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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| European Gold | LSE:EGU | London | Ordinary Share | CA2987741006 | COM SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 807.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMEGU
RNS Number : 7640I
European Goldfields Ltd
18 March 2010
European Goldfields Limited
Consolidated Financial Statements
(Audited)
31 December 2009 and 2008
Management's Responsibility for Consolidated Financial Statements
The accompanying consolidated financial statements of European Goldfields
Limited are the responsibility of management and have been approved by the Board
of Directors of the Company. The consolidated financial statements include some
amounts that are based on management's best estimate using reasonable judgment.
The consolidated financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles.
Management maintains an appropriate system of internal controls to provide
reasonable assurance that transactions are authorised, assets safeguarded and
proper records are maintained.
The Audit Committee of the Board of Directors has met with the Company's
external auditors to review the scope and results of the annual audit and to
review the consolidated financial statements and related financial reporting
matters prior to submitting the consolidated financial statements to the Board
of Directors for approval.
The consolidated financial statements have been audited by Ernst and Young LLP,
Chartered Accountants, and their report follows.
(s) Martyn Konig (s) Timothy Morgan-Wynne
Martyn Konig
Timothy Morgan-Wynne
Executive Chairman
Chief Financial Officer
Auditors' Report to the Shareholders of European Goldfields Limited
We have audited the consolidated balance sheet of European Goldfields Limited as
at 31 December 2009and the consolidated statements of profit and loss, other
comprehensive income/(loss), shareholders' equity and cash flows for the year
then ended. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether these consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in these consolidated 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 31 December 2009
and the results of its operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles.
The consolidated financial statements as at 31 December 2008 and for the year
then ended were audited by other auditors who expressed an opinion without
resolution on these statements in their report dated 18 March, 2009.
(s) Ernst and Young
Chartered Accountants, Licensed Public Accountants
London, United Kingdom
March 18, 2010
+----------------------------------------------------+------+----------+-------+---------+
| Consolidated Balance SheetsAs at 31 December 2009 |Note | 2009 | | 2008 |
| and 2008 | | $ | | $ |
| (in thousands of US Dollars, except per share | | | | |
| amounts) | | | | |
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Assets | | | | |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Current assets | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Cash and cash equivalents | 17 | 113,642 | | 170,296 |
+----------------------------------------------------+------+----------+ +---------+
| Accounts receivable | 5 | 26,813 | | 20,057 |
+----------------------------------------------------+------+----------+ +---------+
| Derivative financial asset | 17 | - | | 10,282 |
+----------------------------------------------------+------+----------+ +---------+
| Current taxes receivable | | 3,954 | | 3,820 |
+----------------------------------------------------+------+----------+ +---------+
| Future tax assets | 11 | 119 | | 2,004 |
+----------------------------------------------------+------+----------+ +---------+
| Prepaid expenses | | 13,794 | | 1,414 |
+----------------------------------------------------+------+----------+ +---------+
| Inventory | 6 | 4,993 | | 3,069 |
+----------------------------------------------------+------+----------+ +---------+
| | | 163,315 | | 210,942 |
+----------------------------------------------------+------+----------+ +---------+
| Non-current assets | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Property, plant and equipment | 7 | 96,100 | | 74,401 |
+----------------------------------------------------+------+----------+ +---------+
| Deferred exploration and development costs | 8 | | | |
+----------------------------------------------------+------+----------+ +---------+
| Greek production stage mineral properties | | 24,051 | | 26,652 |
+----------------------------------------------------+------+----------+ +---------+
| Greek development stage mineral properties | | 405,146 | | 403,907 |
+----------------------------------------------------+------+----------+ +---------+
| | | 429,197 | | 430,559 |
+----------------------------------------------------+------+----------+ +---------+
| Romanian development stage mineral properties | | 50,173 | | 45,187 |
+----------------------------------------------------+------+----------+ +---------+
| Turkish exploration stage mineral properties | | 1,625 | | 456 |
+----------------------------------------------------+------+----------+ +---------+
| | | 480,995 | | 476,202 |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Investment in associates | 9 | 711 | | 2,075 |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Investment other | 10 | 1,490 | | - |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Future tax assets | 11 | 1,489 | | 2,475 |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| | | 744,100 | | 766,095 |
+----------------------------------------------------+------+----------+ +---------+
| Liabilities | | | | |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Current liabilities | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Accounts payable and accrued liabilities | 12 | 12,684 | | 16,263 |
+----------------------------------------------------+------+----------+ +---------+
| Derivative financial liability | 17 | 1,064 | | - |
+----------------------------------------------------+------+----------+ +---------+
| Deferred revenue | 14 | 4,549 | | - |
+----------------------------------------------------+------+----------+ +---------+
| Future tax liabilities | 11 | - | | 3,496 |
+----------------------------------------------------+------+----------+ +---------+
| | | 18,297 | | 19,759 |
+----------------------------------------------------+------+----------+ +---------+
| Non-current liabilities | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Future tax liabilities | 11 | 90,083 | | 90,294 |
+----------------------------------------------------+------+----------+ +---------+
| Asset retirement obligation | 13 | 7,068 | | 6,937 |
+----------------------------------------------------+------+----------+ +---------+
| Deferred revenue | 14 | 48,412 | | 58,496 |
+----------------------------------------------------+------+----------+ +---------+
| | | 145,563 | | 155,727 |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Non-controlling interest | | 2,930 | | 2,874 |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Shareholders' equity | | | | |
+----------------------------------------------------+------+----------+ +---------+
| Capital stock | 15 | 545,180 | | 538,316 |
+----------------------------------------------------+------+----------+ +---------+
| Contributed surplus | 15 | 10,047 | | 7,788 |
+----------------------------------------------------+------+----------+ +---------+
| Accumulated other comprehensive income | 15 | 35,911 | | 43,676 |
+----------------------------------------------------+------+----------+ +---------+
| Deficit | | (13,828) | | (2,045) |
+----------------------------------------------------+------+----------+ +---------+
| | | 577,310 | | 587,735 |
+----------------------------------------------------+------+----------+ +---------+
| | | | | |
+----------------------------------------------------+------+----------+ +---------+
| | | 744,100 | | 766,095 |
+----------------------------------------------------+------+----------+-------+---------+
The accompanying notes are an integral part of these consolidated
financial statements.
Approved by the Board of Directors
(s) Timothy Morgan-Wynne (s) Bruce Burrows
Timothy Morgan-Wynne, Director
Bruce Burrows, Director
+---------------------------------------------------+------+----------+----------+----------+
| Consolidated Statements of Profit and LossFor the | | 2009 | | 2008 |
| years ended 31 December 2009 and 2008 | | | | |
| (in thousands of US Dollars, except per share | | | | |
| amounts) | | | | |
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| |Note | $ | | $ |
+---------------------------------------------------+------+----------+ +----------+
| Income | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Sales | | 62,712 | | 60,044 |
+---------------------------------------------------+------+----------+ +----------+
| Cost of sales | 6 | (44,030) | | (48,424) |
+---------------------------------------------------+------+----------+ +----------+
| Depreciation and depletion | | (7,012) | | (5,973) |
+---------------------------------------------------+------+----------+ +----------+
| Gross profit | | 11,670 | | 5,647 |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Other income | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Hedge contract profit | | 5,621 | | 4,918 |
+---------------------------------------------------+------+----------+ +----------+
| Interest income | | 625 | | 5,729 |
+---------------------------------------------------+------+----------+ +----------+
| Foreign exchange loss | | (1,576) | | (6,406) |
+---------------------------------------------------+------+----------+ +----------+
| Loss in dilution of interest in associates | 9 | (36) | | - |
+---------------------------------------------------+------+----------+ +----------+
| Share of loss of associate | 9 | (76) | | (105) |
+---------------------------------------------------+------+----------+ +----------+
| | | 4,558 | | 4,136 |
+---------------------------------------------------+------+----------+ +----------+
| Expenses | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Corporate administrative and overhead expenses | | 7,295 | | 4,859 |
+---------------------------------------------------+------+----------+ +----------+
| Equity-based compensation expense | | 6,530 | | 2,900 |
+---------------------------------------------------+------+----------+ +----------+
| Hellas Gold administrative and overhead expenses | | 5,401 | | 7,620 |
+---------------------------------------------------+------+----------+ +----------+
| Hellas Gold water treatment expenses | | 3,390 | | 5,189 |
| (non-operating mines) | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Accretion of asset retirement obligation | 13 | 131 | | 132 |
+---------------------------------------------------+------+----------+ +----------+
| Depreciation | | 661 | | 682 |
+---------------------------------------------------+------+----------+ +----------+
| Write-down of mineral property | 8 | 1,171 | | - |
+---------------------------------------------------+------+----------+ +----------+
| | | 24,579 | | 21,382 |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| | | (8,351) | | (11,599) |
| Loss for the year before income taxes | | | | |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Income taxes | 11 | | | |
+---------------------------------------------------+------+----------+ +----------+
| Current taxes | | 848 | | (1,454) |
+---------------------------------------------------+------+----------+ +----------+
| Future taxes | | 2,528 | | (15,185) |
+---------------------------------------------------+------+----------+ +----------+
| | | 3,376 | | (16,639) |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| (Loss)/Profit for the year after income taxes | | (11,727) | | 5,040 |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Non-controlling interest | | (56) | | 479 |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| (Loss)/Profit for the year | | (11,783) | | 5,519 |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Deficit - Beginning of year | | (2,045) | | (7,564) |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Deficit - End of year | | (13,828) | | (2,045) |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| (Loss)/Earnings per share | 24 | | | |
+---------------------------------------------------+------+----------+ +----------+
| Basic | | (0.07) | | 0.03 |
+---------------------------------------------------+------+----------+ +----------+
| Diluted | | (0.07) | | 0.03 |
+---------------------------------------------------+------+----------+ +----------+
| | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Weighted average number of shares (in thousands) | | | | |
+---------------------------------------------------+------+----------+ +----------+
| Basic | | 179,825 | | 179,566 |
+---------------------------------------------------+------+----------+ +----------+
| Diluted | | 179,825 | | 181,223 |
+---------------------------------------------------+------+----------+----------+----------+
The accompanying notes are an integral part of these consolidated financial
statements.
+---------------------------+----------+----------+-------------+----------+---------------+-+----------+-+------------+
| Consolidated Statements | Capital | | Contributed | | Accumulated | | Deficit | | Total |
| of Shareholders' EquityAs | Stock | | Surplus | | Other | | $ | | $ |
| at 31 December 2009 and | $ | | $ | | Comprehensive | | | | |
| 2008 | | | | | Income | | | | |
| (in thousands of US | | | | | $ | | | | |
| Dollars, except per share | | | | | | | | | |
| amounts) | | | | | | | | | |
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Balance - 31 December | 537,275 | | 5,997 | | 38,295 | | (7,564) | | 574,003 |
| 2007 | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Equity-based compensation | - | | 2,788 | | - | | - | | 2,788 |
| expense | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Share issue costs | (10) | | - | | - | | - | | (10) |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Restricted share units | 973 | | (973) | | - | | - | | - |
| vested | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Share options exercised | 78 | | (24) | | - | | - | | 54 |
| or exchanged | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Change in fair value of | - | | - | | 5,904 | | - | | 5,904 |
| cash flow hedge | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Movement in cumulative | | | | | | | | | |
| translation adjustment | - | | - | | (523) | | - | | (523) |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Profit for the year | - | | - | | - | | 5,519 | | 5,519 |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | 1,041 | | 1,791 | | 5,381 | | 5,519 | | 13,732 |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Balance - 31 December | 538,316 | | 7,788 | | 43,676 | | (2,045) | | 587,735 |
| 2008 | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Equity-based compensation | - | | 6,820 | | - | | - | | 6,820 |
| expense | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Share issue costs | (29) | | - | | - | | - | | (29) |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Restricted share units | 3,317 | | (3,317) | | - | | - | | - |
| vested | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Share options exercised | 3,576 | | (1,244) | | - | | - | | 2,332 |
| or exchanged | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Change in fair value of | - | | - | | (7,850) | | - | | (7,850) |
| cash flow hedge | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Revaluation of | - | | - | | 157 | | - | | 157 |
| available-for-sale asset | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Movement in cumulative | | | | | | | | | (72) |
| translation adjustment | - | | - | | (72) | | - | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Loss for the year | - | | - | | - | | (11,783) | | (11,783) |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | 6,864 | | 2,259 | | (7,765) | | (11,783) | | (10,425) |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| Balance - 31 December | 545,180 | | 10,047 | | 35,911 | | (13,828) | | 577,310 |
| 2009 | | | | | | | | | |
+---------------------------+----------+ +-------------+ +---------------+ +----------+ +------------+
| | | | | | | | | | |
+---------------------------+----------+----------+-------------+----------+---------------+-+----------+-+------------+
The accompanying notes are an integral part of these consolidated financial
statements.
