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European Goldfields (EGU)

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Monday 17 May, 2004

European Goldfields

Final Results

European Goldfields Ltd
17 May 2004

Immediate Release
                                                           17 May 2004

                          European Goldfields Limited

       Audited financial statements for the year ended 31 December 2003.


European Goldfields is a resource company involved in the acquisition,
exploration and development of gold, silver and base metal properties. The
Company's primary focus is to develop its projects in Romania and Greece.

Formed in 2000, its principal interests lie across 195.3km2 of Romania's 'Golden
Quadrilateral'-Europe's largest historic gold province. Work is primarily being
conducted within the Certej concession covering approximately 40.51km2. European
Goldfields shares a basis of 80-20 interest with Romania's mining company

In early 2004 the Company acquired a 38% interest in Hellas Gold S.A. which will
be subsequently diluted to 30%.  Hellas Gold S.A. owns the Kassandra Mines
assets in northern Greece. The 314km2 property hosts the Skouries gold-copper
and Olympias poly-metallic deposits. The development of Kassandra mine is being
undertaken with, among others, Aktor S.A., Greece's largest construction and
infrastructure development company.  One of its principals, Dimitrios Koutras,
is a shareholder of Hellas Gold S.A.

This year with a new, experienced team and a fresh focus the Company aims to
develop its primary assets, continue to grow through strategic acquisitions and
seek prospective new targets.


Dear Shareholder

In 2003 European Goldfield's management faced adversity head-on. The Company's
principal exploration work in Romania was completely revised and required some
difficult management decisions. These changes culminated in the revamping of
management at the Senior Officer and Board level.

During the course of the latter part of 2003, new management refocused
exploration work on the Eastern zone of its Certej project with a view to
redefining the viability of the project. Technical reports were carried out and
despite no definite resolutions, management continues to investigate the
potential of the Certej deposit. While further work in the coming months of 2004
will enable management to undertake a final production decision, management will
review its options and revisit other properties of interest in the Golden
Quadrilateral. Management regards its presence in Romania as an intricate
component of its Balkan success.

The Company, through its wholly-owned subsidiary, European Goldfields (Greece)
B.V. ('EG Greece'), entered into a shareholders agreement with Dimitris Koutras
('DK') , Greek Mines S.A. ('GM')  and Global Mineral Resources S.a.r.l. ('GMR')
to acquire a 38% interest in Hellas Gold S.A. ('Hellas Gold') which interest
will be diluted to 30% on the completion of subscription by GMR. Hellas Gold
entered into a contract with the Greek state to purchase the Kassandra Mines
assets (the 'Project Assets') formerly owned by TVX Hellas S.A. The Project
Assets were transferred to the Greek state under the terms of an extrajudicial
settlement contract between the Greek state, TVX Hellas S.A. and TVX Gold Inc.
The Hellas State Contract was ratified by Greek parliament on January 8, 2004
and passed into law on gazetting on January 28, 2004. Under the Hellas State
Contract, Hellas Gold does not have any liability for financial obligations
arising from the operation of the Kassandra Mines, environmental damages or
damages to third parties which occurred prior to gazetting of the Hellas State
Contract. Hellas Gold is obligated within 24 months from gazetting of the Hellas
State Contract, to prepare an investment plan for development of the Kassandra
Mines and construction/operation of a gold processing plant and to commence
preparatory work in respect of the Mademm Lakkos and Mavres Petres mines in
order to allow recommencement of production activities within three months. If
either party fails to perform its obligations, the party which is not in breach
may terminate the Hellas State Contract in which case Hellas Gold will return
the Project Assets to the Greek state and the Greek state will return the €11
million purchase price to Hellas Gold without interest. The non-defaulting party
may be entitled to compensation for damages resulting from the termination.

EG Greece and/or GMR will provide mining expertise and know-how and facilitate
non-recourse third party financing for the Project Assets.  DK and/or GM will be
responsible for local Greek issues affecting Hellas Gold such as dealing with
the Greek state, ministries or other authorities, labour issues, local
environmental issues and approvals and obtaining licences required in connection
with the Project Assets.  GM will also provide engineering and construction
expertise and know-how and facilitate the provision of construction services for
development of the Project Assets.  Aktor S.A. will be the contractor for all
civil engineering and construction work required for development of the Project
Assets, subject to competitive pricing.  Aktor S.A. is a publicly-held company
listed on the Athens Stock Exchange. Dimitris Koutras is the President and
General Director-Executive member of Aktor S.A.

New Management, New Focus

Having moved our operational base to London's west end in November 2002 we are
now in a stronger position both geographically within Europe and strategically
in a bid to expand our shareholder base.

I was appointed to head European Goldfields as President and CEO late in 2003 in
the hope of breathing new life into the Company. It is my inherent goal to begin
reshaping this Company by managing current resources but also by seeking and
exploring possible new assets and investments.

The year 2003 witnessed rapid management changes in European Goldfields
culminating in a full company structural overhaul by the opening months of 2004.

