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European Goldfields (EGU)

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Wednesday 27 April, 2005

European Goldfields

Final Results Part 2

European Goldfields Ltd
27 April 2005


PART 2
                                                       Suite 200 Financial Plaza
                                                              204 Lambert Street
                                                               Whitehorse, Yukon
                                                                  Canada Y1A 3T2




                          European Goldfields Limited

                       Consolidated Financial Statements
                                   (Audited)

                           31 December 2004 and 2003





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 financial statements include some amounts that
are based on management's best estimate using reasonable judgment.

The 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 financial statements have been audited by BDO Dunwoody LLP, Chartered
Accountants, and their report follows.

(s) David Reading                       (s) David Grannell
David Reading                           David Grannell
Chief Executive Officer                 Chief Financial Officer

Auditors' Report to the Shareholders of European Goldfields Limited

We have audited the consolidated balance sheets of European Goldfields Limited
as at 31 December 2004 and 2003 and the consolidated statements of equity, loss
and deficit and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 2004
and 2003 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.

(s) BDO Dunwoody LLP
Chartered Accountants
Toronto, Canada, 23 March 2005


European Goldfields Limited
Consolidated Balance Sheets
As at 31 December 2004 and 2003
(US Dollars)

                                                                    2004         2003
                                                      Note             $            $
Assets

Current assets
Cash and cash equivalents                                     65,252,532   14,997,993
Short-term investments                                                 -    3,090,800
Accounts receivable, prepaid expenses and supplies      11     2,046,945    2,004,190
                                                              ----------   ----------
                                                              67,299,477   20,092,983
                                                              ----------   ----------
Non current assets

Plant and equipment                                      5    13,687,427      486,678
                                                              ----------   ----------
Mineral properties and deferred exploration and
development costs
Romanian mineral properties                              6    26,331,967   25,363,348
Greek mineral properties                                 6   195,807,381            -
                                                              ----------   ----------
                                                             222,139,348   25,363,348
                                                              ----------   ----------
Future tax asset                                        14     1,632,078            -

                                                              ----------   ----------
                                                             304,758,330   45,943,009
                                                              ----------   ----------
Liabilities

Current liabilities
Accounts payable and accrued liabilities                12     3,820,094      711,688
Convertible loan notes                                   8             -   14,323,410
                                                              ----------   ----------
                                                               3,820,094   15,035,098
                                                              ----------   ----------
Non current liabilities
Asset retirement obligation                             13     5,810,999            -
Future tax liability                                    14    47,472,957            -
Non-controlling interest                                      18,035,927            -
                                                              ----------   ----------
                                                              71,319,883            -
                                                              ----------   ----------
Shareholders' equity
Capital stock                                            8   238,419,586   27,302,021
Contributed surplus                                      8     5,588,785    2,374,075
Cumulative translation adjustment                              8,964,420    5,403,615
Deficit                                                      (23,354,438)  (4,171,800)
                                                              ----------   ----------
                                                             229,618,353   30,907,911

                                                              ----------   ----------
                                                             304,758,330   45,943,009
                                                              ----------   ----------
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

Approved by the Board of Directors

(s) David Grannell                          (s) Glenn Featherby
David Grannell                              Glenn Featherby
Director                                    Director


European Goldfields Limited
Consolidated Statements of Loss and Deficit
For the years ended 31 December 2004 and 2003
(US Dollars)

                                                                   2004         2003
                                                      Note            $            $

Other income
Interest income                                                (500,203)    (169,650)

Expenses
Administrative and overhead expenses                          3,939,829      559,357
Audit, accounting, legal and other professional               1,291,362      836,584
fees
AIM listing expense                                             559,733            -
Business development - New project evaluation                   455,236      151,511
Foreign exchange gain                                          (510,235)    (114,574)
Greek operating, general and administrative                   1,768,453            -
expenses
Other expenses
Amortisation                                                     93,220        7,603
Capital raising costs - Convertible loan notes                1,121,681      177,738
Impairment of mineral property                                4,806,048            -
Accretion of asset retirement obligation                13       23,763            -
Milestone share compensation expense                          2,527,006            -
Share option compensation expense                             3,893,179      992,451
                                                             ----------   ----------
                                                             19,469,072    2,441,020

Share of loss in equity investment                              729,579            -

                                                             ----------   ----------
Loss for the year before income tax                          20,198,651    2,441,020

Income taxes                                            14     (481,318)      15,989

                                                             ----------   ----------
Loss for the year after income tax                           19,717,333    2,457,009

Non-controlling interest                                       (534,695)           -

                                                             ----------   ----------
Loss for the year                                            19,182,638    2,457,009

Deficit - Beginning of year                                   4,171,800    1,714,791
                                                             ----------   ----------

Deficit - End of year                                        23,354,438    4,171,800
                                                             ----------   ----------
Loss per share                                           4         0.39         0.11

Weighted average number of shares                            49,245,920   22,021,126




  The accompanying notes are an integral part of these consolidated financial
                                  statements.


