experience to date, EMC expects the locally recruited operators to attain the production levels required in the project working in a safe and efficient manner. The Maintenance and Repair Contract ("MARC") agreed with the Caterpillar agent in Kazakhstan also commenced using a temporary workshop facility constructed on site by JSCV. A purpose built mine fleet workshop is currently under construction and will be complete in mid - 2006. In spite of an unusually severe winter which saw temperatures dropping to -43 degrees C, no serious disruptions to the build up of the mining operations occurred and the mining schedule is on target to have ore on the stockpiles in readiness for the completion of the process plant construction.

In addition to the central pit pre-stripping, earthworks on the construction of the tailings dam was started and will be completed on target in late-2006. The main water storage and overflow reservoir was completed and the de-watering ring linked to the central pit de-watering boreholes is ready for operation in anticipation of the spring thaw in 2006.

Construction of the process plant and infrastructure commenced in July 2005. To-date placement of approximately 4,000 cubic metres of concrete and the concomitant civil engineering works has been completed. These works are largely the foundations for the process plant and the mine fleet workshop. Unfortunately, deliveries of structural steel placed in 2005 are well behind schedule and this has placed the erection of the process plant building behind programme. As noted above the very severe winter experienced in northern Kazakhstan and Russia meant that there was a virtual construction-site shutdown from December 2005 to February 2006.

Progress was also made on the owner installed infrastructure aspects of the project. Agreements for the construction of fuel and explosive facilities at the mine site were put in place. The contract for the installation of the 60km overhead 25MW power line for the project power supply was signed and equipment orders for transformers will be fulfilled in the second quarter 2006. Power to the project is on target to be available in late 2006. A temporary analytical laboratory has been constructed on site to ensure tight assay control as mining nears the ore body in 2006. This facility will be replaced by a purpose-built laboratory as part of the mine offices, accommodation camp and other facilities which will be constructed in 2006.

During the year the Company continued to build up its management and operating team for the project. Several key appointments of Kazakh national and expatriate managers were made in 2005.

Termination of lump sum turnkey contract ("LSTK")

In January 2006, the Company terminated the LSTK that had been entered into with MDM in September, 2005, in relation to the Varvarinskoye Project and it appointed SENET CC ("SENET"), a South African based design, engineering and project management company, to undertake a review (the "SENET Review") to reassess the design and cost of construction of the Varvarinskoye process plant and associated infrastructure. SENET has extensive project and construction experience operating worldwide within the mining industry, including the former Soviet Union, specialising in engineering, procurement and construction management ("EPCM") and engineering, procurement and construction turnkey contracts for multi-disciplined projects.

In February 2006, the Company received the SENET Review that included overall design parameters as detailed in the definitive feasibility study undertaken by MDM in November 2004. The total cost estimate for completion of the Varvarinskoye process plant and related infrastructure costs is $60.8 million plus EPCM fees and reimbursable costs payable to SENET of $8.8 million for a total of $69.6 million. This compares to total estimated plant and infrastructure costs of approximately $55.6 million under the LSTK.

SENET has also advised that based on the work done to date, it expects to be able to achieve practical completion of the process plant and introduction of first ore by March 30, 2007, with full commissioning of the plant to occur by mid-June 2007.

The Company has accepted the revised cost estimates and construction schedule submitted by SENET and signed a letter of intent ("LOI") appointing SENET as EPCM contractors, to supervise construction in conjunction with JSC Consolidated Development Corporation ("CDC") and the Company's own project team. SENET has commenced work under the LOI which will be translated into a formal EPCM contract shortly.

Off-take contract

In December 2005, EMC concluded a copper/gold concentrate sales contract with Trafigura Beheer BV, a major commodity sales and trading organization. The contract is for the full production of copper and gold concentrates for the life of the Project, estimated in the 2004 Bankable Feasibility Study to be 600,000 tonnes at an average grade of 17% copper and 20 g/t gold.

Other Projects

The Company continued to investigate sourcing additional properties in Eastern Europe. A review of projects in Albania was undertaken. It is planned that these efforts will continue in 2006. Consistent with the Company's policy on expensing costs relating to non-specific projects, these expenditures have been written-off in 2005.

Oil Interest

In 1999, Lisburne Holdings Limited ("Lisburne"), a 55%-owned subsidiary of EMC sold Tasbulat Oil Corporation ("Tasbulat") to the National Oil Company Petrom S.A. (the Romanian national oil company). Tasbulat holds interests in three oil fields in Kazakhstan (the "Tasbulat Fields").

The proceeds of sale, excluding anticipated royalties and expenses, amounted to $6.05 million of which $4.95 million has been received by Lisburne. On January 13, 2006, the final sales proceeds of $1.1 million were received by Lisburne, of which the Company's share was $605,000 leaving the Company with a remaining net investment in oil and gas residual interest of approximately $1.9 million at that date.

The remaining net investment in oil and gas residual interest is expected to be recovered from the Company's share of a 1% gross overriding royalty (based on gross sales proceeds less certain sales related costs and taxes) which is payable to Lisburne from all oil sales from the Tasbulat Fields exceeding 2.0 million barrels of oil equivalent.

Acquisition of remaining 14% interest in Varvarinskoye project

On June 23, 2005, the Company announced the completion of the acquisition of remaining 14% interest (the "Additional Interest") in its key asset, the Varvarinskoye gold-copper deposit located in northern Kazakhstan, that it did not already own. The Company agreed to pay $7.25 million to acquire the Additional Interest in JSCV, the holder of the licences covering the Project deposit. A cash payment of $5 million was paid on closing with the remaining balance ($2.25 million) due on the earlier of the fifteenth business day following the first date upon which gold dore is produced from the Varvarinskoye mine or December 31, 2006. The discounted value of the remaining purchase price balance of $2.25 million was $2.11 million at December 31, 2005 and has been recorded as a liability. Legal costs regarding the transaction were approximately $44,800, and have been included as part of the purchase cost.

ANNUAL GENERAL MEETING, ANNUAL REPORT, PROXY MATERIAL AND ANNUAL INFORMATION FORM

The Annual General Meeting of the Company is schedule for May 11, 2006 and will be held in London at a time and venue to be announced. The Annual Report in respect of the year ended December 31, 2005, Information Circular and other proxy related material is scheduled to be issued to shareholders on April 13, 2006 and will be filed on SEDAR on that date.

The Company's Annual Information Form will be filed on SEDAR on March 31, 2006.

Documentation filed on SEDAR may be accessed on www.sedar.com.



European Minerals Corporation

Audited Consolidated
Financial Statements
(in thousand of US dollars)

Years Ended
December 31, 2005 and 2004


MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements of the Company have been prepared by management in accordance with accounting principles generally accepted in Canada and contain estimates based on management's judgement. Management maintains an appropriate system of internal controls to provide assurance that transactions are authorised, assets safeguarded and proper records maintained.

The Audit Committee of the Board of Directors has reviewed with the Company's independent auditors the scope and results of the annual audit and the consolidated financial statements and related financial reporting matters prior to submitting the consolidated financial statements to the Board for approval.

The Company's independent auditors, PricewaterhouseCoopers LLP, are appointed by the shareholders to conduct an audit in accordance with Canadian generally accepted auditing standards and their report follows.



(signed) (signed)
W. G. Kennedy S. M. Gledhill
President and Chief Executive Officer Chief Financial Officer


March 30, 2006

AUDITORS' REPORT

To the Shareholders of European Minerals Corporation

We have audited the consolidated balance sheets of European Minerals Corporation as at December 31, 2005 and 2004, and the consolidated statements of operations and deficit and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards in Canada. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2005 and 2004, and the results of its operations and its cash flows for each of the years then ended in accordance with generally accepted accounting principles in Canada.