In May, one of the Company's original founders Mr. V. Frank Timis resigned as
Chairman, CEO, President and Director of the Company in order to devote more
time to other business interests. I was appointed as President, Executive
Director and then CEO of the Company in November and December respectively.

In July Mr. David Grannell, a partner in a London based chartered accountant
firm with direct experience in assisting resource companies list on the London
Alternative Investment Market (AIM), was appointed Chief Financial Officer,
replacing Ms Eileen Carr.

A change to the Board of Directors ensued in November. Our newly built team was
strengthened with the appointment of Mr. Glenn Featherby. Mr. Featherby brings
over 20 years experience in corporate advisory work and is currently Finance
Director of Regal Petroleum plc, listed on the London AIM. In February, 2004 the
Hon. Robert Kaplan joined the Board. The Hon. Robert Kaplan's vast experience
includes directorships in companies listed on the New York, London, Toronto and
other stock exchanges, a 25-year career in elective politics and posts as
solicitor general of Canada and Hon. Consul of the republic of Kazakhstan for

We have also begun recruiting an extended specialized technical team to assist
with exploring, evaluating and developing current and potential resources. John
Raisbeck recently appointed as Chief Executive Operating Officer heads up our
highly experienced technical team consisting of a senior geologist, senior
mining engineer, senior metallurgist and senior project manager.

I believe this new management team will prove invaluable as the Company moves
towards strengthening its European presence in 2004.

Focused Financing

With the completion of a CAD$19.5 million private placement in December 2003 and
CAD$23.6 million non-brokered private placement in January 2004 the Company
purchased a 38% interest (to be diluted to 30%) in Hellas Gold S.A at a
subscription price of €18 million and adequately capitalized the Company.

The Company's stock price showed significant appreciation during the period from
November, 2003 to March, 2004. The stock price rose from CAD$1.80 to over CAD$3.
  The market capitalization tripled in the same period from approximately CAD$40
million to over CAD$130 million. The Company's current cash position is
sufficient to fund our share of work to be conducted in implementing the
programs for our Greek assets and our planned Romanian development and
exploration plans for the coming year.

Prospects - 2004

We have expanded our shareholder base by obtaining the admission to trading of
the Company's shares on AIM and will seek further market exposure by making
application to list the Company's shares on the TSX with a view to continue to
enhance the Company's visibility.

I thank you, my fellow shareholders, for your support over the first months of
my tenure and promise to honour my commitment to lead the Company into this new
era of growth for our Company.

We look forward to the coming year with confidence in our current development
plans for our projects in Romania and Greece as well as our ability to discover
new golden prospects waiting in other areas of Europe.

Ed Baer
President and CEO


In 2004 European Goldfields will use CAD$5 million to fund continued exploration
and technical or metallurgical studies of our principal targets.

In Romania the Company aims to:

Commence an Initial Scoping Study

•    The initial scoping study will require a site visit by team members, and
     include detailed review of the geological and mining reports with site
     personnel. It will provide initial mining costs (stripping ratio and pit
     optimization), resource grade and a preliminary resource size. This study 
     will require cross sections and longitudinal sections to be prepared by 
     European Goldfields' site personnel.

•    The Deva concentrator and other local facilities will be investigated to
     determine suitability for conducting the crushing of a metallurgical bulk
     sample. The concentrator will also be audited to determine process 
     requirements in treating Certej ore and produce suitable concentrates.

•    Conceptual designs will be developed for the process plant for two or three
     of the most likely process options as a basis for preparing 
     order-of-magnitude capital and operating cost estimates.

•    A simple financial model will be developed so that different ore grades and
     treatment options can be evaluated to give a target for the sampling and
     testwork activities.

•    The results of this initial scoping study will enable a 'Go or No Go'
     decision to be made about further project development.

Carry Out a Bulk Sampling Program

•    General areas of likely sampling will be identified in order to prepare
     safe working and sampling areas. The areas to be made safe will focus on 
     the open pit (stabilizing the benches), several underground galleries and 
     selected surface areas. This will include ensuring that suitable ground 
     support and proper ventilation is set up underground.

Devise a Schedule of Proposed Activities

•    A detailed review of available information at Certej will be conducted with
     site geologists in order to pinpoint suitable sample collection sites. This
     information review will complement the initial scoping review. Information 
     which will be reviewed includes pit cross sections and longitudinal 
     sections, underground openings (with assays) and the various rock types of 
     the Coranda open pit.

•    Sampling locations will be located.

•     Sample preparation equipment will be set up. This activity will involve
     the transport vehicles, conveyors, samplers and crushing equipment.

•    Metallurgical sample will be prepared by a qualified person.

Conduct Metallurgical Testwork

•    A portion of the bulk metallurgical sample will be shipped to a laboratory
     facility and prepared for metallurgical testwork.

•    The testwork program will be defined at this time.

•    Based on preliminary discussions with SGS Lakefield Research Centre
     (Lakefield), this activity has been staggered over 5 months. This long test
     period is primarily due to the length of time required to conduct 
     Geobiotics Testwork.

