European Goldfields Limited: Results for 2004; Transforming Year in 2004-Production Expected to Commence in 2005.

VANCOUVER, British Columbia -- European Goldfields Limited (TSX:EGU)(AIM:EGU), a resource company involved in the acquisition, exploration and development of mineral properties in Greece, Romania and the Balkans, today reported its results for the financial year ended 31 December 2004.

European Goldfields had a transforming year in 2004. During the period, the company evolved from a junior resource business with a single project in one country, to a multi-million ounce entity hosting feasibility and mining assets. In addition, we are now poised to go into production at Stratoni, providing a springboard for further growth opportunities in South East Europe and the Balkans.

The Year 2004 was a landmark one for our company during which we achieved the following significant milestones:

- We acquired a 65% interest in Hellas Gold for a total consideration of US$150 million, representing approximately US$11 per gold equivalent ounce of resources.

- The company now holds a majority interest in four gold and base metal deposits hosting over 24 Moz of resources and 17 Moz of reserves on a gold equivalent basis. These assets have significant existing mining infrastructure, represent some of the largest defined deposits in Europe and two of them have previously been in production.

- Two significant listings have been achieved - firstly the London AIM listing completed in March 2004 and secondly our graduation to the main board in Toronto (TSX) in March 2005.

- The market capitalisation of European Goldfields has increased fivefold during 2004 and now stands in excess of US$215 million.

- Our fund raisings in 2004 have established solid financial foundations for the future growth of our business. European Goldfields and Hellas Gold had over US$65 million in cash at year end. With the current cash balance and expected revenue from Stratoni mining operations and sale of Olympias surface concentrates, we expect to be self-funded to the end of 2006 and beyond, covering all corporate and exploration activities in Romania, as well as the permitting and updated feasibility studies associated with our major gold and base metal projects in Greece.

- The appointment of Dimitrios Koutras as non-executive Chairman has consolidated the partnership with Aktor S.A. in Greece. Aktor is the largest construction company in Greece and was a major contributor in the successful 2004 Olympic Games through their construction activities.

- We recently announced the awarding of environmental permits for our Stratoni operations - the first such permits granted in Greece for over six years.

- The first European Goldfields mining project, Stratoni, is about to commence production. Stratoni has a six year life based on current reserves, boasts attractive grades of 17-20% combined lead & zinc and 200 g/t silver and has good potential for expanding the current reserve and resource base.

- The feasibility studies for our major gold and base metal projects of Olympias and Skouries are currently being updated to yield viable and permittable development options which are designed to optimise exploitation of resources, including over 9.3 Moz of gold, 60.1 Moz silver, 1.8 Mt of combined lead and zinc and over 1 Mt of copper.

- In Romania, we have breathed new life back into our projects with the recent update of a new, better defined 2.3+ Moz gold equivalent resource at Certej and the near completion of an in-house pre-feasibility study. A new licence area, referred to as Cainel, which was awarded in January 2005 against strong competition, is located contiguous with our Certej deposit and hosts high grade, quartz lode and lower grade disseminated epithermal mineralisation.

- European Goldfields has commenced the evolution to an operating company by building a new management team involving the recruitment of a new CEO, new non-executive directors and a new core technical team with a proven track record, and finally the expansion and restructuring of teams in Romania and Greece to support and develop our projects.

Hellas Gold - "an accretive acquisition"

The acquisition of the Hellas Gold assets was part of a long-term strategy formulated by the board. The strategy was designed to turn European Goldfields into a major company in Europe with producing mines and the ability to grow through the acquisition of additional projects and the leveraging of its partnerships in South East Europe and the Balkans.

In February 2004, we acquired an initial 30% interest in Hellas Gold and in November 2004 an additional 35%, increasing our total interest to 65% on a fully diluted basis. The total consideration paid for our 65% interest in Hellas Gold was US$150 million, representing approximately US$11 per gold equivalent ounce of measured and indicated resources or approximately US$14 per gold equivalent ounce of proven and probable reserves.

Some of the largest assets in South East Europe

The Hellas Gold assets are located in Northern Greece and consist of three near-production deposits within 70-year mining concessions covering a total area of 317 km2. The deposits include the polymetallic projects of Stratoni and Olympias which contain gold, lead, zinc and silver, and the copper-gold porphyry body referred to as Skouries. All three deposits have been well defined with over 200,000 metres of drilling and the completion of feasibility studies and later engineering studies.

The total proven and probable reserves of these assets are 17.0 Moz on a gold equivalent basis (65% attributable equals 11.1 Moz) from a measured and indicated resource base of 21.8 Moz gold equivalent (65% attributable equals 14.2 Moz). These assets represent some of the largest defined deposits in Europe. The three deposits are located within a 10 km radius of each other, making this effectively a gold and base metal centre. Furthermore, both Stratoni and Olympias were previously in production and have extensive existing mining and plant infrastructure, making them near-production properties which require new permits.

Finally, an 8,000 tonne ship loading facility is located at the Stratoni port next to the mill giving Hellas Gold the ability to ship concentrates offshore for processing and sale. This is a significant asset for our business as all of the projects produce concentrate material which is saleable to European markets. Stockpiles of gold concentrates amounting to 0.2 Moz gold are already located at surface and can be a potential source of short-term revenue.

The first project to go into production will be the Stratoni deposit. Stratoni has good underground access and a plant capable of producing 650,000 tonnes ROM per year. Previous production reached a maximum of 450,000 tonnes per year at consistent grades of approximately 8-10% lead, 8-11% zinc and 200 g/t silver. Based on our work on site, we believe that this capacity can be reached or even exceeded in the future. Current reserves give us a six year life but the deposit is open in all directions and there is good potential to expand the resource and reserve base.

Prior to gaining the environmental permits, we have been active at Stratoni during the last six months refurbishing the previous plant infrastructure, submitting all our new mining plans to the Greek government and selling existing surface stockpiles of lead and zinc concentrates to generate revenue of US$3.4 million in the third quarter of 2004.

