Marlowe Regulatory News (MRL)

14 Sep 2006 07:00

Medoro Resources Announces 2006 First Half Results TORONTO, Sept. 14 /CNW/ - Medoro Resources Ltd. (TSX-V:MRS, AIM: MRL)announced today results for the six months ended June 30, 2006. For the six months ended June 30, 2006 the company reported a loss of$844,000 or $0.00 per share as compared to a loss of $935,000 or $0.01 pershare for the same period last year. At June 30, 2006 the company had cash andshort-term investments of $15.8 million and no debt. Complete financialstatements are available on the Company's website or on SEDAR atwww.sedar.com. As previously announced, Medoro completed the acquisition of the LoIncreible 4A and 4B properties in Venezuela on July 10, 2006. Upon closing ofthe acquisition, the company also completed a private placement with GoldFields Ltd. of 2.15 million units, for additional proceeds of $3 million,bringing their ownership in the company to 9.9%. Each unit consisted of ashare and one-half of a warrant, with each whole warrant being exercisable fortwo years at a price of $2.80. On August 11, 2006, Medoro announced that ithad completed the sale of its remaining assets in Sardegna, resulting inadditional proceeds to the company of approximately $3 million. At the Lo Increible property, the company has started a 10,000-metredrilling campaign designed to provide the basis for reclassifying the existinghistorical resources and identify additional reserves and resources. The firstphase of drilling will be in-fill drilling at the La Cruz, La Sofia and ElTapon prospects on 12.5 and 25-metre spacing with the objective of upgradingthe existing 390,000 ounces of indicated resources and 505,000 ounces ofinferred resources respectively. Included in this phase will be a number ofdeep holes to test the down-dip potential of the mineralization at the threeprospects. Medoro Resources is a gold exploration and development company focused onacquiring properties of merit for potential joint ventures with seniorproducers. Further information is available on our website atwww.medororesources.com. THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE Financial Statements follow MEDORO RESOURCES LTD. Consolidated Balance Sheets (Expressed in Canadian dollars) ------------------------------------------------------------------------- June 30, December 31, 2006 2005 -------------- -------------- ASSETS (Unaudited) (Audited) CURRENT Cash and cash equivalents $ 575,058 $ 118,572 Cash in escrow 3,130,800 Short-term investments 12,077,203 5,180,000 Accounts receivable and prepaid 478,459 64,898 -------------- -------------- 16,261,520 5,363,470 NOTE AND SHARES RECEIVABLE (Note 3) 549,506 515,498 PROPERTY PLANT AND EQUIPMENT (Note 4) 1,711,021 1,000,000 ------------------------------------------------------------------------- $ 18,522,047 $ 6,878,968 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES CURRENT Accounts payable and accrued liabilities $ 239,836 $ 53,437 FUTURE INCOME TAXES 292,000 292,000 ------------------------------------------------------------------------- 531,836 345,437 ------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Share capital (Note 5a) 43,073,412 34,111,117 Shares to be issued (Note 5e) 3,099,743 Contributed surplus (Note 5a) 825,643 587,392 Deficit (29,008,587) (28,164,978) ------------------------------------------------------------------------- 17,990,211 6,533,531 ------------------------------------------------------------------------- $ 18,522,047 $ 6,878,968 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying unaudited interim consolidated financial statements of the Company have been prepared by and are the responsibility of the Company's management. The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor. See accompanying Notes to the Consolidated Financial Statements MEDORO RESOURCES LTD. Consolidated Statements of Operations and Deficit (Unaudited) (Expressed in Canadian dollars) ------------------------------------------------------------------------- Three months ended Six months ended For the period ended June 30, 2006 2005 2006 2005 ------------------------------------------------------------------------- OPERATING EXPENSES Consulting fees $ 123,770 $ (172,177) $ 260,857 $ - Bank charges and interest 2,460 1,484 3,329 2,789 Director fees 22,324 494,789 31,084 522,411 Investor relations, transfer agent and filing fees 187,712 75,115 229,778 98,098 Legal and accounting fees 141,331 127,943 155,410 150,450 Office and administration (4,725) 7,609 54,375 7,609 Rent 178,917 - 178,917 - Salaries and benefits 76,077 96,382 114,514 96,382 Exploration expenses - (210,805) - - Telephone 118,672 428 119,025 771 Travel and