+--------------------------------------------------------+------+----------+-------+----------+
| Consolidated Statements of Cash FlowsFor the years | | 2009 | | 2008 |
| ended 31 December 2009 and 2008 | | | | |
| (in thousands of US Dollars, except per share amounts) | | | | |
| | | | | |
+--------------------------------------------------------+------+----------+-------+----------+
| |Note | $ | | $ |
+--------------------------------------------------------+------+----------+ +----------+
| Cash flows from operating activities | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| (Loss)/Profit for the year | | (11,783) | | 5,519 |
+--------------------------------------------------------+------+----------+ +----------+
| Foreign exchange loss | | 213 | | 6,368 |
+--------------------------------------------------------+------+----------+ +----------+
| Share of loss in equity investment | | 76 | | 105 |
+--------------------------------------------------------+------+----------+ +----------+
| Loss on change of interest in associates | | 36 | | - |
+--------------------------------------------------------+------+----------+-------+----------+
| Depreciation | | 4,046 | | 3,336 |
+--------------------------------------------------------+------+----------+ +----------+
| Equity-based compensation expense | | 6,530 | | 3,001 |
+--------------------------------------------------------+------+----------+ +----------+
| Accretion of asset retirement obligation | 13 | 131 | | 133 |
+--------------------------------------------------------+------+----------+ +----------+
| Future tax asset recognised | | 2,528 | | (15,185) |
+--------------------------------------------------------+------+----------+ +----------+
| Non-controlling interest | | 56 | | (479) |
+--------------------------------------------------------+------+----------+ +----------+
| Deferred revenue recognised | 14 | (5,535) | | (6,399) |
+--------------------------------------------------------+------+----------+ +----------+
| Depletion of mineral properties | | 3,816 | | 3,398 |
+--------------------------------------------------------+------+----------+ +----------+
| Write-down of mineral property | | 1,171 | | - |
+--------------------------------------------------------+------+----------+ +----------+
| | | 1,285 | | (203) |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Net changes in non-cash working capital | 19 | (13,665) | | (9,776) |
+--------------------------------------------------------+------+----------+ +----------+
| | | (12,380) | | (9,979) |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Cash flows from investing activities | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Deferred exploration and development costs - Romania | | (5,478) | | (6,096) |
+--------------------------------------------------------+------+----------+ +----------+
| Property, plant and equipment - Greece | | (25,288) | | (26,181) |
+--------------------------------------------------------+------+----------+ +----------+
| Deferred development costs - Greece | | (2,096) | | (2,489) |
+--------------------------------------------------------+------+----------+ +----------+
| Deferred exploration costs - Turkey | | (1,084) | | (429) |
+--------------------------------------------------------+------+----------+-------+----------+
| Purchase of land | | (88) | | (2,705) |
+--------------------------------------------------------+------+----------+ +----------+
| Purchase of equipment | | (443) | | (173) |
+--------------------------------------------------------+------+----------+ +----------+
| Prepayments - equipment | | (11,865) | | - |
+--------------------------------------------------------+------+----------+ +----------+
| Restricted investment | | - | | 4,900 |
+--------------------------------------------------------+------+----------+ +----------+
| Investment in subsidiary | | - | | (14) |
+--------------------------------------------------------+------+----------+ +----------+
| Investment in associates | | (143) | | (2,694) |
+--------------------------------------------------------+------+----------+ +----------+
| | | (46,485) | | (35,881) |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Cash flows from financing activities | | | | |
+--------------------------------------------------------+------+----------+-------+----------+
| Deferred revenue | | - | | 3,563 |
+--------------------------------------------------------+------+----------+ +----------+
| Proceeds from exercise of share options | | 2,332 | | 54 |
+--------------------------------------------------------+------+----------+ +----------+
| Share issue costs | | - | | (10) |
+--------------------------------------------------------+------+----------+ +----------+
| | | 2,332 | | 3,607 |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Effect of foreign currency translation on cash | | (121) | | (6,290) |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Decrease in cash and cash equivalents | | (56,654) | | (48,543) |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Cash and cash equivalents - Beginning of year | | 170,296 | | 218,839 |
+--------------------------------------------------------+------+----------+ +----------+
| | | | | |
+--------------------------------------------------------+------+----------+ +----------+
| Cash and cash equivalents - End of year | | 113,642 | | 170,296 |
+--------------------------------------------------------+------+----------+-------+----------+
The accompanying notes are an integral part of these consolidated financial
statements.
+-----------------------------------------------------------+----------+----------+----------+
| Consolidated Statements of Other Comprehensive | 2009 | | 2008 |
| Income/(Loss)For the years ended 31 December 2009 and | $ | | $ |
| 2008 | | | |
| (in thousands of US Dollars, except per share amounts) | | | |
| | | | |
+-----------------------------------------------------------+----------+ +----------+
| | | | |
+-----------------------------------------------------------+----------+ +----------+
| (Loss)/Profit for the year | (11,783) | | 5,519 |
+-----------------------------------------------------------+----------+ +----------+
| | | | |
+-----------------------------------------------------------+----------+ +----------+
| Other comprehensive income/(loss) in the year | | | |
+-----------------------------------------------------------+----------+ +----------+
| Currency translation adjustment | (72) | | (523) |
+-----------------------------------------------------------+----------+ +----------+
| Gains and losses on derivative designated as cash flow | (2,229) | | 10,822 |
| hedges | | | |
+-----------------------------------------------------------+----------+ +----------+
| Gains and losses on derivative designated as cash flow | | | |
| hedges in prior periods transferred to profit in the | (5,621) | | (4,918) |
| current year | | | |
+-----------------------------------------------------------+----------+ +----------+
| Unrealised gain on available-for-sale financial asset | 157 | | - |
+-----------------------------------------------------------+----------+ +----------+
| | | | |
+-----------------------------------------------------------+----------+ +----------+
| Comprehensive income/(loss) | (19,548) | | 10,900 |
+-----------------------------------------------------------+----------+ +----------+
| | | | |
+-----------------------------------------------------------+----------+----------+----------+
Notes to Consolidated Financial Statements
For the years ended 31 December 2009 and 2008
(in thousands of US Dollars, except per share amounts)
The accompanying notes are not part of these consolidated financial statements.
1. Nature of operations
European Goldfields Limited (the "Company"), a company incorporated under the
Yukon Business Corporations Act, is a resource company involved in the
acquisition, exploration and development of mineral properties in Greece,
Romania and South-East Europe.
The Company's common shares are listed on the AIM Market of the London Stock
Exchange and on the Toronto Stock Exchange (TSX) under the symbol "EGU".
The Company 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 and the sale of gold concentrates from Olympias. European Goldfields will
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.
The underlying value of the deferred exploration and development costs for
mineral properties is dependent upon the existence and economic recovery of
reserves in the future, and the ability to fund the development of the
properties.
For the coming year, the Company believes it has adequate funds available to
meet its corporate and administrative obligations and its planned expenditures
on its mineral properties.
2. Basis of Presentation
These consolidated financial statements have been prepared on a going concern
basis in accordance with accounting principles generally accepted in Canada
("Canadian GAAP"), which assumes the Company will be able to realise assets and
discharge liabilities in the normal course of business for the foreseeable
future. These consolidated financial statements do not include the adjustments
that would be necessary should the Company be unable to continue as a going
concern.
3. Significant accounting policies
These consolidated financial statements reflect the following significant
accounting policies.
Basis of consolidation - Business acquisitions are accounted for under the
purchase method and the results of operations of these businesses are included
in these consolidated financial statements from the acquisition date.
Investments in associates over which the Company has significant influence are
accounted for using the equity method.
These consolidated financial statements include the accounts of the Company and
the following subsidiaries:
+----------------------------------------+------------------+--------------------+
| Company | Country of | |
| | incorporation | Ownership |
+----------------------------------------+------------------+--------------------+
| | | |
+----------------------------------------+------------------+--------------------+
| Deva Gold (Barbados) Ltd | Barbados | 100% owned |
+----------------------------------------+------------------+--------------------+
| European Goldfields (Services) Limited | England | 100% owned |
+----------------------------------------+------------------+--------------------+
| European Goldfields Mining | Netherlands | 100% owned |
| (Netherlands) B.V. | | |
+----------------------------------------+------------------+--------------------+
| European Goldfields (Greece) B.V. | Netherlands | 100% owned |
+----------------------------------------+------------------+--------------------+
| Hellas Gold B.V. | Netherlands | 100% owned |
+----------------------------------------+------------------+--------------------+
| European Goldfields Deva SRL | Romania | 100% owned |
+----------------------------------------+------------------+--------------------+
| Hellas Gold S.A. | Greece | 95% owned |
+----------------------------------------+------------------+--------------------+
| Deva Gold S.A. | Romania | 80% owned |
+----------------------------------------+------------------+--------------------+
| Greater Pontides Exploration B.V. | Netherlands | 51% owned |
+----------------------------------------+------------------+--------------------+
| Pontid Madencilik San. ve Ltd | Turkey | 51% owned |
+----------------------------------------+------------------+--------------------+
| Pontid Altin Madencilik Ltd. Sti. | Turkey | 51% owned |
+----------------------------------------+------------------+--------------------+
| Greek Nurseries SA | Greece | 50% owned |
+----------------------------------------+------------------+--------------------+
| Macedonian Copper Mines SA | Greece | 100% owned |
+----------------------------------------+------------------+--------------------+
The 20% minority interest held in the Company's 80% owned subsidiary, Deva Gold
S.A. ("Deva Gold"), is accounted for in these consolidated financial statements.
The Company is required to fund 100% of all costs related to the exploration and
development of the mineral properties held by Deva Gold. As a result, the
Company is entitled to the refund of such costs (plus interest) out of future
cash flows generated by Deva Gold, prior to any dividends being distributed to
shareholders.
Associates - Associates are those entities in which the Company has a material
long term interest and in respect of which the group exercises significant
influence over operational and financial policies, normally owning between 20%
and 50% of the voting equity, but which it does not control.
Investments in associates are accounted for using the equity method of
accounting and are initially recognised at cost. The Company's share of its
associates' post-acquisition profits or losses is recognised in the statement of
profit and loss. Cumulative post-acquisition movements are adjusted against the
carrying amount of investment. When the Company's share of losses in an
associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Company does not recognise further losses, unless it
has unsecured obligations or made payments on behalf of the associate.
When the group no longer has significant influence over an associate, accounting
for the investment as an associate ceases. The carrying value of the investment
in the associate at the date it ceases to be an associate is transferred to the
new designated class of financial asset. The investment is then accounted for
under the requirements of the new financial asset designation.
Investments - Available-for-sale financial assets are those non-derivative
financial assets, principally equity securities, that are designated as
available-for-sale or are not classified in any other investment category. After
initial recognition available-for sale financial assets are measured at fair
value with gains or losses being recognised as a separate component of equity
until the investment is derecognised or until the investment is determined to be
impaired, at which time the cumulative gain or loss previously reported in
equity is recognised in profit or loss.
The fair values of investments that are actively traded in organised financial
markets are determined by reference to quoted market bid prices at the close of
business on the reporting date.
Inventory - Inventories of ore mined and metal concentrates are valued at the
lower of combined production cost and net realisable value. Production costs
include the costs directly related to bringing the inventory to its current
condition and location, such as materials, labour, mine site overheads, related
depreciation of mining and processing facilities and related depletion of
mineral properties and deferred exploration and development costs. Exploration
materials and supplies are valued at the lower of cost and net realisable value
and on a weighted average basis.
Property, plant and equipment - Property,plant and equipment are recorded at
cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis based on a useful life of 3 years for office equipment, 6
years for vehicles, 10 years for leasehold improvements, at rates varying
between 3 and 5 years for exploration equipment and at rates varying between 4
and 20 years for buildings. Depreciation for equipment used for exploration and
development are capitalised to mineral properties.
Deferred exploration and development costs - Acquisition costs of resource
properties, together with direct exploration and development costs incurred
thereon, are deferred and capitalised. Upon reaching commercial production,
these capitalised costs are transferred from exploration properties to producing
properties on the consolidated balance sheets and are amortised into operations
using the unit-of-production method over the estimated useful life of the
estimated related ore reserves.
Based on annual impairment reviews made by management, in the event that the
long-term expectation is that the net carrying amount of these
capitalisedexploration and development costs will not be recovered such as would
be indicated where:
- Producing properties:
· the carrying amounts of the capitalised costs exceed the related
undiscounted net cash flows of reserves;
- Exploration properties:
· exploration activities have ceased;
· exploration results are not promising such that exploration will not be
planned for the foreseeable future;
· lease ownership rights expire; or
· insufficient funding is available to complete the exploration program;
then the carrying amount is written down to fair value accordingly and the
write-down amount charged to operations.
Impairment of long-lived assets - All long-lived assets and intangibles held and
used by the Company are reviewed for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. If changes in circumstances indicate that the carrying amount of
an asset that an entity expects to hold and use may not be recoverable, future
cash flows expected to result from the use of the asset and its disposition must
be estimated. If the undiscounted value of the future cash flows is less than
the carrying amount of the asset, impairment is recognised based on the fair
value of the assets.
Asset retirement obligation - The fair value of the liability of an asset
retirement obligation is recorded when it is legally incurred and the
corresponding increase to the mineral property is depreciated over the life of
the mineral property. The liability is adjusted over time to reflect an
accretion element considered in the initial measurement at fair value and
revisions to the timing or amount of original estimates and for drawdowns as
asset retirement expenditures are incurred. As at 31 December 2009 and 2008,
the Company had an asset retirement obligation relating to its Stratoni property
in Greece.
Deferred revenue - The Company receives prepayments for the sale of all of the
silver metal to be produced from ore extracted during the mine-life within an
area of some 7 km² around its zinc-lead-silver Stratoni mine as well as for sale
of gold pyrite concentrate in northern Greece. The prepayment, which is
accounted for as deferred revenue, is recognised as sales revenue on the basis
of the proportion of the settlements during the period expected to the total
settlements.
Revenue recognition - Revenues from the sale of concentrates are recognised and
are measured at market prices when the rights and obligations of ownership pass
to the customer. A number of the Company's concentrate products are sold under
pricing arrangements where final prices are determined by quoted market prices
in a period subsequent to the date of sale. These concentrates are
provisionally priced at the time of sale based on forward prices for the
expected date of the final settlement. The terms of the contracts result in
non-hedge derivatives that do not qualify for hedge accounting treatment,
because of the difference between the provisional price and the final settlement
price. These embedded derivatives are adjusted to fair value through revenue
each period until the date of final price determination. Subsequent variations
in the price are recognised as revenue adjustments as they occur until the price
is finalised.