•    Throughout this period, an ongoing review will consider the 'Go-No Go'
     decision. If the testwork is progressing in a manner which does not 
     encourage a successful outcome, an end to the testwork program will be 

Review with a Final Scoping Study

The final scoping study will incorporate a review of the results of the updated
mining and geological models, as well as the metallurgical testwork. A site
visit will be made by various specialists.

The result of the final scoping study will involve a comparison of the different
process options to determine whether any of them are worthy of more detailed
evaluation at the final feasibility study level.

In Greece the Company aims to:

  • Produce a full due diligence report on all assets under the Hellas Gold
    S.A. state contract to permit a re-estimation of current resources.
  • Review and update feasibility studies conducted by previous owners to
    prioritise exploration targets and commence mining operations.
  • Prepare investment plan for development at Kassandra mines.

Internally it will be a year of growth for the new structure of the Company as

  • Aim to expand our shareholder base in support of our Q1AIM listing and
    making application to list on the TSX in Q2.

  • Build upon new management infrastructure by hiring senior level management
    and strengthen our board of directors.
  • Entertain growth opportunities in The Balkans and other areas of interest.


Business & Objectives

European Goldfields is a resource company involved in the acquisition,
exploration and development of mineral properties in Greece, Romania and the

Results of Operations

During the year ending December 31, 2003, the Company continued its aggressive
regional exploration programs in Romania resulting in deferred exploration
expenditures of $5,530,297 for the twelve month period ending December 31, 2003
versus $8,829,983 for the twelve month period ending December 31, 2002. This
included $211,005 on the newly acquired 100% owned Voia concession. The Certej
licence area incurred approximately 40% of the total resource property

Drilling and assaying accounted for 23% of the total exploration expenditure in
2003 (2002, 32%) with 11,172 metres of reverse circulation drilling and 860
metres of diamond drilling undertaken in the year 2003. The main diamond
drilling programs were located at the Coranda and Sacaramb deposits in the
Certej concession and the Valea Tisei project in the Zlatna concession.

At $964,157 sampling, mining and surveying accounted for 17% of the exploration
costs in 2003 (2002, 21%). A total of 5205 metres of underground and 6131 metres
of surface channel sampling were completed during the year with the focus being
the Certej, Baita and Bolcana concession. A total of 1349 samples and 1414 soil
samples were taken in the Certej and Voia concessions.

Project overheads of $1,392,567 (2002 - $1,454,913), include costs relating to
the Company's support offices located in Deva, Certej, Zlatna and Bucharest and
are located to each concession in proportion to total expenditure on each area.

The results of operations are summarized in the following tables:

                                                              Year ending 2003      Year ending 2002
                                                                             $                     $
Income Statement
Loss                                                                 3,431,383             1,797,018
Loss per share                                                            0.16                  0.09
Balance Sheet
Working Capital                                                      6,544,948            12,918,762
Total Assets                                                        59,485,286            41,798,205
Statement of Cash Flows
Investments in exploration and development                         (5,530,297)           (8,829,983)
Proceeds from Stock Issues                                          19,463,225            17,192,398
Year end Cash and Cash Equivalents                                  19,409,354            13,218,589

For the year ended December 31, 2003, the Company had a loss of $3,431,383 or
$0.16 per share compared to a loss of $1,797,018 or $0.09 per share in the
comparative year 2002.

Liquidity and Capital Resources

As at December 31, 2003, European Goldfields had working capital of $6,544,948
million. On December 23, 2003, the Company completed a private placement to
European and US institutional investors of convertible loan notes in the
aggregate principal amount of $19,528,400. The proceeds of this private
placement funded, in part, the acquisition by the Company's wholly owned
subsidiary, European Goldfields (Greece) Limited ('EG Greece'), of 30% of the
issued shares of Hellas Gold S.A. and exploration work at the Company's Romanian

2004 Outlook

During 2004, the Company intends to continue to grow its portfolio of assets by
investigating projects of interests within its area of strategic focus of
operations. As well, in 2004, the Company will define work programs for its
Greek assets in partnership with its local partner and complete an intensive
technical study of its Romanian based Certej project.

For Further Information:

IR/Media Contact:

Ed Baer
London Office:     +44 (0)20 7763-7118        e-mail:[email protected]
London Mobile:    +44 (0)77 4681-5902         website:

Buchanan Communications                       +44 (0)20 7466 5000
Tim Thompson / Catherine Miles

European Goldfields Limited

DECEMBER 31, 2003 AND 2002
 DOCPROPERTY 'FiguresCurrency'
Management's Responsibility for Financial Reporting

The accompanying consolidated financial statements of the Company have been
prepared by management in accordance with accounting principles generally
accepted in Canada and contain estimates based on management's judgment.
Management maintains an appropriate system of internal controls to provide
reasonable assurance that transactions are authorized, assets safeguarded and
proper records are maintained.