The Olympias deposit is similar to Stratoni in terms of its geology but also has resource grades of 9.3 g/t gold as well as silver, lead and zinc. Olympias has good underground infrastructure which includes ramps and a shaft system down to 390 metres below surface, plus a concentrator plant which was capable of processing 400,000 tonnes ROM per year for the sale of lead and zinc concentrates. The deposit is well defined with over 91,000 metres of drilling for a total gold equivalent resource of over 8.7 Moz which includes 4.3 Moz gold. Traditionally, the mine produced and sold lead and zinc concentrates and stockpiled the arsenopyrite-pyrite gold concentrate. Feasibility studies confirmed that good gold recoveries can be achieved by pressure oxidation, which would require the building of a gold recovery plant. The opportunity exists to generate early cash flow revenue from the sale of surface sources, with over 0.2 Moz gold present in the form of stockpiles, and 0.2 Moz gold in the form of tailings.

Olympias also has good upside with both the East and West deposits open at depth and along strike, and both are linked along the north-south trending Olympias fault system which extends to the Stratoni deposit and is largely unexplored.

The Skouries deposit is a major copper-gold porphyry pipe. The project is metallurgically simple with 25-30% of the gold recovered by gravity and the remainder of the gold and all the copper recovered by flotation, which produces a concentrate that is readily saleable in European markets. At a US$350/oz gold price, the reserve exceeds 129 Mt grading 0.9 g/t gold and 0.6% copper. Skouries is located on a high plateau with no habitation in the immediate vicinity and has both potential for open pit and subsequent underground exploitation. The deposit is well drilled for resource definition but is still open to the southwest.

In addition to the three main deposits, we consider the prospects and exploration potential on the 317 km2 of mining concessions to be high. We have good geological models to define where to find further Olympias-Stratoni type mineralisation and where to drill for more porphyry bodies. Previous exploration work has already outlined the existence of another Olympias-type deposit at Piavitsa and a second porphyry at Fisoka. Furthermore, the licence areas have not been subject to any modern exploration work such as generative studies and airborne geophysical surveys so we believe the likelihood of further discoveries to be high.

Unlocking value with strong local partnerships

We believe that the key to success in developing our mineral assets in Greece and Romania is establishing strong and viable partnerships with local stakeholders. For example, our acquisition of a controlling interest in Hellas Gold includes a partnership with Aktor S.A., Greece's largest construction company, which hold the remaining 35% interest in Hellas Gold.

Aktor has considerable experience in developing projects in Greece, which includes extensive construction for the 2004 Olympic Games and the completion of other major projects such as the Athens suburban railway and various tunnel, mining and quarry excavations. Aktor has a good track record in Greece in completing major construction projects, including obtaining required permits.

The final step in consolidating our partnership came through the appointment in November 2004 of Aktor's President & General Manager, Dimitrios Koutras, as non-executive Chairman. Dimitrios has a passion for building successful projects and companies and is well informed on the Hellas Gold assets having completed his Phd on the Skouries deposit.

Our partnership with Aktor and the drive of Dimitrios Koutras have been instrumental in the successful negotiation of Hellas Gold's contract with the Greek State. Hellas Gold's contract with the Greek State acknowledges our right to employ appropriate local persons and does not include historical environmental or social liabilities. We are already close to fulfilling our first commitment which is the re-commencement of mining operations at Stratoni. Furthermore, there are clear timelines for submission of business plans and granting of permits for the gold and base metal projects of Olympias and Skouries. This contractual transparency coupled with Aktor's understanding of community needs and their ability to operate in both the EU and Greece is the key to unlocking the value in our current projects. So much so that we were recently awarded by the Greek State all necessary environmental permits for mining operations at the Stratoni deposit, the first such permits awarded for over six years.

Finally, we should not forget our partnership in Romania where our 20% partner is Minvest S.A., a Romanian state-owned mining company. Through the last four years, we have benefited from Minvest's support in building our portfolio of assets, and utilising and developing local skills. Minvest have extensive mining and development skills which we hope to lever into our projects in the future.

Breathing new life back into our projects in Romania

European Goldfields holds five mineral properties located within the "Golden Quadrilateral" area of Romania, a gold province which historically is estimated to have produced over 40 Moz. We recently embarked on a resource development and pre-feasibility programme to underpin the value of our 80%-owned Certej deposit and surrounding  satellite bodies. This work has culminated in a new estimate for Certej which outlined measured and indicated resources of 31.4 Mt grading 2.1 g/t gold and 11 g/t silver for 2.3 Moz of gold equivalent (80% attributable equals 1.9 Moz). This estimate is based on a new geological model and includes a 11.4 Mt high grade core to the deposit grading 3.4 g/t at a 2 g/t gold cut-off. This work has underpinned the fact that Certej can be mined more selectively to optimise an open pit. An in-house pre-feasibility study is now in progress with specific focus on generating a higher grade metallurgical concentrate, assessing the contribution from satellite bodies and defining and sizing appropriate mining, plant and tailings infrastructure.

In January 2005, we were awarded an additional exploration licence referred to as Cainel which covers an area of 31.3 km2 and is located contiguous with our Certej property. The Cainel deposit includes vein-hosted epithermal, stockwork and disseminated mineralisation with workings occurring over an area of some 1,000 metres by 250 metres. Historic mining was restricted to below 200 metres depth from surface and grab sampling by European Goldfields has indicated that the mineralisation extends to surface. Exploration work continues to define the mineralised system with a view to either defining a stand-alone project or a satellite for Certej.

Solid financial foundations

In 2004, we raised over US$120 million by the issue of 49 million common shares at an average price of Pounds Sterling 1.30 (C$3.05) per share. European Goldfields and Hellas Gold had over US$65 million in cash at year end. With this cash balance and a market capitalisation which now stands in excess of US$215 million (having increased fivefold during 2004), we have established solid financial foundations for the future growth of our business.

In March 2004, our common shares commenced trading on the AIM Market of the London Stock Exchange, followed by a graduation to the Toronto Stock Exchange (TSX) from the TSX Venture Exchange in March 2005.

The listings and fund raisings have strengthened our shareholder base and endorsed our growth strategy and the inherent underlying value in the company.

With the current cash balance and expected revenue from Stratoni mining operations and sale of Olympias concentrates, we expect to be self-funded to the end of 2006 and beyond, covering all corporate and exploration activities in Romania, as well as the permitting and updated feasibility studies associated with our major gold and base metal projects in Greece.

A unique opportunity

We believe our company represents a unique mining and exploration opportunity in Europe with over 16.1 Moz of measured and indicated resources and 11.1 Moz of proven and probable reserves on a gold equivalent and attributable basis. Production is about to commence at Stratoni where we have major mining and port infrastructure, and we believe we have good exploration upside in both Greece and Romania.