European Goldfields Limited
Consolidated Statements of Equity
As at 31 December 2004 and 2003
(US Dollars)

                                     Capital Contributed  Cumulative      Deficit         Total
                                       Stock     Surplus Translation           
                                                             Reserve
                                           $           $           $            $             $
                                  ---------- -----------  ----------   ----------    ----------
Balance - 31 December 2002        27,651,584     304,754    (423,824)  (1,714,791)   25,817,723
                                  ---------- -----------  ----------   ----------    ----------

Share options exercised                5,174           -           -            -         5,174
Share option compensation                  -   1,078,127           -            -     1,078,127
expense
Equity component of conv. loan             -     751,928           -            -       751,928
notes
Capital raising costs - conv.              -     (70,458)          -            -       (70,458)
loan notes
Broker warrants expense                    -     309,724           -            -       309,724
Movement in cumulative                     -           -   5,827,439            -     5,827,439
translation reserve
Share issue costs                   (354,737)          -           -            -      (354,737)
Loss for the period                        -           -           -   (2,457,009)   (2,457,009)
                                  ---------- -----------  ----------   ----------    ----------
                                    (349,563)  2,069,321   5,827,439   (2,457,009)    5,090,188
                                  ---------- -----------  ----------   ----------    ----------

                                  ---------- -----------  ----------   ----------    ----------
Balance - 31 December 2003        27,302,021   2,374,075   5,403,615   (4,171,800)   30,907,911
                                  ---------- -----------  ----------   ----------    ----------

Shares issued on conversion of    14,919,593    (673,029)          -            -    14,246,564
conv. loan
Shares issued from non-brokered   35,846,004           -           -            -    35,846,004
private placements
Shares issued from brokered       75,728,892           -           -            -    75,728,892
private placements
Share options exercised            2,588,210    (652,629)          -            -     1,935,581
Shares issued as consideration    77,425,937           -           -            -    77,425,937
for shares in Hellas Gold S.A.
Warrants exercised                 7,428,171           -           -            -     7,428,171
Milestone shares issued as         1,801,592     725,414           -            -     2,527,006
compensation
Share issue costs                 (4,620,834)          -           -            -    (4,620,834)
Transfer of broker warrant                 -     (78,225)          -            -       (78,225)
related expense to share issue
cost
Share option compensation                  -   3,893,179           -            -     3,893,179
expense
Movement in cumulative                     -           -   3,560,805            -     3,560,805
translation reserve
Loss for the period                        -           -           -   (19,182,638) (19,182,638)
                                  ---------- -----------  ----------   ----------    ----------
                                 211,117,565   3,214,710   3,560,805   (19,182,638) 198,710,442
                                  ---------- -----------  ----------   ----------    ----------

                                  ---------- -----------  ----------   ----------    ----------
Balance - 31 December 2004       238,419,586   5,588,785   8,964,420   (23,354,438) 229,618,353
                                  ---------- -----------  ----------   ----------    ----------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.



European Goldfields Limited
Consolidated Statements of Cash Flows
For the years ended 31 December 2004 and 2003
(US Dollars)

                                                                    2004         2003
                                                      Note             $            $

Cash flows from operating activities
Loss for the year after tax                                  (19,717,333)  (2,457,009)
Amortisation                                                      93,220        7,603
Capital raising costs - Convertible loan notes                 1,121,681       42,796
Share option compensation expense                              3,893,179      992,451
Milestone share compensation expense                           2,527,006            -
Impairment of mineral property                                 4,806,048            -
Accretion of asset retirement obligation                13        23,763            -
Future tax asset recognized                                     (528,234)           -
Loss on disposal of equipment                                      2,291            -
Foreign exchange profit                                         (510,235)
                                                              ----------   ----------
                                                              (8,288,614)  (1,414,159)


Net changes in non-cash working capital                 15     2,093,068   (1,379,225)
                                                              ----------   ----------
                                                              (6,195,546)  (2,793,384)
                                                              ----------   ----------

Cash flows from investing activities
Deferred exploration and development costs -                  (5,970,571)  (4,257,002)
Romania
Acquisition of Hellas Gold assets net of cash                (61,075,119)           -
acquired
Short term investment                                          3,090,800   (3,090,800)
Proceeds from disposal of equipment                               21,989            -
Purchase of equipment                                           (339,004)    (113,819)
                                                              ----------   ----------
                                                             (64,271,905)  (7,461,621)
                                                              ----------   ----------

Cash flows from financing activities
Proceeds from exercise of warrants                             7,428,171            -
Proceeds from brokered private placements                     75,728,892            -
Proceeds from non-brokered private placement                  35,846,004            -
Proceeds from convertible loan notes                                   -   15,089,594
Proceeds from exercise of share options                        1,935,581        5,174
Capital raising costs - Equity portion of convertible                  -      (55,770)
loan notes
Capital raising costs                                         (4,620,834)           -
                                                              ----------   ----------
                                                             116,317,814   15,038,998
                                                              ----------   ----------

Effect of foreign currency translation on cash                 4,404,176    1,828,130
                                                              ----------   ----------

Increase in cash and cash equivalents                         50,254,539    6,612,123

Cash and cash equivalents - Beginning of year                 14,997,993    8,385,870
                                                              ----------   ----------

Cash and cash equivalents - End of year                       65,252,532   14,997,993
                                                              ----------   ----------

  The accompanying notes are an integral part of these consolidated financial
                                  statements.