(signed)
Vancouver, B.C "PricewaterhouseCoopers LLP"
March 28, 2006 Chartered Accountants



European Minerals Corporation

Audited Consolidated
Financial Statements
(in thousand of US dollars)

Years Ended
December 31, 2005 and 2004



European Minerals Corporation
Consolidated Balance Sheets
As at December 31
(In thousands of U.S. dollars)
---------------------------------------------------------------------
2005 2004
--------------------
ASSETS

Current assets
Cash and cash equivalents 9,474 8,099
Restricted cash (note 3) 24,435 -
Advances held by contractors bank (note 16) 4,518 -
Accounts receivable and prepaid expenses 324 272
--------------------

38,751 8,371

Net investment in oil and gas residual
interests (note 4) 2,544 3,184
Resource assets (note 5) 59,748 4,786
Deferred financing costs (note 6) 5,310 876
--------------------

106,353 17,217
--------------------
--------------------

LIABILITIES

Current liabilities
Accounts payable and accrued liabilities
(notes 8 and 16) 8,621 549
JSC Varvarinskoye purchase consideration
(note 5(b)) 2,108 -
--------------------
10,729 549
--------------------

Future income taxes (note 9(b)) 2,600 -
Asset retirement obligations (note 10) 470 -
--------------------
3,070 -
--------------------
13,799 549
--------------------

SHAREHOLDERS' EQUITY

Share capital (note 7(a)) 120,359 71,499
Share purchase options (note 7(d)) 2,285 1,730
Share purchase warrants (note 7(c)) 28,708 780
Share purchase units (note 7(e)) 3,141 -
Contributed surplus (note 7(b)) 186 157
Deficit (62,125) (57,498)
--------------------
92,554 16,668
--------------------

106,353 17,217
--------------------
--------------------

Nature of operations and going concern (note 1)
Measurement uncertainty (note 16)
Contingencies (notes 5, 6, 9 and 15)
Commitments (notes 5 and 16)
Subsequent events (notes 4, 5, 6 and 17)

The accompanying notes are an integral part of these consolidated
financial statements


APPROVED BY THE DIRECTORS

(signed) (signed)
A J Williams W G Kennedy
Director Director



European Minerals Corporation
Consolidated Statements of Operations and Deficit
For the Years Ended December 31
(In thousands of U.S. dollars except shares and per share amounts)
---------------------------------------------------------------------
2005 2004
--------------------

Income
Interest 1,195 120
--------------------

1,195 120
--------------------

Expenses
Investor relations 266 320
Administration (note 8) 1,616 1,064
Legal and professional fees (note 8) 595 791
Stock-based compensation (note 7(f)) 609 134
Foreign exchange (gain)/loss 1,680 (58)
Resource projects 1,056 377
--------------------

5,822 2,628
--------------------

Net loss before income tax recovery (4,627) (2,508)
Income tax recovery (note 9(a)) - -
--------------------

Net loss (4,627) (2,508)

Deficit - beginning of year as previously
reported (57,498) (53,118)
Adjust for stock-based compensation (note 7(f)) - (1,872)
--------------------
Deficit - beginning of year as restated (57,498) (54,990)
--------------------

Deficit - end of year (62,125) (57,498)
--------------------
--------------------

Basic and diluted loss per common share $(0.03) $(0.04)
--------------------
--------------------

Weighted average number of shares ('000s) 160,264 57,872
--------------------
--------------------

The accompanying notes are an integral part of these consolidated
financial statements



European Minerals Corporation

Consolidated Statements of Cash Flows
For the Years Ended December 31
(In thousands of U.S. dollars)
---------------------------------------------------------------------
2005 2004
--------------------

Cash provide from (used for):
Operating activities
Net loss for the year (4,627) (2,508)
Adjustments to reconcile net loss to cash flow
from operating activities:
Stock-based compensation 609 134
Shares provided for consulting services 49 -
Changes in non cash working capital:
(Increase)/decrease in accounts receivable
and prepaid expenses (52) (255)
Increase in accounts payable and accrued
liabilities 79 437
--------------------

Cash used in operating activities (3,942) (2,192)
--------------------

Investing activities
Development of resource assets (44,345) (4,786)

Acquisition of minority interest in
Varvarinskoye project (note 5 (b)) -
Restricted cash (note 3) (24,435) -
Recovery of net investment in oil and gas
residual interests residual interests
--------------------
Cash used in investing activities (73,140) (4,786)
--------------------

Financing activities
Common shares issued, net of issue costs 78,550 -
Proceeds from exercise of stock options 31 71
Proceeds from exercise of warrants - -
Proceeds from exercise of units 367 -
Deferred financing costs (491) (96)
--------------------

Cash provided by financing activities 78,457 (25)
--------------------

(Decrease)/increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

--------------------
Cash and cash equivalents at end of the year 9,474 8,099
--------------------
--------------------

Cash and Cash Equivalents at December 31
comprise:
Cash balances on deposit with bank 7,901 1,599
Short-term deposit accounts 1,573 6,500
--------------------

9,474 8,099
--------------------
--------------------

Supplementary cash flow information (note 14)

The accompanying notes are an integral part of these consolidated
financial statements



European Minerals Corporation
Notes to Consolidated Financial Statements
For the years ended December 31, 2005 and 2004
(In U.S. dollars)
---------------------------------------------------------------------


1. Nature of operations and going concern

European Minerals Corporation ("EMC" or the "Company") is a mineral exploration and development company which holds interests in various mineral projects in Kazakhstan and Albania. During 1995 and 1996, EMC acquired a number of interests in mineral exploration joint ventures in Kazakhstan, including its key asset, the Varvarinskoye gold-copper deposit, in which it presently holds a 100% indirect interest (the "Varvarinskoye Project") through its 100%-owned subsidiaries, Three K Exploration and Mining Limited ("Three K"), Althames Holdings Limited ("Althames") and JSC Varvarinskoye ("JSCV"). The Varvarinskoye Project is located in northern Kazakhstan and the Company is currently constructing a mine at the project site that is expected to be fully commissioned by June 2007. Subsequent to the December 31, 2005 balance sheet date, the Company replaced its existing contractor for the Varvarinskoye Project (note 5(c)) and is in continuing negotiations with its bankers to maintain its debt facility to be used to fund development of the Varvarinskoye Project (note 6).

The Company is listed on the Alternative Investments Market of the London Stock Exchange, England ("EUM", traded in pounds sterling) and the Toronto Stock Exchange in Canada ("EPM", traded in Canadian dollars). To date, the Company has not earned significant operating revenues. On April 8, 2005, EMC was continued from the Yukon Territory, Canada, to the British Virgin Islands (the "Continuance"). As one of the results of the Continuance, the Company has changed its authorized share capital from an unlimited number to 100 billion common shares.

Management believes that the Company has sufficient cash resources to meet planned administrative costs and property exploration commitments through 2006. Additional funding will be required for any new mining projects that may be acquired. While the Company has been successful in the past in raising additional financing, there can be no assurance that the Company will be able to continue to raise such additional funding as may be required for future operations.

Although the Company has take steps to verify title to mineral properties in which it has an interest, these procedures do not guarantee the Company's title. Such properties may be subject to prior agreements or transfers and title may be affected by undetected defects.

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will be able to realise assets and discharge liabilities in the normal course of business for the foreseeable future. These financial statements do not include the adjustments that would be necessary should the Company be unable to continue as a going concern. As of March 24, 2006, the Company's treasury has been increased by approximately Cdn$80.9 million (approximately $70 million) as a result of the closing of a short form prospectus offering (note 17).

2. Accounting policies

Accounting convention

The consolidated financial statements are presented in United States dollars and have been prepared using Canadian generally accepted accounting policies. As described in note 13, these principles differ in certain material respects from accounting principals generally accepted in the United States.