The Audit Committee of the Board of Directors has met with the Company's
independent 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
for approval.

The Company's independent auditors, BDO Dunwoody LLP, are appointed by the
shareholders to conduct an audit in accordance with generally accepted auditing
standards in Canada and their report follows.

David Grannell                 Ed Baer
Chief Financial Officer        President and CEO

April 16, 2004

Auditors' Report

To the Shareholders of European Goldfields Limited

We have audited the consolidated balance sheets of European Goldfields Limited
as at December 31, 2003 and 2002 and the consolidated statements of 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 December 31, 2003
and 2002 and the results of its operations and its cash flows for the years then
ended in accordance with Canadian generally accepted accounting principles.

BDO Dunwoody LLP
Chartered Accountants
Toronto, Canada
March 18, 2004

European Goldfields Ltd
Consolidated Balance Sheets
As at December 31, 2003 and 2002
                                                                                           2003             2002
Assets                                                                    Note                $                $

Current assets
Cash and cash equivalents                                                            19,409,354       13,218,589
Short-term investments                                                       4        4,000,000                -
Accounts receivable, prepaid expenses and supplies                          10        2,591,094          746,570
                                                                                     26,000,448       13,965,159

Capital assets                                                               3          629,790          688,172

Mineral properties and deferred exploration costs                            5       32,855,048       27,144,874
                                                                                     59,485,286       41,798,205

Current liabilities
Accounts payable and accrued liabilities                                    11          918,668        1,046,397
Convertible loan notes                                                      12       18,536,832                -
                                                                                     19,455,500        1,046,397

Shareholders' Equity

Capital stock                                                                7       42,840,058       42,833,058
Contributed surplus                                                          7        3,169,918          467,557
Deficit                                                                             (5,980,190)      (2,548,807)
                                                                                     40,029,786       40,751,808
                                                                                     59,485,286       41,798,205

The accompanying notes are an integral part of these consolidated financial

Approved by the Board of Directors

Glenn Featherby                       Hon Robert Kaplan
Non-Executive Director                Non-Executive Director

April 16, 2004

European Goldfields Ltd
Consolidated Statements of Loss and Deficit
For the years ended December 31, 2003 and 2002

                                                                                              2003            2002

                                                                            Note                 $               $

General and administrative expenses

Administrative and overhead costs                                                        2,377,973         419,125
Audit, accounting, legal and other professional fees                                     1,169,138         853,360
Financing costs - convertible loan notes                                                   248,137               -
Foreign exchange gain                                                                    (159,955)        (11,799)
Interest income                                                                          (236,846)       (311,567)
Management fee                                                                 6                 -         843,732
Amortization                                                                                10,614           4,167

Loss for the year before income tax                                                      3,409,061       1,797,018

Income taxes                                                                  13            22,322               -

Loss for the year                                                                        3,431,383       1,797,018

Deficit - Beginning of year                                                              2,548,807         751,789

Deficit - End of year                                                                    5,980,190       2,548,807

Loss per share                                                                                0.16            0.09

The accompanying notes are an integral part of these consolidated financial

European Goldfields Ltd
Consolidated Statements of Cash Flows
For the years ended December 31, 2003 and 2002

                                                                    Note  2003                  2002
                                                                          $                     $
Cash flows from operating activities
Loss for the year                                                                   (3,431,383)      (1,797,018)
Amortization                                                                             10,614            4,167
Financing costs - convertible loan notes                                                 55,385                -
Stock compensation expense                                                            1,385,543                -
Net changes in non-cash working capital                              14             (1,639,943)          328,848
                                                                                    (3,619,784)      (1,464,003)

Cash flows from investing activities
Exploration expenditures                                                            (5,530,297)      (8,829,983)
Short term investment                                                               (4,000,000)                -
Purchase of capital assets                                                            (122,379)        (383,599)
                                                                                    (9,652,676)      (9,213,582)

Cash flows from financing activities
Proceeds from private placements                                                              -       16,828,398
Proceeds from stock options                                                               7,000          364,000
Financing costs - equity portion of convertible loan notes                             (72,175)                -
Proceeds from convertible loan notes                                                 19,528,400                -
                                                                                     19,463,225       17,192,398

Increase in cash and cash equivalents                                                 6,190,765        6,514,813

Cash and cash equivalents - Beginning of year                                        13,218,589        6,703,776

Cash and cash equivalents - End of year                                              19,409,354       13,218,589

The accompanying notes are an integral part of these consolidated financial

European Goldfields Ltd
Notes to Consolidated Financial Statements
For the years ended December 31, 2003 and 2002

1.       Nature of operations

European Goldfields Ltd. (the 'Company') is in the process of exploring several
mineral properties in Romania and has not yet determined whether those
properties contain economic reserves.  The underlying value of the mineral
properties is dependent upon the existence and economic recovery of such
reserves, confirmation of the Company's interest in the underlying mineral
claims, the ability to raise long-term financing to complete the development of
the properties and upon future profitable production or, alternatively upon the
Company's ability to dispose of its interest on an advantageous basis, all of
which are uncertain.

