Marlowe Regulatory News (MRL)

10 May 2006 07:00

Medoro Resources Announces 2005 Year-End Results TORONTO, May 9 /CNW/ - Medoro Resources Ltd. (TSX-V/AIM: MRL) announcedtoday results for the year ended December 31, 2005. For the year ended December 31, 2005, Medoro reported a net loss of$11.0 million or $0.10 per share as compared to a loss of $10.3 million or$0.15 per share in the previous year. The 2005 loss largely reflects thewritedown of the Pestarena property and a provision for the potential non-collectability of amounts receivable. At December 31, 2005 the company hadcash and short-term investments of $5.3 million and no debt. Subsequent to theend of the year, the company completed two private placements for net proceedsof $9.3 million and $3.1 million, respectively. Medoro Resources is a gold exploration and development company focused on acquiring properties of merit for potential joint ventures with senior producers. THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE Management's discussion and analysis and financial statements follow MEDORO RESOURCES LTD. Consolidated Balance Sheets December 31 (Expressed in Canadian dollars) ------------------------------------------------------------------------- 2005 2004 -------------- -------------- ASSETS CURRENT Cash and cash equivalents $ 118,572 $ 2,448,813 Accounts receivable 64,898 75,981 Short-term investments 5,180,000 - Current portion of note receivable (Note 3) - 747,908 ------------------------------------------------------------------------- 5,363,470 3,272,702 NOTE AND SHARES RECEIVABLE (Note 3) 515,498 5,882,880 MINERAL PROPERTIES (Note 4) 1,000,000 5,979,873 ------------------------------------------------------------------------- $ 6,878,968 $ 15,135,455 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES CURRENT Accounts payable and accrued liabilities $ 53,437 $ 401,534 FUTURE INCOME TAXES (Note 6) 292,000 2,130,031 ------------------------------------------------------------------------- 345,437 2,531,565 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Share capital (Note 5) 34,111,117 29,161,976 Contributed surplus (Note 5) 587,392 584,622 Deficit (28,164,978) (17,142,708) ------------------------------------------------------------------------- 6,533,531 12,603,890 ------------------------------------------------------------------------- $ 6,878,968 $ 15,135,455 ------------------------------------------------------------------------- ------------------------------------------------------------------------- APPROVED BY THE DIRECTORS (Signed) Neil Woodyer ----------------------------------------- Neil Woodyer, Director (Signed) Miguel de la Campa ----------------------------------------- Miguel de la Campa, Director MEDORO RESOURCES LTD. Consolidated Statements of Operations and Deficit (Expressed in Canadian dollars) ------------------------------------------------------------------------- Fourteen Year ended months ended December 31, December 31, 2005 2004 -------------- -------------- OPERATING EXPENSES Bank charges and interest $ 4,886 $ 5,730 Consulting fees 941,763 922,425 Director fees 357,963 119,409 Investor relations, transfer agent and filing fees 142,996 168,921 Legal and accounting fees 121,261 537,145 Office and administration 249,964 26,330 Salaries and benefits 48,014 - Stock-based compensation 2,770 160,269 Telephone 4,462 2,080 Travel and promotion 164,593 527,348 ------------------------------------------------------------------------- 2,038,672 2,469,657 ------------------------------------------------------------------------- OTHER INCOME (EXPENSES) Accreted interest on note and shares receivable 785,359 162,593 Foreign exchange gain (loss) (555,728) 208,575 Interest income 50,073 44,846 Loss on disposal of mineral property (5,353,748) - Provision on notes and shares receivable from Sargold (5,566,830) - Other income 38,276 3,805 ------------------------------------------------------------------------- (10,602,598) 419,819 ------------------------------------------------------------------------- NET LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (12,641,270) (2,049,838) FUTURE INCOME TAX RECOVERY 1,619,000 - ------------------------------------------------------------------------- NET LOSS FROM CONTINUING OPERATIONS (11,022,270) (2,049,838) NET LOSS FROM DISCONTINUED OPERATIONS (Note 3) - (8,228,907) ------------------------------------------------------------------------- NET LOSS FOR THE PERIOD (11,022,270) (10,278,745) DEFICIT, BEGINNING OF PERIOD (17,142,708) (6,863,963) ------------------------------------------------------------------------- DEFICIT, END OF PERIOD $ (28,164,978) $ (17,142,708) ------------------------------------------------------------------------- ------------------------------------------------------------------------- LOSS PER SHARE FROM CONTINUING OPERATIONS $ (0.10) $ (0.03) ------------------------------------------------------------------------- LOSS PER SHARE FROM DISCONTINUED OPERATIONS $ - $ (0.12) ------------------------------------------------------------------------- BASIC AND DILUTED LOSS PER SHARE $ (0.10) $ (0.15) ------------------------------------------------------------------------- BASIC AND DILUTED WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 115,705,490 68,590,779 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MEDORO RESOURCES LTD. Consolidated Statements