European Minerals posts $2.5-million (U.S.) 2004 loss
2005-03-29 06:31 ET - News Release
Mr. Anthony Williams reports
EUROPEAN MINERALS CORPORATION ANNOUNCES 2004 RESULTS
European Minerals Corp. has released its results for the 12 months ended Dec. 31, 2004. All amounts are expressed in United States dollars unless otherwise indicated.
Highlights:
Financial:
As at Dec. 31, 2004, the company had assets of $17.2-million, including cash of approximately $8.1-million.
Consolidated loss for the year was $2.5-million. The loss included expenditures totalling $2.7-million offset by interest income of $120,000. This compares with expenditures totalling $2.5-million offset by interest income of $12,000, for 2003.
Operational:
During 2004, EMC continued to focus on the optimization of the bankable feasibility study respecting the company's 86-per-cent-owned Varvarinskoye gold-copper deposit located in northern Kazakhstan (the project or the Varvarinskoye project). The optimization was completed in November, 2004, and confirmed that the project was economically viable.
During the 2004 field season, stripping of top soil and overburden from the central pit and waste dump areas of the project was commenced and the company began the recruitment of staff to manage the construction and operation of the project.
In October, 2004, the company appointed Barclays Capital to provide advice and services to the company with respect to the debt financing portion of the financing required to bring the project into production.
In March, 2005, the company filed a long-form preliminary prospectus in certain provinces of Canada relating to an offering of units of the company to raise the equity portion of the project financing.
In March, 2005, the company appointed Investec Bank Ltd. and Nedbank Ltd. as joint underwriters for a $80-million debt facility for the project.
Construction work at the project is planned to commence in the second quarter of 2005 in order to exploit the spring/summer construction window. If this construction window is fully exploited, management expects gold production to commence in the fourth quarter of 2006.
Stock market:
On Sept. 29, 2004, the company was admitted to the Alternative Investment Market (AIM) on the London Stock Exchange. The company's trading symbol on AIM is "EUM."
In December, 2004, the company changed its trading currency on the Toronto Stock Exchange to Canadian dollars and the trading symbol changed to "EPM" (from "EPM.U," when it traded in United States dollars).
Financial review
During the past two years, the company has not generated any operating revenues and therefore losses have been incurred throughout the period. In November, 2004, the company completed the bankable feasibility study on the project, and is arranging the final project debt and equity financing required to develop and operate the project. Prestripping had commenced prior to Dec. 31, 2004, and as such the company is considered to be in the development stage.
Year ended Dec. 31, 2004, compared with year ended Dec. 31, 2003
The company's principal source of income during the year was from interest on bank deposits which amounted to $120,000, compared with $12,000 in 2003. The higher level of this income reflects the higher level of average cash balances invested in interest-bearing short-term deposits.
The consolidated net loss for 2004 amounted to $2.5-million (four cents per share) compared with $2.5-million (seven cents per share) for 2003. The consolidated net loss included expenditures on administration costs of $1.06-million (2003 -- $666,000), legal and professional costs of $791,000 (2003 -- $348,000), and resource projects costs of $377,000 (2003 -- $1.3-million).
The higher level of administration expenses is indicative of EMC developing its corporate administration as well as its project operations following the favourable results of the technical review of the Varvarinskoye project. The company also incurred costs associated with its listing on AIM.
Professional fees and other costs also increased as a result of a higher level of investor relations activity, compared with 2003. Resource project costs of $377,000 have decreased by approximately $950,000. This reflects management's decision to capitalize costs related to the Varvarinskoye project as of Jan. 1, 2004.
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.
As at Dec. 31, 2004, cash balances held by EMC amounted to approximately $8.1-million (2003 -- $15.1-million).
On March 1, 2005, the company filed a long-form preliminary prospectus in certain provinces of Canada relating to an offering of units of the company to raise part of the funds required to satisfy the capital cost of the Varvarinskoye project. Each unit of the offering comprises one common share of the company and one-half of one common share purchase warrant, with each full share purchase warrant entitling the holder to acquire one common share of the company for a period of five years following the closing. The minimum and maximum size of the Offering as well as the issue price and subsequent purchase warrant price, are yet to be finalized. Funds raised from the Offering will also be used for working capital and general corporate purposes.
On March 9, 2005, the company announced that it had appointed Investec Bank Ltd. and Nedbank Ltd. (collectively, the lenders) as joint underwriters for the debt facility to be used to develop the Varvarinskoye project. The Lenders will also provide a gold hedging facility on the basis of a joint term sheet which has been approved by credit committees of the lenders.
Working capital
The company's working capital amounted to approximately $7.8-million as at Dec. 31, 2004, compared with approximately $14.7-million as at Dec. 31, 2003, a 47-per-cent decrease. This decrease was attributable to the increased corporate activity during the year and the costs associated with the feasibility study on the Varvarinskoye project. Management expects that working capital requirements to the end of 2005 will amount to approximately $6.4-million, comprising a commitment to spend $3.4-million on the mineral licences covering the Varvarinskoye project area and surrounding land, and approximately $3.0-million to cover overhead expenses.
Management believes that the company has sufficient cash resources to meet planned administrative and exploration expenses through to the end of 2005. However, additional financing will be required to advance the project through planned construction and development activities for 2005, and to operate a mine or for any new mining projects that may be acquired.
The company currently estimates its expenditures for administrative costs to be $3.0-million for 2005. Capital expenditures to place the project into production are estimated at $115.0-million (including the purchase of the mining fleet), with approximately $60-million estimated to be spent in 2005. The funds required for these expenditures are expected to be raised through the closing of the offering and the debt facility.
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