European Goldfields Limited
Notes to Consolidated Financial Statements
For the years ended 31 December 2004 and 2003
(US Dollars)

1.  Nature of operations

European Goldfields Limited (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. ('Deva
Gold') and a 100% interest in European Goldfields (Romania) SRL ('EG Romania'),
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.

The underlying value of the mineral properties and deferred exploration and
development costs is dependent upon the existence and economic recovery of
reserves in the future, and the ability to raise long-term financing to complete
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.

These consolidated financial statements have been prepared on a going concern
basis, 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.

2.  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.

3.  Business combination - Acquisition of a controlling interest in Hellas Gold

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 €18
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 £1.75 (C$3.98) per share. This was
accounted for at a price per share of £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 £40 million ($75.73 million)
(before expenses) by the issue of 29,629,630 common shares at a price of £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 £1.70 (C$4.18) per share were issued, for total subscription proceeds of £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 9 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.

A summary of the fair value of net assets acquired and consideration given is as
follows:

                                                                              $
Cash and short term investments                                      14,269,621
Net current assets                                                      935,987
Land                                                                  4,022,859
Mines, farms and forest                                               3,993,627
Other assets                                                          5,102,072
Asset retirement obligation                                          (5,787,236)
Future tax assets                                                     1,103,844
Mineral properties                                                  195,807,381
Future tax liabilities                                              (47,472,957)
Non-controlling interest                                            (18,570,622)
                                                                    -----------
                                                                    153,404,576
                                                                    -----------
Purchase consideration
Cash paid                                                            71,982,824
Shares issued (30,423,280 common shares)                             77,425,937
Transaction costs                                                     3,995,815
                                                                    -----------
Purchase price                                                      153,404,576
                                                                    -----------

4.  Significant accounting policies

These consolidated financial statements have been prepared on the going concern
basis in accordance with Canadian GAAP and 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 affiliated
companies over which the Company has significant influence are accounted for
using the equity method. Investments in other businesses are recorded at cost.

These consolidated financial statements include the accounts of the Company and
the following subsidiaries:

Company                                  Country of           Ownership
                                      incorporation

European Goldfields (Services)              England          100% owned
Limited
European Goldfields (Romania) SRL           Romania          100% owned
Deva Gold (Barbados) Ltd.                  Barbados          100% owned
Castle Europa Ltd.                         Barbados          100% owned
Deva Gold S.A.                              Romania           80% owned
European Goldfields Mining              Netherlands          100% owned
(Netherlands) B.V.
European Goldfields (Greece) B.V.       Netherlands          100% owned
Global Mineral Resources Limited           Barbados          100% owned
Global Mineral Resources Holdings        Luxembourg          100% owned
S.a.r.l.
Global Mineral Resources S.a.r.l.        Luxembourg          100% owned
Hellas Gold S.A.                             Greece           65% owned

The 20% minority interest held in the Company's 80% owned subsidiary, Deva Gold,
is not accounted for in these consolidated financial statements. The basis for
this treatment is that 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.

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.

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.

Plant and equipment

Plant and equipment are recorded at cost less accumulated amortisation.
Amortisation is calculated on a straight-line basis based on a useful life of
three years for office equipment, six years for vehicles, ten years for
leasehold improvements, at rates varying between three and five years for
exploration equipment and at rates varying between four and 20 years for
buildings. Amortisation for equipment used for exploration and development are
capitalised to mineral properties.

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.

Loss per share ('LPS')

LPS is calculated based on the weighted average number of common shares issued
and outstanding during 2004 being 49,245,920 (2003 - 22,021,126). Diluted per
share amounts are calculated using the treasury stock method whereby proceeds
deemed to be received on the exercise of options and warrants in the per share
calculation are applied to reacquire common shares. The effect of potential
issuances of shares under options and warrants would be anti-dilutive, and
accordingly basic and diluted loss per share are the same.

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, which is described in Note 9.
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.

Cash and cash equivalents

Cash and cash equivalents include cash and deposits with three months or less to
maturity.

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.

