August 10, 2010 / 6:24 AM / 8 years ago

UPDATE 2-European Goldfields posts loss; upbeat on permits

* Stronger euro since Q2 already reversed large part of loss

* Still confident of getting final permits by end of 2010

* Mulls main board listing once permits, financing in place

* Q2 loss $18.3 million vs profit of $1.4 million

* Shares up 0.8 pct, have jumped almost 25 pct this month

(Adds interview with chairman and CFO, analyst comment)

By Julie Crust

LONDON, Aug 10 (Reuters) - European Goldfields EGUq.L said the strengthening of the euro since the end of the second quarter has already reversed a large part a loss it incurred for the period mainly as a result foreign exchange movements.

The company swung to a loss of $18.3 million in the quarter from a profit of $1.4 million for the same period in 2009.

Chief Financial Officer Tim Morgan-Wynne told Reuters that the company expects to remain loss-making this year, but that it may return to a small profit next year depending on the gold price as the Olympias gold concentrate business restarts.

During the first half, the group submitted environmental impact studies for its Greek and Romanian projects. Obtaining these key permits has taken longer than expected.

“We are still confident that we will have the final permits both in Greece and Romania by the end of the year,” Chairman Martyn Konig told Reuters in an interview. “We believe that we are absolutely on track with that.”

Some analysts have been sceptical that the company could reach this year-end target because government ministers in both countries are taking summer holidays.

“We handed the Romanian authorities the EIS (environmental impact study) about a month ago,” Konig said. “With the Greeks, what we did was put the documents on to memory sticks and delivered them to various ministers so they could take them on holiday.”

Shares in the company were up 0.8 percent in London at 0928 GMT, they have jumped almost 25 percent this month after the company said it submitted the environmental permits.

European Goldfields, the fourth-largest firm on the junior Alternative Investment Market, said it would consider moving up to the main board once final permits and financing are in place.

“At that stage we would hope for the re-rating and would then naturally be looking at the main board,” Konig said.

Shares in the company were also lifted this month by Kinross Gold’s (K.TO) plan to buy Red Back Mining RBI.TO to create one of the world’s largest gold miners. [ID:nN02108994]

Ambrian Capital said it sees European Goldfields as either a takeover target within 12 months or a ‘Randgold II’ within three years, referring to FTSE-100 gold miner Randgold Resources (RRS.L).

“We don’t believe at this stage it would be beneficial for us to be looking to do a deal with anyone else,” said Konig. “I have no doubt that we are on the radar screen of somebody.”

European Goldfields EGU.TO, which has working capital of $106 million, is looking at a number of financing alternatives for the development of its Greek projects.

“We don’t need to raise equity and certainly we don’t intend to raise equity at the current share price levels,” Konig said.

The company is looking at a similar project finance facility as for its Certej project in Romania with no forward gold sales.

It is considering various ways of using some of its base metals, similar to Talvivaara’s TALV.L zinc deal with Nyrstar (NYR.BR) in January, as well as long-term offtake agreements for its concentrates. [ID:nLDE60O05W]

Editing by Kate Holton and Hans Peters

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