Our attractive mix of viable gold and base metal projects distinguishes us from our peers in an industry where there is a lack of new quality projects emerging despite the strong demand for metal production. We are about to enter into production within a market environment where demand for both zinc and gold is not able to be matched by the available supply. This environment is further supported by a strong platform of price sustainability in lead, copper and silver. We believe that global metal markets are at the beginning of a strong upward cycle which, according to expert opinion, could be sustainable for over a decade.

Our attractiveness is also attested to by our blend of local and international management coupled with strong partnerships and a European approach to problem solving, company building and environmental issues. We believe we represent the start of a new dawn for European mining which will be tackled by partnerships involving national stakeholders and the support of local communities and institutions.

In summary, we represent a development company with extensive assets and production capacity which currently sits at the base of the value curve. Our story is not, as yet, well known. Through the achievement of our milestones in 2005 we hope to redress this imbalance and move European Goldfields into the tier of producing companies.

Stratoni environmental permits granted - production expected to commence shortly

In April 2005, we announced that Hellas Gold had been awarded by the Greek State all environmental permits for mining operations at the Stratoni deposit. We have worked closely with the Greek government and local community to gain these permits and this represents a major milestone in the development of European Goldfields' strategy. Final approval to commence mining operations is expected shortly, to be followed by production launch.

The permits provide for a new mining method involving completion of a 1,900 metre access tunnel (or adit) and thereafter more efficient and mechanised cut and fill operations designed to excavate from the base of the reserve upwards with fill being placed on the floor. Previous mining at Stratoni was inefficient with backfill  often affected in the hangwall and gravity was not utilised to remove ore blocks.

Construction on the new adit is expected to begin shortly to provide improved access to the Stratoni reserve and allow full scale mining operations to be effected by the end of Q2 2006. In the meantime, we have cleaned out all the old access ways and will commence mining from existing infrastructure immediately after we have need awarded the mining permit.

Production of ore is expected to reach 170,000 tonnes by the end of the first year of full scale production and increase steadily thereafter.

Stratoni is a high grade base metal project with a six year life based on current reserves, and there is strong market demand for the lead plus silver and zinc concentrates which are produced.

In addition to the expected commencement of production at Stratoni, we will also be initiating aggressive exploration programmes with the objective of extending the life of mine. The new adit will provide access from the old, mined out, Madem Lakkos deposit to the new Mavres Petres deposit and will be located within the hanging wall to and adjacent to the Stratoni fault. This area between the two deposits remains largely unexplored and there is a good chance of finding additional resources. Drilling is planned to test this target area and existing extensions to the current deposit in order to extend the current life of mine.

Outlook - obtaining the gold permits and pursuing new opportunities

We are currently updating the feasibility studies and preparing new business and environmental plans defining the way forward for Hellas Gold's multi-million ounce gold and base metal projects of Olympias and Skouries. Preliminary work on Olympias demonstrates that this is a robust project with strong returns at a realistic gold price of US$375/oz. The Olympias project is also enhanced by the discovery that we can segregate the arsenopyrite from pyrite which should provide for greater flexibility with regard to processing options.

In the case of Skouries, the project economics appear to be positive for a combined open pit and underground operation with the higher grade zones adding to mining flexibility.

In Q1 2006, we intend to submit our new business plans to the Greek government to facilitate the granting of all relevant environmental, mining and development permits.

In Greece, we will also continue to look for new discoveries through focused exploration programmes. We have a good exploration model defining where we must look for further Olympias and Skouries targets and we will be actively testing these opportunities this year.

In Romania, work at Certej is now directed towards completing an in-house pre-feasibility study with specific focus on optimising metallurgical recoveries and defining a practical open pit. We also continue to look at new satellite targets around the Certej deposit with a view to adding additional incremental ounces. At Cainel, underground channel sampling continues to define the bigger mineralised target covering an area of 200 x 1,000 metres. Aggressive drilling campaigns will be effected during the second half of 2005 to test our geological model and the potential for a major mineralised system.

A major driving force for European Goldfields in the current year is to achieve our mission statement of "Resource development, gold and base metal production in South East Europe through effective national stakeholder partnerships". This path is expected to commence with Stratoni production and continue with the development of our major gold and base metal projects in Greece and our Romanian assets. We also intend to continue growing our portfolio by new exploration discoveries and the pursuit of accretive, value enhancing acquisitions in Europe and the Balkans.

Reserve and resource parameters

Reserves and resources are classified in accordance with the Canadian Institute of Mining Metallurgy and Petroleum's "CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines" as per the requirements of Canadian Securities Administrator's National Instrument 43-101 (the "Instrument").

Disclosure of mineral resources and reserves for Hellas Gold's Olympias, Stratoni and Skouries deposits is derived from a prefeasibility study prepared by independent consultants Behre Dolbear & Company, Inc. in accordance with the guidelines set out in the Instrument and under the supervision of Richard Parker, a "qualified person" under the Instrument. The prefeasibility study was filed on SEDAR at www.sedar.com on 29 October 2004 under the category "Technical Report".

Disclosure of mineral resources for European Goldfield's 80%-owned Certej deposit is derived from a resource estimation  prepared by independent consultants RSG Global Pty Ltd in accordance with the guidelines set out in the Instrument and under the supervision of Brett Gossage, a "qualified person" under the Instrument. The resource estimation was filed on SEDAR on 23 March 2005 under the category "Technical Report".

Gold equivalent ounces were calculated using the following metal prices, representing the average of (i) the average metal prices from 1993 to 2003 (source: LME), and (ii) the average metal prices from 1 January to 30 June 2004 (source: LME): Au: US$369/oz; Ag: US$5.79/oz; Pb: US$0.31/lb; Zn: US$0.47/lb; Cu: US$1.09/lb. Mining recoveries for reserves have been taken into account. However, metallurgical and refinery costs have not been considered when calculating the gold equivalents.

Reserves are estimated using projected process recoveries, operating costs and mine plans that are unique to each property and include estimated allowances for dilution and mining recovery.

Normal data verification procedures have been used in collecting, compiling, interpreting and processing the data used to estimate resources and reserves. Data verification includes quality assurance and quality control procedures put in place by European Goldfields in Romania and by the previous owners of the Hellas Gold assets in Greece, and reviews by independent consultants of drill hole information on geological sections prepared by European Goldfields and such previous owners.

Resources (unlike reserves) do not have demonstrated economic viability.

Development of all properties is dependent on successful permitting.