5.  Plant and equipment

                           Exploration /  Vehicles        Land and       Leasehold        Total
                                  office                 buildings    improvements   
                               equipment                                         
                                       $         $               $               $            $
Cost - 2003

At 31 December 2002              224,045   343,115               -               -      567,160

Additions                         79,481    15,119               -               -       94,600
Disposals                              -         -               -               -            -
Currency translation              48,842    74,800               -               -      123,642
adjustment
                                 -------   -------         -------         -------      -------
At 31 December 2003              352,368   433,034               -               -      785,402
                                 -------   -------         -------         -------      -------

Accumulated amortisation -
2003

At 31 December 2002               69,634    77,220               -               -      146,854

Provision for the year            85,922    37,481               -               -      123,403
Currency translation              15,180    13,287               -               -       28,467
adjustment
                                 -------   -------         -------         -------      -------
At 31 December 2003              170,736   127,988               -               -      298,724
                                 -------   -------         -------         -------      -------

                                 -------   -------         -------         -------      -------
Net book value at 31             181,632   305,046               -               -      486,678
December 2003
                                 -------   -------         -------         -------      -------

Cost - 2004

At 31 December 2003              352,368   433,034               -               -      785,402

Additions                      1,274,384   781,803      11,378,532         218,816   13,653,535
Disposals                        (27,423)        -               -               -      (27,423)
Currency translation              11,376     9,256               -               -       20,632
adjustment
Transfer to mineral             (221,519) (102,750)              -               -     (324,269)
property
                                 -------   -------         -------         -------      -------
At 31 December 2004            1,389,186  1,121,343     11,378,532         218,816   14,107,877
                                 -------   -------         -------         -------      -------

Accumulated amortisation -
2004

At 31 December 2003              170,736    127,988              -               -      298,724

Provision for the year           137,397     84,799         15,769          10,841      248,806
Disposals                         (3,143)         -              -               -       (3,143)
Currency translation               4,486      2,647              -               -        7,133
adjustment
Transfer to mineral             (177,414)    46,344              -               -     (131,070)
property
                                 -------   -------         -------         -------      -------
At 31 December 2004              132,062    261,778         15,769          10,841      420,450
                                 -------   -------         -------         -------      -------

                                 -------   -------         -------         -------      -------
Net book value at 31           1,257,124    859,565     11,362,763         207,975   13,687,427
December 2004
                                 -------   -------         -------         -------      -------

6.  Mineral properties and deferred exploration and development costs

Romanian mineral properties:

                           Certej      Zlatna     Bolcana Baita-Craciunesti      Voia        Total
                                $           $           $                 $         $            $

                       ----------   ---------   ---------         ---------   -------   ----------
Balance - 31 December  11,772,931   2,690,008   1,611,719         1,057,317    88,758   17,220,733
2002
                       ----------   ---------   ---------         ---------   -------   ----------

Drilling and              665,062     129,280       6,212           200,424    14,464    1,015,442
assaying
Geosciences and tech.     420,837     229,364      16,907            91,672    30,332      789,112
consulting
Samplers, miners and      306,388     203,898      53,752           169,229    11,737      745,004
surveying
Project management        301,215     191,133      23,313            87,495    34,553      637,709
Project overhead          538,005     250,245      33,264           182,566    71,957    1,076,037
Amortisation               92,031      13,147      13,147            13,147         -      131,472
Currency adjustment     2,566,516     586,426     345,089           230,459    19,349    3,747,839
                       ----------   ---------   ---------         ---------   -------   ----------
                        4,890,054   1,603,493     491,684           974,992   182,392    8,142,615
                       ----------   ---------   ---------         ---------   -------   ----------
Balance - 31 December  16,662,985   4,293,501   2,103,403         2,032,309   271,150   25,363,348
2003
                       ----------   ---------   ---------         ---------   -------   ----------

Drilling and            2,323,291     211,403      35,602           278,576     6,457    2,855,329
assaying
Geosciences and tech.     458,131      47,995      20,084            44,806    34,055      605,071
consulting
Samplers, miners and      121,544      26,119       5,187            24,035     9,230      186,115
surveying
Project management        204,780      33,251      23,520            38,493    24,699      324,743
Project overhead          696,028      65,434      14,219            80,106   100,201      955,988
Amortisation              108,224      15,461      15,461            15,461     2,108      156,715
Currency adjustment       455,884     112,884      61,706            53,108     7,124      690,706
Impairment of mineral           -  (4,806,048)          -                 -         -   (4,806,048)
property
                       ----------   ---------   ---------         ---------   -------   ----------
                        4,367,882  (4,293,501)    175,779           534,585   183,874      968,619
                       ----------   ---------   ---------         ---------   -------   ----------
Balance - 31 December  21,030,867           -   2,279,182         2,566,894   455,024   26,331,967
2004
                       ----------   ---------   ---------         ---------   -------   ----------

As at 31 December 2004, the Company's 80%-owned subsidiary, Deva Gold, held four
mineral resource properties in Romania. Exploitation licences have been issued
to Deva Gold as titleholder for the Certej, Zlatna and Bolcana projects. An
exploration licence has been issued to Deva Gold as titleholder for the
Baita-Craciunesti project. Minvest S.A. (a Romanian state owned mining company),
together with three private Romanian companies, holds a 20% interest in Deva
Gold and the Company holds the pre-emptive right to acquire such 20% interest.
The Company's wholly-owned subsidiary, European Goldfields (Romania) SRL, holds
the Voia exploration licence.