The Company believes it has adequate funds available to meet its corporate and
administrative obligations for the coming year and its planned expenditures on
its mineral properties.

These consolidated financial statements have been prepared on an ongoing concern
basis, which assumes the Company will be able to realize 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.       Significant accounting policies

These consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada and reflect the following
significant accounting policies:

Basis of consolidation

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

Deva Gold (Barbados) Ltd.                                                                              100% owned
Castle Europa Ltd.                                                                                     100% owned
Deva Gold S.A. ('Deva')                                                                                 80% owned
European Goldfields Mining (Netherlands) B.V.                                                          100% owned
European Goldfields (Romania) S.R.L.                                                                   100% owned

The 20% minority interest held in the Company's 80% owned subsidiary, Deva, is
not accounted for in the consolidated accounts of the Company.  The basis for
this treatment is that the Company is required to fund 100% of all expenditures
related to the exploration and development of these properties.  The Company
also holds a preferential right to all funding plus interest from future cash
flows prior to the shareholders dividends.

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 costs.  While management believes that these
estimates and assumptions are reasonable, actual results could vary

Income Taxes

Income taxes are calculated using the asset and liability method of tax
accounting.  Under this method, current income taxes are recognized 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.

Capital assets

Capital assets are recorded at cost less accumulated amortization.  Amortization
is calculated on a straight-line basis based on a useful life of three years for
office equipment, six years for vehicles and at rates varying between three and
five years for field equipment.  Amortization for capital assets used for
exploration and development are capitalized to mineral properties, deferred
exploration and development costs.

Mineral properties and deferred exploration and development costs

Acquisition costs of resource properties, together with direct exploration and
development expenses incurred thereon, are deferred and capitalized.  Upon
reaching commercial production, these capitalized costs are transferred from
exploration properties to producing properties on the consolidated balance
sheets and are amortized 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 capitalized
exploration costs will not be recovered such as would be indicated where:

Producing properties:

•    the carrying amounts of the capitalized 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

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 capitalized.

During 2002, the Company adopted retroactively a new accounting standard issued
by the Canadian Institute of Chartered Accountants ('CICA') in respect of
foreign currency translation that eliminates the deferral and amortization of
currency translation adjustments related to long-term monetary items with a
fixed and ascertainable life.  There was no impact on the Company's results of
operations or financial position as a result of adoption of this new standard.

Loss per share (LPS)

LPS is calculated based on the weighted average number of common shares issued
and outstanding during the year being 22,017,633 (2002 - 22,016,126).  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 LPS are the same.

Financial Instruments

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 the 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
Romanian Lei, Euro, United States dollars and Australian dollars, which are,
therefore, subject to exchange variations against the reporting currency, the
Canadian dollar.

Stock Options

The Company has one stock option plan, which is described in Note 10.  During
the year the Company adopted the fair value method of accounting for stock
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 stock
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 stock 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

3.     Capital Assets
                                                                                            2003             2002

                                                                                               $                $
Vehicles                                                                                 560,417          540,850
Field/Office equipment                                                                   455,972          353,160
                                                                                       1,016,389          894,010

Less:  Accumulated amortization                                                          386,599          205,838

                                                                                         629,790          688,172

4.       Short term investments

The cash deposit earns interest at a rate of 2.6% and matures on October 1,

5.       Mineral properties and deferred exploration costs
                                      Certej      Zlatna      Bolcana     Baita-Craciunesti   Voia      Total
                                                $           $           $                   $         $           $
Balance - December 31, 2001            14,923,283   1,476,907     386,306           1,406,732            18,193,228

Drilling and assaying                     995,122     826,433     989,313              61,501             2,872,369
Geosciences and technical consulting      591,014     371,066     231,715              17,298             1,211,093
Samplers, miners and surveying            806,508     539,333     458,353              30,494    11,127   1,845,815
Project management                        556,456     550,648     117,921              98,536   122,234   1,445,795
Project overhead                          600,040     463,688     344,771              39,867     6,547   1,454,913
Amortization                               85,164      12,166      12,166              12,165               121,661
                                        3,634,304   2,763,334   2,154,239             259,861   139,908   8,951,646
Balance - December 31, 2002            18,557,587   4,240,241   2,540,545           1,666,593   139,908  27,144,874

Drilling and assaying                     860,698     167,308       8,039             259,381    18,719   1,314,145
Geosciences and technical consulting      544,632     296,835      21,880             118,639    39,255   1,021,241
Samplers, miners and surveying            396,517     263,877      69,563             219,010    15,190     964,157
Project management                        412,439     247,357      30,170             113,232    44,718     847,916
Project overhead                          696,501     323,968      43,064             235,911    93,123   1,392,567
Amortization                              119,103      17,015      17,015              17,015               170,148
                                        3,029,890   1,316,360     189,731             963,188   211,005   5,710,175
Balance - December 31, 2003            21,587,477   5,556,601   2,730,276           2,629,781   350,913  32,855,048

Romanian mineral properties

The Company's 80% owned subsidiary, Deva Gold S.A. ('Deva'), presently holds
100% interests in four mineral resource properties in Romania.  Exploitation
licenses have been issued to Deva as titleholder for the Certej, Zlatna and
Bolcana projects.  An exploration license has been issued to Deva as titleholder
for the Baita-Craciunesti project. Minvest S.A., together with three private
Romanian companies, hold a 20% interest in Deva and the Company holds the
pre-emptive right to acquire such 20% interest.