Basis of consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. Intercompany balances and transactions are eliminated on consolidation.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant estimates include assessments of the potential impairment of the carrying value of resource assets and the determination of asset retirement obligations. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalent balances include cash and short-term deposits with banks or other financial institutions which may or may not be held in high interest bearing accounts that have an original maturity date of 90 days or less.

Resource assets

Exploration and associated costs relating to properties for which there is no evidence of economically recoverable mineralisation 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.

Senior management periodically reviews the carrying value of mineral properties and deferred exploration costs to consider whether there are any events or changes in circumstances that may indicate impairment. Where estimates of future cash flows are available, a reduction in the carrying value is recorded to the extent the carrying value exceeds the discounted amount of future cash flows. Where estimates of future cash flows are not available and where events or changes in circumstances suggest impairment, management assesses if the carrying value can be recovered and provides for impairment for any excess of carrying value over estimated fair value.

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.

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. Monetary assets and liabilities are translated at the exchange rates on the date of the balance sheet. Non-monetary items are translated at historical rates. Differences arising on foreign currency translations are reflected in the consolidated statement of operations.

Loss per share

Loss per share is calculated based on the weighted average number of shares issued and outstanding during the year. Diluted loss per common share is calculated using the treasury stock method, which assumes that stock options and warrants are only exercised when the exercise price is below the average market price during the period, and that the Company will use any proceeds to purchase its common shares at their average market price during the period. In the years when the Company reports a net loss, the effect of potential issuances of shares under options and warrants would be anti-dilutive and, therefore, basic and diluted losses per share are the same.

Incentive stock option plan

The Company has an incentive stock option plan as described in note 7(d). On January 1, 2004, the Company retroactively adopted without restatement the fair value method of accounting for stock-based compensation for employees and directors. Under this method, the fair value of options granted is recognised over the vesting period of the options. Previously, the Company did not record any compensation expense on the granting of stock options to employees and directors as the exercise price was equal to or greater than the market price at the date of the grants. Consideration paid for shares on the exercise of a stock option is credited to share capital. Further, the value assigned to the options on issue is deducted from share purchase options balance and added to share capital. Note 7(d) to these financial statements provides additional disclosures on the Company's options.

Income taxes

Income taxes are calculated using the liability method. Temporary differences arising from the difference between the tax basis of an asset or liability and its carrying amount on the balance sheet are used to calculate future income tax liabilities or assets. Future income tax liabilities or assets are calculated using tax rates anticipated to apply in the periods that the temporary differences are expected to reverse. A valuation allowance is applied to the extent that it is more likely than not that future income tax assets will not be realized (note 9).

Asset retirement obligations

Asset retirement obligations are recognized for statutory, contractual, or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development, or normal operation of the assets. The obligations are measured initially at fair value (using present value methodology), and added to the carrying amount of the related asset. In subsequent periods, the liability is adjusted for the accretion of discount and any changes in the amount or timing of the underlying future cash flows. The related asset is adjusted only as a result of changes in the amount or timing of the underlying cash flows. The capitalised asset retirement cost is depreciated on the same basis as the related asset; discount accretion is included in determining the results of operations.

Deferred financing costs

Financing costs incurred on the issuance of long-term debt are deferred and amortised over the term of the related debt.

Variable Interest Entities ("VIE's")

The Canadian Institute of Chartered Accountants (CICA) issued Accounting Guideline 15, "Consolidation of Variable Interest Entities", to provide accounting guidance related to variable interest entities ("VIE's") and indicates that they are required to be consolidated by the primary beneficiary. The Company adopted the Guideline effective January 1, 2005 and has determined that it has no VIE's.

Account reclassifications

Certain prior year amounts have been reclassified to conform to the account presentation in the current year.

3. Restricted cash

Restricted cash is comprised of $24.4 million of funds not available for general or other purposes. Approximately $4.4 million is required as remaining collateral for letters of credit originally valued at approximately $15 million issued by the Company to pay for the mine fleet, the majority of which has now been delivered to the project site. The remaining restricted funds of $20 million are set aside and held in accounts by the Lenders as required under the Debt Facility and the Hedging Facility (notes 6 and 12(d)).



4. Net investment in oil and gas residual interests

2005 2004
$000's $000's
-------------------
Net investment in oil and gas residual interests:
Opening balance, January 1 3,184 3,184
Sales proceeds (640) -
-------------------

2,544 3,184
-------------------
-------------------


In 1999, Lisburne Holdings Limited ("Lisburne"), a 55%-owned subsidiary of EMC sold Tasbulat Oil Corporation ("Tasbulat") to the National Oil Company Petrom S.A. (the Romanian national oil company). Tasbulat holds interests in three oil fields in Kazakhstan (the "Tasbulat Fields").

The proceeds of sale, excluding anticipated royalties and expenses, amounted to $6.05 million of which $4.95 million has been received by Lisburne. On January 13, 2006, the final sales proceeds of $1.1 million were also received by Lisburne, of which the Company's share was $605,000, leaving the Company with a remaining net investment in oil and gas residual interests of approximately $1.9 million at that date.

The remaining net investment in oil and gas residual interests is expected to be recovered from the Company's share of a 1% gross overriding royalty (based on gross sales proceeds less certain sales related costs and taxes) which is payable to Lisburne from all oil sales from the Tasbulat Fields exceeding 2.0 million barrels of oil equivalent.



5. Resource assets

Balances of the resource assets as at December 31:

2005 2004
$000's $000's
-------------------
Varvarinskoye Project
Acquisition (b) 9,681 -
Exploration and development costs 49,597 4,786
Asset retirement obligation 470 -
-------------------

59,748 4,786
-------------------
-------------------


(a) Mineral interests - Varvarinskoye Project

The Company, through its 100%-owned subsidiaries Three K and Althames, holds a 100% interest in JSCV, a Kazakh company that holds the Varvarinskoye Project mining licences.

JSCV holds two licenses to explore and develop the Varvarinskoye Project. Under these licenses, JSCV entered into a 2005 program of works with the Kazakh government, pursuant to which JSCV was required to conduct field work and laboratory work totalling $3.4 million during 2005. This work was completed with funds expended exceeding the $3.4 million requirement.

JSCV has entered into a Subsoil Use Contract ("SSUC") between JSCV and the Kazakh government that provides that gold and copper production from the Project will be subject to royalties of (i) in the case of gold, a gross royalty of 1.2% of the value of the gold produced from the Project based on the average monthly spot price of gold on the London Metals Exchange and (ii) in the case of copper, a net smelter return royalty of 1% based on the average monthly sales proceeds of copper.

Under the terms of the SSUC (and its amendments) with the government of Kazakhstan, the Company has agreed to repay certain historic costs totalling $2.1 million that the Republic of Kazakhstan incurred for a geological survey of the license area. These costs are repayable over a period of 7 years (without interest) after both of the following events have taken place: i) the first discovery of a reserve in the license area (this is complete) and ii) the completion of the first year during which the licensee has a net profit for tax purposes (estimated to occur in fiscal 2007). As the Company has yet to complete a year in which a net profit for tax purposes has occurred and there is no certainty that it will occur, no liability has been recorded at December 31, 2005.

(b) Acquisition of remaining 14% interest in Varvarinskoye Project

On June 23, 2005, the Company announced the completion of the acquisition of the remaining 14% interest in its key asset, the Varvarinskoye Project located in northern Kazakhstan, that it did not already own. The Company agreed to pay $7.25 million to acquire this interest in JSCV. A cash payment of $5 million was paid on closing with the remaining balance ($2.25 million) due on the earlier of the fifteenth business day following the first date upon which gold dore is produced from the Varvarinskoye mine or December 31, 2006. The discounted value of the remaining purchase price balance of $2.25 million was $2.11 million at December 31, 2005 and has been recorded as a liability. Legal costs regarding the transaction were approximately $44,800, and have been capitalised to the resource asset account.