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.

In January 2005, the Company's wholly-owned subsidiary, European Goldfields
(Romania) SRL, has been awarded by The National Agency for Mineral Resources in
Romania (NAMR) an exploration license for the Cainel perimeter located in the
historic gold producing area of the 'Golden Quadrilateral' area of Romania. The
licence is for an initial term of three years, renewable for an additional term
of three years under certain conditions. The licence covers an area of 31.3 km2
and lies only 10 km to the northwest of the Company's 80%-owned Certej deposit.
Concurrently, the Company decided to relinquish its 80%-owned exploitation
licence for the Zlatna perimeter in Romania and a provision for the costs in
this property has been recorded. This will allow the Company to concentrate its
exploration and pre-feasibility activities to the more contiguous Certej and
Cainel perimeters.

Individual property spending commitments for the Certej, Zlatna, Bolcana and
Baita-Craciunesti licences have been met as at 31 December 2004 and 2003.

Greek mineral properties:
                                Stratoni      Skouries       Olympias         Total
                                       $             $              $             $

Acquisition cost              11,375,542    73,517,372    110,914,467   195,807,381
                              ----------    ----------    -----------   -----------
Balance - 31 December 2004    11,375,542    73,517,372    110,914,467   195,807,381
                              ----------    ----------    -----------   -----------

As at 31 December 2004, the Company held a 65% interest (on a fully diluted
basis) in 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.

Greek State Contract

On 12 December 2003, Hellas Gold entered into a contract with the Greek State
(the 'Greek State Contract') pursuant to which Hellas Gold acquired the assets
referred to in the preceding paragraph (the 'Greek Assets'). The Greek State
Contract was ratified by Greek parliament on 8 January 2004 and passed into law
on 28 January 2004. The purchase price paid by Hellas Gold to the Greek State
for the Greek Assets was €11 million ($15 million) in cash. Under the Greek
State Contract, among other things:

a) Hellas Gold must prepare an investment plan for development of the Greek
Assets and construction/operation of a gold processing plant on or before 28
January 2006 and the Greek Government must review the investment plan within two
months of its submission and issue necessary licences and approvals within ten
months;

b) Hellas Gold must commence preparatory work in respect of the Madem Lakkos and
Mavres Petres mines in order to allow recommencement of production activities
within a reasonable period of time;

c) Hellas Gold must take all required actions and procedures to protect the
environment as directed by the Minister of Development for Greece, including the
adoption of measures for water re-treatment;

d) Hellas Gold does not have any environmental liabilities arising before the
date of ratification of the Greek State Contract;

e) all licences and approvals which were issued by an administrative or other
government authority and which expire before 31 December 2006 were automatically
extended to 31 December 2006;

f) if Hellas Gold is evicted from any of the transferred property, no claim can
be made by Hellas Gold in order to reduce the purchase price; and

g) if either party breaches the terms of the Greek State Contract, the
non-defaulting party may terminate the contract and, on termination, all assets
are to be returned to the Greek Government and the purchase price repaid without
interest. The non-defaulting party may be entitled to compensation for damages
resulting from the termination.

7.  Transactions with related parties

As part of the Acquisition described in Note 3, 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 (€18 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 in Note
3, 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% interest (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.

8.  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 of        Amount
                                                             Shares             $
                                                         ----------    ----------
Balance - 31 December 2002                               22,016,126    27,651,584
                                                         ----------    ----------

Share options exercised                                       5,000         5,174
Share issue costs                                                 -      (354,737)
                                                         ----------    ----------
                                                              5,000      (349,563)
                                                         ----------    ----------

                                                         ----------    ----------
Balance - 31 December 2003                               22,021,126    27,302,021
                                                         ----------    ----------

Shares issued on conversion of convertible loan notes     8,309,947    14,919,593
(a)
Shares issued from non-brokered private placement (b)     9,458,750    18,079,386
Shares issued from non-brokered private placement (c)     5,882,000    17,766,618
Shares issued from brokered private placement (d)        29,629,630    75,728,892
Shares issued as consideration for shares in Hellas      30,423,280    77,425,937
Gold S.A. (e)
Milestone shares issued as compensation (f)                 755,000     1,801,592
Share options exercised                                   1,350,000     2,588,210
Warrants exercised                                        3,918,975     7,428,171
Share issue costs                                                 -    (4,620,834)
                                                         ----------    ----------
                                                         89,727,582   211,117,565
                                                         ----------    ----------

                                                         ----------    ----------
Balance - 31 December 2004                              111,748,708   238,419,586
                                                         ----------    ----------

a)         In December 2003, the Company raised $14.92 million by way of a
brokered private placement of convertible loan notes. Following the completion
of certain transactions (the 'Conversion Events'), the convertible loan notes
were automatically converted in March 2004 into 8,309,947 common shares of the
Company at a price of C$2.35 per share. The convertible loan notes were
non-interest bearing unless the Conversion Events did not occur by 31 March 2004
or certain other events of default occurred, in which case they would have born
interest at a rate of 18% per annum thereafter. The present value of interest
forgone, amounting to $751,928, attributable to the convertibility features of
the convertible loan notes has been credited to contributed surplus.

b)         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.