promotion 61,362 27,357 78,660 75,063 ------------------------------------------- ----------------------------- 907,900 448,125 1,225,949 953,573 ------------------------------------------- ----------------------------- OTHER INCOME (EXPENSES) Accreted interest on note and shares receivable 17,369 212,460 34,008 427,040 Foreign exchange gain (loss) (37,524) (246,830) 102,875 (479,396) Interest income 121,915 21,152 129,772 32,879 Other income 102,996 38,527 115,685 38,527 ------------------------------------------- ----------------------------- 204,756 25,309 382,340 19,050 ------------------------------------------- ----------------------------- NET LOSS FOR THE PERIOD (703,144) (422,816) (843,609) (934,523) DEFICIT, BEGINNING OF PERIOD (28,305,443) (17,654,415) (28,164,978) (17,142,708) ------------------------------------------- ----------------------------- DEFICIT, END OF PERIOD $(29,008,587) $(18,077,231) $(29,008,587) $(18,077,231) ------------------------------------------- ----------------------------- ------------------------------------------- ----------------------------- BASIC AND DILUTED LOSS PER SHARE $ (0.02) $ (0.00) $ (0.00) $ (0.01) ------------------------------------------- ----------------------------- ------------------------------------------- ----------------------------- BASIC AND DILUTED WEIGHTED- AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 44,230,844 87,115,744 193,496,567 87,077,418 ------------------------------------------- ----------------------------- ------------------------------------------- ----------------------------- See accompanying Notes to the Consolidated Financial Statements. MEDORO RESOURCES LTD. Consolidated Statements of Cash Flows (Expressed in Canadian dollars) (Unaudited) ------------------------------------------------------------------------- Three months Six months For the period ended June 30 2006 2005 2006 2005 ------------------------------------------------------------------------- OPERATING ACTIVITIES Net loss from operations $ (703,145) $ (422,816) $ (843,609) $ (934,523) Items not affecting cash: Foreign exchange loss on note receivable - 357,369 572,629 Accreted interest on note receivable (17,370) (230,152) (34,008) (427,039) Changes in non-cash working capital items: Accounts receivable (106,469) (126,253) (413,561) (127,992) Prepaid and deposits 13,234 (62,273) (91,081) Accounts payable and accrued liabilities 112,477 223,391 186,399 (137,556) ------------------------------------------------------------------------- (701,273) (260,734) (1,104,779) (1,145,562) ------------------------------------------------------------------------- INVESTING ACTIVITIES Short-term investments 872,797 (6,897,203) Cash held in escrow (3,130,800) (3,130,800) Property, plant and equipment (165,878) (103,311) (234,764) (103,311) Deferred expenses (476,257) (476,257) ------------------------------------------------------------------------- (2,900,138) (103,311) (10,739,024) (103,311) ------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of common shares for cash (103,013) 3,990,819 9,195,046 4,990,819 Shares to be issued 3,099,743 3,099,743 Exercise of options 5,500 5,500 ------------------------------------------------------------------------- 3,002,230 3,990,819 12,300,289 4,990,819 ------------------------------------------------------------------------- NET INCREASE IN CASH (599,181) 3,626,774 456,486 3,741,946 CASH, BEGINNING OF PERIOD 1,174,239 2,563,985 118,572 2,448,813 ------------------------------------------------------------------------- CASH, END OF PERIOD $ 575,058 $ 6,190,759 $ 575,058 $ 6,190,759 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying Notes to the Consolidated Financial Statements. 1. NATURE OF OPERATIONS The Company is currently engaged in the exploration and development of mineral properties; as such, the Company is considered to be in the development stage. These financial statements have been prepared under the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business rather than through a process of forced liquidation. Continued operations of the Company are dependent on the Company's ability to receive continued financial support, complete equity financings, and successfully acquire an interest in assets or a business and the ability to generate profitable operations in the future. These financial statements have been reviewed by the Company's Audit Committee and approved by its Board of Directors, but have not been reviewed by the Company's auditors. 