The acquisition resulted in the recognition of a future income tax liability of $2.6 million (note 9(b)) and an additional resource asset of $9.6 million.

(c) Lump Sum Turnkey Agreement

During the year ended December 31, 2005, the Company and JSCV made construction advances totalling approximately $16.2 million. Under the terms of an interim agreement with MDM Ferroman (Pty) Limited ("MDM"), dated March 18, 2005, the Company made advances that were primarily for payment of sub-contractors engaged by MDM as well as for MDM management fees. In September 2005, the interim agreement with MDM was replaced by a lump sum turnkey agreement ("LSTK"), pursuant to which MDM was to provide all design, engineering, project management, agreed equipment procurement and purchase, construction, commissioning, performance testing, training and other services required to bring the Varvarinskoye Project into operation.

Effective January 31, 2006, the Company terminated the LSTK with MDM (note 15) and subsequently (February 6) entered into a letter of intent ("LOI") with SENET CC ("SENET") appointing SENET as the engineering, procurement and construction manager ("EPCM").

In February 2006, the Company received an independent review from SENET (the "SENET Review") that included overall design parameters as detailed in the definitive feasibility study undertaken by MDM in November 2004. The total cost estimate for completion of the process plant and infrastructure costs is $60.8 million plus EPCM fees payable to SENET of $8.8 million for total costs of $69.6 million. This compares to total estimated plant and infrastructure costs of approximately $55.6 million under the LSTK.

(d) Off-take contract

In December 2005, EMC concluded a copper/gold concentrate sales contract with Trafigura Beheer BV, a major commodity sales and trading organization. The contract is for the full production of copper/gold concentrates for the life of the Project.

(e) Capital Commitments

The following table summarizes the capital commitments of the Company as at December 31, 2005:



Payments due by Period ($000's)
------------------------------------------------------------------------
Total Less than 1 - 3 4 - 5 After 5
1 year years years years
------------------------------------------------------------------------

Long-term debt - - - - -

Capital lease
obligations - - - - -

Operating leases - - - - -

Purchase
Obligations 15,935 15,935 - - -

Other short
-term
obligations - - - - -

Other long-term
obligations(1) 2,112 - 954 636 522

------------------------------------------------------------------------
18,047 15,935 954 636 522
------------------------------------------------------------------------
------------------------------------------------------------------------

(1) Under the terms of a sub-soil agreement (and its amendments) with
the government of Kazakhstan, the Company has agreed to repay
certain historic costs that the Republic of Kazakhstan incurred for
a geological survey of the license area. These costs are repayable
after both of the following events have taken place: i) the first
discovery of a reserve in the license area - complete and ii) the
completion of the first year (not earlier than the year in which the
discovery in i) occurs) during which the licensee has a net profit
for tax purposes.


6. Long-term debt

In November 2005, the Company and JSCV entered into a debt facility (the "Debt Facility") in the amount of $75.4 million with Investec Bank (UK) Limited, Investec Bank Limited and Nedbank Limited (the "Lenders") to fund the debt portion of the construction of the Varvarinskoye Project. No amounts had been drawn on the Debt Facility at December 31, 2005. In connection with and as a condition of drawdown under the Debt Facility, EMC also implemented a gold hedging facility (the "Hedging Facility") for the period of the Debt Facility. The Hedging Facility is in the form of a monthly US dollar, flat forward gold sale over the 8-year term of the Debt Facility (note 12(d)).

Notwithstanding the entering into of the Debt Facility, it has not been possible for JSCV to make a drawdown as a result of the termination of the LSTK. It is an event of default under the Debt Facility if the contractor for the Project is not replaced within 28 days of termination of the LSTK which occurred on January 31, 2006. However, as of February 23, 2006, the Lenders have granted the Company an extension until May 1, 2006 to replace the contractor and, as noted above, an LOI appointing SENET as EPCM contractors has been entered into as of February 24, 2006. There is no assurance that the existing Debt Facility will not be modified or cancelled by the Lenders or the Company.

If the Lenders were to terminate the Debt Facility, all fees paid to the Lenders would be forfeit (being an aggregate of approximately $2.2 million). Also, the Lenders would be in a position to enforce their security over the assets of JSCV and furthermore the Lenders, as hedging counterparties under the Hedging Facility, would be entitled to terminate the hedges. The Company would be exposed for the full balance of any break costs associated with terminating the hedges. At December 31, 2005, the Company's hedge book (note 12(d)) reflected a loss of $14.7 million.

During the year ended December 31, 2005, the Company incurred deferred financing charges of $4.5 million (2004 - $876,000) with regard to the Debt Facility. Included in deferred financing costs is an amount of $907,000 related to warrants issued to advisors (2004 - $780,000) (note 7(C)) and $1 million in success fees due to an advisor on the earlier of first drawdown under the Debt Facility or May 30, 2006.

7. Share capital

a) Authorised

The Company is authorized to issue 100,000,000,000 common shares of no par value.



Issued

-----------------------------------------------
2005 2005 2004 2004
-----------------------------------------------
Number Number of
of Shares Amount Shares Amount
(000's) (000's) (000's) (000's)
-----------------------------------------------
As at January 1 57,902 71,499 57,327 70,908
Common shares issued
for cash 138,000 55,806 - -
Cash issue costs of
share issuance - (4,156) - -
Value of share purchase
units issued to
advisors (note 7(e)) - (3,431) - -
Common shares issued
for consulting
services 100 49 - -
Exercise of warrants - - - -
Exercise of stock
options 75 31 175 71
Exercise of units 568 367 - -
Common shares issued
for settlement of
accounts payable - - 400 350
Transfer of fair value
of stock-based
compensation on
exercise of stock
options, warrants
and units - 194 - 56
Retroactive stock-based
compensation adjustment - - - 114
-----------------------------------------------

Balance - December 31 196,645 120,359 57,902 71,499

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


During the years ended December 31, 2005 and 2004 the Company made the following share, warrant and unit issues:

2005

On April 11, 2005, the Company completed an offering (the "Offering") which consisted of approximately 120 million units at Cdn$0.75 ($0.62) each and approximately 10 million units at Pounds Sterling 0.33 ($0.62) each, raising gross proceeds of approximately $80 million. Pursuant to the exercise of the over-allotment option granted to the agents in connection with the Offering, on April 26, 2005, the Company issued an additional 8 million units at Cdn$0.75 ($0.62) each, raising further gross proceeds of approximately $5 million. Each unit is comprised of one common share and one-half of one common share purchase warrant. Each whole common share purchase warrant entitles the holder to purchase one common share until April 11, 2010 at a price of Cdn$1.20 per share. Proceeds from the sales of the units have been split between share capital and share purchase warrants. Issue costs totalled $6.6 million and have been recorded as a reduction to the value of share capital and share purchase warrants.

During the year ended December 31, 2005, a total of 75,000 common shares were issued on the exercise of stock options and 567,949 common shares on the exercise of agent compensation options (note 7(e)). Each agent compensation option allowed the holder to acquire one common share and one-half of one common share purchase warrant exercisable at Cdn $1.20 ($0.99) until April 11, 2010.

The company also issued 100,000 common shares in payment of consulting fees totalling $49,000.

2004

In January 2004, the Company issued 400,000 common shares at $0.875 per share in exchange for the settlement of accounts payable balances totaling $350,000.