of Cash Flows (Expressed in Canadian dollars) ------------------------------------------------------------------------- Fourteen Year ended months ended December 31, December 31, 2005 2004 -------------- -------------- OPERATING ACTIVITIES Net loss from continuing operations $ (11,022,270) $ (2,049,838) Items not affecting cash: Loss on disposal of mineral property 4,979,873 - Provision on notes and shares receivable from Sargold 5,566,830 - Future income tax recovery (1,619,000) - Stock compensation expense 2,770 160,269 Foreign exchange loss (gain) on note receivable 746,023 (208,575) Accreted interest on note receivable (785,359) (162,593) Changes in non-cash working capital items Accounts receivable 11,083 (66,513) Prepaid and deposits - 1,973 Accounts payable and accrued liabilities (348,097) 303,772 ------------------------------------------------------------------------- (2,468,147) (2,021,505) Discontinued operations - (2,506,554) ------------------------------------------------------------------------- (2,468,147) (4,528,059) ------------------------------------------------------------------------- INVESTING ACTIVITIES Short-term investments (5,180,000) - Acquisition of mineral properties - (1,006,042) Proceeds on disposition of subsidiary, net (Note 3) - 763,130 Proceeds received on note receivable 368,765 - Repayment of promissory note - 50,000 ------------------------------------------------------------------------- (4,811,235) (192,912) Discontinued operations - (144,733) ------------------------------------------------------------------------- (4,811,235) (337,645) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of common shares for cash 4,949,141 7,528,485 Discontinued operations - (3,435,307) ------------------------------------------------------------------------- 4,949,141 4,093,178 ------------------------------------------------------------------------- NET DECREASE IN CASH FROM CONTINUING OPERATIONS (2,330,241) (772,526) CASH, BEGINNING OF PERIOD 2,448,813 3,221,339 ------------------------------------------------------------------------- CASH, END OF PERIOD $ 118,572 $ 2,448,813 ------------------------------------------------------------------------- ------------------------------------------------------------------------- MEDORO RESOURCES LTD. Consolidated Statements of Cash Flows (Expressed in Canadian dollars) ------------------------------------------------------------------------- SUPPLEMENTAL CASH FLOW INFORMATION Fourteen Year ended months ended December 31, December 31, 2005 2004 -------------- -------------- Interest paid $ - $ - ------------------------------------------------------------------------- The following transactions are not reflected in the consolidatedstatement of cash flows: During the fourteen month period ended December 31, 2004: (i) 44,171,118 common shares, 5,793,918 share purchase warrants and 1,182,888 share purchase options with a value of $8,895,626 were issued in connection with the acquisition of Sardinia Gold Mining SpA. (ii) 4,000,000 common shares with a value of $2,200,000 were issued in connection with the acquisition of Miniere di Pestarena srl (Note 3). (iii) 1,000,000 common shares with a value of $180,000 were issued in consideration for services provided in connection with the sale of GMS Australia (Note 4). (iv) 140,624 common shares with a value of $70,312 as payment for certain liabilities. (v) 75,000 common shares with a value of $15,000 as consideration for a bridge facility. (vi) The Company received a long-term note, payable in cash and shares, with a discounted value of $6,630,788 as consideration on the sale of GMS Australia (Note 4). Management's Discussion and Analysis The following discussion of the operating results and financial positionof Medoro Resources Ltd. should be read in conjunction with the company'saudited consolidated financial statements and related notes for the fiscalyear ended December 31, 2005. This Management's Discussion and Analysis has been prepared withreference to National Instrument 51-102 "Continuous Disclosure Obligations" ofthe Canadian Securities Administrators. This Management's Discussion andAnalysis has been prepared as of April 26, 2006. The financial statements and management report have been reviewed byMedoro's Audit Committee and approved by its Board of Directors. All dollaramounts are expressed in Canadian dollars unless otherwise indicated. Background Medoro Resources Ltd. was created in February 2004 as a result of thebusiness combination between Full Riches Investments Limited and a subsidiaryof Gold Mines of Sardinia plc (GMS), whose principal assets were theexploration and formerly-producing gold assets in Sardegna. The original focus of GMS was the exploration, development and productionof gold on the island of Sardegna in Italy. Having exhausted all readily-available sources of ore in February 2003, GMS suspended operations andpursued alternatives that would enable its shareholders to realize some valuefor its extensive portfolio of exploration concessions. The Full Richestransaction achieved this objective. Following the amalgamation, Medoro management assessed both the potentialfor restarting operations at Furtei, as well as the development potential atOsilo and other exploration prospects relative to ongoing cash requirements.Having concluded that the company would experience an unacceptable cash