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

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

e)         In November 2004, the Company issued 30,423,280 common shares at a
price of £1.75 (C$3.98) per share in partial payment ($95.83 million) of the
purchased price paid by the Company for the acquisition of a controlling
interest in Hellas Gold. This was accounted for at a price per share of £1.38
(C$3.14) amounting to $77.43 million, representing the then fair market value of
such shares.

f)           During the financial year ended 31 December 2004, the Company
issued a total of 755,000 common shares to senior officers of the Company under
its Milestone Share Compensation Plan, 250,000 of which at a deemed price of
C$2.71 per share, 100,000 at a deemed price of C$3.36 per share and 405,000 at a
deemed price of £1.35 (C$3.07) per share. Furthermore, in July 2004, the Company
undertook to issue in March 2005 an additional 350,000 commons shares at a
deemed price of C$2.71 per share to a senior officer of the Company under its
Milestone Share Compensation Plan. Such shares were issued on 17 March 2005.

g)         As at 31 December 2004, the Company had 35,038,764 common shares held
in escrow or in respect of which trading restrictions applied.

Contributed surplus:
                                                             2004        2003
                                                                $           $
Share option compensation expense                       5,010,946   1,078,127
Equity component of convertible loan notes                      -     751,928
Capital raising costs - Convertible loan notes                  -     (70,458)
Broker warrants                                           577,839     614,478
                                                        ---------   ---------
                                                        5,588,785   2,374,075
                                                        ---------   ---------

9.  Share options and milestone shares

Share Option Plan

The Company operates a Share Option Plan (together with its predecessor, the
'Share Option Plan') authorising the directors to grant options 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.

As at 31 December 2004, outstanding share options were as follows:

                                                     Number of     Exercise
                                                       options        price
                                                                         C$
Expiry date
2005                                                    15,000         1.40
2005                                                   200,000         2.50
2005                                                   500,000         2.80
2006                                                   211,000         1.40
2006                                                    64,000         2.50
2007                                                   300,000         2.50
2008                                                   175,000         2.20
2009                                                 1,025,000         2.80
2009                                                   265,000         3.20
2009                                                   275,000         4.20
2009                                                   625,000         3.07
2009                                                   360,000         3.15
                                                     ---------    ---------
                                                     4,015,000         2.85
                                                     ---------    ---------

During the financial year ended 31 December 2004, share options were granted,
exercised and cancelled as follows:

                                                         Number of     Weighted
                                                           options      average
                                                                       exercise
                                                                          price
                                                                             C$
                                                         ---------    ---------
Balance - 31 December 2002                               1,895,000         1.90
                                                         ---------    ---------

Options granted -2003                                      800,000         2.10
Options exercised - 2003                                    (5,000)        1.40

                                                         ---------    ---------
Balance - 31 December 2003                               2,690,000         1.96
                                                         ---------    ---------

Options granted - 2004                                   3,260,000         3.05
Options exercised - 2004                                (1,350,000)        1.80
Options cancelled - 2004                                  (585,000)        2.31

                                                         ---------    ---------
Balance - 31 December 2004                               4,015,000         2.85
                                                         ---------    ---------

As at 31 December 2004, options to purchase 4,015,000 common share were
outstanding (of which 3,377,500 are fully vested and have a weighted average
exercise price of C$2.81 per share), representing 3.6% of the Company's issued
and outstanding common shares. Outstanding options have a weighted average
exercise price of C$2.85 per share.

On 9 March 2004, the Company granted 1,225,000 fully vested share options to
directors and 485,000 share options (of which 50% vest in November 2004 and 50%
in August 2005) to employees and consultants, all of which are exercisable at
C$2.80 per common share. 185,000 of such share options have since been
cancelled.

On 6 May 2004, the Company granted 250,000 fully vested share options to a
director and 50,000 share options (of which 50% vest in February 2005 and 50% in
November 2005) to employees, all of which are exercisable at C$4.20 per common
share. 25,000 of such share options have since been cancelled.

On 16 June 2004, the Company granted 240,000 fully vested share options and
25,000 options (50% of which vest in March 2005 and 50% in December 2005) to
employees, all of which are exercisable at C$3.20 per common share.

On 11 November 2004, the Company granted 500,000 fully vested share options to a
director and 125,000 options (50% of which vest in August 2005 and 50% in May
2006) to employees, all of which are exercisable at C$3.07 per common share.