During the year ended December 31, 2004, a total of 175,000 common shares were issued on the exercise of options, at an exercise price of $0.41, which raised proceeds of approximately $72,000.

b) Contributed surplus

A summary of the changes in the Company's contributed surplus for the years ended December 31, 2005 and 2004, is set out below:



---------------------------------------------------------------------
2005 2004
---------------------------------------------------------------------
Amount Amount
($000's) ($000's)
--------------------------
As at January 1 157 83
Transfer of fair value of expired/forfeit
Incentive stock options 29 74

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

As at December 31 186 157
---------------------------------------------------------------------
---------------------------------------------------------------------


c) Share purchase warrants

A summary of the changes in the Company's share purchase warrants for the years ended December 31, 2005 and 2004 is set out below:



------------------------------------------------------------------------
2005 2005 2005 2004 2004 2004
------------------------------------------------------------------------
Weighted Weighted
Warrants average Warrants average
Value out- exercise Value out- exercise
Assigned standing price assigned standing price
($) (000's) ($) ($) (000's) ($)
------------------------------------------------------------------------
As at
January 1 780 9,550 1.11 - 8,250 1.17
Exercised - - - - - -
Issued 30,381 71,284 0.99(1) 780 1,300 0.77
Expired - (750) 0.85 - - -
Issue costs (2,453) - - - -- -
------------------------------------------------------------------------
Balance -
December 31 28,708 80,084 1.00 780 9,550 1.11
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Converted to $US. Actual exercise price of Cdn$1.20


A summary of the share purchase warrants outstanding and exercisable as at December 31, 2005 and 2004, is set out below:



------------------------------------------------------------------------
2005 2005 2005 2004 2004 2004
------------------------------------------------------------------------
Exercise Number Exercise Number
Price ($) Exp. Date (000's) Price ($) Exp.Date (000's)
------------------------------------------------------------------------
0.99(1) 11-Apr-10 69,284 - - -
0.86(2) 30-Nov-10 2,000 - - -
- - - 0.85 30-Jun-05 750
1.20 23-Dec-08 7,500 1.20 23-Dec-08 7,500
0.72 05-Oct-06 50 0.72 05-Oct-06 50
0.77(3) 30-Sep-09 1,250 0.77(3) 30-Sep-09 1,250
--------- ---------
Total 80,084 9,550
------------------------------------------------------------------------
------------------------------------------------------------------------
(1) Converted to $US. Actual exercise price is Cdn$1.20.
(2) Converted to $US. Actual exercise price is Cdn$1.00.
(3) Converted to $US. Actual exercise price is Pounds Sterling 0.40.


The warrants issued in 2005 were comprised of 69.3 million issued together with the common shares of the Offering. In addition, 284,000 warrants were issued when 568,000 share purchase units were exercised. These warrants have an exercise price of Cdn$1.20 and are exercisable until April 11, 2010. A further 2,000,000 warrants were issued to a lender in connection with the proposed, $75.4 million Debt Facility. These warrants are exercisable at Cdn$1.00 until November 30, 2010.

In accordance with Canadian generally accepted accounting principles, the fair value of the warrants granted has been calculated using the Black-Scholes option pricing model.

A summary of the warrants issued in the period and the related Black-Scholes model assumptions used in their valuation is as outlined below:



Warrants Warrants
issued upon issued to a
exercise of lender in
agent connection
Offering compensation with Debt
Warrants options Facility Total
------------------------------------------------------------------------

Number of warrants
(000's) 69,000 284 2,000 71,284
------------------------------------------------------------------------
Risk-free interest
rate 5.0% 5.0% 5.0%
Expected dividend
yield Nil Nil Nil
Expected stock
price volatility 112.9% 112.9% 94.3%
Expected warrant
life 5 years 5 years 5 years
------------------------------------------------------------------------
Total value assigned
($000's) 29,353 121(1) 907 30,381
------------------------------------------------------------------------

(1) The total of $121,000 was transferred from the share purchase units
category within equity .


Pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable single measure of the fair value of warrants granted by the Company.

d) Incentive stock options

The Company maintains an incentive stock option plan (the "Plan") covering directors, officers, employees and consultants of the Company and its subsidiary companies. The exercise price of an option is determined by the Board of Directors on the basis of the closing market price of the Company's shares on the trading day prior to the date of issue of the option. Options are granted for a period of three years and the Board of Directors determines the vesting provisions of each option granted, which may vary. The Plan provides that options may be granted for a maximum period of ten years and the aggregate number of shares which may be issued and sold under the Plan may not exceed 15,957,500 shares. At December 31, 2005, a total of 9,960,000 options remained available for granting under the Plan.

A summary of the Company's stock options for the years ended December 31, 2005 and 2004 is set out below:



------------------------------------------------------------------------
2005 2005 2005 2004 2004 2004
------------------------------------------------------------------------
Weighted Weighted
average average
Value Out- exercise Value Out- exercise
assigned standing price assigned standing price
($) (000's) ($) ($) (000's) ($)
------------------------------------------------------------------------
As at
January 1 1,730 4,580 0.48 50 4,930 0.49
Retroactive
stock-based
comp adj. - - - 1,675 - -
Exercised (24) (75) 0.41 (56) (175) 0.41
Issued 203 550 0.58 135 200 0.86
Extended(2) 405 - 0.46(1) -
Expired - - - (50) (300) 1.10
Forfeited (29) (90) 0.41 (24) (75) 0.41
-----------------------------------------------------------------------
Balance -
December 31 2,285 4,965 0.49 1,730 4,580 0.48
-----------------------------------------------------------------------

(1) Converted to $US. Actual exercise prices range between Cdn$0.71 and
Cdn$0.73.
(2) Options' expiry dates extended: 835,000@$0.50 until 05-Sep-08;
400,000@$0.37 until 16-May-08.


A summary of the stock options outstanding and exercisable as at December 31, 2005 and 2004 is set out below:



------------------------------------------------------------------------
2005 2005 2005 2004 2004 2004
------------------------------------------------------------------------
Exercise Number Exercise Number
Price $ Exp. Date (000's) Price $ Exp.Date (000's)
------------------------------------------------------------------------
0.37 16-May-05 400 0.37 16-May-05 400
0.50 05-Sep-05 835 0.50 05-Sep-05 835
0.76 23-Jan-06 330 0.76 23-Jan-06 330
0.41 30-Sep-06 400 0.41 01-Oct-06 565
0.425 16-Oct-06 2,250 0.425 16-Oct-06 2,250
0.86 02-Mar-07 200 0.86 02-Mar-07 200
0.61(1) 31-Aug-08 100 - - -
0.58(2) 28-Jan-08 150 - - -
0.57(3) 05-Jan-08 100 - - -
0.57(4) 11-Nov-08 200 - - -
------- ------
4,965 4,580
------- ------
------- ------

(1) Converted to $US. Actual exercise price is Cdn$0.72.
(2) Converted to $US. Actual exercise price is Cdn$0.73.
(3) Converted to $US. Actual exercise price is Cdn$0.71.
(4) Converted to $US. Actual exercise price is Cdn$0.68.


e) Agent compensation options

On April 11, 2005, and April 26, 2005, the Company entered into agency agreements with each of Canaccord Capital (Europe) Limited ("Canaccord"), Haywood Securities Inc. ("Haywood") and Pacific International Securities Inc. ("Pacific") (collectively, the "Agents"). Under the terms of the agency agreements, the Agents were granted 6,900,000 compensation options ("Agent Options").

Each Agent Option entitles the holder to purchase one unit (an "Agent Unit") for Cdn$0.75 or Pounds Sterling 0.33 until October 11, 2006. Each Agent Unit consists of one common share and one-half of one common share purchase warrant (each whole common share purchase warrant, an "Agent Unit Warrant"). Each Agent Unit Warrant entitles the holder thereof to acquire one common share until October 11, 2010, at a price of Cdn$1.20. The Agent Options were valued using the Black-Scholes pricing model and have been applied as share issue costs.