drainfor a longer than expected period, management decided to dispose its interestin Furtei and to focus all of its exploration efforts on Monte Ollastedu andPestarena. On October 20, 2004 Sargold Resource Corporation agreed to acquireall of the company's assets, excluding Monte Ollasteddu and Pestarena inexchange for (euro) 500,000 ($784,700) in cash, notes receivable with anominal value of (euro) 5.5 million payable over 60 months and $1 million incommon shares of Sargold to be issued 60 months after closing at a minimumissue price of $0.225. In 2004, the company was successful in obtaining the permits for drillingat Monte Ollasteddu, which commenced in August 2004. A total of twelve drillholes totalling 3,014 metres were completed on the western half of the fourkilometre long mineralised zone. Best results included 25 metres grading1.7 g/t gold including a 5-metre interval grading 5.5 g/t gold, 20 metres witha gold grade of 1.3 g/t and 1 metre at 9.9 g/t gold and 17 metres grading1.9 g/t gold. In 2005, the company was unsuccessful in obtaining further permits tocarry out additional work at Monte Ollasteddu, ultimately leading to GoldFields' decision to drop their option on the property with Bolivar Gold Corp.(However, the subsequent acquisition of Bolivar by Gold Fields has resulted inGold Fields effectively re-acquiring an option on the property.) Throughout2005, Medoro was also unable to find a joint venture partner willing to fundexploration expenditures at Pestarena and decided to revert the property toits original owner to avoid further holding costs. The company remained very active in its search for new opportunities. Inaddition, the search radius was broadened to include those areas outside ofEurope where management has long-standing relationships and previous workexperience. This search resulted in the identification of an exciting newprospect, the Lo Increible 4A and 4B concessions located in the El Callaodistrict of Venezuela. The company hopes to aggressively expand the previously-identified open pit gold resource with a view to fast-tracking development ofthe property. Strategy Medoro Resources' vision is to create a gold-focused exploration anddevelopment company. To achieve this objective, the company has leveraged offof its existing land position in Sardegna to focus on a smaller number of moreprospective properties. Given the company's current financial and technicalresources, Medoro's strategy will initially be to rely extensively on jointventures with highly-qualified, well-financed partners to fund exploration ofMonte Ollasteddu as well as newly-acquired opportunities. In order to achieve this strategy, the company has eliminated thenegative cash flow associated with the formerly producing GMS assets. In thelonger term, this strategy is only viable if economic quantities of gold arediscovered and developed on at least one of the company's properties andthereby generate positive cash flow sufficient to cover all corporate costs onan ongoing basis. Risk Factors The following risk factors should be given special consideration whenevaluating trends, risks and uncertainties relating to the company's business.Any of the following risks could have a material adverse effect upon thecompany, its business and future prospects. In addition, other risks anduncertainties not presently known by management of the company could impairthe company and its business in the future. - Exploration and Development Exploration and development of natural resources involve a high degree of risk and few properties which are explored are ultimately developed into producing properties. Although the mineral resource figures set out herein have been carefully prepared and reviewed or verified by an independent mining expert, these amounts are estimates only and no assurance can be given that an identified mineral resource will ever qualify as a commercially mineable (or viable) ore body which can be legally and economically exploited. Estimates of mineral resources can also be affected by such factors as environmental permitting regulations and requirements, fluctuations in the price of gold, weather, environmental factors, unforeseen technical difficulties, unusual or unexpected geological formations and work interruptions. The long term profitability of the company's operations will be in part directly related to the cost and success of its exploration programs, which may be affected by a number of factors. Substantial expenditures are required to establish reserves through drilling, to develop processes to extract the resources and, in the case of new properties, to develop the extraction and processing facilities and infrastructure at any site chosen for extraction. Although substantial benefits may be derived from the discovery of a major deposit, no assurance can be given that resources will be discovered in sufficient quantities to justify commercial operations or that the funds required for development can be obtained on a timely basis. - Operating Hazards and Risks Exploration for natural resources involves many risks, which even a combination of experience, knowledge and careful evaluation may not be able to overcome. Operations in which the company has a direct or indirect interest will be subject to all the hazards and risks normally incidental to exploration, development and production of resources, any of which could result in