Patrick Forward, General Manager, Exploration of European Goldfields, was the "qualified person" under the Instrument responsible for reviewing the disclosure of resource and reserve estimates quoted above.

Forward-looking statements

This news release contains certain forward-looking statements concerning the Company's future operations, economic performances, financial condition and financing plans. These statements are based on certain assumptions and analyses made by the Company in light of the its experience and its perception of historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate in the circumstances. However, whether actual results and developments will conform to the Company's expectations and predictions is subject to a number of risks, uncertainties and assumptions. Consequently, all of the forward-looking statements made in this news release are qualified by these cautionary statements, and there can be no assurance that the results or developments anticipated by the Company will be realised or, even if substantially realised, that they will have the expected consequences to or effects on the Company and its subsidiaries or their businesses or operations. The Company undertakes no obligation and do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law.

MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 DECEMBER 2004

The following discussion and analysis, prepared as at 27 April 2005, is intended to assist in the understanding and assessment of the trends and significant changes in the results of operations and financial conditions of European Goldfields Limited (the "Company"). Historical results may not indicate future performance. Forward-looking statements are subject to a variety of factors that could cause actual results to differ materially from those contemplated by these statements. The following discussion and analysis should be read in conjunction with the Company's audited consolidated financial statements for the years ended 31 December 2004 and 2003 and accompanying notes (the "Consolidated Financial Statements").

Additional information relating to the Company is available on the Canadian System for Electronic Document Analysis and Retrieval  (SEDAR) at www.sedar.com. Except as otherwise noted, all dollar amounts in the following discussion and analysis and the Consolidated Financial Statements are stated in United States dollars.

Overview

The Company, a company incorporated in the Yukon, Canada, is a resource company involved in the acquisition, exploration and development of mineral properties in Greece, Romania and the Balkans.

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".

Greece - As at 31 December 2004, the Company held a 65% interest (on a fully-diluted basis) in Hellas Gold S.A ("Hellas Gold"). Hellas Gold owns assets in Northern Greece which include 70-year mining concessions over a total area of 317 km2 and three polymetallic near-production deposits, known as Olympias, Stratoni and Skouries, which contain proven and probable reserves. The Stratoni and Olympias deposits were previously in production and benefit from significant infrastructure which includes underground mining development, two plants and a ship loading facility on the Aegean Sea. Hellas Gold's assets also include potential revenue generating stockpiles and tailings located on the surface.

Romania - In Romania, the Company holds a 80% interest in Deva Gold S.A. and a 100% interest in European Goldfields (Romania) SRL, which are in the process of exploring their mineral properties in Romania and have not yet determined whether those properties contain economic reserves.

Balkans - The Company is currently entertaining certain investments for exploration and development of mineral properties in the Balkans.

Significant acquisition in 2004

In February 2004, the Company acquired an initial 37.97% interest (30% on a fully-diluted basis) in Hellas Gold for a total subscription price of EUR18 million ($24.06 million) in cash.

In November 2004, the Company completed the acquisition of additional shares in Hellas Gold (the "Purchased Shares"), increasing its total interest from 37.97% to 55.70%, and assumed an obligation to subscribe to additional shares in Hellas Gold for a subscription price of $23.48 million (the "Subscription Obligation"), resulting in an interest of 65% on a fully-diluted basis (the "Acquisition"). The total price paid by the Company for the Purchased Shares and for the assumption of the Subscription Obligation was $125.35 million, satisfied as follows:

(a) $77.43 million by the issue in November 2004 of 30,423,280 common shares to the vendors at a deemed issue price of Pounds Sterling 1.75 (C$3.98) per share. This was accounted for at a price per share of Pounds Sterling 1.38 (C$3.14), representing the then fair market value of such shares; and

(b) $47.92 million paid in cash to the vendors in December 2004.

Transaction costs of $3.99 million were also accounted for as part of the Acquisition.

In January 2005, the Company satisfied the Subscription Obligation for a subscription price of US$23.48 million.

To fund the cash requirements relating to the Acquisition and provide additional working capital, the Company raised concurrently Pounds Sterling 40 million ($75.73 million) (before expenses) by the issue of 29,629,630 common shares at a price of Pounds Sterling 1.35 (C$3.07) per share (the "Placing"). The balance of the cash consideration required for the Acquisition was funded by a non-brokered private placement with Commerzbank A.G. completed in May 2004, where 5,882,000 common shares at a price of Pounds Sterling 1.70 (C$4.18) per share were issued, for total subscription proceeds of Pounds Sterling 10 million ($17.76 million).

The Acquisition was accounted for as a purchase and the results of operations of Hellas Gold were included in the consolidated statements of loss and deficit from 30 November 2004, the effective date of the Acquisition. From 6 February 2004 to 30 November 2004, the Company's initial 37.97% interest (30% on a fully-diluted basis) in Hellas Gold was accounted for as an equity investment and the Company's share of loss in Hellas Gold was included in the consolidated statements of loss and deficit.

Results of operations

The Company's results of operations for the three-month period and year ended 31 December 2004 were comprised primarily of activities related to the Company's regional exploration programs in Romania. The Company continues to incur losses and until commercial production commences and revenues are generated, the Company will continue to do so.

The Company's results of operations for the eight most recently completed quarters are summarised in the following table:

---------------------------------------------------------------------
                             2004        2004        2004        2004
                               Q4          Q3          Q2          Q1
                                $           $           $           $
---------------------------------------------------------------------
Statement of loss
 and deficit
Interest Income           279,277     142,507      60,340      18,079
Expenses (non-cash)     5,510,145   1,735,977      43,712   4,664,828
Expenses (total)        9,224,437   2,853,951   1,324,467   6,566,420
Loss                    8,133,661   2,189,958   2,055,739   6,803,280
Loss (before non-
 cash expenses)         2,623,516     453,981   2,012,027   2,138,452
Loss per share               0.17        0.05        0.05        0.24
Loss per share (before
 non-cash expenses)          0.05        0.01        0.05        0.07
Balance sheet
Working capital        63,479,383  29,045,152  31,117,158  14,412,628
Total assets          304,758,330  86,879,327  83,516,659  67,875,357
Non current
 liabilities           71,319,883           -           -           -
Statement of
 cash flows
Deferred exploration
 and development costs  2,462,164   1,171,323     943,157   1,393,927
---------------------------------------------------------------------


