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2020-08-06

EURO Ressources reports earnings for the second quarter and six months ended June 30, 2020

 NEWS RELEASEParis: EUR

EURO RESSOURCES REPORTS EARNINGS FOR THE
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 2020

Paris, France, August 6, 2020:  EURO Ressources S.A. (“EURO” or “the Company”) (Paris: EUR) today announced its unaudited statutory interim financial results prepared in accordance with French Generally Accepted Accounting Principles (“GAAP”) and its unaudited condensed interim financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) for the six months ended June 30, 2020. These unaudited interim financial statements were approved by the Board of Directors on August 6, 2020. All financial amounts are expressed in Euros (“€” or “euros”) unless otherwise specified.

Highlights

Under French GAAP, EURO reported a net profit of €8.5 million (€0.137 per share) for the six months ended June 30, 2020 (€3.5 million for the second quarter of 2020 (€0.055 per share)) compared to €8.3 million (€0.132 per share) for the six months ended June 30, 2019 (€3.7 million for the second quarter of 2019 (€0.059 per share)).  

Under IFRS, EURO reported a net profit of €8.3 million (€0.132 per share) for the six months ended June 30, 2020 (€3.3 million for the second quarter of 2020 (€0.053 per share)) compared to €8.2 million (€0.131 per share) for the six months ended June 30, 2019 (€4.7 million for the second quarter of 2019 (€0.074 per share)). 

EURO recorded revenues of €12.5 million in the first six months of 2020 (€5.2 million in the second quarter of 2020) compared to revenues of €12.4 million in the first six months of 2019 (€6.5 million reported in the second quarter of 2019). 

On June 11, 2020, EURO paid dividends of €12.5 million (€0.20 per share).

Liquidity and capital resources

Cash at June 30, 2020 totaled €28.7 million as compared to €31.6 million at December 31, 2019.  The decrease was mainly due to the dividends paid, partially offset by cash flow from operating activities.

Marketable securities

EURO holds marketable securities related to mining companies which are part of a volatile market.  Share market price exposure risk is related to the fluctuation in the market price of marketable securities. Investments in marketable securities are recorded at fair value. 

As at June 30, 2020, marketable securities were comprised of 19,095,345 shares of Orea Mining Corp. (formerly Columbus Gold Corp) (“Orea”) (9.7% of outstanding shares; December 31, 2019: 10.6%) and 3,819,069 shares of Allegiant Gold Ltd. (“Allegiant”) (6.2% of outstanding shares; December 31, 2019: 6.2%).

During the six month period ended June 30, 2020, the Company recognized an unrealized gain under IFRS following the increase of the fair value of these marketable securities. Under IFRS, this gain of €0.3 million was recorded in other comprehensive income (loss of €0.6 million during the six months ended June 30, 2019). Under French GAAP, the gain of €0.1 million was recorded in investment income in the statement of earnings.


Royalty assets
(Refer to MD&A for more detail)

As at June 30, 2020, the Company’s impairment review indicated that the facts and circumstances did not represent an indication of potential impairment. In May 2019, The French Government declared the Montagne D’Or project not yet compatible with environmental requirements. The statements by the French Government regarding the Compagnie Minière Montagne d’Or (the joint venture) in May 2019, to which the Paul Isnard royalty is attached, have created some uncertainty around the delivery of the various authorizations and permits not yet obtained and required for developing the project, and can potentially affect the operational and financial capacities of the project. Nevertheless, work continues on both the design of the project and the environmental framework around it. According to the press release issued by Orea Mining Corp. on June 4, 2020, the engineering studies for the project’s improvements and modifications for mining permits are expected to be completed by mid-year.  In light of the above, the Company maintains the same assumption as in the impairment test performed as at December 31, 2019. The Company continues to assume that the various authorizations and permits would be granted under conditions that will allow the joint venture to go forward with this project, although the timing is somewhat uncertain. No impairment charges were recorded in the statement of earnings for the second quarter ended June 30, 2020.

Comments on financial results prepared in accordance with French GAAP for the six month period ended June 30, 2020 compared to the same period in 2019

Under French GAAP and IFRS, EURO accounted for revenues of €12.5 million, an increase compared to revenues of €12.4 million for the same period in 2019. Revenues were primarily attributable to the Rosebel royalty of €12.5 million (six months ended June 30, 2019: €12.5 million). Revenues were similar to the prior period, primarily as a result of a higher average gold price in the first six months of 2020 of US$1,633 per ounce compared to US$1,307 per ounce in the first six months of 2019 (€3.1 million) and a weakened euro (€0.3 million), partially offset by lower gold production of 107,794 ounces in the first six months of 2020 compared to 147,744 ounces in the first six months of 2019 (€3.4 million), due to lower throughput and ore mined as a result of the temporary suspension of operations (see news releases dated July 20, 2020 and July 27, 2020). There were no other royalties from third parties in French Guiana for the six months ended June 30, 2020 (first six months of 2019: -€0.1 million due to a reversal of a previously over estimated royalty receivable).