On 7 December 2004, the Company granted 300,000 fully vested share options to
employees and 60,000 options to a consultant (50% of which vest in September
2005 and 50% in June 2006), all of which are exercisable at C$3.15 per common
share.

The weighted average grant-date fair value of the 3,260,000 share options
granted during 2004 (2003 - 800,000) was C$3.05 (2003 - C$2.10). A compensation
cost of $4,858,052 (2003 - $992,451) has been recognised in the income statement
for these share options.

The fair value of the options granted has been estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions:
weighted average risk free interest rate of 2.3% (2003 - 4.3%); volatility
factor of the expected market price of the Company's shares of 62.84% (2003 -
93.4%); and a weighted average expected life of the options of 4 to 5 years
(2003 - 5 years).

Milestone Share Compensation Plan

The Company operates a Milestone Share Compensation Plan (the 'Milestone Share
Compensation Plan') authorising the directors, based on recommendations received
from the Compensation Committee, to issue common shares of the Company to
executive officers of the Company and its subsidiaries to recognise out of the
out of the ordinary performance in achieving corporate milestones set by the
Board of Directors. The maximum number of common shares of the Company that may
be reserved for issuance under the Milestone Share Compensation Plan shall not
exceed 1,108,970 common shares. As at 31 December 2004, a total 1,105,000 common
shares have been issued or reserved for issuance to executive officers of the
Company under the Milestone Share Compensation Plan, at a weighted average
deemed issue price of C$2.90 per share.

10. Warrants

As at 31 December 2004, the following common share purchase warrants were
outstanding:

                                            Expiry date   Numbers of   Exercise
                                                            warrants      price
                                                                             C$

Broker warrants                           12 June 2005      415,498        2.35

During the financial years ended 31 December 2004 and 2003, warrants were
granted, exercised and expired as follows:

                                                         Number of    Weighted
                                                          warrants     average
                                                                      exercise
                                                                         price
                                                                            C$
                                                         ---------   ---------
Balance - 31 December 2002                               4,240,000        2.50
                                                         ---------   ---------

Warrants granted - 2003                                    415,498        2.35

                                                         ---------   ---------
Balance - 31 December 2003                               4,655,498        2.49
                                                         ---------   ---------

Warrants exercised - 2004                               (3,918,970)       2.50
Warrants expired - 2004                                   (321,030)       2.50

                                                         ---------   ---------
Balance - 31 December 2004                                 415,498        2.35
                                                         ---------   ---------

As part of the compensation related to the December 2003 brokered private
placement of convertible loan notes, the agents received 415,498 broker warrants
at an exercise price of C$2.35 for a period of eighteen months. The fair value
of the 415,498 broker warrants has been estimated using a Black-Scholes pricing
model resulting in an amount of $309,724. Of this amount $293,998 has been
debited to deferred financing costs and $15,726 has been debited to contributed
surplus as capital raising costs - convertible loan notes. The following
assumptions were used in the Black-Scholes pricing model: weighted average risk
free interest rate of 4.3%; volatility factor of the expected market price of
the Company's stock of 93.4%; and an expected life of the warrants of eighteen
months.

11. Accounts receivable, prepaid expenses and supplies

This balance comprises the following:

                                                             2004        2003
                                                                $           $
Taxes recoverable                                       1,099,920      63,053
Prepaid expenses                                          203,978     474,480
Deferred financing costs - Convertible loan notes               -   1,150,415
Exploration supplies                                       17,955      25,630
Accounts receivable                                       700,599     270,356
Interest receivable                                        24,493      20,256
                                                        ---------   ---------
                                                        2,046,945   2,004,190
                                                        ---------   ---------

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 2004 was 30 days (2003 - 30 days).

13. Asset retirement obligation

Management has estimated the total future asset retirement obligation based on
the Company's net ownership interest in the Olympias, Skouries and Stratoni
mines and facilities. This includes all estimated costs to dismantle, remove,
reclaim and abandon the facilities and the estimated time period during which
these costs will be incurred in the future. The following table reconciles the
asset retirement obligations for the financial years 2004 and 2003:

                                                              2004         2003
                                                                 $            $
Asset retirement obligation - Beginning of year                  -            -
Obligation acquired                                      5,787,236            -
Accretion expense                                           23,763            -
                                                         ---------    ---------
Asset retirement obligation - End of year                5,810,999            -
                                                         ---------    ---------

The undiscounted amount of estimated cash flows required to settle the
obligation is $16.85 million. The estimated cash flow has been discounted using
a credit adjusted risk free rate of 5.04%. The expected period until settlement
is 22 years.