Income taxes - Income taxes are calculated using the asset and liability method
of tax accounting. Under this method, current income taxes are recognised for
the estimated income taxes payable for the current period. Future income tax
assets and liabilities are determined based on differences between the financial
reporting and tax bases of assets and liabilities, and are measured using the
substantially enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The benefit of the temporary differences
is not recognised to the extent the recoverability of future income tax assets
is not considered more likely than not.
Equity-based compensation - The Company operates a share option plan and a
restricted share unit plan. The Company accounts for equity-based compensation
granted under such plans using the fair value method of accounting. Under such
method, the cost of equity-based compensation is estimated at fair value and is
recognised in the profit and loss statement as an expense, or recognised as
deferred exploration and development costs when the compensation can be
attributed to mineral properties. This cost is recognised over the relevant
vesting period for grants to directors, officers and employees, and measured in
full at the earlier of performance completed or vesting for grants to
non-employees. Any consideration received by the Company on exercise of share
options is credited to share capital.
Cash settled awards - The Company operates a deferred phantom unit plan. The
Company accounts for the compensation using the fair value method. The cost of
each unit is recognised at the date of grant and is marked-to-market based on
the Company's share price at the end of every reporting period.
Earnings per share ("EPS") - EPS is calculated based on the weighted average
number of common shares issued and outstanding. Diluted per share amounts are
calculated using the treasury stock method whereby proceeds deemed to be
received on the exercise or exchange of share options and warrants and on the
granting of restricted share units in the per share calculation are applied to
reacquire common shares at the average market price during the period.
Foreign currency translation - The Company's functional currency is the United
States dollar. Monetary assets and liabilities denominated in foreign currencies
are translated at the exchange rate in effect at the balance sheet date.
Non-monetary assets and liabilities and revenue and expenses arising from
foreign currency transactions are translated at the exchange rate in effect at
the date of the transaction. Exchange gains or losses arising from the
translation are included in operations.
Integrated foreign subsidiaries and associates are accounted for under the
temporal method. Under this method, monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date.
Non-monetary assets and liabilities are translated at historical rates. Revenue
and expenses are translated at actual or average rates for the period. Exchange
gains or losses arising from the translation are included in operations except
for those related to mineral properties which are capitalised.
Self-sustaining foreign subsidiaries and associates are accounted for under the
current rate method. Under this method, all assets and liabilities are
translated at the exchange rate in effect at the balance sheet date. Revenue
and expenses are translated at actual or average rates for the period. Exchange
gains or losses arising from the translation are recorded in equity in the
cumulative translation adjustment component of other comprehensive income.
Estimates, risks and uncertainties- 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 assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the period. Significant estimates and assumptions include those related to the
recoverability of deferred exploration, development costs for mineral
properties, asset retirement obligations and equity-based compensation. While
management believes that these estimates and assumptions are reasonable, actual
results could vary significantly.
Financial instruments - The Company'sinvestments and investments in marketable
securities have been classified as available-for-sale and are recorded at fair
value on the balance sheet. Fair values are determined directly by reference to
published price quotations in an active market. Changes in the fair value of
these instruments are reflected in other comprehensive income and included in
shareholders' equity on the balance sheet.
All derivatives are recorded on the balance sheet at fair value.
Marked-to-market adjustments on these instruments are included in net profit,
unless the instruments are designated as part of a cash flow hedge relationship.
All other financial instruments are recorded at cost or amortised cost, subject
to impairment reviews. Transaction costs incurred to acquire financial
instruments are included in the underlying balance.
Cash and cash equivalents - Cash and cash equivalents include cash and deposits
with original maturities of three months or less.
Hedges - The Company uses derivative and non-derivative financial instruments to
manage changes in commodity prices. Hedge accounting is optional and it
requires the Company to document the hedging relationship and test the hedging
item's effectiveness in offsetting changes in fair values or cash flows of the
underlying hedged item on an ongoing basis.
The Company uses cash flow hedges to manage base metal commodity prices. The
effective portion of the change in fair value of a cash flow hedging instrument
is recorded in other comprehensive income and is reclassified to earnings when
the hedge item impacts profit. Any ineffectiveness is recorded in net profit.
If a derivative instrument designated as a cash flow hedge ceases to be
effective or is terminated, hedge accounting is discontinued and the gain or
loss at that date is deferred in other comprehensive income and recognised
concurrently with the settlement of the related transaction. If a hedged
anticipated transaction is no longer probable, the gain or loss is recognised
immediately in profit. Subsequent gains and losses from ineffective derivative
instruments are recognised in profit in the period they occur.
Comprehensive income - Comprehensive income includes both net profit and other
comprehensive income. Other comprehensive income includes holding gains and
losses on available-for-sale investments, gains and losses on certain derivative
instruments and foreign currency gains and losses relating to self-sustaining
foreign operations, all of which are not included in the calculation of net
earnings until realised.
Capital disclosure -Effective 1 January 2008, the Company adopted CICA Handbook,
Section 1535, Capital disclosures. The new standard requires disclosures of
qualitative and quantitative information that enables users of financial
statements to evaluate the Company's objectives, policies and processes for
managing capital.
4. Significant changes in accounting policies
Goodwill and intangible assets - In February 2008, the Canadian Institute of
Chartered Accountants ("CICA") issued Section 3064 Goodwill and intangible
assets, replacing Section 3062, Goodwill and other intangible assets. It
establishes standards for the recognition, measurement, presentation and
disclosure of goodwill subsequent to its initial recognition and of intangible
assets by profit-oriented enterprises. Standards concerning goodwill are
unchanged from the standards included in the previous Section 3062. The Company
adopted the new standards on 1 January 2009. The adoption of this new Section
had no impact on the consolidated financial statements.
Credit Risk and the Fair Value of Financial Assets and Financial Liabilities
(EIC 173) - In January 2009, the CICA issued EIC 173, "Credit Risk and the Fair
Value of Financial Assets and Financial Liabilities". The EIC requires the
Company to take into account the Company's own credit risk and the credit risk
of the counterparty in determining the fair value of financial assets and
financial liabilities, including derivative instruments. This EIC applies to
interim and annual consolidated financial statements relating to fiscal years
beginning on or after 1 January 2009. The adoption of this new accounting policy
did not have any impact on the Company's consolidated financial statements.
Mining Exploration Costs (EIC 174) - In March 2009, the CICA issued EIC Abstract
174, "Mining Exploration Costs". The EIC provides guidance on the accounting and
the impairment review of exploration costs. This EIC applies to interim and
annual consolidated financial statements relating to fiscal years beginning on
or after 1 January 2009. The adoption of this new accounting policy did not have
any material impact on the Company's consolidated financial statements.
5. Accounts receivable
This balance comprises the following:
+-----------------------------------------------------+--------+----------+----------+
| | 2009 | | 2008 |
+-----------------------------------------------------+--------+----------+----------+
| | $ | | $ |
+-----------------------------------------------------+--------+ +----------+
| | | | |
+-----------------------------------------------------+--------+----------+----------+
| Value added taxes recoverable | 18,360 | | 11,780 |
+-----------------------------------------------------+--------+----------+----------+
| Accounts receivable | 8,453 | | 8,277 |
+-----------------------------------------------------+--------+ +----------+
| | 26,813 | | 20,057 |
+-----------------------------------------------------+--------+----------+----------+
6. Inventory
This balance comprises the following:
+-----------------------------------------------------+-------+----------+----------+
| | 2009 | | 2008 |
+-----------------------------------------------------+-------+ +----------+
| | $ | | $ |
+-----------------------------------------------------+-------+ +----------+
| | | | |
+-----------------------------------------------------+-------+ +----------+
| Ore mined | 102 | | 397 |
+-----------------------------------------------------+-------+ +----------+
| Metal concentrates | 2,195 | | 767 |
+-----------------------------------------------------+-------+ +----------+
| Material and supplies | 2,696 | | 1,905 |
+-----------------------------------------------------+-------+ +----------+
| | 4,993 | | 3,069 |
+-----------------------------------------------------+-------+----------+----------+
The components of cost of sales were as follows:
+-----------------------------------------------------+---------+----------+----------+
| | 2009 | | 2008 |
+-----------------------------------------------------+---------+----------+----------+
| | $ | | $ |
+-----------------------------------------------------+---------+ +----------+
| | | | |
+-----------------------------------------------------+---------+----------+----------+
| Mining cost | 24,907 | | 28,313 |
+-----------------------------------------------------+---------+----------+----------+
| Direct labour | 4,611 | | 4,991 |
+-----------------------------------------------------+---------+----------+----------+
| Indirect labour | 520 | | 964 |
+-----------------------------------------------------+---------+----------+----------+
| Other overhead costs | 6,162 | | 7,259 |
+-----------------------------------------------------+---------+----------+----------+
| Increase in gross inventories | (1,311) | | (1,100) |
+-----------------------------------------------------+---------+----------+----------+
| Freight charges | 9,141 | | 7,044 |
+-----------------------------------------------------+---------+----------+----------+
| Write-down of inventory to net realisable value | - | | 953 |
+-----------------------------------------------------+---------+ +----------+
| | 44,030 | | 48,424 |
+-----------------------------------------------------+---------+----------+----------+
As at 31 December 2009, the value of total inventory carried at net realisable
value amounted to Nil (2008 - $767), which includes a write-down of Nil (2008 -
$953).
7. Property, plant and equipment
+---------------------------------+-----------+--------+----------+-------+-------------+--+--------+
| | | | | | Mine | | Total |
| | | | | | development | | $ |
| | Plant | | | | land and | | |
| | and | | Vehicles | | buildings | | |
| | equipment | | $ | | $ | | |
| | $ | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Cost - 2008 | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| At 31 December 2007 | 31,701 | | 1,932 | | 21,523 | | 55,156 |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Additions | 14,674 | | 138 | | 14,215 | | 29,027 |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Disposals | (21) | | (8) | | - | | (29) |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| At 31 December 2008 | 46,354 | | 2,062 | | 35,738 | | 84,154 |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Accumulated depreciation - 2008 | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| At 31 December 2007 | 3,151 | | 1,076 | | 2,153 | | 6,380 |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Provision for the year | 1,527 | | 215 | | 1,648 | | 3,390 |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Disposals | (10) | | (7) | | - | | (17) |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| At 31 December 2008 | 4,668 | | 1,284 | | 3,801 | | 9,753 |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| | | | | | | | |
+---------------------------------+-----------+ +----------+ +-------------+ +--------+
| Net book value at 31 December | 41,686 | | 778 | | 31,937 | | 74,401 |
| 2008 | | | | | | | |
+---------------------------------+-----------+--------+----------+-------+-------------+--+--------+
+---------------------------------+---------+--------+----------+----------+----------+----------+----------+
| Cost - 2009 | | | | | | | |
+---------------------------------+---------+--------+----------+----------+----------+----------+----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| At 31 December 2008 | 46,354 | | 2,062 | | 35,738 | | 84,154 |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| Additions | 17,886 | | 143 | | 7,726 | | 25,755 |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| Disposals | - | | (98) | | - | | (98) |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| At 31 December 2009 | 64,240 | | 2,107 | | 43,464 | | 109,811 |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+----------+----------+ +----------+
| Accumulated depreciation - 2009 | | | | | | | |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| At 31 December 2008 | 4,668 | | 1,284 | | 3,801 | | 9,753 |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| Provision for the year | 1,601 | | 204 | | 2,251 | | 4,056 |
+---------------------------------+---------+ +----------+----------+----------+----------+----------+
| Disposals | - | | (98) | | - | | (98) |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| At 31 December 2009 | 6,269 | | 1,390 | | 6,052 | | 13,711 |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| | | | | | | | |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| Net book value at 31 December | 57,971 | | 717 | | 37,412 | | 96,100 |
| 2009 | | | | | | | |
+---------------------------------+---------+ +----------+ +----------+ +----------+
| | | | | | | | |
+---------------------------------+---------+--------+----------+----------+----------+----------+----------+
During 2009, the total depreciation charge amounted to $4,056 (2008 - $3,390)
and the net book value amount of property, plant and equipment not amortised
amounted to $75,499 (2008 - $43,098).
8. Deferred exploration and development costs
Greek mineral properties:
+-------------------------+----------+----------+----------+----------+----------+----------+-------------+--------+----------+
| | | | | | | | Other | | |
| | Stratoni | | Olympias | | Skouries | | exploration | | Total |
| | $ | | $ | | $ | | $ | | $ |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| Balance - 31 December | 29,199 | | 237,356 | | 164,641 | | 158 | | 431,354 |
| 2007 | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+--------+----------+
| Acquisition of mineral | - | | - | | 78 | | - | | 78 |
| properties | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+--------+----------+
| Deferred development | 502 | | 369 | | 1,573 | | 95 | | 2,539 |
| costs | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+--------+----------+
| Depletion of mineral | (3,049) | | (363) | | - | | - | | (3,412) |
| properties | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+--------+----------+
| | (2,547) | | 6 | | 1,651 | | 95 | | (795) |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| Balance - 31 December | 26,652 | | 237,362 | | 166,292 | | 253 | | 430,559 |
| 2008 | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+ +----------+
| Acquisition of mineral | - | | - | | - | | - | | - |
| properties | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+--------+----------+
| Deferred development | 636 | | 606 | | 1,257 | | 33 | | 2,532 |
| costs | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+----------+-------------+--------+----------+
| Depletion of mineral | (3,237) | | (657) | | - | | - | | (3,894) |
| properties | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| | (2,601) | | (51) | | 1,257 | | 33 | | (1,362) |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| | | | | | | | | | |
+-------------------------+----------+ +----------+ +----------+ +-------------+ +----------+
| Balance - 31 December | 24,051 | | 237,311 | | 167,549 | | 286 | | 429,197 |
| 2009 | | | | | | | | | |
+-------------------------+----------+----------+----------+----------+----------+----------+-------------+--------+----------+
The Stratoni, Skouries and Olympias properties are held by the Company's 95%
owned subsidiary, Hellas Gold. In September 2005, the Stratoni property
commenced production.
