European Goldfields Limited - Results for Q2 2011

WHITEHORSE, Aug. 12, 2011 /CNW/ --
WHITEHORSE, Aug. 12, 2011 /CNW/ - European Goldfields Limited (TSX: EGU) (AIM: EGU) ('European Goldfields' or the 'Company') today reports its results for
the quarter ended 30 June 2011.  The financial statements, as well as
the accompanying management's discussion and analysis, are available
for review at http://www.egoldfields.com/egoldfields/en/financials/quarterlies and should be read in conjunction with this news release.

Highlights

Greece

    --  Greek State delivers Joint Ministerial Decision to formally
        approve EIS
    --  Major progress on Olympias plant refurbishment
    --  On schedule at Olympias for first gold production Q2 2012
    --  Bid document for Skouries project construction ready for issue

Romania

    --  Local public consultation complete, final cross-border
        consultation well advanced
    --  Pre-qualification of equipment suppliers complete
    --  Expansion of project team with technical software training
        underway

Exploration

    --  Aiming to define maiden resource at 3 targets in Greece in 2012

Financial

    --  Sales of US$11.1 million
    --  Gross profit of US$2.8 million
    --  Working capital US$31 million

Corporate

    --  Appointment of David Cather as COO
    --  London Main Market evaluation initiated

Martyn Konig, Executive Chairman and President, commented:

'The recent formal approval of our Greek EIS in the form of the final
Joint Ministerial Decision announced by the Greek Government is a key
milestone for European Goldfields. This approval represents the
culmination of over five years of tireless effort, particularly on the
part of our Greek colleagues at Hellas Gold, and allows us to progress
towards our goal of becoming the largest primary gold producer in
Europe. With build-out timelines clearly defined, we were able to
revisit our business plan, review our reserve base and update the
project economics.  Accordingly, we have increased our total mineral
resource base by approximately 10% to 24 million oz gold equivalent and
while the majority of the industry is experiencing rising capital
costs, we have successfully contained both our operating and capital
costs at highly competitive levels.  With the EIS approval in hand and
under the stewardship of our newly appointed COO, we have hit the
ground running both at Olympias and Skouries and we are firmly on
schedule for first gold production from our Olympias tailings project
in Q2 2012.

In Romania, we have been building out the technical team and intensive
training on project management software is currently underway.  Our
longer term exploration programmes are focused on increasing our
resource base significantly over the coming years.  We are looking
forward to drill testing near mine targets in Greece and also working
toward defining a resource at our three advance-stage exploration
targets, with Piavitsa our first priority.  We also aim to provide an
update on drilling in Turkey in the next couple of months.'

                           SELECTED FINANCIAL DATA

                                                

                                      Quarter ended 30 June

(in thousands of US dollars,              2011         2010
except per share amounts)                    $            $

Statement of profit and loss                               

Sales                                   11,109       11,969

Gross profit                             2,847          579

Profit/(loss) before income tax       (15,237)     (20,321)

Income taxes                             (141)        (445)

Profit/(loss) after income tax        (15,378)     (20,766)

Non-controlling interest                    37          341

Profit/(loss) for the period          (15,341)     (20,425)

Earnings/(loss) per share               (0.08)       (0.11)

                                           

                             30 June 2011 30 June 2010
(in thousands of US dollars)            $            $

Balance sheet                                         

Working capital                    31,132      102,320

Total assets                      505,617      510,721

The Company's base metal operation at Stratoni had a strong quarter,
generating revenues of US$11.1 million and gross profits of US$2.8
million driven by positive base metal price performance in the
quarter.  After overheads and other expenses, the Company recorded a
loss before taxes of US$15.2 million for the three-month period ended
30 June 2011, compared to a loss before taxes of US$20.3 million for
the same period of 2010.  Working capital balances totalled US$31
million at the quarter end.

Financing - The Company continues to progress technical and legal due diligence in
respect of the debt facilities for Greece and Romania that have
previously been announced. The Company is also well advanced in
structuring prepaid off-take funding from the short term production at
its Stratoni Operation and Olympias Tailings Project.  In addition, the
Company continues to make significant progress across a suite of
complementary financing options, such as long term off-taker supported
financing, equipment financing, base metal streaming and capital
markets structures, so as to determine the optimal complete financing
solution.

OPERATIONAL AND DEVELOPMENT HIGHLIGHTS

GREECE

Greek EIS Approval - The Greek Government announced after the quarter end that the Joint
Ministerial Decision had been delivered thereby formally approving the
Environmental Impact Study ('EIS') submitted by the Company's 95%-owned
subsidiary, Hellas Gold SA, for the development of the Company's Greek
assets. This completes the official approval process for the EIS.