The Company is required to fund 100% of all expenditure related to the
exploration and development of these properties.  The Company holds a
preferential right to recover all funding plus interest from future cash flows
prior to the shareholders receiving dividends.

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

The Company's 100% owned subsidiary, European Goldfields (Romania) SRL, holds a
100% interest in the Voia exploration license.  The license was granted in March
2002.  The Company has spending commitments of US$1,700,900 over the initial
five year term of the license.

6.       Related party transactions

During the year, the Company recorded expenses of $ Nil (2002 - $585,882) for
management services received from a related party, Gabriel Resources Ltd. ('
Gabriel'), and at year-end had accounts payable of $ Nil (2002 - $122,772) to
Gabriel.  During the year, the related party relationship ceased to exist as the
major shareholder resigned as chairman of Gabriel.

During the year, Deva recorded expenses associated with their exploration
activities in Romania of $Nil (2002 - $571,072) from a related party, Rosia
Montana Gold Corporation S.A. ('RMGC'), a subsidiary of Gabriel. During the
year, Deva received $Nil (2002 - $86,932) from RMGC and at year-end had an
accounts receivable from RMGC of $2,192 (2002 - $16,905) and an accounts payable
to RMGC of $16,516 (2002 - $14,699) for cost reimbursement related to their
exploration activities in Romania.

These related party transactions were in the normal course of operations and are
recorded at the exchange amount agreed to by the parties.

7.       Capital stock


     Unlimited number of common shares
     Unlimited number of preferred shares, issuable in series

Issued and outstanding                                                               Number of         Amount
                                                                                     shares            $
Common shares

Balance - December 31, 2001                                                            17,741,126      26,108,218

Shares issued in accordance with Corporate Reorganization (a)                              15,000
Stock options exercised                                                                   260,000         364,000
Shares issued from Private Placement (b)                                                4,000,000      18,000,000
Share issue costs                                                                                     (1,639,160)
Balance - December 31, 2002                                                            22,016,126      42,833,058

Stock options exercised                                                                     5,000           7,000
Balance - December 31, 2003                                                            22,021,126      42,840,058

a)   As a condition of the Corporate Reorganization, on June 13, 2000, the
     Company and Gabriel have entered into an agreement which provides that 
     holders of common share purchase warrants in Gabriel immediately prior to 
     the reorganization, would be entitled to receive 1/10th of a common share 
     of the Company on the exercise of each such warrant.  The proceeds from the 
     exercise of such warrants will remain solely with Gabriel.  As at December 
     31, 2002, the commitment to issue shares under this agreement had expired.

b)   On May 31, 2002, the Company completed a brokered private placement of
     4,000,000 units at $4.50 per unit for gross proceeds to the Company of
     $18,000,000.  Each unit consists of one common share and one common share
     purchase warrant.  Each warrant is exercisable into one common share at an
     exercise price of $5.50 for a period of one year.  The agents were paid a 
     cash commission of 6% of the gross proceeds and 240,000 warrants to 
     purchase common shares at an exercise price of $4.50 for a period of one 
     year from date of issue.  During the year these share purchase warrants and 
     broker's warrants were re-priced to $2.50 and their period to expiry 
     extended by one year.

Contributed Surplus

                                                                                         2003                2002
                                                                                            $                   $
Stock option compensation                                                           1,395,272                   -
Equity component of convertible loan notes                                            991,568                   -
Financing costs - convertible loan notes                                             (92,913)                   -
Broker's warrants                                                                     875,991             467,557
                                                                                    3,169,918             467,557

8.       Stock Options

The plan allows that the Directors are authorized to grant stock options, which
enable the directors, officers, consultants and employees to acquire common

As at December 31, 2003, fully vested and exercisable common share stock options
held by directors and employees are as follows:

                                                                    Number of options          Exercise price
Expiry date
2006                                                                        1,026,000                    1.40
2006                                                                          214,000                    2.50
2007                                                                          650,000                    2.50
2008                                                                           50,000                    2.04
2008                                                                          500,000                    2.05
2008                                                                          250,000                    2.20
                                                                            2,690,000                    1.96

During the year ended December 31, 2002 and 2003, stock options were issued,
exercised and expired as follows:

                                                                 Number of Stock Options     Weighted Average
                                                                                               Exercise Price

Balance - December 31, 2001                                                    1,505,000                 1.56

Options granted - 2002                                                           650,000                 2.50
Options exercised - 2002                                                       (260,000)                 1.40

Balance - December 31, 2002                                                    1,895,000                 1.90

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

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

The weighted average grant-date fair value of 800,000 stock options granted to
employees, directors and officers during 2003 was $1,227,150.  A compensation
cost has been recognized in the income statement for these stock options.