2. SIGNIFICANT ACCOUNTING POLICIES These interim-period financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles and are expressed in Canadian dollars. The preparation of interim financial statements is based on accounting principles and practices consistent with those used in the preparation of the annual financial statements. These interim period financial statements should be read together with the annual audited financial statements and the accompanying notes. In the opinion of the Company, its unaudited interim financial statements contain all adjustments necessary in order to present a fair statement of the results of the interim periods presented. Certain reclassifications have also been made to the prior period financial statements to conform to the current period presentation. The principal accounting policies followed by the Company, which have been consistently applied, are outlined below: (a) Principles of consolidation These consolidated financial statements include the accounts of the Company and all of its incorporated subsidiaries. All significant intercompany transactions and balances have been eliminated. (b) Measurement uncertainties The preparation of financial statements, in conformity with Canadian generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. On an ongoing basis, management evaluates its estimates, including those related to the recoverability of mineral properties, mineral exploration and development costs. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates under different assumptions or conditions. (c) Cash and equivalents Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid investments, with an original term to maturity of three months or less. (d) Mineral properties The Company considers its mineral properties to have the characteristics of property, plant and equipment. As such, the Company defers all exploration costs, including acquisition costs, field exploration and field supervisory costs relating to specific properties until those properties are brought into production, at which time, they will be amortized on a unit-of- production basis based on proven and probable reserves or until the properties are abandoned, sold or considered to be impaired in value, at which time, an appropriate charge will be made. The recoverability of the amounts shown for mineral properties is dependent on the existence of economically recoverable reserves, the ability to obtain financing to complete the development of such reserves and meet its obligations under various agreements and the success of future operations or dispositions. (e) Impairment of long-lived assets The Company monitors the recoverability of the carrying amount of its long-lived assets by estimating the undiscounted cash flows expected to result from their use and eventual disposition. This assessment is based on the carrying amount of the asset at the date it is tested for recoverability, whether it is in use or under development. If the carrying amount exceeds the sum of the undiscounted cash flows expected to result, an impairment loss is recognized and the adjusted carrying amount becomes the new cost basis. (f) Reclamation and site restoration costs The Company records the present value of asset retirement obligations including reclamation costs when the obligation is incurred and it is recorded as a liability with a corresponding increase in the carrying value of the related mining assets. The carrying value is amortized over the life of the related mining asset on a units-of-production basis commencing with initial commercialization of the asset. The liability is accreted to the actual liability on settlement through charges each period in the statement of operations. (g) Foreign currency translation The Company's functional currency is the Canadian dollar. The Company's foreign subsidiaries are considered to be integrated operations. Accordingly, the Company utilizes the temporal method to translate the financial statements of these subsidiaries into Canadian dollars. An exchange gain or loss that arises on translation or settlement of a foreign currency denominated monetary item or a non-monetary item carried at market is included in the determination of net income for the current period. At each balance sheet date, monetary items denominated in a foreign currency are adjusted to reflect the exchange rate in effect at the balance sheet date. Revenues and expenses are translated into Canadian dollars at the exchange rates prevailing on the transaction dates. (h) Income taxes Future income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized in the year that includes the substantive enactment date. A valuation allowance is recorded against any future income tax asset if it is not more likely than not that the asset will be realized. (i) Stock-based compensation The Company accounts for stock options