European Goldfields increases stake in Greek projects (June 18, 2007)

European Goldfields (EGU-T, EGU-L) is looking to boost its interest in its Greek projects to 95% at a cost of US$178 million.

The London-based company has agreed to acquire an added 30% in Hellas Gold S.A., the Greek company that owns the Stratoni silver-zinc-lead mine, the Olympias gold-zinc-lead-silver mine and the Skouries copper-gold porphyry project, all in Northern Greece.

Hellas Gold is a wholly owned subsidiary of the largest Greek construction company, Aktor, which is a subsidiary of Elliniki Technodomiki TEB, a Greek conglomerate with a market capitalization of US$2 billion.

The majority of the acquisition will be payable in common shares — 19.9% of issued and outstanding shares — with the remainder paid in cash. European Goldfields’ current market capitalization is $577 million. Under the terms of the acquisition, Aktor will reinvest half of the cash it receives towards maintaining its residual 5% shareholding interest in Hellas Gold.

The company aims to raise US$112 million through a marketed offering to fund development of its projects in Greece and Romania.

After the acquisition is complete, Aktor will enter a lock-up undertaking with European Goldfields. Aktor will not sell, transfer, pledge, or otherwise dispose of its European Goldfields shares before the fourth anniversary of the closing of the acquisition, or before the Skouries mining project achieves production.

The offering is being led by RBC Capital Markets and involves a collective of underwriters including Evolution Securities, Raymond James, Dundee Securities and Orion Securities. The underwriters will have the option to buy an additional 15% in shares over the treasury offering to cover over-allotments and for market stabilization purposes.

Major shareholder and a director of European Goldfields, Dimitrios Koutras, may offer and sell up to 3 million shares according to the same terms of the treasury offering. Koutras owns 13.7 million shares valued at 13% of the existing issued and outstanding common shares.

Production began at the Stratoni mine in September 2005 and sales from an existing gold stockpile at Olympias began in July 2006. The company is in the process of applying for permits to further develop both Olympias and the Skouries open-pit project.

Current reserves in Greece total 5.1 million oz. gold, 42.9 million oz. silver, 500,000 tonnes copper, 500,000 tonnes lead and 600,000 tonnes zinc.

European Goldfields also owns 80% of the Certej gold-silver project, in Romania. A feasibility study being conducted over 2007 will determine whether the company should produce a high-grade concentrate or a dor. Current reserves at Certej are 1.8 million oz. gold and 10 million oz. silver.

The company reported sales of US$17.1 million for the first quarter of 2007 compared with US$9.1 million for the same period in 2006. Profit increased to US$7 million from US$1 million during the first quarter of 2006.