Romanian mineral properties:
+--------------------------------------------------+----------+----------+-------------+-+----------+
| | | | Other | | |
| | Certej | | exploration | | Total |
| | $ | | $ | | $ |
+--------------------------------------------------+----------+----------+-------------+-+----------+
| | | | | | |
+--------------------------------------------------+----------+ +-------------+ +----------+
| Balance - 31 December 2007 | 32,915 | | 5,370 | | 38,285 |
+--------------------------------------------------+----------+ +-------------+ +----------+
| | | | | | |
+--------------------------------------------------+----------+ +-------------+ +----------+
| Project development and exploration | 2,158 | | 420 | | 2,578 |
+--------------------------------------------------+----------+ +-------------+ +----------+
| Project management | 1,894 | | 376 | | 2,270 |
+--------------------------------------------------+----------+ +-------------+ +----------+
| Project overhead | 1,795 | | 170 | | 1,965 |
+--------------------------------------------------+----------+ +-------------+ +----------+
| Depreciation | 70 | | 19 | | 89 |
+--------------------------------------------------+----------+ +-------------+ +----------+
| | 5,917 | | 985 | | 6,902 |
+--------------------------------------------------+----------+ +-------------+ +----------+
| | | | | | |
+--------------------------------------------------+----------+ +-------------+ +----------+
| Balance - 31 December 2008 | 38,832 | | 6,355 | | 45,187 |
+--------------------------------------------------+----------+----------+-------------+-+----------+
+--------------------------------------------------+----------+----------+----------+-+----------+
| Project development and exploration | 3,672 | | 547 | | 4,219 |
+--------------------------------------------------+----------+----------+----------+-+----------+
| Permit acquisition | 157 | | - | | 157 |
+--------------------------------------------------+----------+----------+----------+-+----------+
| Write-down of mineral property | - | | (1,171) | | (1,171) |
+--------------------------------------------------+----------+----------+----------+-+----------+
| Project overhead | 1,551 | | 159 | | 1,710 |
+--------------------------------------------------+----------+----------+----------+-+----------+
| Depreciation | 58 | | 13 | | 71 |
+--------------------------------------------------+----------+ +----------+ +----------+
| | 5,438 | | (452) | | 4,986 |
+--------------------------------------------------+----------+ +----------+ +----------+
| | | | | | |
+--------------------------------------------------+----------+ +----------+ +----------+
| Balance - 31 December 2009 | 44,270 | | 5,903 | | 50,173 |
+--------------------------------------------------+----------+----------+----------+-+----------+
The Certej exploitation licence and the Baita-Craciunesti exploration licence
are held by the Company's 80%-owned subsidiary, Deva Gold. Minvest S.A. (a
Romanian state owned mining company), together with three private Romanian
companies, hold the remaining 20% interest in Deva Gold. The Company is
required to fund 100% of all costs related to the exploration and development of
these properties. As a result, the Company is entitled to the refund of such
costs (plus interest) out of future cash flows generated by Deva Gold, prior to
any dividends being distributed to shareholders. The Voia and Cainel exploration
licences are held by the Company's wholly-owned subsidiary, European Goldfields
Deva SRL.
Since the award of the Cainel Exploration Licence in 2005, the Company conducted
an extensive programme of mapping, surface sampling, investigation of historic
workings and dumps, drilling and geological interpretation on the property.
This work concluded that the main mineralised structures had been mined out to
practical mining depths and that there were no indications of significant
extensions to the known mineralisation. Permit wide soil sampling was completed
in 2009 which identified no other near surface resources and therefore the
decision was made by the Company to relinquish the licence. A total of $1,171
was written down being historic costs capitalised relating to Cainel.
As at the 31 December 2009, the following cost had been incurred on the
remaining Romanian mineral properties:
+----------------------------------------------------+----------+----------+----------+
| | 2009 | | 2008 |
| | $ | | $ |
+----------------------------------------------------+----------+----------+----------+
| | | | |
+----------------------------------------------------+----------+----------+----------+
| Baita-Craciunesti | 3,334 | | 3,312 |
+----------------------------------------------------+----------+----------+----------+
| Voia | 1,847 | | 1,741 |
+----------------------------------------------------+----------+----------+----------+
| Magura Tebii | 181 | | 136 |
+----------------------------------------------------+----------+ +----------+
| Exploration projects | 541 | | 44 |
+----------------------------------------------------+----------+ +----------+
| Cainel | - | | 1,122 |
+----------------------------------------------------+----------+ +----------+
| | 5,903 | | 6,355 |
+----------------------------------------------------+----------+----------+----------+
Turkish Mineral Properties:
+--------------------------------------------+---------+---------+-------------+-+---------+
| | | | Other | | |
| | Ardala | | exploration | | Total |
| | $ | | $ | | $ |
+--------------------------------------------+---------+---------+-------------+-+---------+
| | | | | | |
+--------------------------------------------+---------+ +-------------+ +---------+
| Balance - 31 December 2007 | - | | - | | - |
+--------------------------------------------+---------+---------+-------------+-+---------+
+--------------------------------------------+---------+--------+--------+-+--------+
| Exploration | 30 | | 2 | | 32 |
+--------------------------------------------+---------+--------+--------+-+--------+
| Project overhead | 402 | | 5 | | 407 |
+--------------------------------------------+---------+--------+--------+-+--------+
| Permit acquisition | 6 | | - | | 6 |
+--------------------------------------------+---------+--------+--------+-+--------+
| Depreciation | 11 | | - | | 11 |
+--------------------------------------------+---------+--------+--------+-+--------+
| | | | | | |
+--------------------------------------------+---------+ +--------+ +--------+
| | 449 | | 7 | | 456 |
+--------------------------------------------+---------+ +--------+ +--------+
| | | | | | |
+--------------------------------------------+---------+ +--------+ +--------+
| Balance - 31 December 2008 | 449 | | 7 | | 456 |
+--------------------------------------------+---------+ +--------+ +--------+
| | | | | | |
+--------------------------------------------+---------+ +--------+ +--------+
| Exploration | 225 | | 40 | | 265 |
+--------------------------------------------+---------+ +--------+ +--------+
| Project overhead | 695 | | 108 | | 803 |
+--------------------------------------------+---------+ +--------+ +--------+
| Permit acquisition | 86 | | - | | 86 |
+--------------------------------------------+---------+ +--------+ +--------+
| Depreciation | 13 | | 2 | | 15 |
+--------------------------------------------+---------+ +--------+ +--------+
| | | | | | |
+--------------------------------------------+---------+ +--------+ +--------+
| | 1,019 | | 150 | | 1,169 |
+--------------------------------------------+---------+ +--------+ +--------+
| | | | | | |
+--------------------------------------------+---------+ +--------+ +--------+
| Balance - 31 December 2009 | 1,468 | | 157 | | 1,625 |
+--------------------------------------------+---------+--------+--------+-+--------+
In April 2008, the Company entered into a Joint Venture ("JV") with Ariana
Resources plc ("Ariana") which became effective in May 2008 after the transfer
of Ariana's properties was confirmed by the General Directorate of Mining
Affairs in Turkey. The JV involves the development of Ariana's current
properties in an Area of Intent ("AOI") in the Greater Pontides region of
north-eastern Turkey, which include the Ardala copper-gold porphyry and fifteen
otherlicencescovering a total area of 229km², and a Strategic Partnership within
the AOI to define new opportunities for the JV.
The Turkish licences are held by the JV through a Turkish Company, Pontid
Madencilik. Currently the Company has a 51% interest in all the properties
within the JV and the Company will fund 100% of all costs related to the
development of these properties. Ownership of the Ardala property may be
increased to 80% by funding to completion of a Bankable Feasibility Study. All
other concessions within the JV funded to a Bankable Feasibility Study will be
90% owned by the Company. The owner of the remaining 49% of the properties is
Ariana Resources plc.
9. Investment in associates
+------------------------------------------------------+---------+--------+--------+
| | 2009 | | 2008 |
+------------------------------------------------------+---------+--------+--------+
| | $ | | $ |
+------------------------------------------------------+---------+ +--------+
| | | | |
+------------------------------------------------------+---------+--------+--------+
| Balance - Beginning of year | 2,075 | | - |
+------------------------------------------------------+---------+--------+--------+
| Shares acquired | 141 | | 2,692 |
+------------------------------------------------------+---------+--------+--------+
| Share of loss of associate | (76) | | (105) |
+------------------------------------------------------+---------+--------+--------+
| Cumulative translation adjustment | (32) | | (517) |
+------------------------------------------------------+---------+--------+--------+
| Equity-based compensation expense | - | | 5 |
+------------------------------------------------------+---------+--------+--------+
| Share issue cost | (28) | | - |
+------------------------------------------------------+---------+--------+--------+
| Loss in dilution of interest in associates | (36) | | - |
+------------------------------------------------------+---------+--------+--------+
| Reclassification as investment available-for-sale | (1,333) | | - |
+------------------------------------------------------+---------+--------+--------+
| Balance - End of year | 711 | | 2,075 |
+------------------------------------------------------+---------+--------+--------+
| | | | |
+------------------------------------------------------+---------+--------+--------+
In January 2008, Hellas Gold acquired a 50% share of Greek Nurseries SA for a
consideration of $834 (EUR530), at the date of acquisition the Company had no net
assets.
In May 2008, the Company subscribed for 20.13% of the issued share capital of
Ariana through a $1,858 (GBP929) private placement of shares. The difference
between the cost of the investment of $1,830 and the underlying net book value
of Ariana was $132 at the date of acquisition. This excess represents
additional fair value assigned to mineral properties of Ariana and will be
depleted upon commencement of mining operations of Ariana.
In January 2009, Ariana performed a share issue which the Company took part in,
however this resulted in a dilution of ownership as the Company did not
subscribe to 20.13% of the new shares being issued. After the share issue the
Company held 19.87% interest in Ariana. During September 2009, Ariana carried
out a further share placement in which the Company did not subscribe and as at
31 December 2009, the Company held 16.58% of the issued share capital. Since
October 2009, the Company no longer has a representative on the board of Ariana
and therefore no longer has significant influence and therefore accounted for
its investment in Ariana as an investment available-for-sale.
10. Investment other
+------------------------------------------------------+--------+--------+--------+
| | 2009 | | 2008 |
+------------------------------------------------------+--------+--------+--------+
| | $ | | $ |
+------------------------------------------------------+--------+ +--------+
| | | | |
+------------------------------------------------------+--------+--------+--------+
| Balance - Beginning of year | - | | - |
+------------------------------------------------------+--------+--------+--------+
| Reclassification from investment in associate | 1,333 | | - |
+------------------------------------------------------+--------+--------+--------+
| Fair value adjustment | 157 | | - |
+------------------------------------------------------+--------+--------+--------+
| Balance - End of year | 1,490 | | - |
+------------------------------------------------------+--------+--------+--------+
| | | | |
+------------------------------------------------------+--------+--------+--------+
The above investment is accounted for as an available-for-sale asset.