In accordance with Canadian generally accepted accounting principles, the fair value of the units granted to advisors was calculated using the Black-Scholes option pricing model, resulting in a value of $3,431,000.

Significant assumptions used in the Black-Scholes model in determining the unit values are as follows:



--------------------------------------------------------------
2005
--------------------------------------------------------------
Risk-free interest rate 5.0%
Expected dividend yield Nil
Expected stock price volatility 92.9% - 112.9%
Expected warrant life 1.5 - 5 years
--------------------------------------------------------------


Pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable single measure of the fair value of units granted by the Company.

A summary of the changes in the Company's share purchase units for the years ended December 31, 2005 and 2004 is set out below:



------------------------------------------------------------------------
2005 2005 2005 2004 2004 2004
------------------------------------------------------------------------
Weighted Weighted
Units average Units average
Value Out- exercise Value Out- exercise
assigned standing price assigned standing price
($) (000's) ($) ($) (000's) ($)
-----------------------------------------------------------
As at
January 1 - - - - - -
Granted 3,431 6,900 0.64(1) - - -
Exercised (290) (568) 0.64(1) - - -
Expired - - - - - -
------------------------------------------------------------------------
Balance -
December 31 3,141 6,332 0.64 - - -
------------------------------------------------------------------------

(1) Converted to $US. Actual exercise price is Cdn$0.75 / Pounds
Sterling 0.33.


A summary of the share purchase units outstanding and exercisable as at December 31, 2005 and 2004, is set out below:



---------------------------------------------------------------------
2005 2005 2005 2004 2004 2004
---------------------------------------------------------------------
Exercise Exp. Number Exercise Exp. Number
Price ($) Date (000's) Price ($) Date (000's)
---------------------------------------------------------------------
0.64(1) 11-Oct-06 5,520 - - -
0.64(1) 11-Oct-06 690 - - -
0.64(1) 11-Oct-06 122 - - -
-------- ----------
Total 6,332 -
---------------------------------------------------------------------
---------------------------------------------------------------------

(1) Converted to $US. Actual exercise price is Cdn$0.75 /
Pounds Sterling 0.33.


f) Stock-based compensation

On January 1, 2004, the Company adopted the fair value method of accounting for stock-based compensation. Previously, the Company did not record any compensation expense on the granting of stock options to employees and directors as the exercise price was equal to or greater than the market price at the date of the grants. The adoption of the fair value method resulted in an adjustment to opening deficit of $1,872,000 at January 1, 2004 and increases of $114,000 and $1,758,000 to share capital and options, respectively, at January 1, 2004.

The fair value of stock options granted for 2005 was $609,000 (2004 - $134,000) which was expensed in the statement of operations.

The fair value of stock options used to calculate compensation expense is estimated using the Black-Scholes option pricing model with the following assumptions:



2005 2004
-----------------------------
Risk free interest rate 5.0% 2.91%
Expected dividend yield Nil Nil
Expected stock price volatility 98.7% - 117.5% 140%
Expected option life in years 3 3


8. Related party transactions

During the years ended December 31, 2005 and 2004, the Company entered into the following transactions involving related parties, all of which have been recorded at the exchange amount:

Dragon Management International Services Limited ("DIS") charged the Company a total of $229,000 (2004 - $227,000) in respect of the provision of office facilities, general office overheads and re-charged costs incurred on behalf of the Company. The provision of office facilities operates on a monthly basis. A. J. Williams, Chairman and a director of the Company, beneficially owns DIS.

Dragon Capital Holdings Limited ("DCH") charged the Company a total of $250,000 (2004 - $370,000) in respect of the provision of the services of A. J. Williams to act as Chairman of the Company. A. J. Williams, also a director of the Company, beneficially owns DCH.

Mining Assets Corp ("MAC") charged the Company a total of $58,000 (2004 - $129,000) in respect of the provision of the consulting services and related expenses of B. D. Rayment. B. D. Rayment, a director of the Company, beneficially owns MAC.

Goodman and Carr LLP ("GC") and Macleod Dixon LLP ("MD") charged the Company a total of $913,000 (2004 - $175,000) in respect of the provision of legal services and related expenses. M. J. Singer, a former director of the Company, was formerly a partner of GC and is currently a partner of MD.

Sutton International Management Services Limited ("SIMS") charged the Company a total of $362,000 (2004 - $194,000) in respect of the provision of geological, mining, management and administration services as well as the services of W. G. Kennedy to act as President and Chief Executive Officer of the Company. W. G. Kennedy beneficially owns SIMS.

Endeavour Financial Corp ("EFC") charged the Company a total of $83,000 (2004 - $37,500) in respect of the provision of consulting services and related expenses. A. J. Williams, Chairman and a director of the Company, is a director and shareholder of EFC.

Keshill Consulting Associates Inc. ("KCA") charged the Company a total of $74,000 (2004 - $Nil) in respect of the provision of consulting services as well as the services of S. Gledhill to act as Chief Financial Officer of the Company. S. Gledhill beneficially owns KCA.

As at December 31, 2005, a total of $54,000 (2004 - $110,000) was due to related parties and is included in accounts payable.

9. Income taxes

a) The income taxes shown in the consolidated statements of operations and deficit differ from the amount obtained by applying statutory rates due to the following:



2005 2004
-----------------------------

Statutory tax rate 37.12% 37.12%
-----------------------------

Loss for the year $ (4,627) $ (2,508)
-----------------------------

Recovery of income taxes based
on statutory rates $ (1,718) $ (931)

Losses for which an income tax benefit
has not been recognised $ 1,178 $ 931
-----------------------------

$ - $ -
-----------------------------
-----------------------------


b) Future income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. On acquisition of resource assets, the Company records a future tax liability and corresponding adjustment to the related asset carrying amount. The following table sets forth the tax effect of temporary differences that give rise to the deferred tax liability:



2005 2004
-----------------------------

Statutory tax rate (Kazakhstan) 30% 30%
-----------------------------

Difference between cost and tax basis
of acquisition of additional 14%
interest in JSCV (note 5(b)) $ 7,250 $ -
-----------------------------

Future income taxes on acquisition
of additional interest $ 3,100 $ -

Loss carry-forwards available to offset
future income taxes (500) -
-----------------------------

$ 2,600 $ -
-----------------------------
-----------------------------


c) As a result of the Continuance, the Company ceased to be a resident of Canada for the purposes of the Income Tax Act (Canada), including the Regulations (the "Tax Act"). A corporation that ceases to be a resident of Canada for Canadian tax purposes may be liable to pay certain "departure" taxes under the Tax Act and applicable provincial or territorial legislation. Departure taxes would be payable in the event that the fair market value of the Company's property is greater than the cost of the property for purposes of the Tax Act or the fair value of the Company's property exceeds the total of the paid-up capital of the Company's shares and debts and other amounts owing to the Company. EMC believes that no such taxes will be payable having regard to the fair market value and tax cost of its property and the paid-up capital of the common shares. The final tax ruling on the matter remains outstanding, pending final filing of certain Canadian tax returns in Canada.

d) As a result of the Continuance, certain of the Company's non-capital losses expired on April 7, 2005. The Company may utilize the losses to offset any departure taxes that may be payable. The Company had non-capital losses available to reduce future taxable income in Canada of approximately $13 million (2004 - $9 million).

10. Asset Retirement Obligation

The Company's estimates of future asset retirement obligations are based on reclamation standards that meet or exceed regulatory requirements. Elements of uncertainty in estimating these amounts include potential changes in regulatory requirements, decommissioning and reclamation alternatives and amounts to be recovered from other parties.