During the year 864,000 options previously granted to employees, directors and
officers with exercise prices ranging from $3.00 to $4.08 were re-priced to an
exercise price of $2.50.  The fair value of the incremental increase in value
resulting from the re-pricing amounted to $168,122.  A compensation cost of
$158,393 was recognized in the income statement for these options and $9,729 was
capitalized to deferred exploration costs.  The weighted average exercise price
of the options issued prior to December 31, 2002 has been adjusted for the
effect of the re-pricing.

The weighted average grant-date fair value of 650,000 stock options granted to
employees, directors and officers during 2002 was $1,691,040.  No compensation
cost was recognized in the income statement for these stock options.  Had the
fair value of these options been expensed, the loss for the 2002 year would be
$3,357,978 and the loss per share would be $0.17. In addition, an amount of
$130,080 would have been capitalized to mineral properties and deferred
exploration costs.

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 4% (2002 - 4.3%); volatility factor
of the expected market price of the Company's stock of 93.4% (2002 - 93.4%); and
a weighted average expected life of the options of 4 to 5 years (2002 - 5

9.       Warrants

As at December 31, 2003, the following common share purchase and broker warrants
were outstanding:

                                                  Expiry Date           Number of Warrants  Exercise Price $

Share purchase warrants                          May 31, 2004               3,445,000           2.50
Share purchase warrants                         June 21, 2004                 555,000           2.50
Broker warrants                                  May 31, 2004                 206,700           2.50
Broker warrants                                 June 21, 2004                  33,300           2.50
Broker warrants                                 June 12, 2005                 415,498           2.35

                                                                            4,655,498           2.49

During the years ended December 31, 2002 and 2003, warrants were issued,
exercised and expired as follows:

                                                                     Number of Stock      Weighted Average
                                                                     Warrants             Exercise Price $
Balance - December 31, 2001                                          -                    -

Warrants granted - 2002                                              4,240,000            2.50

Balance - December 31, 2002                                          4,240,000            2.50

Warrants granted - 2003                                              415,498              2.35

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

As part of the compensation related to the May 31, 2002 brokered private
placement (Note 7(b)), the agents received 240,000 broker warrants at an
exercise price of $4.50 for a period of one year.  The fair value of the 240,000
broker warrants has been estimated using a Black-Scholes pricing model with the
following assumptions: weighted average risk free interest rate of 4.3%;
volatility factor of the expected market price of the Company's stock of 95%;
and an expected life of one year resulting in $467,557 recorded as share issue
costs.  During the year these warrants together with the share purchase warrants
were re-priced to $2.50 and the date of expiry was extended by one year.

As part of the compensation related to the December 12, 2003 brokered private
placement of convertible loan notes, the agents received 415,498 broker warrants
at an exercise price of $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 $408,434.  Of this amount $387,696 has been
debited to deferred financing costs and $20,738 has been debited to contributed
surplus as financing 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 eighteen months.

10.       Accounts receivable, prepaid expenses and supplies

This balance is comprised of the following:

                                                                                           2003              2002
                                                                                              $                 $
Taxes recoverable                                                                        80,095           365,468
Prepaid expenses                                                                        611,781           146,507
Deferred financing costs - convertible loan notes                                     1,488,825                 -
Exploration supplies                                                                     33,098            42,894
Accounts receivable                                                                     349,688           104,693
Interest receivable                                                                      27,607            87,008
                                                                                      2,591,094           746,570

11.    Accounts payable and accrued liabilities

The balance comprises amounts outstanding for normal operations and ongoing
costs. The average credit period taken in 2003 and 2002 was 30 days.

12.    Convertible loan notes

The convertible loan notes ('the Convertible Notes') become due and payable on
March 31, 2004 ('the Maturity Date') unless prior to such date, the Company
completed the acquisition of the mineral exploration and mining assets in Greece
and admits its common shares to trading on the AIM (together, 'the Conversion
Events').  On admission to AIM, the Convertible Notes are automatically
converted into common shares in the Company at a price of $2.35 per share. The
holders of the Convertible Notes are also entitled to convert their Convertible
Notes at any time prior to the maturity Date into common shares in the Company
and may extend the Maturity Date at their option. The Convertible Notes are
non-interest bearing unless the Conversion Events do not occur by the Maturity
Date or certain other events of default occur, in which case they bear interest
at a rate of 18% per annum thereafter (See Note 17).   The Convertible Notes and
any common shares issued on conversion of the Convertible Notes cannot be traded
through the facilities of the TSXV or otherwise in Canada or to or for the
benefit of a Canadian resident until April 12, 2004 without the consent of the
TSXV and compliance with all applicable securities legislation. The present
value of the interest foregone, amounting to $991,568, attributable to the
convertibility features of the Convertible Notes has been credited to
contributed surplus. (See Note 7).