11. Income taxes
The following table reconciles the expected income tax recovery at the Canadian
statutory income tax rate to the amounts recognised in the consolidated
statements of profit and loss:
+------------------------------------------------------+----------+-------+----------+
| | 2009 | | 2008 |
+------------------------------------------------------+----------+-------+----------+
| | $ | | $ |
+------------------------------------------------------+----------+ +----------+
| | | | |
+------------------------------------------------------+----------+ +----------+
| Income tax rate | 34.00% | | 34.50% |
+------------------------------------------------------+----------+ +----------+
| Income taxes at statutory rates | (2,839) | | 4,002 |
+------------------------------------------------------+----------+ +----------+
| Tax rate difference from foreign jurisdictions | 323 | | 1,205 |
+------------------------------------------------------+----------+ +----------+
| Permanent differences | (391) | | 3,149 |
+------------------------------------------------------+----------+ +----------+
| Under provision prior year | 654 | | - |
+------------------------------------------------------+----------+ +----------+
| Change in tax rate | (60) | | (18,434) |
+------------------------------------------------------+----------+ +----------+
| Change in valuation allowance | 5,689 | | 1,443 |
+------------------------------------------------------+----------+ +----------+
| | 3,376 | | (16,639) |
+------------------------------------------------------+----------+-------+----------+
The following table reflects future income tax assets:
+------------------------------------------------------+------------+--------+---------+
| | 2009 | | 2008 |
+------------------------------------------------------+------------+--------+---------+
| | $ | | $ |
+------------------------------------------------------+------------+ +---------+
| | | | |
+------------------------------------------------------+------------+ +---------+
| Loss carry forwards | 10,091 | | 8,693 |
+------------------------------------------------------+------------+ +---------+
| Intangibles | - | | 2 |
+------------------------------------------------------+------------+ +---------+
| Plant and equipment | 45 | | - |
+------------------------------------------------------+------------+ +---------+
| Retirement obligation | 1,396 | | 1,323 |
+------------------------------------------------------+------------+ +---------+
| Inventory | - | | 3 |
+------------------------------------------------------+------------+ +---------+
| Personal indemnities | 47 | | 39 |
+------------------------------------------------------+------------+ +---------+
| Capital raising costs | 853 | | 1,108 |
+------------------------------------------------------+------------+ +---------+
| Valuation allowance | (10,824) | | (6,689) |
+------------------------------------------------------+------------+ +---------+
| | 1,608 | | 4,479 |
+------------------------------------------------------+------------+ +---------+
| Less: Current portion | (119) | | (2,004) |
+------------------------------------------------------+------------+ +---------+
| Future income tax assets recognised | 1,489 | | 2,475 |
+------------------------------------------------------+------------+--------+---------+
The following table reflects future income tax liabilities:
+------------------------------------------------------+---------+--------+---------+
| | 2009 | | 2008 |
+------------------------------------------------------+---------+--------+---------+
| | $ | | $ |
+------------------------------------------------------+---------+ +---------+
| | | | |
+------------------------------------------------------+---------+ +---------+
| Mineral properties | 84,491 | | 85,167 |
+------------------------------------------------------+---------+ +---------+
| Plant and equipment | 1,329 | | 882 |
+------------------------------------------------------+---------+ +---------+
| Exploration and development expenditure | 3,187 | | 2,709 |
+------------------------------------------------------+---------+ +---------+
| Accrued expenses & other | 286 | | - |
+------------------------------------------------------+---------+ +---------+
| Inventory | 10 | | - |
+------------------------------------------------------+---------+ +---------+
| Retirement obligation | 780 | | 873 |
+------------------------------------------------------+---------+ +---------+
| Hedge contract | - | | 3,496 |
+------------------------------------------------------+---------+ +---------+
| Foreign exchange | - | | 663 |
+------------------------------------------------------+---------+ +---------+
| | 90,083 | | 93,790 |
+------------------------------------------------------+---------+ +---------+
| Less: Current portion | - | | (3,496) |
+------------------------------------------------------+---------+ +---------+
| Future income tax liabilities recognised | 90,083 | | 90,294 |
+------------------------------------------------------+---------+--------+---------+
The tax liability arises as a result of the increase in value placed on the
mineral properties held by Hellas Gold on acquisition by the Company. This
future tax liability will reverse as the corresponding mineral properties are
amortised.
As at 31 December 2009, the Company has available tax losses for income tax
purposes of $36,258 (2008 - $29,656) which may be carried forward to reduce
taxable income derived in future years.
The non-capital losses expire as follows:
+----------------------------------------------------------------+--------+
| | 2009 |
+----------------------------------------------------------------+--------+
| | $ |
+----------------------------------------------------------------+--------+
| | |
+----------------------------------------------------------------+--------+
| 2016 | 4,254 |
+----------------------------------------------------------------+--------+
| Non expiring losses | 32,004 |
+----------------------------------------------------------------+--------+
| | 36,258 |
+----------------------------------------------------------------+--------+
In addition, the Company incurred share issue costs and other deductible
temporary differences, which have not yet been claimed for income tax purposes,
totalling as at 31 December 2009 $1,357 (2008 - $2,828).
A valuation allowance has been provided as a portion of the potential income tax
benefits of these carry-forward non-capital losses and deductible temporary
differences and the realisation thereof is not considered more likely than not.
12. Accounts payable and accrued liabilities
The balance principally comprises amounts outstanding for normal operations and
ongoing costs. The average credit period taken during the financial year ended
31 December 2009 was 30 days
(2008 - 30 days).
13. Asset retirement obligation
Management has estimated the total future asset retirement obligation based on
the Company's ownership interest in the Stratoni mines and facilities. This
includes all estimated costs to dismantle, remove, reclaim and abandon the
facilities at the Stratoni property, and the estimated time period during which
these costs will be incurred in the future. The following table reconciles the
asset retirement obligation for the financial years ended 31 December 2009 and
2008:
+----------------------------------------------------------+-------+------+-------+
| | 2009 | | 2008 |
+----------------------------------------------------------+-------+------+-------+
| | $ | | $ |
+----------------------------------------------------------+-------+ +-------+
| | | | |
+----------------------------------------------------------+-------+ +-------+
| Asset retirement obligation - Beginning of year | 6,937 | | 6,805 |
+----------------------------------------------------------+-------+ +-------+
| Accretion expense | 131 | | 132 |
+----------------------------------------------------------+-------+ +-------+
| Asset retirement obligation - End of year | 7,068 | | 6,937 |
+----------------------------------------------------------+-------+------+-------+
As at 31 December 2009, the undiscounted amount of estimated cash flows required
to settle the obligation is $7,805 (2008 - $7,805). The estimated cash flow has
been discounted using a credit adjusted risk free rate of 5.04% (2008 - 5.04%).
The expected period until settlement is five years.
14. Deferred revenue
In April 2007, Hellas Gold agreed to sell to Silver Wheaton (Caymans) Ltd.
("Silver Wheaton") all of the silver metal to be produced from ore extracted
during the mine-life within an area of some 7 km² around its zinc-lead-silver
Stratoni mine in northern Greece (the "Silver Wheaton Transaction"). The sale
was made in consideration of a prepayment to Hellas Gold of $57.5 million in
cash, plus a fee per ounce of payable silver to be delivered to Silver Wheaton
of the lesser of $3.90 (subject to an inflationary adjustment beginning after
year three) and the prevailing market price per ounce. During the year ended 31
December 2009, Hellas Gold delivered concentrate containing ounces 772,865 (2008
- 1,038,762 ounces) of silver for credit to Silver Wheaton.
In April 2007, Hellas Gold entered in an agreement with MRI Trading AG ("MRI")
for the sale of 25,000 wet metric tonnes of gold bearing pyrite concentrate.
Hellas Gold received a prepayment of $2.18 million in cash. A further agreement
with MRI was entered into in March 2008, for the sale of a further 23,372 dry
metric tonnes, for which Hellas Gold received a prepayment of $3.56 million in
cash. The remaining balances relating to MRI prepayments were transferred to
current liabilities reflecting the repayment of all prepaid amounts to MRI in
February 2009. In September 2007, Hellas Gold entered into an agreement with a
subsidiary of Celtic Resources Holdings ("Celtic") Plc for the sale of 50,000
wet metric tonnes of gold bearing pyrite concentrate, for which Hellas Gold
received a prepayment of $4.71 million in cash. During the year a total of
24,680 wmt (2008 - 3,000 wmt) of concentrate was delivered to Celtic.
The following table reconciles movements on deferred revenue associated with the
MRI, Celtic and the Silver Wheaton transaction:
+--------------------------------------------------------+---------+-------+---------+
| | 2009 | | 2008 |
+--------------------------------------------------------+---------+-------+---------+
| | $ | | $ |
+--------------------------------------------------------+---------+ +---------+
| | | | |
+--------------------------------------------------------+---------+ +---------+
| Deferred revenue - Beginning of year | 58,496 | | 65,344 |
+--------------------------------------------------------+---------+ +---------+
| Additions | - | | 3,564 |
+--------------------------------------------------------+---------+ +---------+
| Revenue recognised | (5,535) | | (6,399) |
+--------------------------------------------------------+---------+-------+---------+
| Transferred to current liabilities | - | | (4,013) |
+--------------------------------------------------------+---------+-------+---------+
| | 52,961 | | 58,496 |
+--------------------------------------------------------+---------+-------+---------+
| Less: Current portion | (4,549) | | - |
+--------------------------------------------------------+---------+-------+---------+
| Deferred revenue - End of year | 48,412 | | 58,496 |
+--------------------------------------------------------+---------+-------+---------+
15. Capital stock
Authorised:
- Unlimited number of common shares, without par value
- Unlimited number of preferred shares, issuable in series, without par value
Issued and outstanding (common shares - all fully paid)
+------------------------------------------------------+-------------+----------+----------+
| | Number | | Amount |
| | of | | $ |
| | Shares | | |
+------------------------------------------------------+-------------+ +----------+
| | | | |
+------------------------------------------------------+-------------+ +----------+
| Balance - 31 December 2007 | 179,162,381 | | 537,275 |
+------------------------------------------------------+-------------+ +----------+
| | | | |
+------------------------------------------------------+-------------+ +----------+
| Restricted share units vested | 195,000 | | 973 |
+------------------------------------------------------+-------------+ +----------+
| Share options exercised or exchanged | 25,000 | | 77 |
+------------------------------------------------------+-------------+ +----------+
| Share issue costs, net of tax | - | | (9) |
+------------------------------------------------------+-------------+ +----------+
| | 220,000 | | 1,041 |
+------------------------------------------------------+-------------+ +----------+
| | | | |
+------------------------------------------------------+-------------+ +----------+
| Balance - 31 December 2008 | 179,382,381 | | 538,316 |
+------------------------------------------------------+-------------+----------+----------+
+------------------------------------------------------+-------------+----------+----------+
| Restricted share units vested | 947,925 | | 3,317 |
+------------------------------------------------------+-------------+----------+----------+
| Share options exercised or exchanged | 1,009,507 | | 3,576 |
+------------------------------------------------------+-------------+----------+----------+
| Share issue costs, net of tax | - | | (29) |
+------------------------------------------------------+-------------+ +----------+
| | 1,957,432 | | 6,864 |
+------------------------------------------------------+-------------+ +----------+
| | | | |
+------------------------------------------------------+-------------+ +----------+
| Balance - 31 December 2009 | 181,339,813 | | 545,180 |
+------------------------------------------------------+-------------+----------+----------+
Contributed surplus
+------------------------------------------------------+----------+----------+--------+
| | 2009 | | 2008 |
+------------------------------------------------------+----------+----------+--------+
| | $ | | $ |
+------------------------------------------------------+----------+----------+--------+
| | | | |
+------------------------------------------------------+----------+ +--------+
| Equity-based compensation expense | 9,469 | | 7,210 |
+------------------------------------------------------+----------+ +----------+
| Broker warrants | 578 | | 578 |
+------------------------------------------------------+----------+ +----------+
| | 10,047 | | 7,788 |
+------------------------------------------------------+----------+----------+--------+
Accumulated other comprehensive income
The components of accumulated other comprehensive income were as follows:
+------------------------------------------------------+----------+----------+--------+
| | 2009 | | 2008 |
+------------------------------------------------------+----------+----------+--------+
| | $ | | $ |
+------------------------------------------------------+----------+----------+--------+
| | | | |
+------------------------------------------------------+----------+ +--------+
| Cumulative translation adjustment | 36,818 | | 36,890 |
+------------------------------------------------------+----------+ +----------+
| Fair value of cash flow hedge (net of tax) | (1,064) | | 6,786 |
+------------------------------------------------------+----------+ +----------+
| Available-for-sale asset | 157 | | - |
+------------------------------------------------------+----------+ +----------+
| | 35,911 | | 43,676 |
+------------------------------------------------------+----------+----------+--------+
16. Share options, restricted share units and deferred phantom units
Share Option Plan
The Company operates a Share Option Plan (together with its predecessor, the
"Share Option Plan") authorising the directors to grant options with a maximum
term of 5 years, to acquire common shares of the Company to the directors,
officers, employees and consultants of the Company and its subsidiaries, on
terms that the Board of Directors may determine, within the limitations of the
Share Option Plan. The maximum number of common shares of the Company which may
be reserved for issuance for all purposes under the Share Option Plan shall not
exceed 15% of the common shares issued and outstanding from time to time
(27,200,927 shares as at 31 December 2009).