work stoppages, damage to persons or property and possible environmental damage. Although the company intends to obtain liability insurance in an amount which it considers adequate, the nature of these risks is such that liabilities might exceed policy limits, the liabilities and hazards might not be insurable, or the company might not elect to insure itself against such liabilities due to high premium costs or other reasons, in which event the company could incur significant costs that could have a material adverse effect upon its financial condition. - Fluctuating Prices The company's future revenues, if any, are expected to be in large part derived from the extraction and sale of gold. The price of gold has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the company's control including international economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional consumption patterns, speculative activities and increased production due to new extraction developments and improved extraction and production methods. The effect of these factors on the price of precious metals, and therefore the economic viability of any of the company's exploration projects, cannot accurately be predicted. - Retention of Key Personnel The company's business is dependent on retaining the services of a small number of key personnel of the appropriate caliber as the business develops. The success of the company is, and will continue to be to a significant extent, dependent on the expertise and experience of the directors and senior management and the loss of one or more could have a materially adverse effect on the company. - Regulatory Approvals The operations of the company and the exploration agreements which it has entered into require approvals, licences and permits from various regulatory authorities, governmental and otherwise (including project specific governmental decrees). The company believes that it holds or will obtain all necessary approvals, licences and permits under applicable laws and regulations in respect of its main projects and, to the extent that they have already been granted, believes it is presently complying in all material respects with the terms of such approvals, licences and permits. However, such approvals, licences and permits are subject to change in various circumstances and further project-specific governmental decrees and/or legislative enactments may be required. There can be no guarantee that the company will be able to obtain or maintain all necessary approvals, licences and permits that may be required and/or that all project specific governmental decrees and/or required legislative enactments will be forthcoming to explore and develop the properties on which it has exploration rights, commence construction or operation of mining facilities or to maintain continued operations that economically justify the costs involved. - Title Matters While the company has diligently investigated title to all mineral claims and, to the best of its knowledge, title to all properties is in good standing, this should not be construed as a guarantee of title. The properties may be subject to prior agreements or transfers and may be affected by undetected defects. If a title defect does exist it is possible that the company may lose all or part of its interest in properties to which the title defect relates. - Currency Risk The company reports its financial results and maintains its accounts in Canadian dollars and the market for gold is principally denominated in United States dollars. The company's operations in Italy make it subject to further foreign currency fluctuations and such fluctuations may materially affect the company's financial position and results. - Economic and Political Factors The company's most important assets are located in Italy and mineral exploration and mining activities may be affected in varying degrees by political stability and government regulations relating to the mining industry. Any changes in regulations or shifts in political conditions are beyond the control of the company and may adversely affect its business. In addition, if the proposed acquisition of Panwest by the company is completed as anticipated, the company's primary exploration activities will occur in Venezuela and, as such, the company could be affected by political or economic instability in Venezuela. The risks include, but are not limited to, civil unrest, terrorism, military repression, extreme fluctuations in currency exchange rates and high rates of inflation. The security situation in Venezuela is highly volatile due to ongoing political conflict between the Venezuelan government and opposition groups. Demonstrations, counter- demonstrations, and street confrontations in 2002 and early 2003 led to acts of violence and disorder, resulting in deaths and injuries. Opposition groups began an indefinite nationwide general strike on December 2, 2002 which they agreed to partially lift from February 3, 2003. Nevertheless, one-third of the workers of the state-owned oil companies that joined the strike were laid off and resumption of the output of oil and related products has not reached pre-strike levels. In August 2004, a national referendum ratified the mandate to the President of the Republic and in October 2004 elections of governors and mayors throughout the country resulted in the ruling group of parties controlling