A reconciliation of the provision for reclamation is as follows:

2005 2004
---------------------------------------------------------------------

As at January 1 - -
Additions to liabilities 470 -
---------------------------------------------------------------------

Balance - December 31 470 -
---------------------------------------------------------------------
---------------------------------------------------------------------


The provision for reclamation is based on the following key assumptions:

- total undiscounted cash flows of $10.8 million;

- the expected timing of payment of the cash flows ranges in the years 2006 to 2021; and

- a credit adjusted risk-free rate at which the estimated flows have been discounted by 7.5%

11. Segmented reporting

The Company has one operating segment, the exploration of natural resource properties. All capital assets of the Company are held in Kazakhstan. Short-term deposit interest, which is the Company's only regular source of income, is generally earned in the United Kingdom.

12. Financial instruments

a) Fair values

At December 31, 2005, the carrying values of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities reflected in the balance sheet approximate their fair values due to the short-term nature of those instruments.

b) Credit risk

Cash and cash equivalents include deposits maturing within 90 days of the original date of investment. In order to limit its exposure, the Company deposits its funds with major international banks.

c) Foreign exchange risk

Certain transactions and investments in Kazakhstan and Canada are exposed to foreign exchange risk on movements of the Kazakh tenge and Canadian dollar.

d) Derivative financial instruments

As a condition of the Debt Facility, the Company has agreed to implement the Hedging Facility for the period of the Debt Facility. On December 6, 2005, EMC implemented the Hedging Facility by entering into monthly US dollar flat forward gold sales (the "Varvarinskoye Hedge") over the 8 year term of the Debt Facility. 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 following table summarizes the monthly forward deliveries of gold under the Hedging Facility by year:



---------------------------------------------------------------------
Quantity (oz.)
--------------------------------------
Year of Delivery Nedbank Investec
---------------------------------------------------------------------
2007 29,000 29,000
2008 34,000 34,000
2009 35,500 35,500
2010 30,500 30,500
2011 41,000 41,000
2012 31,000 31,000
2013 20,500 20,500
---------------------------------------------------------------------

Total 221,500 221,500
---------------------------------------------------------------------
---------------------------------------------------------------------


The Varvarinskoye Hedge is un-margined with deliveries of gold into the hedge scheduled to commence in the first quarter of 2007. The hedge represents approximately 50% of the estimated production during the term of the Debt Facility, but only approximately 19% of the current proven and probable reserves of gold calculated at $375/oz.

The Company has designated its Varvarinskoye Hedges as "normal sales contracts". Normal sales contracts include those contracts whose obligations permit physical delivery of a company's production. As a result, any gains or losses on these forward contracts will be recognised in gold revenue at the earlier of when the related designated production is sold or the contract is closed out. Based on the December 30, 2005, London Precious Metals index closing spot price for gold ($513/oz), the value of the Hedging Facility as at December 31, 2005 is a negative $14.7 million.

13. 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 European Minerals Corporation have been prepared in accordance with Canadian generally accepted accounting principles "Canadian GAAP" which differ, in certain material respects, from U.S. GAAP.

Had the Company prepared the consolidated financial statements in accordance with U.S. GAAP, certain items on the consolidated balance sheets, statements of operations and deficit, and statements of cash flows would have been reported as follows:



$000's, except per share amounts 12 months ended Dec 31,
------------------------
2005 2004
------------------------

Consolidated statements of operations
As reported in accordance with Canadian GAAP (4,627) (2,508)
Exploration expenditures (a) - (4,786)
------------------------

Net loss and comprehensive loss under
U.S. GAAP (4,627) (7,294)
------------------------
------------------------

Basic and diluted loss per common share
under U.S. GAAP (0.03) (0.13)

Cash flows from operating activities
Under Canadian GAAP (3,942) (2,192)
Exploration expenditures (a) - (4,786)
------------------------

Under U.S. GAAP (3,942) (6,978)
------------------------
------------------------

Cash flows from investing activities
Under Canadian GAAP (73,140) (4,786)
Exploration expenditures (a) - 4,786
------------------------

Under U.S. GAAP (73,140) -
------------------------
------------------------


Dec 31, Dec 31,
$000's, except per share amounts 2005 2004
------------------------

Consolidated balance sheet
Resource assets
Under Canadian GAAP 59,748 4,786
Exploration expenditures (a) (4,786) (4,786)
------------------------

Under U.S. GAAP 54,962 -
------------------------
------------------------

Total shareholders' equity
Under Canadian GAAP 92,554 16,668
Exploration expenditures (a) (4,786) (4,786)
------------------------

Total shareholder's equity under U.S. GAAP 87,768 11,882
------------------------
------------------------


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. Since the costs incurred in December, 2004 were not material for U.S. GAAP, the Company has expensed all exploration expenditures incurred in 2004 and has capitalised costs for U.S. GAAP purposes effective January 1, 2005.

b) Recent accounting pronouncements

In December 2004, the Financial Accounting and Standards Board ("FASB") issued SFAS 153 - Exchanges of Non-Monetary Assets - An amendment of APB 29. This statement amends APB 29, which is based on the principle that exchanges of non-monetary assets should be measured at fair value of the assets exchanged with certain exceptions. SFAS 153 eliminates the exception for non-monetary exchanges of similar productive assets and replaces it with a general exception for exchanges of non-monetary assets that do not have commercial substance. A non-monetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. This statement is effective for non-monetary assets exchanges occurring in fiscal periods beginning on or after June 15, 2005.

For US GAAP purposes, the Company adopted SFAS 154 - Accounting for Changes and Error Corrections. The new standard requires that entities which make a voluntary change in accounting principle apply that change retroactively to prior period financial statements, unless this would be impracticable. For changes in methods of depreciation, amortization or depletion for long-lived assets, the change must be accounted for prospectively, as a change in estimate.

In June 2005, the Emerging Issues Task Force issued EITF 04-06 - Accounting for Post Production Stripping Costs in the Mining Industry. The EITF requires that stripping costs incurred during the production phase of a mine are variable production costs that should be included in the costs of the inventory produced during the period that the stripping costs are incurred. The Company has not yet reached the production phase of the Varvarinskoye Project and as such, has no inventory in which to include any stripping costs. Once the Project goes into production, it will account for stripping costs as per EITF 04-06 for US GAAP purposes. However, this may result in GAAP differences based on the proposed Canadian EIC D56 - Accounting for Deferred Stripping Costs in the Mining Industry.

c) Recent accounting pronouncements in Canada

In October 2005, the CICA issued for comment a draft abstract, EIC D56 - Accounting for Deferred Stripping Costs in the Mining Industry. If adopted, the EIC would require the stripping costs to be accounted for as variable productions costs to be included in inventory unless the stripping activity can be shown to be a betterment of the mineral property, in which case the stripping costs would be capitalised. Betterments occur when stripping activity increases future output of the mine by providing access to additional sources of reserves. Capitalised stripping costs would be amortised on a units-of-production basis over the proven and probable reserves to which they relate. As at December 31, 2005, the Company's financial statements do not include any deferred stripping costs.

Commencing with the Company's 2006 fiscal year, the amended recommendations of the CICA for the measurement of non-monetary transactions (CICA Handbook Section 3831) will apply to the Company. The amended recommendations will result in non-monetary transactions normally being measured at their fair values, unless certain criteria are met.

Commencing with the Company's 2007 fiscal year, the Company will adopt the new CICA Section 1530 - Accounting for comprehensive income. The concept of comprehensive income for purposes of Canadian GAAP will be to include changes in shareholders' equity arising from unrealized changes in the values of financial instruments. Comprehensive income as prescribed by US GAAP is largely aligned with comprehensive income as prescribed by Canadian GAAP.