An option holder under the Share Option Plan may elect to dispose of its rights
under all or part of its options (the "Exchanged Rights") in exchange for the
following number of common shares of the Company (or at the Company's option for
cash) in settlement thereof (the "Settlement Common Shares"):
+------------+-+------------------------+--+-------------------------+
| Number of |=| Number of Optioned |X | (Current Price - |
| Settlement | | Shares issuable on | | Exercise Price) |
| Common | | exercise of the | | Current Price |
| Shares | | Exchanged Rights | | |
+------------+-+------------------------+--+-------------------------+
As at 31 December 2009, the following share options were outstanding:
+---------------------------------------------------+-----------+---------+----------+
| Expiry date | Number | | Exercise |
| | of | | price |
| | Options | | C$ |
+---------------------------------------------------+-----------+---------+----------+
| | | | |
+---------------------------------------------------+-----------+---------+----------+
| 2010 | 60,000 | | 2.00 |
+---------------------------------------------------+-----------+---------+----------+
| 2011 | 66,666 | | 3.25 |
+---------------------------------------------------+-----------+---------+----------+
| 2011 | 600,000 | | 3.85 |
+---------------------------------------------------+-----------+---------+----------+
| 2011 | 50,000 | | 4.10 |
+---------------------------------------------------+-----------+---------+----------+
| 2012 | 250,000 | | 5.66 |
+---------------------------------------------------+-----------+---------+----------+
| 2012 | 150,000 | | 5.71 |
+---------------------------------------------------+-----------+---------+----------+
| 2012 | 256,666 | | 5.87 |
+---------------------------------------------------+-----------+---------+----------+
| 2013 | 50,000 | | 1.99 |
+---------------------------------------------------+-----------+---------+----------+
| 2013 | 360,000 | | 3.54 |
+---------------------------------------------------+-----------+---------+----------+
| 2013 | 135,000 | | 5.07 |
+---------------------------------------------------+-----------+---------+----------+
| 2013 | 78,333 | | 6.80 |
+---------------------------------------------------+-----------+ +----------+
| 2014 | 1,300,000 | | 6.00 |
+---------------------------------------------------+-----------+ +----------+
| 2014 | 50,000 | | 7.00 |
+---------------------------------------------------+-----------+ +----------+
| | 3,406,665 | | 5.10 |
+---------------------------------------------------+-----------+---------+----------+
During the years ended 31 December 2009 and 2008, share options were granted,
exercised, exchanged and forfeited as follows:
+-------------------------------------------------+-----------+------------+----------------+
| | Number | | Weighted |
| | of | | average |
| | Options | | exercise price |
| | | | C$ |
+-------------------------------------------------+-----------+ +----------------+
| | | | |
+-------------------------------------------------+-----------+ +----------------+
| Balance - 31 December 2007 | 3,006,665 | | 3.80 |
+-------------------------------------------------+-----------+ +----------------+
| | | | |
+-------------------------------------------------+-----------+ +----------------+
| Options granted | 1,010,000 | | 4.64 |
+-------------------------------------------------+-----------+ +----------------+
| Options exercised | (25,000) | | 2.11 |
+-------------------------------------------------+-----------+ +----------------+
| Options exchanged for shares | - | | - |
+-------------------------------------------------+-----------+ +----------------+
| Options forfeited | (500,000) | | 4.14 |
+-------------------------------------------------+-----------+ +----------------+
| | | | |
+-------------------------------------------------+-----------+ +----------------+
| Balance - 31 December 2008 | 3,491,665 | | 4.01 |
+-------------------------------------------------+-----------+------------+----------------+
+-------------------------------------------------+-----------+------------+------------+
| Options granted | 1,350,000 | | 6.04 |
+-------------------------------------------------+-----------+------------+------------+
| Options exercised | (960,000) | | 2.72 |
+-------------------------------------------------+-----------+------------+------------+
| Options exchanged for shares | (125,000) | | 4.46 |
+-------------------------------------------------+-----------+------------+------------+
| Options forfeited | (50,000) | | 6.80 |
+-------------------------------------------------+-----------+------------+------------+
| Options expired | (300,000) | | 4.18 |
+-------------------------------------------------+-----------+------------+------------+
| | | | |
+-------------------------------------------------+-----------+ +------------+
| Balance - 31 December 2009 | 3,406,665 | | 5.10 |
+-------------------------------------------------+-----------+------------+------------+
Of the 3,406,665 (2008 - 3,491,665) share options outstanding as at 31 December
2009, 1,855,001 (2008 - 2,421,667) were fully vested and had a weighted average
exercise price of C$4.57 (2008 - C$3.53) per share. The share options
outstanding as at 31 December 2009, had a weighted average remaining contractual
life of years 3.38 (2008 - 3.18 years).
The weighted average grant date fair value cost of the 1,350,000 share options
granted during the financial year ended 31 December 2009 (2008 - 1,010,000) was
$3,221 (2008 - $1,659). For outstanding share options, including options
granted during the year and those which were not fully vested during the year
ended 31 December 2009, the Company incurred a total equity-based compensation
cost of $2,039 (2008 - $1,384) of which $1,901 (2008 - $1,057) has been
recognised as an expense in the statement of profit and loss and $138 (2008 -
$327) has been capitalised to deferred exploration and development costs.
The fair value of the share options granted has been estimated at the date of
grant using a Black-Scholes and Parisian option pricing model with the following
assumptions: weighted average risk free interest rate of 0.05% (2008 - 2.05% to
3.05%); volatility factor of the expected market price of the Company's shares
of 68.03% (2008 - 32.86% to 89.59%); a weighted average expected life of the
share options of 5 years (2008 - 5 years), maximum term of 5 years and a
dividend yield of Nil (2008 - Nil).
In 2009, Nil (2008 - 500,000) options forfeited during the year represent
options cancelled and were replaced with DPUs. These have been accounted for as
a stock modification.
Restricted Share Unit Plan
The Company operates a Restricted Share Unit Plan (the "RSU Plan") authorising
the directors, based on recommendations received from the Compensation
Committee, to grant Restricted Share Units ("RSUs") to designated directors,
officers, employees and consultants. The RSUs are "phantom" shares that rise and
fall in value based on the value of the Company's common shares and are redeemed
for actual common shares on the vesting dates determined by the Board of
Directors when the RSUs are granted. The RSUs vest on the dates below; however,
upon a change of control of the Company they would typically become 100% vested.
The maximum number of common shares of the Company which may be reserved for
issuance for all purposes under the RSU Plan shall not exceed 2.5% of the common
shares issued and outstanding from time to time (4,533,495 shares as at 31
December 2009).
As at 31 December 2009, the following RSUs were outstanding:
+---------------------------------------------+-----------+---------------+---------------+
| | Number | | Grant date |
| | of | | fair value of |
| | RSUs | | underlying |
| | | | shares |
| Vesting date | | | C$ |
+---------------------------------------------+-----------+ +---------------+
| | | | |
+---------------------------------------------+-----------+ +---------------+
| 04 January 2010 | 187,911 | | 2.65 |
+---------------------------------------------+-----------+ +---------------+
| 04 January 2010 | 187,910 | | 2.65 |
+---------------------------------------------+-----------+ +---------------+
| 04 January 2010 | 50,000 | | 6.99 |
+---------------------------------------------+-----------+ +---------------+
| 31 March 2010 | 200,000 | | 6.02 |
+---------------------------------------------+-----------+ +---------------+
| 31 March 2010 | 165,411 | | 6.18 |
+---------------------------------------------+-----------+ +---------------+
| 08 December 2010 | 70,102 | | 6.18 |
+---------------------------------------------+-----------+ +---------------+
| 31 December 2010 | 200,000 | | 6.02 |
+---------------------------------------------+-----------+ +---------------+
| 31 December 2011 | 200,000 | | 6.02 |
+---------------------------------------------+-----------+ +---------------+
| | | | |
+---------------------------------------------+-----------+ +---------------+
| | 1,216,334 | | 5.09 |
+---------------------------------------------+-----------+---------------+---------------+
During the years ended 31 December 2009 and 2008, RSUs were granted, vested and
forfeited as follows:
+---------------------------------------------+-----------+--------------+--------------+
| | | | Weighted |
| | | | average |
| | | | grant date |
| | Number | | fair value |
| | of | | of |
| | RSUs | | underlying |
| | | | shares |
| | | | C$ |
+---------------------------------------------+-----------+ +--------------+
| | | | |
+---------------------------------------------+-----------+ +--------------+
| Balance - 31 December 2007 | 185,000 | | 4.86 |
+---------------------------------------------+-----------+ +--------------+
| | | | |
+---------------------------------------------+-----------+ +--------------+
| RSUs granted | 365,000 | | 5.26 |
+---------------------------------------------+-----------+ +--------------+
| RSUs vested | (195,000) | | 5.08 |
+---------------------------------------------+-----------+ +--------------+
| RSUs forfeited | (150,000) | | 6.59 |
+---------------------------------------------+-----------+ +--------------+
| | | | |
+---------------------------------------------+-----------+ +--------------+
| Balance - 31 December 2008 | 205,000 | | 4.09 |
+---------------------------------------------+-----------+--------------+--------------+
+---------------------------------------------+-----------+--------------+--------------+
| RSUs granted | 2,104,259 | | 4.52 |
+---------------------------------------------+-----------+--------------+--------------+
| RSUs vested | (947,925) | | 3.86 |
+---------------------------------------------+-----------+--------------+--------------+
| RSUs forfeited | (100,000) | | 2.74 |
+---------------------------------------------+-----------+--------------+--------------+
| | | | |
+---------------------------------------------+-----------+ +--------------+
| Balance - 31 December 2009 | 1,261,334 | | 5.09 |
+---------------------------------------------+-----------+--------------+--------------+
The weighted average grant date fair value cost of underlying shares of the
2,104,259 RSUs granted during the financial year ended 31 December 2009 (2008 -
365,000) was C$4.52 (2008 - C$5.26). For outstanding RSUs which were not fully
vested, including RSU's granted during the year ended 31 December 2009, the
Company incurred a total equity-based compensation cost of $4,781 (2008 -
$1,399) of which $3,793 (2008 - $889) has been recognised as an expense in the
statement of profit and loss and $988 (2008 - $510) has been capitalised to
deferred exploration and development costs.
Deferred Phantom Unit Plan
The company operates a Deferred Phantom Unit plan (the "DPU Plan") authorising
the directors based on recommendation by the Human Capital Management Committee
to grant Deferred Phantom Units ("DPUs") to independent eligible directors. The
DPU are units which give rise to a right to receive a cash payment the value of
which, on a particular date should be the market value of the equivalent number
of shares at that date. The market value at 31 December 2009 has been included
in current liabilities.
As at 31 December 2009, the following DPUs were outstanding:
+------------------------------------------------------------+----------+----------+----------+
| | Number | | Grant |
| | of | | date |
| | DPUs | | Fair |
| Grant date | | | Value of |
| | | | DPUs |
| | | | C$ |
+------------------------------------------------------------+----------+ +----------+
| | | | |
+------------------------------------------------------------+----------+ +----------+
| 05 December 2008 | 271,000 | | 504,060 |
+------------------------------------------------------------+----------+ +----------+
| 23 March 2009 | 6,184 | | 22,448 |
+------------------------------------------------------------+----------+ +----------+
| 15 May 2009 | 7,712 | | 22,365 |
+------------------------------------------------------------+----------+ +----------+
| 18 August 2009 | 6,918 | | 22,690 |
+------------------------------------------------------------+----------+ +----------+
| 07 October 2009 | 55,000 | | 331,650 |
+------------------------------------------------------------+----------+ +----------+
| 15 November 2009 | 4,596 | | 32,906 |
+------------------------------------------------------------+----------+ +----------+
| | | | |
+------------------------------------------------------------+----------+ +----------+
| | 351,410 | | 936,119 |
+------------------------------------------------------------+----------+----------+----------+
During the years ended 31 December 2009 and 2008, DPUs were granted and
forfeited as follows:
+------------------------------------------------------------+-----------+----------+----------+
| | Number | | Fair |
| | of | | Value of |
| | DPUs | | DPUs |
| | | | C$ |
+------------------------------------------------------------+-----------+ +----------+
| | | | |
+------------------------------------------------------------+-----------+ +----------+
| Balance - 31 December 2007 | - | | - |
+------------------------------------------------------------+-----------+ +----------+
| | | | |
+------------------------------------------------------------+-----------+ +----------+
| DPUs granted and vested | 406,500 | | 1.86 |
+------------------------------------------------------------+-----------+ +----------+
| DPUs forfeited | - | | - |
+------------------------------------------------------------+-----------+ +----------+
| | | | |
+------------------------------------------------------------+-----------+ +----------+
| Balance - 31 December 2008 | 406,500 | | 1.86 |
+------------------------------------------------------------+-----------+ +----------+
| | | | |
+------------------------------------------------------------+-----------+ +----------+
| DPUs granted and vested | 90,817 | | 5.13 |
+------------------------------------------------------------+-----------+ +----------+
| DPUs forfeited | - | | - |
+------------------------------------------------------------+-----------+ +----------+
| DPUs converted to RSU | (145,907) | | 1.96 |
+------------------------------------------------------------+-----------+ +----------+
| | | | |
+------------------------------------------------------------+-----------+ +----------+
| Balance - 31 December 2009 | 351,410 | | 2.66 |
+------------------------------------------------------------+-----------+----------+----------+
Of the 90,817 (2008 - 416,500) DPU's granted during the year, 90,817 (2008 -
406,500) were fully vested.
The weighted average grant date fair value cost of the 90,817 DPUs granted
during the financial year ended 31 December 2009 (2008 - 406,500) was $409 (2008
- $760). The weighted average fair value cost of the
351,410 DPUs as at the 31 December 2009, based on the year end share price,
amounted to $2,046
(2008 - $1,054).
17. Financial instruments and financial risk management
Financial exposures, in varying degrees, arise in the normal course of the
Company's consolidated operations and include commodity price risk, foreign
exchange risk, interest rate risk, liquidity risk and credit risk associated
with trade and financial counterparties. These exposures are monitored by
Senior Management and are assessed and mitigated in accordance to the Group Risk
Management Policy.
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable, accrued liabilities and hedge contracts.
Short-term financial assets are amounts that are expected to be settled within
one year. The carrying amounts in the consolidated balance sheets approximate
fair value because of the short term nature of these instruments.
The carrying amounts of the financial instruments and their fair values as at 31
December 2009 and 2008 are as follows:
+------------------------------------+---------+----------+---------+----------+---------+----------+------------+--------+
| | Carrying amount | | Fair value |
| | 2009 2008 | | 2009 2008 |
+------------------------------------+------------------------------+----------+------------------------------------------+
| Financial assets | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+ +---------------------+
| | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+----------+---------------------+
| Cash and cash equivalents | 113,642 | | 170,296 | | 113,642 | | 170,296 |
+------------------------------------+---------+----------+---------+----------+---------+----------+---------------------+
| Accounts receivable | 26,813 | | 20,057 | | 26,813 | | 20,057 |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| Derivative financial asset | - | | 10,282 | | - | | 10,282 |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| Available-for-sale asset | 1,490 | | - | | 1,490 | | - |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| Financial liabilities | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| Accounts payable and accrued | 12,684 | | 16,263 | | 12,684 | | 16,263 |
| liabilities | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| Derivative financial liability | 1,064 | | - | | 1,064 | | - |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+-----------------------+--------+
| | | | | | | | | |
+------------------------------------+---------+----------+---------+----------+---------+----------+------------+--------+
+------------------------------------------------+--------+----------+-------------+
| | | | Fair |
| | | | Value |
| | | | 2009 |
| | Fair | | Valuation |
| | Value | | technique |
| | 2009 | | market |
| | Quoted | | observation |
| | market | | inputs |
| | price | | (Level 2) |
| | (Level | | |
| | 1) | | |
+------------------------------------------------+--------+ +-------------+
| | | | |
+------------------------------------------------+--------+ +-------------+
| Financial assets | | | |
+------------------------------------------------+--------+ +-------------+
| | | | |
+------------------------------------------------+--------+ +-------------+
| Available-for-sale asset | 1,490 | | - |
+------------------------------------------------+--------+ +-------------+
| | | | |
+------------------------------------------------+--------+ +-------------+
| Financial liabilities | | | |
+------------------------------------------------+--------+ +-------------+
| | | | |
+------------------------------------------------+--------+ +-------------+
| Derivative financial liability | - | | 1,064 |
+------------------------------------------------+--------+----------+-------------+
Quoted market price represents the fair value determined based on quoted prices
on active markets as at the reporting date without any deduction for transaction
costs. The fair value of the listed equity investments are based on quoted
market prices.