13.    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 operations:

                                                                               2003                2002
                                                                                  $                   $

Income tax rate                                                               36.62%                39%
Income taxes at statutory rates                                          (1,248,399)          (700,837)
Financing costs                                                            (422,557)          (456,924)
Adjustments for foreign subsidiaries                                         14,977             29,204
Change in valuation allowance                                               995,019          1,107,122
Change in tax rate                                                          112,542             21,435
Large corporations tax                                                       22,322                  -
Non-deductible stock compensation expense                                   548,418                  -

                                                                             22,322                  -

The following table reflects future income tax assets:

                                                                              2003                2002
                                                                                 $                   $

Loss carry forwards                                                      1,731,365           1,038,971
Share issue and financing costs                                            664,768             365,797
Capital assets                                                               6,091               2,437
Valuation allowance                                                     (2,402,224)         (1,407,205)

Future income tax recognized                                                                    -               -

The Company has available tax losses for Canadian income tax purposes of
approximately $4,793,400 (2002 - $2,550,000) which may be carried forward to
reduce taxable income derived in future years. A summary of these losses is
provided below:

Non-capital losses expiring in:                                                       $
2007                                                                                  151,600
2008                                                                                  446,000
2009                                                                                1,953,000
2010                                                                                2,242,800

In addition, the Company incurred share issue costs and other deductible
temporary differences, which have not yet been claimed for income tax purposes,
totaling approximately $1,857,000 (2002 - $944,000).

The potential income tax benefits of these carry-forward non-capital losses and
deductible temporary differences have been allowed for in the consolidated
financial statements as the realization thereof is not considered more likely
than not.

14.    Supplementary cash flow information

                                                                                    2003            2002
                                                                                       $               $
Changes in non-cash operating accounts:
Accounts receivable, prepaid expenses and supplies                           (1,512,214)        (50,809)
Accounts payable                                                               (127,729)        379,657

                                                                             (1,639,943)        328,848

Supplemental cash flow information:
Income taxes paid                                                                22,322               -

Supplemental disclosure of non-cash transactions:
Options issued for non-cash consideration                                     1,395,272               -
Brokers warrants issued for non-cash consideration                              408,434         467,557

15.    Segmented information

The Company has one operating segment: the acquisition, exploration and
development of precious metal projects located principally in Romania.

Geographic segmentation of capital assets and deferred exploration costs is as

                                                                                    2003            2002
                                                                                       $               $

Romania                                                                       33,467,539      27,826,796
Canada                                                                            17,299           6,250

                                                                              33,484,838      27,833,046

16.   Commitments

The Company entered into an agreement with Baden Ventures Limited on August 20,
2003 .Under the agreement the Company contracted consultancy services of Baden
Ventures Limited.  The Company is required to pay fees of US$2.5 Million upon
the achievement of agreed milestones.

17.     Post balance sheet events

     (a)  Hellas Gold S.A.

          In February 2004, the Group acquired 38% of the issued share capital 
          in Hellas Gold S.A., a joint venture company established for the
          purposes of acquiring the Stratoni, Olympias and Skouries mines in 
          Chalkidiki, Greece from the Greek government. Hellas Gold S.A. 
          completed the acquisition of these interests on January 28, 2004. The 
          38% shareholding will be subsequently diluted to 30% on completion of 
          subscriptions by all parties to the transaction.

          Payment in respect of the subscription for the Group's interest in 
          Hellas Gold S.A. was made, in part, out of the proceeds of a private
          placement by the Company of convertible loan notes of a principal 
          amount of approximately $19.5 million.

          In February 2004, the Company issued a further $23.6 million by way of 
          a non-brokered private placing of 9,458,750 special warrants at a 
          price of $2.50 per special warrant.  The special warrants were 
          exercised, effective as of February 12, 2004 convertible into one 
          common share in the Company.   The subscription proceeds were used to 
          part fund the subscription by the Group of its interest in Hellas Gold 

     (b)  Conditional allotment and issue of common shares.
          On March 9, 2004, as consideration for the achievement of milestones 
          related to a private placements of over US$30,000,000, the admission 
          to AIM market of the London Stock Exchange and the completion of the
          Greek Acquisition, the Company agreed to issue 350,000 common shares 
          to the Company's president and 250,000 common shares to the Company's 
          chief financial officer at a deemed consideration of $2.71 per share.   
          The issue is subject to acceptance by the TSX Venture Exchange and the 
          AIM market of the London Stock Exchange and to shareholder approval.

     (c)  Grant of Stock Options
          On March 9, 2004, the Company granted 1,225,000 fully vested stock 
          options to directors and 485,000 stock options (of which 50% vest in 
          November 2004 and 50% in August 2005) to employees and consultants; 
          all are exercisable at $2.80 per common share and expire five years 
          from the date granted.

                      This information is provided by RNS
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