Commencing with the Company's 2007 fiscal year, the proposed amended recommendations of the CICA for accounting for business combinations will apply to the Company's business combinations, if any, with an acquisition date of January 1, 2007, or later. Whether the Company would be materially affected by the proposed amended recommendations would depend upon the specific facts of the business combinations, if any, occurring on or after January 1, 2007. Generally, the proposed recommendations will result in measuring business acquisitions at the fair value of the acquired entities and a prospectively applied shift from a parent-company conceptual view of consolidation theory (which results in the parent company recording the book values attributable to non-controlling interests) to an entity-conceptual view (which results in the parent company recording the fair values attributable to non-controlling interests).

In early 2006, Canada's Accounting Standards Board ("CASB") ratified a strategic plan that will result in Canadian GAAP, as used by public companies, being converged with International Financial Reporting Standards over a transitional period. During 2006, the CASB is expected to develop and publish a detailed implementation plan with a transition period expected to be approximately five years. As this convergence initiative is very much in its infancy as of the date of these consolidated financial statements , it would be premature to currently assess the impact of the initiative, if any, on the Company.

14. Supplemental cash flow information



2005 2004
---------------------------------------------------------------------
Non-cash operating, investing
and financing activities:
Shares issued for consulting services 49 -
Shares issued for settlement of
accounts payable - 350
Accrued consideration for acquisition
of 14% minority interest in
Varvarinskoye Project (note 5) 2,108 -
Agent Units issued in connection
with the Offering (note 7(e)) 3,431 -
Warrants issued to a lender regarding
financing (note 7(c)) 907 780
Accrued financing fees 1,000 -
Financing costs capitalised 71 -
Deferred financing costs re: Debt Facility 2,036 -
Recognition of receivable for MDM (note 16) 4,518 -


15. Contingencies

In January 2006, the Company terminated the LSTK with MDM in relation to the Varvarinskoye Project. At the time of the cancellation of the LSTK, various suppliers (the "Suppliers") were in various stages of providing the components that they had agreed to supply to MDM. Amounts remained owing by MDM to certain Suppliers who had completed their obligations and to certain other Suppliers who had not completed their obligations and who indicated that they would not do any further work without receiving satisfactory assurances that they would receive the balance of amounts owing to them.

In November 2005, prior to being placed into provisional liquidation, MDM assigned all of its rights and obligations under its contracts with the Suppliers to JSCV under a cession agreement (the "Cession"). Virtually all suppliers have advised JSCV that they are prepared to be bound by the Cession and deal directly with JSCV. There is a risk that the liquidator appointed to oversee the affairs of MDM could apply to a court to set aside the Cession and/or pursue claims against JSCV and/or the Suppliers for damages. As a result, certain of the Suppliers have requested indemnification from JSCV for any losses suffered by them based on claims by the liquidator. Such damage awards against the Suppliers and/or JSCV may be material.

On February 28, 2006, an officer of MDM, purporting to act on behalf of MDM, issued a letter to JSCV asserting that JSCV was improperly using information proprietary to MDM, asserting various claims against JSCV and claiming damages in the aggregate amount or approximately $13.8 million for amounts alleged to be owing under the LSTK and for the alleged use of MDM's technology, as well as unspecified civil damages. EMC has received preliminary advice from its English and South African legal counsel. The South African counsel have advised that, among other things, since MDM is in liquidation proceedings, MDM's directors and officers have no authority under South African law to represent MDM in any way. EMC's English counsel have advised that, under the terms of the LSTK, JSCV is entitled to use any of the documents and designs that MDM had prepared for JSCV under the LSTK in order to complete the work that MDM had contracted to complete. Based on this advice, the Company believes that MDM's allegation to improper use of proprietary information is without merit. The Company also believes that the monetary claims are without merit and intends to vigorously defend any action that may be commenced by MDM or any other party in relation to the matters referred to in such letter or otherwise in connections with the termination of the LSTK. The Company is not currently able to accurately assess the potential impact of any such action, although such impact may have a material adverse effect on EMC's business, financial condition and prospects.

16. Measurement Uncertainty

MDM is currently subject to insolvency proceedings and the Company has been informed that certain advances made under the LSTK totalling approximately $4.5 million intended for payment of MDM sub-contractors have been withheld by MDM's bankers. The Company believes that this is an act of expropriation and has received legal advice that supports EMC's belief that such amounts will be fully recoverable. However, there can be no assurance that the Company shall be successful in any legal actions it may take to recoup such advances from MDM's bankers, nor in the MDM liquidator's ability to repay such amounts that may be awarded under such action. As a result, the Company may suffer losses arising from the LSTK contract arrangement and such losses may be material. At December 31, 2005, the Company has recorded a receivable of approximately $4.5 million for the amount it believes is recoverable from MDM's bankers along with a reciprocal liability in accounts payable representing the liability assumed by the Company for unpaid amounts due to MDM's sub-contractors.

17. Subsequent Events

Bought Deal Financing

On February 27, 2006, the Company announced that it had entered into a bought deal financing (the "BDF") with a syndicate led by Canaccord Capital Corporation and including Pacific International Securities Inc. (the "Underwriters"). On March 21, 2006, the Company announced that it had closed its previously announced short form prospectus offering of 55,000,000 units. The Underwriters' option was also exercised resulting in a total of 67,000,000 units (the "Units") being sold at Cdn$1.05 per unit (the "Issue Price") for gross proceeds of approximately Cdn$70 million (approximately $60.8 million or Pounds Sterling 35.6 million). Each unit consists of one common share of EMC and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share at a price of Cdn$1.55 per share until March 21, 2011.

In addition, on March 24, 2006, the Company issued 10,050,000 units following the full exercise of the over-allotment option by the Underwriters. As a result of the exercise of the over-allotment option, the gross proceeds raised pursuant to the BDF, was approximately Cdn$81.0 million (approximately $70.0 million or Pounds Sterling 40.8 million) in aggregate.

EMC intends to use the net proceeds of the BDF to bring the Project into commercial production and for general working capital purposes.

Cancellation of Lump Sum Turnkey Contract

In January 2006, the Company terminated the LSTK with MDM in relation to the Varvarinskoye Project and appointed SENET CC ("SENET"), a South African based design, engineering and project management company, to undertake an independent review (the "SENET Review") to reassess the design and cost of construction of the Varvarinskoye process plant and associated infrastructure. SENET has extensive project and construction experience operating worldwide within the mining industry, including the former Soviet Union, specialising in EPCM and construction turnkey contracts for multi-disciplined projects.

Long-term Debt

Based on the March 28, 2006, London Precious Metal Index closing spot gold price of $565.00/oz, the Company's hedge book (note 12(d)) reflected a loss of $24.9 million.

Readers are cautioned that the preceding statements and information may include certain estimates, assumptions and other forward-looking information. The actual future performance, developments and/or results of the Company may differ materially from any or all of the forward-looking statements, which include current expectations, estimates and projections in all or part attributable to general economic conditions and other risks, uncertainties and circumstances partly or totally outside the control of the Company, including imprecision of reserve estimates, rates of inflation, changes in future costs and expenses related to the exploration and extraction of gold or copper, future market prices of gold or copper, financing availability and other risks related to financial activities, and environmental and geopolitical risks. Discussion of the various factors that may affect future results is contained in the Company's recent filings with the Canadian securities regulatory authorities. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

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.

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

Contact Information

  • UK
    European Minerals Corporation
    Tony Williams, Chairman
    + 44 (0) 20 7529 7508
    or
    European Minerals Corporation
    Bert Kennedy
    President and CEO
    + 44 (0) 20 7529 7508
    or
    North America
    Vanguard Shareholder Solution, Inc.
    Keith Schaefer
    1 (866) 448-0780 North America
    ir@vanguardsolutions.ca