granted using the fair value based method of accounting for stock-based compensation. Accordingly, the fair value of the options at the date of grant is accrued and charged to operations, with a corresponding credit to contributed surplus, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital. (j) Loss per share Loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the reporting year. Diluted loss per share is computed similar to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options, warrants and convertible debentures, if dilutive. The number of additional shares is calculated by assuming that outstanding stock option warrants were exercised and convertible debentures converted and that the proceeds from such exercises and conversion were used to acquire common stock at the average market price during the reporting years. Options and warrants as disclosed in Note 5 are anti-dilutive and, therefore, have not been taken into account in the per share calculations. (k) Financial instruments and financial risks The fair values of cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying values due to the short term to maturity of these financial instruments. The Company has no derivative financial instruments. The fair value of the notes and shares receivable approximates the carrying value as the yield incorporated on the notes and shares receivable approximates the interest rate the Company could obtain on similar financing. The Company is subject to credit risk in connection with notes and share receivable and accounts receivable. The Company minimizes credit risk by reviewing the credit risk of the counterparty to the arrangement and has made any necessary provisions related to credit risk at December 31, 2005. 3. NOTE AND SHARES RECEIVABLE On October 20, 2004, the Company completed the sale of all of its shares in Gold Mines of Sardinia Australia ("GMS Australia"), including its 90% interest in Sardinia Gold Mining SpA ("Sardinia Gold") and thereby all the shares of Sardinia Gold, to Sargold Resource Corporation ("Sargold") for consideration consisting of: Note receivable(i) $6,082,910 Shares receivable(ii) 547,878 --------------------------------------------------------------------- $6,630,788 --------------------------------------------------------------------- --------------------------------------------------------------------- (i) The Company has determined to record a provision on the notes receivable for $5,458,742, being the full discounted value of the note as at December 31, 2005. (ii) Sargold has also agreed to issue the Company on or by August 30, 2009 common shares of Sargold equal to $1 million, to be valued at the market price (as determined according to TSX Venture Exchange policy) as at August 30, 2009, subject to a minimum price of $0.225. At December 30, 2005 Sargold shares had a ten day closing average of $0.186. The Company recorded a provision for the decrease in the market value of the shares and written the receivable down to its net discounted value as at December 31, 2005, using a 13.75% discount rate, to $515,498. The net discounted value as at June 30, 2006, using the same discount rates was $549,506. Subsequent to the quarter-end, the Company re-negotiated the terms of its agreement and disposed of all its mineral properties in Italy to Sargold. 4. PROPERTY, PLANT & EQUIPMENT June 30, December 31, 2006 2005 ------------ ------------ Mineral properties Monte Ollasteddu $1,000,000 $1,000,000 Other deferred costs 476,257 - Plant & equipment Furniture & equipment 7,252 - Computer equipment 18,014 - Vehicles 208,198 - Software 1,299 - --------------------------------------------------------------------- $1,711,021 $1,000,000 --------------------------------------------------------------------- --------------------------------------------------------------------- 5. SHARE CAPITAL (a) Common shares Authorized: an unlimited number of common shares with no par value Issued and outstanding Number of Contributed shares Amount surplus ------------- ------------- ------------- Balance as at December 31, 2004 87,022,667 29,161,976 584,622 Issued under private placement (Notes 5 (b) and (c)) 37,692,307 4,949,141 - Stock-based compensation - - 2,770 ----------------------------------------------------------------- Balance as at December 31, 2005 124,714,974 34,111,117 $ 587,392 Private placement 100,000,000 9,195,045 - Compensation warrants - (241,020) 241,020 ----------------------------------------------------------------- Balance as at May 24, 2006 prior to consolidation 224,714,974 $43,065,142 $ 828,412 ----------------------------------------------------------------- ----------------------------------------------------------------- Opening