---------------------------------------------------------------------
                             2003        2003        2003        2003
                               Q4          Q3          Q2          Q1
                                $           $           $           $
---------------------------------------------------------------------
Statement of loss
 and deficit
Interest Income            27,649      16,255      68,512      57,234
Expenses (non-cash)     1,172,229       2,325       1,619       1,620
Expenses (total)        1,714,515     293,089     351,847     267,208
Loss                    1,686,866     276,834     283,335     209,974
Loss (before non-
 cash expenses)           514,637     274,509     281,716     208,354
Loss per share               0.08        0.01        0.01        0.01
Loss per share (before
 non-cash expenses)          0.03        0.01        0.01        0.01
Balance sheet
Working capital         5,057,885   5,433,159   6,709,136   7,667,515
Total assets           45,943,009  29,929,347  29,784,760  28,455,250
Non current
 liabilities                    -           -           -           -
Statement of
 cash flows
Deferred exploration
 and development costs  1,097,467   1,087,776   1,133,743     938,016
---------------------------------------------------------------------

The following tables and discussion compare the results of operations
for the years ended 31 December 2004, 2003 and 2002, and the three-
month periods ended 31 December 2004 and 2003.

                                                  Three-month periods
                     Years ended 31 December        ended 31 December

              -------------------------------------------------------
                   2004       2003       2002         2004       2003
                      $          $          $            $          $
---------------------------------------------------------------------
Statement of
 loss and
 deficit
Interest
 Income         500,203    169,650    198,423      279,277     27,649
Expenses
(non-cash)   11,954,662  1,177,793      2,654    5,510,145  1,172,229
Expenses
(total)      19,969,275  2,626,659  1,341,371    9,224,437  1,714,515
Loss         19,182,638  2,457,009  1,145,602    8,133,661  1,686,866
Loss
(before
 non-cash
 expenses)    7,227,976  1,279,216  1,142,948    2,623,516    514,638
Loss per
 share             0.39       0.11       0.06         0.17       0.08
Loss per
 share
(before
 non-cash
 expenses)         0.15       0.06       0.06         0.05       0.03
Balance sheet
Working
 capital     63,479,383  5,057,885  8,176,685   63,479,383  5,057,885
Total
 assets     304,758,330 45,943,009 26,481,551  304,758,330 45,943,009
Non
 current
 liabilities 71,319,883          -          -   71,319,883          -
Statement of
 cash flows
Deferred
 exploration
 and
 development
 costs        5,970,571   4,257,002 5,678,950    2,462,164  1,097,467

---------------------------------------------------------------------

Loss before non-cash expenses and loss per share before non-cash
expenses represent the loss before any expenses which are not deemed
to be cash expenses. They are not a generally accepted accounting
principle measures. Loss before non-cash expenses and loss per share
before non-cash expenses may not be comparable to similar measures
used by other companies and as a result they are not reflected in the
key financial statements.

The breakdown of deferred exploration and development costs per
exploration concessions for the years ended 31 December 2004, 2003
and 2002, and the three-month periods ended 31 December 2004 and 2003
is as follows:

                                                 Three-month periods
                    Years ended 31 December        ended 31 December

             -------------------------------------------------------
                  2004       2003       2002         2004       2003
                  $ (%)      $ (%)      $ (%)        $ (%)      $ (%)
--------------------------------------------------------------------
Romanian
mineral
properties
 Certej      4,516,016  2,250,518  2,305,600    1,798,904    877,974
                  (76%)      (53%)      (41%)        (73%)      (80%)
 Zlatna        529,930    985,379  1,753,058      266,183    131,696
                   (9%)      (23%)      (30%)        (11%)      (12%)
 Voia          181,740    157,532     88,758       73,646     43,899
                   (3%)       (4%)       (2%)         (3%)       (4%)
 Baita-
 Craciunesti   552,715    721,112    164,887      156,963     32,924
                   (9%)      (17%)       (3%)         (6%)       (3%)
 Bolcana       190,170    142,461  1,366,647      166,468     10,974
                   (3%)       (3%)      (24%)         (7%)       (1%)
--------------------------------------------------------------------
             5,970,571  4,257,002  5,678,950    2,462,164  1,097,467
                 (100%)     (100%)     (100%)       (100%)     (100%)
--------------------------------------------------------------------
Greek
mineral
properties
 Stratoni   11,375,542          -          -   11,375,542          -
                   (6%)                               (6%)
 Skouries  110,914,467          -          -  110,914,467          -
                  (57%)                              (57%)
 Olympias   73,517,372          -          -   73,517,372          -
                  (37%)                              (37%)
--------------------------------------------------------------------
           195,807,381          -          -  195,807,381          -
                 (100%)                             (100%)
--------------------------------------------------------------------
Total      201,777,952  4,257,002  5,678,950  198,269,545  1,097,467
--------------------------------------------------------------------

The Company incurred a loss for the year ended 31 December 2004 of $19,182,638 ($0.39 per share), and of $8,133,661 ($0.17 per share) for the three-month period ended 31 December 2004, compared to $2,457,009 ($0.11 per share) and $1,686,866 ($0.08 per share), respectively, for the same periods of 2003.

Before non-cash expenses, the Company incurred a loss for the year ended 31 December 2004 of $7,227,976 ($0.15 per share), and of $2,623,516 ($0.05 per share) for the three-month period ended 31 December 2004, compared to $1,279,216 ($0.06 per share) and $514,637 ($0.03 per share), respectively, for the same periods of 2003.

Generally, this increase in loss can be explained by a significant increase in the Company's investment and exploration activities in 2004 in both Romania and the Company's newly acquired subsidiary in Greece, compared to 2003, as well as by the hiring of new management and technical staff in 2004. In essence, this amounted to a transformation of the Company in 2004.

In particular, the following factors have contributed to the increase in loss (before non-cash expenses) for the three-month period and year ended 31 December 2004, compared to the same periods of 2003:

- In 2004, the Company initiated and completed significant investment activities in Greece and financing at the corporate level, which resulted in the listing of the Company's shares on the AIM Market of the London Stock Exchange, the acquisition of a 65% interest in Hellas Gold and year-end cash balances of $65,252,532 million. To achieve these milestones, new management and technical staff were hired. The Company also accelerated exploration activities in Romania. As a result, the Company's administrative and overhead expenses increased to $1,861,667 for the three-month period ended 31 December 2004, and to $3,939,829 for the year ended 31 December 2004, compared to $207,844 and $559,357, respectively, for the same periods of 2003.