14. 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 loss and deficit:

                                                              2004         2003
                                                                 $            $
Income tax rate                                              37.12%       36.62%
Income taxes at statutory rates                         (7,333,415)    (894,215)
Capital raising costs                                     (503,122)    (302,673)
Tax rate difference from foreign jurisdictions             491,141       10,728
Permanent differences                                    3,347,696      392,826
Change in tax rate                                         (39,939)      80,613
Currency translation adjustment                           (143,780)           -
Change in valuation allowance                            3,667,134      712,721
Large corporations tax                                      32,967       15,989
                                                         ---------    ---------
                                                          (481,318)      15,989
                                                         ---------    ---------

The following table reflects future income tax assets:
                                                              2004         2003
                                                                 $            $
Loss carry forwards                                      6,637,212    1,337,825
Plant and equipment                                          4,532        4,707
Valuation allowance                                     (5,009,666)  (1,342,532)
                                                         ---------    ---------
Future income tax recognised                             1,632,078            -
                                                         ---------    ---------

The following table reflects future income tax liabilities:
                                                              2004         2003
                                                                 $            $
                                                         ---------    ---------
Mineral property                                        47,472,957            -
                                                         ---------    ---------

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.

The Company has available tax losses for income tax purposes of approximately
$17,736,148 (2003 - $3,703,860) which may be carried forward to reduce taxable
income derived in future years. The non-capital losses will expire as follows:

                                                                            2004
                                                                               $
2007                                                                     125,906
2008                                                                     370,233
2009                                                                   5,602,122
2010                                                                   1,862,203
2014                                                                   7,123,422
Non expiring losses                                                    2,652,262
                                                                      ----------
                                                                      17,736,148
                                                                      ----------
In addition, the Company incurred share issue costs and other deductible
temporary differences, which have not yet been claimed for income tax purposes,
totalling approximately $1,632,414 (2003 - $1,434,904). Subject to certain
restrictions, exploration and development expenditures available to reduce
taxable income in Romania is $25,641,261 (2003 - $21,615,509)
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.

15. Supplementary cash flow information
                                                              2004        2003
                                                                 $           $
Changes in non-cash operating accounts:
Accounts receivable, prepaid expenses and supplies      (1,032,083) (1,427,086)
Accounts payable                                         3,125,151      47,861
                                                         ---------   ---------
                                                         2,093,068  (1,379,225)
                                                         ---------   ---------

Supplemental cash flow information:
Income taxes paid                                           46,916      15,989

Supplemental disclosure of non-cash transactions:
Options issued for non-cash consideration                4,585,052     999,420
Exercise of options - Transfer from contributed surplus   (652,629)          -
to share capital
Broker warrants issued for non-cash consideration                -     309,724

16. Segmented information

The Company has one operating segment: the acquisition, exploration and
development of precious and base metal mineral resources properties located in
Greece and Romania.

Geographic segmentation of plant and equipment and deferred exploration and
development costs and operating liabilities is as follows:
                                                                2004         2003
                                                                   $            $
Plant and equipment and deferred exploration and
development costs
Canada                                                             -       13,367
Greece                                                   208,873,486            -
Romania                                                   26,543,586   25,836,659
United Kingdom                                               409,703            -
                                                         -----------   ----------
                                                         235,826,775   25,850,026
                                                         -----------   ----------
Operating liabilities
Canada                                                       387,490      361,189
Greece                                                     1,952,667            -
Romania                                                      285,947            -
United Kingdom                                             1,193,963      350,499
                                                         -----------   ----------
                                                           3,820,094      711,688
                                                         -----------   ----------

17. Reconciliation to International Accounting Standards ('IAS')

These financial statements have been prepared in accordance with Canadian GAAP.
The effect of the differences between Canadian GAAP and IAS on the Company's
consolidated balance sheets and statements of equity is summarised as follows:

                                                               2004        2003
                                                                  $           $
Non current liabilities
Non current liabilities under Canadian GAAP              71,319,883           -
Adjustment for non-controlling interest                 (18,035,927)          -
                                                        -----------  ----------
Non current liabilities under IAS                        53,283,956           -
                                                        -----------  ----------

This would result in the following disclosure under IAS:

Shareholders' equity                                    229,618,353  30,907,911
Non-controlling interest                                 18,035,927           -
                                                        -----------  ----------
                                                        247,654,280  30,907,911
                                                        -----------  ----------

During the financial year ended 31 December 2004, the Company changed its
reporting currency from the Canadian dollar to the United States dollar. In
accordance with Canadian GAAP, the change was effected retrospectively, with
assets and liabilities translated at the end of the prior reporting periods (see
Note 2). Under IAS, a change in reporting currency is treated prospectively with
assets and liabilities translated at the rate prevailing at the date of change
in the functional currency. The impact of this difference on the balance sheets
of the prior periods has not been reported.

Other than the differences noted above, management considers that there are no
material differences between amounts reported under Canadian GAAP and those that
would result from the application of IAS.

18. Commitments

As at 31 December 2004, the Company had remaining spending commitments of
$1,516,900 (2003 - $1,700,900) over the remaining term of its Voia exploration
licence in Romania which expires in March 2007.

The Company has spending commitments of £97,440 ($186,685) 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 on 20 April 2004. The rent will
be reviewed on the fifth anniversary of the commencement of the term to reflect
any increase in rents in the market.




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