For financial instruments not quoted in active markets, the Company used
valuation techniques such as present value and Black - Scholes option valuation
techniques, comparison to similar instruments for which market observable prices
exist and other relevant models used by market participants. These valuation
techniques use both observable and unobservable market inputs.
Commodity Price Risk - The Company's net profit and value of the mineral
resource properties are related to the prices of gold, silver, copper, zinc and
lead and the outlook for these commodities.
Gold prices historically have fluctuated widely and are affected by numerous
factors outside of the company's control, including, but not limited to,
industrial and retail demand, central bank lending, forward sales by market
participants, levels of worldwide production, macro-economic and political
variables and certain other factors related specifically to gold. Silver and,
in particular, base metal prices have historically tended to be driven more by
the demand and supply fundamentals for each metal, however, they are also
influenced by speculative activity, macro-economic and political variables and
certain other factors related specifically to silver and base metals.
The long term profitability of the Company's operations is highly correlated to
the market price of its commodities and in particular gold. To the extent that
these prices increase, asset values increase and cash flows improve; conversely,
declines in metal prices directly impact value and cash flows. A protracted
period of depressed prices could impair the Company's operations and development
opportunities, and significantly erode shareholder value.
Hedging commitments - The Company enters into financial transactions in the
normal course of business and in line with Board guidelines for the purpose of
hedging and managing its expected exposure to commodity prices. There are a
number of financial institutions which offer metal hedging services and the
Company deals with highly rated banks and institutions who have demonstrated
long term commitment to the mining industry. The Company has one counterparty in
respect of its lead and zinc hedge contracts noted below. Market conditions and
prices would affect the fair value of these hedge contracts and in certain
market conditions, where the fair value of the hedge contract is positive to the
Company, if this counterparty were unable to honour its obligations under the
hedge contract, the Company would be exposed to the value of the hedge and the
difference between the hedged price and the then current market price on the
date of the settlement. The hedges below are treated as cash flow hedges in
accordance with CICA 3865: Hedges.
Lead and Zinc hedging contracts - As at 31 December 2009, the Company had
entered into hedging arrangementsas illustrated below which, for the amount of
production shown, protect the Company from decreasing prices below the floor
price and limit participation in increasing prices above the cap price. The
period of the hedge is from 1 January 2010 until 31 December 2010 and is cash
settled on a monthly basis between the monthly average of the relevant commodity
price and the cap and floor price, as applicable. As at 31 December 2009, these
contracts had a fair value of ($1,064) (2008 - $10,282), determined by a 3rd
party valuation using the appropriate Black-Scholes options valuation model,
based on the then prevailing market prices including lead and zinc prices,
interest rates and market volatility.
+----------------+------------------------------+-----+-------+----------+-------+
| Period January 2010 - December 2010 | | | |
| | Lead | | Zinc |
| Lead | | | |
+-----------------------------------------------------+-------+----------+-------+
| | | | | | |
+----------------+------------------------------+-----+-------+----------+-------+
| Total Volume | (tonne) | | 6,000 | | 7,800 |
+----------------+------------------------------+-----+-------+----------+-------+
| Monthly Volume | (tonne) | | 500 | | 650 |
+----------------+------------------------------+-----+-------+----------+-------+
| | | | | | |
+----------------+------------------------------+-----+-------+----------+-------+
| Floor Price | ($/tonne) | | 2,000 | | 2,000 |
+----------------+------------------------------+-----+-------+----------+-------+
| Cap Price | ($/tonne) | | 2,900 | | 2,925 |
+----------------+------------------------------+-----+-------+----------+-------+
During the year ended 31 December 2009, the Company recorded income relating to
its hedging program of $5,621 (2008 - $4,918).
Given the current maturity profile of the hedge, market expectations and
parameters, we expect that the fair value of the existing hedge contracts
($1,064) will be released to net income within the next 12 months.
Currency risk - The Company is exposed to currency risk on accounts receivable,
accounts payable and cash holdings that are denominated in currencies other than
the functional currencies of the operating entities in the group. As at the 31
December 2009, the Company held the equivalent of $16,133 (2008 - $30,246) in
net assets denominated in foreign currencies. These balances are primarily made
up of Euro and, to a lesser extent, Pound Sterling.
The Company publishes its consolidated financial statements in US dollars and as
a result, it is also subject to foreign exchange translation risk in respect of
Euro denominated assets and liabilities in its foreign operations.
For the year ended 31 December 2009 the Company recorded a foreign exchange loss
of $1,576 (2008 - a loss of $6,406), mainly due to the translation of Euro
balances in its subsidiaries.
Liquidity risk - Liquidity risk is the risk that the Company will not be able to
meet its financial obligations when they become due.
The Company manages its liquidity risk by ensuring there is sufficient capital
to meet working capital, short and long term business requirements after taking
into account cash flows from operations and holdings of cash and cash
equivalents. Senior management is actively involved in the review and approval
of planned expenditures by regularly monitoring cash flows from operations and
anticipated investing and financing activities.
The Company does not have any borrowing or debt facilities and settles its
obligations out of cash and cash equivalents. The ability to do this relies on
the Company collecting its accounts receivable in a timely manner and
maintaining cash on hand.
Financial liabilities consist of trade payables, accrued liabilities and
financial derivatives. As at 31 December 2009, the Company's trade payables and
accrued liabilities amounted to $12,684 (2008 - $16,263), all of which fall due
for payment within 12 months of the balance sheet date. The average credit
period achieved during the year ended 31 December 2009 was 30 days (2008 - 30
days).
As at 31 December 2009, cash and cash equivalents comprises the following:
+-------------------------------------------------------+---------+----------+----------+
| | 2009 | | 2008 |
| | $ | | $ |
+-------------------------------------------------------+---------+ +----------+
| | | | |
+-------------------------------------------------------+---------+ +----------+
| Interest bearing bank accounts | 102,686 | | 123,297 |
+-------------------------------------------------------+---------+ +----------+
| Short-term deposits | 10,956 | | 46,999 |
+-------------------------------------------------------+---------+ +----------+
| | 113,642 | | 170,296 |
+-------------------------------------------------------+---------+----------+----------+
The Company has accounts receivable from trading counterparties to whom
concentrate products are sold. Where traders are chosen as counterparties, only
the larger and most financially secure metal trading groups are dealt with. The
company may also transact agreements with trading groups who have direct
interests in smelting capacity or direct to the smelters themselves.
Of the total trade receivable as at 31 December 2009, 4 (2008 - 3) customers
represented 84% (2008 - 96%) of the total. The Company does not anticipate any
loss for non-performance.
As at 31 December 2009, the accounts receivable comprises the following:
+-------------------------------------------------------+--------+----------+----------+
| | 2009 | | 2008 |
| | $ | | $ |
+-------------------------------------------------------+--------+ +----------+
| | | | |
+-------------------------------------------------------+--------+ +----------+
| Trade receivables | 6,712 | | 4,986 |
+-------------------------------------------------------+--------+ +----------+
| Valued added taxes recoverable | 18,360 | | 11,780 |
+-------------------------------------------------------+--------+ +----------+
| Other accounts receivable | 1,741 | | 3,291 |
+-------------------------------------------------------+--------+ +----------+
| | 26,813 | | 20,057 |
+-------------------------------------------------------+--------+ +----------+
| | | | |
+-------------------------------------------------------+--------+----------+----------+
As at 31 December 2009, the Company considers its accounts receivable excluding
Value Added Taxes recoverable and other accounts receivable to be aged as
follows:
+-------------------------------------------------------+-------+----------+----------+
| | 2009 | | 2008 |
| Ageing | $ | | $ |
+-------------------------------------------------------+-------+ +----------+
| | | | |
+-------------------------------------------------------+-------+ +----------+
| Current | 4,139 | | 1,807 |
+-------------------------------------------------------+-------+ +----------+
| Past due (1-30 days) | 2,283 | | 2,632 |
+-------------------------------------------------------+-------+ +----------+
| Past due (31-60 days) | 233 | | 417 |
+-------------------------------------------------------+-------+ +----------+
| Past due (more than 60 days) | 57 | | 130 |
+-------------------------------------------------------+-------+ +----------+
| | 6,712 | | 4,986 |
+-------------------------------------------------------+-------+----------+----------+
Interest rate risk - The Company is exposed to interest rate risk arising from
fluctuations in interest rates on its cash equivalents. The Company does not
have any borrowings or debt facilities and seeks to maximise returns on cash
equivalents without risking capital values. The Company's objectives of managing
its cash and cash equivalents are to ensure sufficient liquid funds are
maintained to meet day to day requirements and to place any amounts which are
considered in excess of this on short-term deposits with the Company's banks to
earn interest. The Company uses top rated institutions and ensures that access
to the amounts can be gained at short notice. During the year ended 31 December
2009 the company earned interest income of $625 (2008 - $5,729) on cash and cash
equivalents, based on rates of returns up to 3.5% (2008 - up to 4.40%).
Credit risk- Credit risk represents the financial loss the Company would suffer
if the Company's counterparties to a financial instrument, in owing an amount to
the Company, fail to meet or discharge their obligation to the Company.
Financial instruments that expose the Company to credit risk consist of cash and
cash equivalents, accounts receivable and in certain market conditions, hedging
contracts. The cash equivalents consist mainly of short-term investments, such
as money market deposits. The Company does not invest in asset-backed
commercial paper and has deposited the cash equivalents only with the largest
banks within a particular region or with top rated institutions.
The Company's concentrate offtake arrangements also expose it to credit risk
which would result should the Company's offtakers default under these
arrangements, as a result of which the Company would not realise its trade
receivable amount. The Company manages this exposure through assessing the
offtaker's credit risk before entering the offtake agreement, the structure of
the offtake contract and sells to a number of different offtakers which
diversifies this risk
Included in the Company's accounts receivable is an amount of $18,095 relating
to value added taxes recoverable which is subject to Greek government credit
risk.
Sensitivity analysis - The Company has completed a sensitivity analysis to
estimate the impact on net (loss)/profit of a 5% change in foreign exchange
rates, a 1% change in interest rates and a 10% change in base metal prices,
excluding the effect of hedging, during the years ended 31 December 2009 and
2008. The results of the sensitivity analysis can be seen in the following
table:
+-------------------------------------------------------+---------+----------+----------+
| | 2009 | | 2008 |
| Impact on Net (Loss)/Profit (+/-) | $ | | $ |
+-------------------------------------------------------+---------+ +----------+
| | | | |
+-------------------------------------------------------+---------+----------+----------+
| Change of - 5 % US$: EUR foreign exchange rate | (1,676) | | (460) |
+-------------------------------------------------------+---------+----------+----------+
| Change of + 5 % US$: EUR foreign exchange rate | 1,674 | | 564 |
+-------------------------------------------------------+---------+----------+----------+
| Change of +/- 1% in interest rates | 890 | | 1,321 |
+-------------------------------------------------------+---------+----------+----------+
| Change of +/- 10% in commodities prices | 8,281 | | 5,417 |
+-------------------------------------------------------+---------+----------+----------+
Limitations of sensitivity analysis - The above table demonstrates the effect of
each sensitivity in isolation. In reality, there may be a correlation between a
combination of any of these sensitivities. Additionally, the financial position
of the Company may vary at the time any of these factors occurs, causing the
impact on the Company's results to differ from that shown above.
18. Capital Risk Management
The Company's objectives when managing its capital are to maintain financial
flexibility to achieve its long term business development plan, whilst managing
its costs, optimizing its access to capital markets and preserving capital
value. Further, it ensures that there is sufficient liquidity available to meet
day to day operating requirements.
The Company currently has no debt and considers its Shareholders' Equity and
cash and cash equivalents as components of its capital structure.
The Company's Board of Directors continually assesses the Company's capital
through its short-term budgets and long-term development plan, meeting regularly
through quarterly board meetings and regular communication with Officers and
senior management to assess the requirements, changes to Company's set of
assumptions and capital market conditions.
Going forward, as part of its capital management, the Company expects to raise a
level of debt based on the forecast cashflows of its projects. As a result, the
Company will need to comply with certain financial covenants and financial
restrictions accordingly.
In order tomaximiseongoing development efforts, the company does not pay out
dividends.
The Company's investment policy is to invest its cash in high-grade investment
securities with varying terms, maturity and counterparties, selected with
regards to the expected timing of expenditures from continuing operations and
counterparty risk.
The Company expects its current capital resources and anticipated debt raising
will be sufficient to carry out its plans and operations through its current
operating period.
The Company is not subject to externally imposed capital requirements and there
has been no change in the overall capital risk management as at 31 December
2009.