- In 2004, the Company's audit, accounting, legal and other professional fees amounted to $80,021 for the three-month period ended 31 December 2004, and to $1,291,362 for the year ended 31 December 2004, compared to $307,907 and $836,584, respectively, for the same periods of 2003. This increase for the year is mainly due to the increase in the Company's activities mentioned above.

- In March 2004, the Company completed the listing of the its common shares on the AIM Market of the London Stock Exchange for which the Company recorded an expense of $4,152 for the three-month period ended 31 December 2004, and of $559,733 for the year ended 31 December 2004, compared to $Nil for the same periods of 2003.

- The Company recorded an expense of $Nil for the three-month period ended 31 December 2004, and of $455,236 for the year ended 31 December 2004, compared to $Nil and $151,511, respectively, for the same periods of 2003, with respect to the evaluation of new projects.

- The Company recorded a foreign exchange gain of $1,268,408 for the three-month period ended 31 December 2004, and of $510,235 for the year ended 31 December 2004, compared to a gain of $130,581 and $114,574, respectively, for the same periods of 2003. Effective 1 October 2004, the Company changed its functional currency from the Canadian dollar to the United States dollar. The gain was mainly due to the weakening of the United States dollar against the British pound sterling and the euro over the year ended 31 December 2004. The majority of the Company's funds were held in euros and United States dollars.

- In November 2004, the Company completed the acquisition of shares in Hellas Gold, increasing its total interest from 37.97% to 55.70%, and assumed an obligation to subscribe to additional shares in Hellas Gold, resulting in an interest of 65% on a fully-diluted basis. The Acquisition was accounted for as a purchase and the results of operations of Hellas Gold were included in the consolidated statements of loss and deficit from 30 November 2004, the effective date of the Acquisition. Hellas Gold's net operating, general and administrative expenses of $1,768,453 for the period 30 November 2004 to 31 December 2004 was incorporated in the Company's consolidated statement of loss and deficit.

The following non-cash expenses have also contributed to the increase in loss for the three-month period and year ended 31 December 2004, compared to the same periods of 2003:

- In December 2003, the Company raised $15,089,594 (C$19,528,400) by way of a brokered private placement of convertible loan notes, for which the Company recorded a non-cash expense for financing costs of $Nil for the three-month period ended 31 December 2004, and of $1,121,681 for the year ended 31 December 2004, compared to $177,738 for the same periods of 2003.

- In January 2005, the Company decided to relinquish its 80%-owned exploitation licence for the Zlatna perimeter in Romania and a provision of $4,806,048 for the costs relating to the impairment of this property was recorded for the three-month period and year ended 31 December 2004, compared to $Nil for the same periods of 2003.

- During the year ended 31 December 2004, the Company issued the following number of common shares to senior officers under the Company's Milestone Share Compensation Plan: 700,000 in July 2004 and 405,000 in November 2004. As a result, the Company recorded an additional non-cash stock-based compensation expense of $1,048,835 for the three-month period ended 31 December 2004, and of $2,527,006 for the year ended 31 December 2004, compared to $Nil for the same periods of 2003. Milestones for which common shares were issued in the year ended 31 December 2004 include (i) the listing in March 2004 of the Company's common shares on the AIM Market of the London Stock Exchange, (ii) the acquisition in February 2004 of an initial 30% interest in Hellas Gold and related financing, and (iii) the acquisition in November 2004 of an additional 35% interest in Hellas Gold and related financing.

- As a result of the introduction of new accounting standards, the Company recorded a non-cash stock-based compensation expense of $828,111 for the three-month period ended 31 December 2004, and of $3,893,179 for the year ended 31 December 2004, compared to $992,451 for the same periods of 2003. Such increase is consistent with the increase in the number of options granted in the three-month period and year ended 31 December 2004, compared to the same periods of 2003. Option grants in 2004 were made mostly to new management and technical staff hired in the context of the Company's initiatives to grow the business in Greece and accelerate exploration activities in Romania.

In February 2004, the Company acquired an initial 37.97% interest (30% on a fully-diluted basis) in Hellas Gold. From 9 February 2004 to 30 November 2004, the Company's interest in Hellas Gold was accounted for as an equity investment and the Company's share of loss in Hellas Gold was included in the consolidated statements of loss and deficit. The Company's share of the loss in Hellas Gold was a loss of $254,856 for the three-month period ended 31 December 2004, and a loss of $729,579 for the year ended 31 December 2004, compared to $Nil for the same periods of 2003. Hellas Gold's loss for the period from 9 February 2004 to 30 November 2004 includes revenue from the sale of surface concentrates of $Nil for the three-month period ended 31 December 2004, and of $3,118,404 for the year ended 31 December 2004, compared to $Nil for the same periods of 2003.

The Company recorded a credit for income taxes of $531,659 for the three-month period ended 31 December 2004, and of $481,318 for the year ended 31 December 2004, compared to $Nil and $15,989, respectively, for the same periods of 2003. The credit has arisen mainly due to the Company recognising a future tax asset for the losses carried forward in Hellas Gold.

Liquidity and capital resources

As at 31 December 2004, the Company had cash and cash equivalents and short term investments of $65.25 million, compared to $18.10 million as at 31 December 2003, and working capital of $63.48 million, compared to $5.06 million as at 31 December 2003.

The increase in cash and cash equivalents and working capital as at 31 December 2004, compared to the balances as at 31 December 2003, resulted from three private placements described below ($111.57 million), the exercise of warrants and options during the year ended 31 December 2004 ($9.36 million) and $0.5 million in interest earned, partly offset by capital raising costs ($4.60 million), the payment of the cash portion of the acquisition price for a 65% interest in Hellas Gold ($61.71 million), operating losses ($6.20 million) and deferred exploration and development costs ($5.97 million) discussed herein.

In February 2004, the Company raised $18.08 million by way of a non-brokered private placement of 9,458,750 special warrants at a price of C$2.50 per warrant. The warrants were exercised in February 2004 into 9,458,750 common shares of the Company.

In May 2004, the Company completed a non-brokered private placement with Commerzbank A.G. of 5,882,000 common shares at a price of Pounds Sterling 1.70 (C$4.18) per share for total subscription proceeds of Pounds Sterling 10 million ($17.76 million).

In November 2004, the Company raised $75.73 million by way of a brokered private placement of 29,629,630 common shares at a price of Pounds Sterling 1.35 (C$3.07) per share.