Olympias Project Development - Major progress has been made on the plant refurbishment including
completing building repairs, a new plant roof, renewal of the motor
control centre, installation of process mixing and holding tanks and
rehabilitation of all access and internal roads. Orders have been
placed for the apron feeder and the filter press, being the two longest
lead items in the renovation of the Olympias concentrator plant, and
the project is on schedule to produce gold concentrate from existing
tailings in Q2 2012.

Refurbishment of the current mine access decline is also progressing
with more than 50% completed. Proposals for the engineering studies
that will define the detail of the remaining underground mine
refurbishment are currently in preparation. This will help to ensure
that underground production commences, as planned, directly after the
processing of existing tailings is complete in 2015, as defined in the
Company's phased development plan for the Olympias project.

Skouries Project Development - A comprehensive bidding document for the Skouries project construction
is ready for issue to major contractors.  This contract would cover the
civil engineering aspects of the project and include the plant
construction and site infrastructure such as power supply, internal and
external access roads and the construction of the tailings starter
embankment.  With the assistance of our Greek partners, the recruitment
process for key owner's team personnel is well advanced.  On the
ground, planned detailed geotechnical work is due to commence in Q3.

Production at Stratoni - The Company's 95%-owned subsidiary, Hellas Gold, mined a total of
59,150 wet tonnes of ore in Q2 2011 (2010 - 64,813). Key operational
data from Stratoni were as follows:

                                                      Q2 2011 Q2 2010

Production

Ore mined (wet tonnes)                                 59,150  64,813

                                                                     

Zinc concentrate (tonnes)                              10,310  10,103

- Containing: Zinc (tonnes)*                            5,109   4,942

Lead concentrate (tonnes)                               4,277   4,479

- Containing:                          Lead (tonnes)*   3,055   3,092

                                       Silver (oz)*   224,837 233,760

Sales

Zinc concentrate (tonnes)                               5,584  10,279

- Containing payable: Zinc (tonnes)*                    2,311   4,159

Lead concentrate (tonnes)                               3,751   4,682

- Containing payable:                  Lead (tonnes)*   2,500   3,071

                                       Silver (oz)*   184,299 232,212

Inventory (end of period)

Ore mined (wet tonnes)                                  3,006  16,392

Zinc concentrate (tonnes)                               6,958   2,663

Lead/silver concentrate (tonnes)                        1,913     902

* Net of smelter payable deductions

In Q2 2011, production from the underground mine was up on Q1 2011 as a
result of revised planning, ameliorating the geotechnical issues
experienced during the last quarter.  There was a significant accrued
stockpile ready for shipment at the end of the quarter due to the
timing of shipments, the first of which was made in early Q3 2011.

ROMANIA

Certej Project - During the quarter significant progress was made in the EIS approval
process. Local public consultation was satisfactorily completed in
accordance with both Romanian and EU requirements.  Final cross border
consultation with both Serbia and Hungary is now underway and is
expected to be completed in accordance with international agreements,
by the early part of Q4. The EIS approval process is expected to
conclude soon afterwards.

The Company's Certej project team is well established with a project
manager already in place.  Pre-qualification of equipment suppliers is
complete and bid documents have been prepared.  Bidding documents for
the project construction have also been drawn up and pre-qualification
of contractors is well advanced. Project management software has also
been installed and training to allow its implementation is underway.

EXPLORATION

Piavitsa - The Piavitsa massive sulphide gold-polymetallic target occurs within two
kilometres of the Stratoni mine underground workings and is hosted by
the same structure. An 8km strike length of electromagnetic conductors
was identified by a geophysical survey and historic drilling along 2km
of this has shown mineralisation very similar in style and tenor to
that at Olympias.  The remaining 6km of the anomaly has displayed
anomalous gold in soils and resource definition drilling is planned,
aiming at maiden resource estimation by Q1 2012.

Fisoka - Fisoka comprises three porphyry centres, the most northerly of which was
drill tested in the past, a chalcocite blanket of copper mineralisation
was defined but with no gold present.  However, geophysical and
geochemical surveys combined with detailed mapping indicate the
un-tested central and southern porphyries carry gold as well as copper
mineralisation.  Drill testing of these previously unrecognised central
and southern Fisoka porphyry targets is planned to define maiden
resources in 2012.

Tsikara - The intrusives at Tsikara represent newly identified targets and the
Company has defined several potential porphyry centres within the
overall volcanic complex that underlies the area.  Follow up mapping
and geological sampling has confirmed the presence of porphyry style
veining and alteration with anomalous copper and gold values.  Drilling
will be aimed at defining maiden resources in 2012.

Romania - Work in 2009 and 2010 identified numerous porphyry and epithermal
targets along the Certej volcanic belt and further work is planned
pending acceptance of licence applications.  In addition, drilling of
satellites to the Certej deposit within existing licences continues
with additional open-pittable resources expected to be defined during
2012.