balance as at May 24, 2006 post- consolidation 32,102,139 $43,065,142 $ 825,412 Exercise of employee options 7,142 8,270 (2,770) ----------------------------------------------------------------- Balance as at June 30, 2006 32,109,281 $43,073,412 $ 825,642 ----------------------------------------------------------------- ----------------------------------------------------------------- (b) On January 18, 2005, the Company completed a private placement of 7,692,307 shares at a price of $0.13 per share for proceeds of $1,000,000. (c) On April 15, 2005, the Company completed a private placement of 30,000,000 units for net proceeds of approximately $3.9 million ((pnds stlg)1.8 million). Each unit consisted of a share and one- half of a share purchase warrant, with each whole warrant being exercisable for a period of two years at $0.235 ((pnds stlg)0.10). 300,000 agent's warrants were also issued in conjunction with this placement, each agent's warrant entitling the holder to acquire one share and one-half warrant of the Company on the same terms as the units, except that the agent's warrants expire after 18 months. (d) On February 28, 2006, the Company completed a private placement of 100 million common shares at $0.10 per share for net proceeds of $9,195,045. In connection with the private placement, 6,000,000 agent compensation warrants were issued. Each agent compensation warrant entitles the holder to purchase one common share of the Company at a price of $0.10 per common share until August 28, 2007. All securities issued as part of this placement are subject to a four-month hold. (e) Shares to be issued On May 8, 2006, the Company completed a private placement of 15,050,000 (2,150,000 post-consolidation) subscription receipts at a price of $0.20 ($1.40 post-consolidation), for net proceeds of $3,099,743. Each subscription receipt, upon exercise, will convert into units of the Company, each unit consisting of one share and one-half of a share purchase warrant, with each warrant exercisable at a price of $2.80 for two years. (f) Share consolidation On May 24, 2006, the Company, pursuant to a special resolution passed by shareholders on May 19, 2006, has consolidated its share capital, warrants and options on a 7-old-for-1-new basis. The number of non-par value common shares issued and outstanding post-consolidation was 32,102,139. (g) Warrants Weighted average Number of exercise warrants price ------------- ------------- Balance, December 31, 2004 6,480,918 1.10 Warrants expired during the year (1,921,291) (2.03) Warrants issued in conjunction with private placement including agent's warrants (Note 5 (c)) 15,300,000 0.23 ----------------------------------------------------------------- Balance, December 31, 2005 19,859,627 $ 0.34 Issued in conjunction with private placement (Note 5 (d)) 6,000,000 0.10 Warrants expired during the period (687,000) 0.70 ----------------------------------------------------------------- Balance, May 24, 2006 prior to consolidation 25,172,627 $ 0.27 ----------------------------------------------------------------- ----------------------------------------------------------------- Opening balance, May 24, 2006 post-consolidation 3,596,090 $ 1.92 ----------------------------------------------------------------- Balance, June 30, 2006 3,596,090 $ 1.92 ----------------------------------------------------------------- ----------------------------------------------------------------- (h) Incentive stock option plan The Company has an incentive stock option plan. Under the plan, the exercise price of each option should not be less than the discounted market price as defined in the policies of the TSX Venture Exchange, and an option's maximum term is five years. Options may be granted by the board of directors at any time, to directors, senior officers or employees of the Company and consultants to the Company or any of its designated affiliates, who, by the nature of their position or duties are, in the opinion of the board, upon recommendation of the Compensation Committee, is in a position to contribute to the success of the Company. A summary of the changes in the Company's incentive share option plan for the periods ended June 30, 2006 and December 31, 2005 are as follows: June 30, 2006 December 31, 2005 ---------------------------------------------------- Weighted Weighted average average exercise exercise Options price Options price ---------------------------------------------------- Outstanding, beginning of period 5,040,681 $ 0.52 6,138,790 $ 0.79 Options granted - - 50,000 0.11 Options cancelled (150,290) 0.61 (1,148,109) 1.97 Options exercised - - - - ----------------------------------------------------------------- Outstanding prior to consoli- dation 4,890,391 $ 0.51 5,040,681 $ 0.52 ----------------------------------------------------------------- ----------------------------------------------------------------- Opening balance, post- consoli- dation 698,627 $ 3.60 Options granted - - Options cancelled - - Options exercised (7,143) 0.77 ----------------------------------------------------------------- Outstanding, end of period 691,484 $ 3.63 5,040,681 $ 0.52 ----------------------------------------------------------------- The following table summarizes information concerning outstanding and exercisable options at June 30, 2006: Weighted Weighted average average Number remaining exercise outstanding life in years price --------------- --------------- --------------- 362,143 2.28 $ 4.90 20,770 0.15 12.31 308,571 3.10 1.55 ----------------------------------------------------------------- 691,484 2.59 $ 3.63 ----------------------------------------------------------------- ----------------------------------------------------------------- 6. RELATED PARTY TRANSACTIONS During the three months period ended June 30, 2006 and 2005, the Company paid the following amounts to related parties: (a) Consulting fees of $50,058 (2005 - $87,900) to a company in which a director of the Company is an officer; and (b) Consulting fees of $168,476 (2005 - $77,164) to directors of the Company. As at June 30, 2006, the Company has advances of $18,520 from a company in which a director of the Company is an officer. These transactions are in the normal course of operations and are measured at the exchange amounts, which is the amount of consideration established and agreed to by the related parties. 7. SEGMENTED INFORMATION The Company currently operates in one reportable operating segment, being the acquisition and exploration of mineral properties. As at June 30, 2006, all of the Company's mineral properties are in Italy. 8. SUBSEQUENT EVENTS (a) On July 10, 2006, the Company completed the acquisition of Panwest Seas Corporation Ltd., which holds the right to the Lo Increible 4A and 4B exploration properties located in the El Callao area of the State of Bolivar, Venezuela. The Lo Increible 4A and 4B properties, totalling 2,216 hectares, are located immediately north, and adjacent to, Crystallex International Corporation's La Victoria property. In addition to Crystallex, Gold Fields, Hecla Mining and CVG Minerven all have producing gold mines and are actively exploring for gold in the area. The properties are held under mining contracts granted by Corporacion Venezolana de Guayana (CVG). The Company issued 15,140,000 shares to the shareholders of Panwest, paid US$1,000,000 in cash and also agreed to pay to the sellers a royalty of US$15 per ounce of gold on all production from the Lo Increible 4A and 4B mining properties. The Company has also assumed all of Panwest's current liabilities and the expenses of the acquisition of the purchased shares and the closing of the transactions, totalling less than US$200,000. Upon completion of the acquisition, the Company closed a private placement of 2,150,000 units with Gold Fields at a price of $1.40. Each unit consists of one share and one-half of a share purchase warrant, with each whole warrant exercisable at a price of $2.80 for two years from the closing of the placement. The Company has commenced a 10,000 metre diamond drilling program at the La Cruz, La Sofia and El Tapon prospects to provide the basis for reclassifying the existing historical resources and identify additional reserves and resources. (b) On August 11, 2006, the Company announced that it has completed its previously announced transaction with Sargold Resource Corporation, whereby the parties amended their existing agreement relating to the sale by Medoro to Sargold of Sardinia Gold Mines SpA. Under the amended terms, Sargold paid (euro)1.0 million to purchase 90% of the issued and outstanding shares of Sardinia Gold Mines S. p. A. Sargold also acquired for an additional (euro)1.0 million all of Medoro's interest in SGM Ricerche, the Italian company that holds the interests to the Monte Ollasteddu gold project. The gain recognized on the transaction is calculated as follows: Cash consideration $2,866,943 Less: Deferred exploration costs - Monte Ollasteddu $1,000,000 Note & shares receivable - Sargold 549,506 Receivables from SGM Ricerche 333,594 Future income tax liability on Monte Ollasteddu (292,000) 1,591,100 ------------ ------------ $1,275,843 ------------ ------------For further information: Robert Doyle, Executive Vice President,(416) 603-4653, rdoyle(at)medororesources.com(MRL)ENDMEDORO RESOURCES LTD