During the year ended 31 December 2004, the Company received total proceeds of $7,428,171 through the exercise of 3,918,970 common share warrants at a price of C$2.50 per share, and $1,935,581 through the exercise of 1,350,000 common share options at a weighted average price of C$1.80 per share.

The following table sets forth the Company's contractual obligations including payments due for each of the next five years and thereafter:

Payments due by period

---------------------------------------------------------------------
Contractual            Less than                                After
obligations      Total    1 year    1-3 years     4-5 years   5 years

---------------------------------------------------------------------
Operating
 lease
(London
 office)     1,120,110   186,685      373,370       373,370   186,685
Exploration
 licence
 spending
 commitments
 (Voia,
 Romania)    1,516,900         -    1,516,900             -         -
---------------------------------------------------------------------
Total
 contractual
 obligations 2,637,010   186,685    1,890,270       373,370   186,685
---------------------------------------------------------------------

For the coming year, the Company believes it has adequate funds available to meet its corporate and administrative obligations (estimated at $3,861,794) and its planned expenditures on its mineral properties (estimated at $6,281,876 for Romania and at $13,277,113 for Greece).

Transactions with related parties

As part of the Acquisition described above, the Company acquired from companies owned by Frank Timis or over which he exercised control or direction, an obligation to subscribe for a 21% interest (on a fully-diluted basis) in Hellas Gold for an aggregate subscription price $23.48 million (EUR18 million). Prior to the Acquisition, Frank Timis owned, or exercised control or direction over, approximately 9% of the issued and outstanding common shares of the Company. After completion of the Acquisition and the Placing described above, Frank Timis owned, or exercised control or direction over, approximately 18.9% of the issued and outstanding common shares of the Company.

As part of the Acquisition, the Company acquired a 14% (on a fully-diluted basis) in Hellas Gold from Dimitrios Koutras. Prior to the Acquisition, Dimitrios Koutras owned, or exercised control or direction over, Nil% of the issued and outstanding common shares of the Company. After completion of the Acquisition and the Placing, Dimitrios Koutras owned, or exercised control or direction over, approximately 12.7% of the issued and outstanding common shares of the Company.

The Acquisition was approved by the disinterested shareholders of the Company at a Special Meeting of Shareholders held on 26 November 2004, and was completed following the rules of the TSX Venture Exchange and the AIM Market of the London Stock Exchange.

During the financial year ended 31 December 2004, Hellas Gold recorded expenses of $3,644,605 (2003 - Nil) for management, technical and engineering services received from a related party, Aktor S.A. As at 31 December 2004, Hellas Gold had accounts payable of $1,366,095 (2003 - Nil) to Aktor S.A. These expenses were contracted in the normal course of operations and are recorded at the exchange amount agreed by the parties.

Change in functional and reporting currency

Effective 1 October 2004, the Company changed its functional currency from the Canadian dollar to the United States dollar. In general, this change resulted from a combination of a gradual increase in the operational exposure to the United States dollar and predominantly United States dollar based asset and investment base of the Company and from a gradual increase in the overall proportion of business activities conducted in United States dollars. Concurrent with this change in functional currency, the Company adopted the United States dollar as its reporting currency. In accordance with accounting principles generally accepted in Canada ("Canadian GAAP"), the change was effected by translating all assets and liabilities, at the end of the prior reporting periods, at the existing United States/Canadian dollar foreign exchange spot rate, while income for those periods were translated at the average rate for each period. Equity transactions have been translated at the historical rates, with opening equity on 30 June 2000, restated at the rate of exchange on that date. The resulting net translation adjustment has been credited to the cumulative translation adjustment account in the equity section of the balance sheet.

Significant accounting policies

In this document, unless otherwise indicated, all financial data and discussion is based upon consolidated financial statements prepared on the going concern basis in accordance with Canadian GAAP and reflect the following significant accountant 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 affiliated companies over which the Company has significant influence are accounted for using the equity method. Investments in other businesses are recorded at cost.

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 mineral properties and deferred exploration and development costs. While management believes that these estimates and assumptions are reasonable, actual results could vary significantly.

Mineral properties and 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 capitalised exploration 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 accordingly and the write-down amount charged to operations.

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 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 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.

Financial instruments - The Company's financial instruments consist of cash and cash equivalents, accounts receivable and accounts payable and accrued liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments. The fair values of these financial instruments approximate their carrying values unless otherwise noted.

The Company's operations expose it to significant fluctuations in foreign exchange rates. The Company has monetary assets and liabilities denominated in British pounds sterling, Romanian lei, euros and Canadian dollars, which are, therefore, subject to exchange variations against the reporting currency, the United States dollar. Included in cash and cash equivalents is approximately $38 million denominated in euros.

The Company does not currently have any hedging policies or practices in place.

Share options - The Company operates a share option plan. Effective 1 January 2003, the Company chose to adopt the accounting standard of the Canadian Institute of Chartered Accountants with respect to the accounting for stock-based compensation and adopted the fair value method of accounting for share options granted to directors, officers and employees on a prospective basis whereby the weighted average fair value of options granted is recorded as a compensation expense in the financial statements. Compensation expense on share options granted to non-employees is recorded as an expense at the earlier of the date the options are vested or the performance is complete, using the fair value method. Any consideration paid by directors, officers, employees and consultants on exercise of share options or purchases of shares is credited to share capital.

Asset retirement obligation - Effective 1 January 2004, the Company adopted the CICA Handbook Section 3110 "Asset Retirement Obligations", which established standards for asset retirement obligations and the associated retirement costs related to reclamation and abandonment. The fair value of the liability of an asset retirement obligation is recorded when it is incurred and the corresponding increase to the asset is depreciated over the life of the asset. The liability is increased over time to reflect an accretion element considered in the initial measurement at fair value. At 31 December 2004, the Company had an asset retirement obligation relating to the development of its mineral properties in Greece.

Impairment of long-lived assets - Effective 1 January 2004, the Company adopted the new recommendations of CICA Handbook Section 3063 "Impairment of Long-lived Assets" on a prospective basis. Section 3063 requires that long-lived assets and intangibles to be held and used by the Company be 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. Effective 31 December 2004, the Company decided to relinquish its 80%-owned exploitation license for the Zlatna perimeter in Romania and a provision for the costs of this property has been recorded.