Capital under management was as follows:
+------------------------------------------------------+----------+-------+---------+
| | 2009 | | 2008 |
+------------------------------------------------------+----------+-------+---------+
| | $ | | $ |
+------------------------------------------------------+----------+ +---------+
| | | | |
+------------------------------------------------------+----------+ +---------+
| Capital stock | 545,180 | | 538,316 |
+------------------------------------------------------+----------+ +---------+
| Contributed surplus | 10,047 | | 7,788 |
+------------------------------------------------------+----------+ +---------+
| Accumulated other comprehensive income | 35,911 | | 43,676 |
+------------------------------------------------------+----------+ +---------+
| Deficit | (13,828) | | (2,045) |
+------------------------------------------------------+----------+ +---------+
| | 577,310 | | 587,735 |
+------------------------------------------------------+----------+-------+---------+
19. Supplementary cash flow information
+------------------------------------------------------+----------+-------+---------+
| | 2009 | | 2008 |
+------------------------------------------------------+----------+-------+---------+
| | $ | | $ |
+------------------------------------------------------+----------+ +---------+
| Changes in non-cash working capital: | | | |
+------------------------------------------------------+----------+ +---------+
| Accounts receivable and prepaid expenses | (7,404) | | (3,696) |
+------------------------------------------------------+----------+ +---------+
| Inventory | (1,845) | | (943) |
+------------------------------------------------------+----------+ +---------+
| Accounts payable and accrued liabilities | (4,416) | | (5,137) |
+------------------------------------------------------+----------+ +---------+
| | (13,665) | | (9,776) |
+------------------------------------------------------+----------+ +---------+
| | | | |
+------------------------------------------------------+----------+ +---------+
| Supplemental disclosure of non-cash transactions: | | | |
+------------------------------------------------------+----------+ +---------+
| | | | |
+------------------------------------------------------+----------+ +---------+
| Share options and restricted share units issued for | 6,820 | | 2,788 |
| non-cash consideration | | | |
+------------------------------------------------------+----------+ +---------+
| Exercise or exchange of share options - Transfer | (1,244) | | |
| from contributed surplus | | | (24) |
| to share capital | | | |
+------------------------------------------------------+----------+ +---------+
| Vesting of restricted share units | (3,317) | | (973) |
+------------------------------------------------------+----------+-------+---------+
20. Commitments
The Company has spending commitments of $236 or GBP166 (2008 - $180) per year
(plus service charges and value added tax) for a term of ten years under the
lease for its office in London, England, which commenced in April 2004. The
rent was subject to an upward only review in April 2009, for which new rent
became effective from November 2008.
Hellas Gold has spending commitments of $150 (EUR104) per year for a term of 9
years under the lease for its office in Athens, Greece, which commenced in
December 2007. The rent will be reviewed on the second anniversary of the
commencement of the term to reflect any increase in rents in the market.
As at 31 December 2009, Hellas Gold had entered into off-take agreements
pursuant to which Hellas Gold agreed to sell 37,050 dmt of zinc concentrates,
5,778 dmt of lead/silver concentrates and 106,489 dmt of gold concentrates until
the financial year ending 2012.
During 2007, Hellas Gold entered into purchase agreements with Outotec Minerals
OY for long-lead time equipment for the Skouries project with a cost of $46,657
(EUR34,470) which is to be paid by the end of 2009. As at 31 December 2009,
$46,062 (EUR31,974) of the commitment had been paid. Hellas Gold has pledged
$1,105 (EUR762) in support of a letter of credit issued on behalf of Outotec
Minerals OY through Nordea Bank of Finland.
21. Transactions with related parties
Aktor S.A ("Aktor") Greece's largest construction Company owns 5% of Hellas Gold
the Company's 95% owned subsidiary. Aktor is a 100% subsidiary of Ellaktor
S.A., which owns 19.7% of the Company's issued share capital. Aktor, which is
deemed a related party, contracts management, technical and engineering services
to Hellas Gold.
During the year ended 31 December 2009, Hellas Gold incurred costs of $33,566
(2008 - $41,852) which have been recognised as cost of sales in the statements
of profit and loss and capitalised to property, plant and equipment, for
services received from Aktor. As at 31 December 2009, Hellas Gold had accounts
payable of $3,881 (2008 - $3,637) to Aktor. These expenditures were contracted
in the normal course of operations and are recorded at the exchange amount
agreed by the parties. The terms of the payable is 30 days (2008 - 30 days).
22. Segmented report
During 2009, the Company had four reporting segments. The Company has
identified its operating segments based on internal reports prepared by
management. Management has identified the operating segments based on the
location of its activities. The Company's operations are managed on a regional
basis. The Greek reporting segment includes the production activities of the
Stratoni mine and development activities of the Olympias and Skouries. The
Romanian reporting segment includes the development activities of the Certej
project. The Turkish reporting segment includes the exploration activities of
the Ardala project. The other reporting segment includes the operation of the
Company's corporate office. The accounting policy used by the Company in
reporting segments are in accordance with the measurement principles of Canadian
GAAP.
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | Corporate | | 2009 |
| | Greece | | Romania | | Turkey | | | | Total |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Assets | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Production stage mineral | 24,051 | | - | | - | | - | | 24,051 |
| properties | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Development stage mineral | 405,146 | | 50,173 | | - | | - | | 455,319 |
| properties | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Exploration stage mineral | - | | - | | 1,625 | | - | | 1,625 |
| properties | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Property, plant and | 92,711 | | 3,102 | | 53 | | 234 | | 96,100 |
| equipment | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Segment assets | 521,908 | | 53,275 | | 1,678 | | 234 | | 577,095 |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Income | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Sales to external | | | | | | | | | |
| customers | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Concentrate sales | 39,563 | | - | | - | | - | | 39,563 |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Gold pyrite sales | 23,149 | | - | | - | | - | | 23,149 |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| Total segment income | 62,712 | | - | | - | | - | | 62,712 |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Result | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Segment result excluding | | | | | | | | | |
| hedge contract profit and | | | | | | | | | |
| equity based compensation | 3,929 | | - | | (82) | | (8,589) | | (4,742) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Hedge contract profit | - | | - | | - | | (5,621) | | (5,621) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Equity-based compensation | - | | - | | - | | 6,530 | | 6,530 |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Total segment result | | | | | | | | | |
| before income taxes | 3,929 | | - | | (82) | | (7,680) | | (3,833) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Income taxes | (2,007) | | - | | - | | (1,369) | | (3,376) |
| (expense)/benefit | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Total segment result | 1,922 | | - | | (82) | | (9,049) | | (7,209) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Reconciliation of segment | | | | | | | | | |
| loss | | | | | | | | | |
| after income taxes | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Depletion | | | | | | | | | (3,216) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Accretion | | | | | | | | | (131) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Write-down of mineral | | | | | | | | | (1,171) |
| property | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
| Loss for the year | | | | | | | | | (11,727) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+----------+
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------+-----------------+----------+
| | | | | | | | | | 2008 | |
| | Greece | | Romania | | Turkey | | Corporate | | Total | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Assets | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Production stage mineral | 26,652 | | - | | - | | - | | 26,652 | |
| properties | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Development stage mineral | 403,907 | | 45,187 | | - | | - | | 449,094 | |
| properties | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Exploration stage mineral | - | | - | | 456 | | - | | 456 | |
| properties | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Property, plant and | 71,293 | | 2,759 | | 40 | | 309 | | 74,401 | |
| equipment | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Segment assets | 501,852 | | 47,946 | | 496 | | 309 | | 550,603 | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Income | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Sales to external | | | | | | | | | | |
| customers | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Concentrate sales | 44,812 | | - | | - | | - | | 44,812 | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Gold pyrite sales | 15,232 | | - | | - | | - | | 15,232 | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| Total segment income | 60,044 | | - | | - | | - | | 60,044 | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+ +---------+ +--------+ +-----------+ +---------+----------------------------+
| | | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------+----------------------------+
| Result | | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------+----------------------------+
| Segment result excluding | | | | | | | | | | |
| hedge contract profit and | | | | | | | | | | |
| equity based | (8,370) | | - | | (214) | | 2,082 | | (6,502) | |
| compensation | | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------------------------+----------+
| | | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------------------------+----------+
| Hedge contract profit | - | | - | | - | | (4,918) | | (4,918) | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------------------------+----------+
| Equity-based compensation | - | | - | | - | | 2,900 | | 2,900 |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Totalsegment result | | | | | | | | | |
| before income taxes | (8,370) | | - | | (214) | | 64 | | (8,520) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Income taxes | 875 | | - | | - | | 15,764 | | 16,639 |
| (expense)/benefit | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Total segment result | (7,495) | | - | | (214) | | 15,828 | | 8,119 |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Reconciliation of segment | | | | | | | | | |
| profit | | | | | | | | | |
| after income taxes | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Depletion | | | | | | | | | (2,946) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Accretion | | | | | | | | | (133) |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Write-down of mineral | | | | | | | | | - |
| property | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| Profit for the year | | | | | | | | | 5,040 |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+--------------------------------------+
| | | | | | | | | | |
+---------------------------+---------+--------+---------+---------+--------+--+-----------+--+---------+-----------------+----------+
23. Pension plans and other post-retirement benefits
The Company's subsidiary, European Goldfields (Services) Limited, maintains a
defined contribution pension plan for its employees. The defined contribution
pension plan provides pension benefits based on accumulated employee and Company
contributions. Company contributions to these plans are a set percentage of
employees' annual income and may be subject to certain vesting requirements. The
cost of defined contribution benefits is expensed as earned by employees.
As at 31 December 2009 and 2008, the Company recognised the following costs:
+-------------------------------------------------------+------+----------+----------+
| | 2009 | | 2008 |
+-------------------------------------------------------+------+----------+----------+
| | $ | | $ |
+-------------------------------------------------------+------+ +----------+
| | | | |
+-------------------------------------------------------+------+----------+----------+
| Defined contribution plans | 641 | | 261 |
+-------------------------------------------------------+------+----------+----------+
24 (Loss)/Earnings per share
The calculation of the basic and diluted earnings per share attributable to
holders of the Company's common shares is based as follows:
+--------------------------------------------------------+----------+-------+---------+
| | 2009 | | 2008 |
+--------------------------------------------------------+----------+-------+---------+
| | $ | | $ |
+--------------------------------------------------------+----------+ +---------+
| | | | |
+--------------------------------------------------------+----------+ +---------+
| (Loss)/Profit for the year | (11,783) | | 5,519 |
+--------------------------------------------------------+----------+ +---------+
| Effect of dilutive potential common shares | - | | - |
+--------------------------------------------------------+----------+ +---------+
| Diluted earnings | (11,783) | | 5,519 |
+--------------------------------------------------------+----------+ +---------+
| | | | |
+--------------------------------------------------------+----------+ +---------+
| Weighted average number of common shares for the | | | |
| purpose of basic earnings | 179,825 | | 179,566 |
| per share | | | |
+--------------------------------------------------------+----------+ +---------+
| Incremental shares - Share options | - | | 1,657 |
+--------------------------------------------------------+----------+ +---------+
| Weighted average number of common shares for the | | | |
| purpose of diluted earnings per share | 179,825 | | 181,223 |
+--------------------------------------------------------+----------+-------+---------+
In 2008, the weighted average number of options excluded from the computation of
diluted earnings per share because their effect was not dilutive, was 1,220.
25. Comparative figures
Certain prior year amounts have been reclassified from statements previously
presented to conform to the presentation of 2009 Consolidated Financial
Statements.
26. Post balance sheet event
Since 31 December 2009, the Company granted 550,000 (2008 - 584,779) restricted
share units under the Company's Restricted Share Unit Plan and 1,600,000 (2008 -
Nil) share options under the Company's share option plan.
27. Recently issued accounting standards
Business Combination, Consolidated Financial Statements and Non Controlling
Interest - In January 2009, the CICA issued Handbook Sections 1582 - Business
Combinations, 1601 - Consolidated Financial Statements and 1602 -
Non-Controlling Interests which replace CICA Handbook Sections 1581 - Business
Combinations and 1600 - Consolidated Financial Statements. Section 1582
establishes standards for the accounting for business combinations that is
equivalent to the business combination accounting standard under International
Financial Reporting Standards. Section 1582 is applicable for the Company's
business combinations with acquisition dates on or after January 1, 2011. Early
adoption of this Section is permitted. Section 1601 together with Section 1602
establishes standards for the preparation of consolidated financial statements.
Section 1601 is applicable for the Company's interim and annual consolidated
financial statements for its fiscal year beginning January 1, 2011. Early
adoption of this Section is permitted. If the Company chooses to early adopt any
one of these Sections, the other two sections must also be adopted at the same
time.
International Financial Reporting Standards - ("IFRS) - In 2006, the Canadian
Accounting Standards Board ("AcSB") published a new strategic plan that will
significantly affect financial reporting requirements for Canadian companies.
The AcSB strategic plan outlines the convergence of Canadian GAAP with IFRS over
an expected five year transitional period. In February 2008, the AcSB confirmed
that publicly listed companies will be required to adopt IFRS for interim and
annual financial statements relating to fiscal years beginning on or after
January 1, 2011, and in April 2008, the AcSB issued for comment it's Omnibus
Exposure Draft, Adopting IFRS in Canada. Early adoption may be permitted,
however it will require exemptive relief on a case by case basis from the
Canadian Securities Administrators.
The Company has begun assessing the adoption of IFRS and is in the process of
completing its overall conversion plan. The plan assesses the possible benefits
of early adoption, the key differences between IFRS and Canadian GAAP including
disclosures as well as a timeline for implementation.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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