Under French GAAP, operating expenses (excluding amortization expense) for the six months ended June 30, 2020 were €0.57 million compared to €0.46 million during the same period in 2019. The increase was mainly due to higher administrative costs in 2020.

The depreciation expense related to intangible assets was €0.15 million during the first half of 2020 compared to €0.21 million during the first six months of 2019. This decrease was mainly due to lower production at the Rosebel mine.

The investment income for the first six months ended June 30, 2020 was €0.2 million compared to €0.4 million during the same period in 2019. The decrease was mainly due to lower interest rates applied to bank balances in 2020.

Financial results included a foreign exchange gain on bank accounts under French GAAP of €0.04 million in the first six months of 2020 compared to a foreign exchange gain on bank accounts of €0.37 million in the first six months of 2019. The decrease of the foreign exchange gain was mainly due to the weakening of the Euro compared to the United States dollar in 2020 compared to the same period in 2019. 

During the first six months ended June 30, 2020, EURO recorded an income tax expense of €3.5 million compared to €3.9 million during the six months ended June 30, 2019.  The decrease was mainly due to the impact of a lower tax rate and translation adjustments, partially offset by the tax impact of the change in fair value of the marketable securities in the six months ended June 30, 2020 compared to the same period in 2019.


Select IFRS financial results

Since December 31, 2010, EURO no longer prepares and publishes consolidated financial statements for French purposes; only French GAAP can be applied for the presentation of statutory financial statements and approval by the shareholders. However, in order to comply with Canadian requirements and have equivalency of information between French financial requirements and Canadian financial requirements, the following information on the IFRS financial results is provided for comparison purposes.

Six months ended June 30, 2020 compared to the same period in 2019 (IFRS)

Under IFRS, EURO reported a net profit of €8.3 million (€0.132 per share) for the six months ended June 30, 2020 compared to €8.2 million (€0.131 per share) for the six months ended June 30, 2019.

Under IFRS, revenues totaled €12.5 million in the first half of 2020 compared to revenues of €12.4 million during the same period in 2019, the same as under French GAAP as explained above. 

Operating expenses for the six months ended June 30, 2020 were €0.33 million compared to €0.31 million in the same period in 2019. The increase was mainly due to higher administrative costs in 2019.

The amortization expense of €0.19 million during the six months ended June 30, 2020 was lower than the amortization expense of €0.26 million recorded during the same period in 2019, mainly due to lower production at the Rosebel mine.

Under IFRS, the investment income for the first six months ended June 30, 2020 was €0.2 million compared to €0.4 million during the same period in 2019, the same as under French GAAP, as explained above.

EURO recorded a foreign exchange loss of €0.18 million in the first six months of 2020 compared to a gain of €0.01 million in the first six months of 2019, mainly due to the revaluation of dividends payable, bank accounts and income tax payable.

EURO recorded an income tax expense of €3.7 million in the six months ended June 30, 2020 compared to €4.0 million in the same period of 2019. The decrease was mainly due to the tax impact of lower earnings and translation adjustments, partially offset by the tax impact of the change in fair value of the marketable securities in the six months ended June 30, 2020 compared to the same period in 2019.

Second quarter ended June 30, 2020 compared to the same period in 2019 (IFRS)

Under IFRS, EURO reported a net profit of €3.3 million (€0.053 per share) for the second quarter of 2020 compared to €4.7 million (€0.074 per share) for the second quarter of 2019.

Revenues were €5.2 million during the second quarter of 2020, a decrease of 20% compared to €6.5 million for the second quarter of 2019. Revenues were only attributable to the Rosebel royalty in the second quarter of 2020 and 2019. The decrease in revenues was mainly due to a lower gold production of 42,395 ounces in the second quarter of 2020 compared to 76,208 ounces in the second quarter of 2019 (€2.9 million), due to lower throughput and ore mined as a result of the temporary suspension of operations, partially offset by a higher average gold price in the second quarter of 2020 of US$1,711 per ounce compared to US$1,309 per ounce in the second quarter of 2019 (€1.5 million) and a weakened euro (€0.1 million).

During the second quarter of 2020, the Company recorded operating expenses of €0.21 million compared to €0.17 million during the same period in 2019. The increase was mainly explained by higher administrative costs in 2020.

The amortization expense of €0.08 million during the second quarter of 2020 was lower than the amortization expense of €0.13 million recorded during the second quarter of 2019, mai...

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