Outstanding share data

The following represents all equity shares outstanding and the number of common shares into which all securities are convertible, exercisable or exchangeable:

Preferred shares:                          Nil

Common shares:                     112,173,708
Common share options:                3,720,000
Common share broker warrants:          415,498
                                   -----------
Common shares (fully-diluted):     116,309,206

Outlook

In Greece, the Company is currently updating the feasibility studies and preparing new business and environmental plans defining the way forward for Hellas Gold's gold and base metal projects of Olympias and Skouries. The Company will also continue to look for new discoveries through focused exploration programmes.

In Romania, work at Certej is now directed towards completing an in-house pre-feasibility study with specific focus on optimising metallurgical recoveries and defining a practical open pit. The Company also continues to look at new satellite targets around the Certej deposit with a view to adding additional incremental ounces. At Cainel, underground channel sampling continues to define the bigger mineralised target covering an area of 200 x 1,000 metres. Aggressive drilling campaigns will be effected during the second half of 2005 to test the Company's geological model and the potential for a major mineralised system.

The Company also intends to continue growing its portfolio by new exploration discoveries and the pursuit of accretive, value enhancing acquisitions in Europe and the Balkans.

Risks and uncertainties

Foreign country risk -Any changes in regulations in Greece and Romania or shifts in political attitudes are beyond the Company's control and may adversely affect its business. Exploration and development of any one or more of the Company's mineral properties may be affected in varying degrees by government regulations or policies with respect to restrictions on future exploitation and production, labour, environmental protection, price controls, royalties, export controls, foreign exchange controls, income taxes, expropriation of property, environmental legislation and mine and/or site safety.

Currently there are no restrictions on the repatriation from Romania and Greece of earnings to foreign entities. However, there can be no assurance that restrictions on repatriation of earnings from Romania and Greece will not be imposed in the future.

Exploration and mining risks - The business of exploring for minerals and mining involves a high degree of risk. Only a small proportion of the properties that are explored are ultimately developed into producing mines.

At present, none of the Company's properties in Romania have proven or probable reserves and the resource and reserve estimates relating to the Company's properties in Greece are historic. Although substantial benefits may be derived from the discovery of a major mineralised deposit, no assurance can be given that minerals will be discovered in sufficient quantities or having sufficient grade to justify commercial operations. The economics of developing gold and other mineral properties is affected by many factors including the cost of operations, variations of the grade of ore mined, fluctuations in the price of gold or other minerals produced, costs of processing equipment and such other factors as government regulations.

The grade of mineralisation ultimately mined may differ from that indicated by drilling results and such differences could be material. There can be no assurance that minerals recovered in small scale laboratory tests will be duplicated in large scale tests under on-site conditions or in production scale operations. Material changes in geological resources, grades, stripping ratios or recovery rates may affect the economic viability of projects.

The Company's operations may be disrupted by a variety of risks and hazards which are beyond the Company's control, including fires, power outages, labour disruptions, flooding, explosions, cave-ins, land slides and the inability to obtain suitable or adequate machinery, equipment or labour and other risks involved in the operation of mines and the conduct of exploration programmes. It is not always possible to fully insure against such risks and hazards as a result of high premiums or other reasons. Should such liabilities arise, they could reduce or eliminate any future profitability and result in increased costs, have a material adverse effect on the Company's results.

Financing risks - Exploration and development of one or more of the Company's properties will be dependent upon the Company's ability to obtain financing through joint ventures, equity or debt financing  or other means, and although the Company has been successful in the past in obtaining financing through the sale of equity securities, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of further exploration and development of the Company's projects with the possible loss of such properties.

Mineral prices - The mineral exploration and development industry in general is intensely competitive and there is no assurance that, even if commercial quantities of proven and probable reserves are discovered, a profitable market may exist for the sale of the same. Factors beyond the Company's control may affect the marketability of any substances discovered. Mineral prices have fluctuated widely, particularly in recent years. Depending on the price of gold or other minerals produced, the Company may determine that it is impractical  to commence or continue commercial production.

Environmental and other regulatory requirements - The Company's activities are subject to environmental regulations promulgated by government agencies from time to time. Environmental legislation generally provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with certain mining industry operations, such as seepage from tailings disposal areas, which would result in environmental pollution. A breach of such legislation may result in imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and their directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the profitability of operations.

The Company's current exploration and development activities require permits from various governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, safety and other matters. Companies engaged in exploration and development activities generally experience increased costs and delays as a result of the need to comply with applicable laws, regulations and permits. There can be no assurance that all permits which the Company may require for exploration and development will be obtainable on reasonable terms or on a timely basis, or that such laws and regulations would not have an adverse effect on any project that the Company may undertake. The Company believes it is in substantial compliance with all material laws and regulations which currently apply to the Company's activities. However, there may be unforeseen environmental liabilities resulting from exploration, development and/or mining activities and these may be costly to remedy.

Amendments to current laws, regulations and permits governing operations and activities of exploration and development companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in expenditures and costs, or require abandonment, or cause delays in developing new mining properties.

Exploration, development, mining and other licences - The Company's exploration, development and mining activities are dependent upon the grant of appropriate licences, concessions, leases, permits and regulatory consents ("Authorisations") which may not be granted or may be withdrawn or made subject to limitations. There can be no assurance that such Authorisations will be renewed following expiry or granted (as the case may be) or as to the terms of such grants or renewals.

Title matters -While the Company has diligently investigated title to all mineral concessions and, to the best of the Company's knowledge, title to all of its properties is in good standing, this should not be construed as a guarantee of title. Title to the properties may be affected by undisclosed and undetected defects.

Dependence on management - The Company's development to date has largely depended and in the future will continue to depend on the efforts of key management. Loss of any of these people could have a material adverse effect on the Company and its business. The Company has not taken out and does not intend to take out key man insurance in respect of any directors, officer or other employees.

Joint ventures - The Company holds, and expect to hold in the future, interests in joint ventures. Joint ventures may involve special risks associated with the possibility that the joint venture partners may (i) have economic or business interests or targets that are inconsistent with ours; (ii) take action contrary to the Company's policies or objectives with respect to their investments, for instance by veto of proposals in respect of joint venture operations; (iii) be unable or unwilling to fulfill their obligations under the joint venture or other agreements; or (iv) experience financial or other difficulties. Any of the foregoing may have a material adverse effect on the Company's results of operations or financial condition. In addition, the termination of certain of these joint venture agreements, if not replaced on similar terms, could have a material adverse effect on the Company's results of operations or financial condition.

European Goldfields Limited (TSX:EGU) (AIM:EGU)