CORPORATE ACTIVITY

Appointment of Chief Operating Officer - The Company was pleased to announce the appointment of David Cather
C.Eng, MIMMM as Senior Vice President and Chief Operating Officer.

Mr. Cather graduated from the Royal School of Mines, Imperial College
London in 1981 with a first class degree in mining engineering. Over a
career spanning more than 25 years, Mr. Cather has gained extensive
senior level project development experience and management skills in
both open pit and underground operations.

His early career with De Beers gave him extensive underground mining and
mine development experience.  His expertise and experience developed
further during 10 years in a senior management role at Redland
Aggregates Ltd, after which, as Development Director of Miller Mining,
Mr. Cather spearheaded the development of a portfolio of open-cast coal
mines.  Mr. Cather spent the next 9 years with Anglo American where, as
Technical Director of Anglo American's Industrial Minerals Division, he
was responsible for Tarmac Group (construction materials in 13
countries), Cleveland Potash (fertiliser operations in the UK) and
Copebras Brazil. Since 2006, Mr. Cather has acted as a retained mining
consultant to Grafton Resources, a London based natural resources fund
with major investments in gold projects in Russia, India and the
Philippines, Brazilian iron ore and a Bulgarian water project.

London Main Market Evaluation Initiated - The Company has initiated an evaluation of a potential upgrade of the
current AIM listing to the Main Market of the London Stock Exchange. In
that regard, the Company announced the appointment of Goldman Sachs
International to assist with this evaluation which includes a review of
the Company's corporate structure with a view to facilitating better
access to, and servicing of, the UK and international capital markets
and a potential re-domiciliation of the Company. Lazard & Co., Limited
are also providing financial advice in connection with this evaluation.

About European Goldfields

European Goldfields is a developer-producer with globally significant
gold reserves located within the European Union. The Company generates
cash flow from its 95% owned Stratoni operation, a high grade
lead/zinc/silver mine in North-Eastern Greece. European Goldfields is
expected to evolve into a mid-tier producer through responsible
development of its project pipeline of gold and base metal deposits at
Skouries and Olympias in Greece and Certej in Romania. The Company
plans future growth through development of its highly prospective
exploration portfolio in Greece, Romania and Turkey.

Patrick Forward supervised and prepared the scientific and technical
information included in this press release. Mr. Forward is a 'qualified
person' for purposes of National Instrument 43-101. Mr. Forward is the
Company's Vice President of Projects and Exploration.

Forward-looking statements

Certain statements and information contained in this document, including
any information as to the Company's future financial or operating
performance and other statements that express management's expectations
or estimates of future performance, constitute forward-looking
information under provisions of Canadian provincial securities laws.
When used in this document, the words 'anticipate', 'expect', 'will',
'intend', 'estimate', 'forecast', 'planned' and similar expressions are
intended to identify forward-looking statements or information.
Forward-looking statements include, but are not limited to, the
estimation of mineral reserves and resources, the conversion of mineral
resources to mineral reserves, the timing and amount of estimated
future production, costs and timing of development of the Skouries,
Olympias and Certej projects, completion of various financing options
and permitting time lines. Forward-looking statements are necessarily
based upon a number of estimates and assumptions that, while considered
reasonable by management, are inherently subject to significant
business, economic and competitive uncertainties and contingencies.

The Company cautions the reader that such forward-looking statements
involve known and unknown risks, uncertainties and other factors that
may cause the actual financial results, performance or achievements of
the Company to be materially different from its estimated future
results, performance or achievements expressed or implied by those
forward-looking statements and the forward-looking statements are not
guarantees of future performance. These risks, uncertainties and other
factors include, but are not limited to: changes in the price of gold,
base metals or certain other commodities (such as fuel and electricity)
and currencies; uncertainty of mineral reserves, resources, grades and
recovery estimates; uncertainty of future production, capital
expenditures and other costs; currency fluctuations; financing and
additional capital requirements; the receipt in a timely fashion of any
further permitting for the Company's projects; legislative, political,
social or economic developments in the jurisdictions in which the
Company carries on business; operating or technical difficulties in
connection with mining or development activities; the speculative
nature of gold and base metals exploration and development, including
the risks of diminishing quantities or grades of reserves; the risks
normally involved in the exploration, development and mining business;
and risks associated with internal control over financial reporting.
For a more detailed discussion of such risks and material factors or
assumptions underlying these forward-looking statements, see the
Company's Annual Information Form for the year ended 31 December 2010,
filed on SEDAR at www.sedar.com. The Company does not intend, and does not assume any obligation, to
update or revise any forward-looking statements whether as a result of
new information, future events or otherwise, except as required by law.

For further information please see the Company's website at www.egoldfields.com 

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