European Minerals Corporation: Varvarinskoye Update LONDON, Feb 24, 2006 (BUSINESS WIRE) -- European Minerals Corporation ("EMC" or "the Company") (TSX:EMP)(AIM:EUM) is currently constructing a gold/copper mine at Varvarinskoye in Kazakhstan. Further to the Company's press release of 31 January, 2006, EMC has now received an independent review of the Varvarinskoye project from SENET CC ("SENET") regarding the design, cost of construction and target completion date for the Varvarinskoye process plant and associated infrastructure (the "SENET Review"). The overall design parameters on which the SENET Review is based include the crushing, milling, flotation, leach/CIP, gold room and tailings disposal sections of the process plant and infrastructure. The designed throughput rate of 4.2 million tonnes per annum with all of the associated infrastructure was detailed in the definitive feasibility study undertaken by MDM Ferroman (Pty) Ltd ("MDM") in November 2004. As previously announced, the Company terminated its contractual relationship with MDM on 31 January, 2006 (see Press Release dated 31 January, 2006). The following summarises the capital cost estimates determined by SENET, as set out in the SENET Review: US$Million Process plant and infrastructure costs 60.81 EPCM costs payable to SENET: Fixed fees and overheads 3.72 Project management and related costs 5.07 ------- Total 69.60 These capital cost estimates follow a detailed review by SENET of all of the process flow diagrams as well as equipment lists and a current procurement schedule. This compares to the previous MDM lump sum turnkey contract price of US$56 million. SENET has confirmed the previous plant design and layout and the initial throughput of 4.2m tonnes of ore per annum. The majority of mechanical equipment items were also confirmed as valid orders already in progress and a review and update of costs with JSC Consolidated Development Corporation ("CDC"), the main Kazakh subcontractor, was incorporated into the total capital cost estimate. Project schedule/programme Following a detailed rescheduling of construction objectives with CDC and the Company's project implementation team, SENET has concluded that the following key dates are achievable. Contract notice to SENET to commence EPCM: February 2006 Practical completion and introduction of first ore: March 2007 Anticipated date of first gold pour: April 2007 Completed commissioning and handover: June 2007 Additional costs Other capital cost escalations and variances, in addition to those costs outlined in the SENET Review, have ocurred since the previous estimates were made, which amount to approximately US$6 million. These additional costs largely result from increased base costs of mining consumables over the last 12 months, which impacts on the project's pre-stripping costs, additional mining support equipment and an increase in overheads arising through the change of the project's contractor. Cost to completion The Company has accepted the revised cost estimates and construction schedule submitted by SENET and has signed a letter of intent ("LOI") appointing SENET as EPCM contractors, to supervise construction in conjunction with CDC and the Company's own project team. SENET has commenced work under the LOI which will be translated into a formal EPCM contract shortly. Following the SENET Review, overall project capital costs have increased to approximately US$145 million (compared with the previously announced US$125 million). The Company has already disbursed some US$50 million of this total from its treasury, approximately US$4 million of which, earmarked for payment to suppliers, is being held by a South African bank and which the Company is seeking to recover. Assuming full recovery of the US$4 million, this leaves approximately US$95 million as the revised estimated capital cost to completion. This increase includes all the additional new elements of the EPCM as well as the additional costs referred to above. At 20 February 2006, the Company had cash assets of around US$25 million, US$20 million of which is restricted by the lenders as security in a cash overrun account related to the Varvarinskoye project debt facility, as a condition precedent to drawdown. Debt facility Following the appointment of SENET, the Company is continuing to review its options to fund completion of the Varvarinskoye project. The lenders to the project have continued to indicate their support of the Company's actions and discussions are ongoing regarding first drawdown of the previously committed US$74.5 million debt facility (Press Release dated 1 December, 2005). However, the Company can give no assurance at this stage that the existing debt facility will not be modified or cancelled by the lenders or the Company or that alternative funding arrangements to replace or supplement the debt facility will be available on terms advantageous to the Company or at all. Project update Site works have continued during the winter months. The Caterpillar mining fleet deliveries commenced on schedule; approximately 60% of the mining equipment has been delivered, is assembled and operating on pre stripping at Central pit. The balance of the mining equipment is being manufactured and is scheduled to be delivered by September 2006. The Company is currently adjusting the Varvarinskoye mining plan to take into account the revised target date for process plant completion in March 2007. Foundations for the main process plant and workshops have been completed and power line construction is on schedule. A 300 man temporary construction accommodation camp has been established on site by the main Kazakh sub contractor CDC; it is anticipated that CDC will recommence civil engineering and concrete works by the end of February. First steel for the mine fleet workshop is anticipated to arrive at site before the end of March 2006. The concentrate loading facility at the nearby railway siding has been cleared and fenced, ready for installation later in the year. Construction of the tailings dam was suspended over winter as planned, but clay for the base of the dam walls has continued to be stockpiled at the dam site ready for placement and compaction in Spring 2006. Boreholes for dewatering the mining area have been drilled and pipework installed and connected to the 2 million cubic metre capacity water reservoir which was constructed during the summer of 2005. Tony Williams, EMC Chairman commented today "The SENET Review has confirmed that the Varvarinskoye plant is suitably designed with respect to metallurgical and engineering principles and will effectively process the initial planned ore throughput, as set out in the feasibility study. Although overall project costs are now estimated at around US$145 million, some 16% higher than previous estimates, we have continued to make significant progress on the project . We believe the new team of SENET, CDC and our own project people will deliver a completed project by mid 2007 which, in the circumstances, is a significant achievement. At current metal prices Varvarinskoye is capable of producing significant early cash flows." The Company's public documentation is available on www.sedar.com. This document may contain or refer to forward looking information. Such forward looking information includes, among other things, statements regarding targets, estimates and/or assumptions in respect of future production, mine development costs, unit costs, capital costs, timing of commencement of operations and future economic, market and other conditions, and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward looking statement include, but are not limited to: the grade and recovery of ore which is mined varying from estimates; capital and operating costs varying significantly from estimates; inflation; changes in exchange rates; fluctuations in commodity prices; delays in the development of the Varvarinskoye project caused by unavailability of equipment, labour or supplies, climatic conditions or otherwise; termination or revision of the debt facility; failure to raise additional funds required to finance the completion of the project; and other factors. Forward-looking statements are subject to significant risks and uncertainties and other factors that could cause actual results to differ materially from expected results. Readers should not place undue reliance on forward-looking statements. These forward-looking statements are made as of the date hereof and we assume no responsibility to update them or revise them to reflect new events or circumstances, except as required by law. No stock exchange, securities commission or other regulatory autho rity has approved or disapproved the information contained herein. European Minerals Corporation (AIM:EUM) (TSX:EPM) SOURCE: European Minerals Corporation Investor Information: European Minerals Corporation - United Kingdom Tony Williams, Chairman +44 (0) 20 7529 7508 OR European Minerals Corporation Bert Kennedy President & CEO +44 (0) 20 7529 7508 OR Vanguard Shareholder Solutions Inc. - North America Keith Schaefer 1 (866) 448-0780 ir@vanguardsolutions.ca