most of such offices. These events have resulted in greater political stability, which is expected to last for some time. Also, oil revenues for the Government have remained high, which has allowed it to increase public spending and create a perception of an economic bonanza. Violent crime is prevalent throughout the country. Kidnapping, smuggling and drug trafficking occur frequently in remote areas, including Bolivar state. Changes in resource development or investment policies or shifts in political attitude in Venezuela subsequent to the completion of the proposed acquisition of Panwest by the company could adversely affect the company's business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, maintenance of claims, environmental legislation, land use, small miners' activities, land claims of local people, water use and mine safety. The effect of these factors cannot be accurately predicted. In the past, Venezuela has imposed exchange controls that make it difficult for foreign mining companies to repatriate profits. On February 6, 2003, the National Executive and the Central Bank of Venezuela enacted Exchange Control Regulations centralizing all currency exchange transactions through the Central Bank and implementing a system for application for foreign currency by Venezuelan companies and individuals in order to repay debt, import authorized supplies and services, pay for travel expenses and pay dividends to foreign investors. All foreign currency brought into Venezuela (as foreign investment) by an investor must be sold to the Central Bank at the fixed exchange rate at the time of the transaction. All foreign currency derived from the export of products from Venezuela, including gold, must be sold to the Central Bank at the fixed exchange rate at the time of the transaction. Foreign investors have the right to apply to the Central Bank for foreign currency at the fixed exchange rate for the purposes of repatriation of capital, dividends and interest. The provisions of the Investment Protection Treaty with Canada which was ratified by Venezuela on January 20, 1998 should provide certain protections to Canadian based investors (like the company will be upon completion of the proposed acquisition of Panwest) in Venezuela. - Environmental And Other Regulatory Requirements The company's operations are subject to the extensive environmental risks inherent in the gold mining industry. The current or future operations of the company, including development activities, commencement of production on its properties, potential mining and processing operations and exploration activities require permits from various governmental authorities and such operations are and will be governed by laws and regulations governing prospecting, development, mining, production, exports, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, mine safety and other matters. Companies engaged in the development and operation of mines and related facilities generally experience increased costs, and delays in production and other schedules as a result of the need to comply with applicable laws, regulations and permits. Existing and possible future environmental legislation, regulations and actions could cause significant additional expense, capital expenditures, restrictions and delays in the activities of the company. Although the company believes that it is in substantial compliance in all material respects with applicable material environmental laws and regulations, there are certain risks inherent in its activities such as accidental spills, leakages or other unforeseen circumstances, which could subject the company to extensive liability. Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment, or remedial actions. Parties engaged in mining operations may be required to compensate those suffering loss or damage by reason of the mining activities and may have civil or criminal fines or penalties imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and permits governing operations and activities of mining companies, or more stringent implementation thereof, could have a material adverse impact on the company and cause increases in capital expenditures or production costs or reduction in levels of production at producing properties or require abandonment or delays in development of new mining properties. - Competition The mineral exploration and mining business is competitive in all of its phases. The company competes with numerous other companies and individuals, including competitors with greater financial, technical and other resources than the company, in the search for and acquisition of exploration and development rights on attractive mineral properties. The company's ability to acquire exploration and development rights on properties in the future will depend not only on its ability to develop the properties on which it currently has exploration and development rights, but also on its ability to select and acquire exploration and development rights on suitable properties for exploration and development. There is no assurance that the company will continue to be able to compete successfully with its competitors in acquiring exploration and development rights on such properties. Results of Operations The following comments identify various issues related to the results ofoperations for the twelve months ended December 31, 2005 as compared to