European Minerals ready to roll at Varvarinskoye

Vancouver A US$75.4-million loan arrangement will be used by European Minerals (EPM-T, EUM-L) to fund the debt portion of project financing for the Varvarinskoye copper-gold mine project in northern Kazakhstan.

The open-pit mine project has total capital costs (including insurance and financing costs) of US$125 million. The company plans to fund the difference of US$49.6 million from existing cash resources, of which US$42.6 million has already been spent on the project.

The first gold pour is expected late next year, with production expected to average 145,000 oz. gold and 18.4 million lbs. copper annually over the first 10 years of a 15-year mine life. Cash costs are projected to average US$130 per oz., after copper credits (based on US$1 per lb. copper).

As part of the aforementioned debt facility, the company agreed to implement a gold-hedging facility for the period of the loan. The company sold 443,000 oz. gold at US$574.25 per oz. for the period. This represents about 50% of production during the term of the loan, and about 19% of current proven and probable reserves calculated at a gold price of US$375 per oz.

The company also arranged a copper-gold concentrate sales contract for the full production of such concentrates for the life of the mine, which is estimated to be 600,000 tonnes at an average grade of 17% copper and 20 grams gold per tonne. Payment for gold and copper will be based on the LME settlement quotation for copper (Grade A) and the average of the London AM/PM quotation for gold. About 80% of gold will be produced as dore at the mine site.

Construction of the mine, process plant and related infrastructure will be managed by a South African firm under a lump-sum turnkey contract. The scheduled completion date is year-end, 2006.

Varvarinskoye hosts proven and probable reserves containing 2.34 million oz. gold and 269 million lbs. copper, with 80% of this in the proven category. Estimated resources are 2.8 million oz. gold and 347.2 million lbs. copper in the measured category, and 1 million oz. gold and 84.5 million lbs. copper in the indicated category. All estimates are compliant with Canadian National Instrument 43-101 standards.