thefourteen months ended December 31, 2004 and management's outlook for 2006. The company reported a net loss for the year ended December 31, 2005 of$11.0 million or $0.10 per share, as compared to a net loss of $10.3 millionor $0.15 per share for the 14-month period ended December 31, 2004. The lossin 2005 reflects the writedown of the Pestarena property and provisions forthe potential non-collectability of amounts receivable. For 2006, it isexpected that exploration expense at the Lo Increible property will be in theorder of $2.2 million. In 2005, the company provided for a potential loss on the recovery ofamounts receivable related to the sale of the formerly producing properties inthe amount of $5.6 and wrote off its investment in Pestarena, amounting to$5.4 million. In 2004, the company recorded a loss from continuing operationsof $2.0 million plus a loss of $8.2 million for discontinued operations, beingthose assets sold to Sargold Resource Corporation. After adjusting net income for non-cash items, primarily the provisionagainst amounts receivable and the loss on the disposal of Pestarena, andchanges in non-cash working capital, cash consumed by operating activities was$2.5 million. During 2005, the company invested, on a net basis, $4.8 million,principally represented by short-term deposits. The company also raised$4.9 million in net proceeds from financing activities. After reflecting theforeign exchange impact on the company's cash balances, cash decreased by$2.3 million to $0.1 million during the year. However, short-term investmentsincreased by $5.2 million during the same period. Selected Annual Information Annual results of operations for the previous three years are summarizedbelow: ------------------------------------------------------------------------- Three most recent years Dec. 31 Dec. 31(x) Oct. 31 2005 2004 2003 ------------------------------------------------------------------------- a) Revenues $ 0 $ 0 $ 0 b) Income before discontinued operations (10,955,301) (2,049,838) (196,683) - per share (0.10) (0.03) (0.01) c) Net income (loss) (10,955,301) (10,278,745) (346,683) - per share (0.10) (0.15) (0.03) d) Total assets 6,945,937 15,135,455 3,945,705 e) Long term debt 0 0 0 f) Dividends per share 0.00 0.00 0.00 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (x) 14 months ------------------------------------------------------------------------- Summary of Quarterly Results Dec. 31 Sept. 30 Jun. 30 Mar. 31 2005 2005 2005 2005 ------------------------------------------------------------------------- a) Revenues $ 0 $ 0 $ 0 $ 0 b) Income (loss) before dis- continued operations (5,928,060) (4,092,718) (422,816) (511,707) - per share (0.06) (0.03) 0.00 (0.01) c) Net income (5,928,060) (4,092,718) (422,816) (511,707) - per share (0.06) (0.03) 0.00 (0.01) ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Summary of Quarterly Results Dec. 31 Sept. 30 Jun. 30 Mar. 31 2004 2004 2004 2004 ------------------------------------------------------------------------- a) Revenues $ 0 $ 0 $ 0 $ 0 b) Income (loss) before dis- continued operations 2,816,964 (1,833,106) (1,879,832) (1,153,864) - per share 0.04 (0.02) (0.02) (0.03) c) Net income (5,411,943) (1,833,106) (1,879,832) (1,153,864) - per share (0.08) (0.02) (0.02) (0.03) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liquidity and Financial Resources At December 31, 2005, the company had cash and short-term investments of$5.3 million and no debt. Subsequent to the end of the year, the companyraised an additional $9.3 million in net proceeds from a private placement.The company expects to maintain approximately the same level of general andadministrative expenses in 2006 and spend approximately $2.2 million onexploration expenditures which are expended to funded from availableresources. Critical Accounting Estimates The company's financial statements are prepared in accordance withCanadian generally accepted accounting principles and are reported in Canadiandollars, which is the company's functional currency. Foreign subsidiaries areconsidered to be integrated and accordingly, the company uses the temporalmethod to translate the financial statements of its foreign subsidiaries intoCanadian dollars. Transactions with Related Parties All transactions with related parties have occurred in the normal courseof operations and are measured at the exchange amount, which is the amount ofconsideration established and agreed to by the related parties. During theyear ended December 31, 2005 and the fourteen month period ended December 31,2004, the Company paid the following amounts to related parties: (a) Consulting fees of $124,508 (2004 - $106,716) and rent of $92,955 (2004 - $4,000) to a company in which a director of the Company is an officer; and (b) Consulting fees of $291,888 (2004 - $211,883) to directors of the Company. Shares Outstanding The company currently has 224,714,974 issued and outstanding commonshares, 19,559,626 common share purchase warrants and 5,040,681 share purchaseoptions that would result, if exercised, in the issuance of an additional24,600,307 common shares and $9.4 million in cash. Additional information relating to Medoro Resources Ltd., including thecompany's Annual Information Form, is available on SEDAR at www.sedar.com. For further information: Peter Volk, Secretary, (416) 603-4653,pvolk(at)medororesources.com (MRL) ENDMEDORO RESOURCES LTD