Marlowe Regulatory News (MRL)

31 Aug 2007 07:00

Medoro Announces 2007 Second Quarter Results

TORONTO, Aug. 30 /CNW/ - Medoro Resources Ltd. announced today results for the three and six-months periods ended June 30, 2007. For the quarter, Medoro reported a net loss of $1.0 million or $0.02 per share as compared to a loss of $0.7 million or $0.02 per share in the second quarter of last year. For the six months ended June 30, 2007 the company reported a loss of $2.0 million or $0.04 per share as compared to a loss of $0.8 million or $0.03 per share in the same period last year.

The 2007 loss in the quarter largely reflects general and administrative costs of $1.0 million to support the increased exploration activities compared to the previous year. At June 30, 2007 the company had cash and short-term investments of $7.6 million and no debt.

The company is continuing its diamond drilling program at the La Cruz, La Sofia and El Tapon prospects in Venezuela, which will provide the basis for reclassifying the existing historical resources and identifying additional reserves and resources. The company has also completed a geochemical sampling program that will allow it to start testing new drilling target areas within the properties. In addition, the company is completing the due diligence phase of the previously announced option agreement relating to Medoro's acquisition of rights to nine gold exploration and exploitation areas in Mali. As part of its due diligence, the company has performed extensive geochemical sampling on all nine properties and based upon the results has identified at least three targets. Upon exercise of its option, Medoro anticipates commencing a drill program in the fourth quarter of this year.

The complete financial statements and management and discussion analysis for the second quarter ended June 30, 2007 are available on the Company's web-site at www.medororesources.com.

Medoro Resources is a gold exploration and development company focused on acquiring properties of merit for potential joint ventures with senior producers. The company holds a 100% interest in the Lo Increible 4A and 4B concessions in Venezuela. Additional information on Medoro Resources can be found by visiting the company's website at www.medororesources.com. Medoro's Nominated Adviser for the purposes of AIM is Canaccord Adams Ltd. (Ryan Gaffney), +44 (0) 20 7050 6500.

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 statements of operations and deficit three and six month periods ended June 30, (Expressed in thousands of Canadian dollars, except share and per share amounts) (Unaudited) Three months ending Six months ending June 30, June 30, 2007 2006 2007 2006 ------------------------------------------------------------------------- $ $ $ $ Operating expenses General and administrative (Schedule) 1,048 908 2,030 1,226 Stock-based compensation (Note 5) - - 33 - ------------------------------------------------------------------------- 1,048 908 2,063 1,226 ------------------------------------------------------------------------- Other income (expenses) Accreted interest on note and shares receivable - 17 - 34 Foreign exchange (loss) gain (33) (37) (106) 103 Interest income 1 122 4 130 Other income 87 103 205 116 ------------------------------------------------------------------------- 55 205 103 383 ------------------------------------------------------------------------- Net loss for the period (993) (703) (1,960) (843) Deficit, beginning of period (31,229) (28,305) (30,262) (28,165) ------------------------------------------------------------------------- Deficit, end of period (32,222) (29,008) (32,222) (29,008) ------------------------------------------------------------------------- Basic and diluted loss per share (0.02) (0.02) (0.04) (0.03) ------------------------------------------------------------------------- Basic and diluted weighted average number of common shares outstanding 49,423,293 44,230,844 49,411,287 27,629,510 -------------------------------------------------------------------------

These 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.

Medoro Resources Ltd. Consolidated balance sheets (Expressed in thousands of Canadian dollars) (Unaudited) June 30, December 31, 2007 2006 ------------------------------------------------------------------------- $ $ Assets Current assets Cash 2,646 910 Short-term investments 4,962 12,520 Prepaid and other assets 1,072 583 ------------------------------------------------------------------------- 8,680 14,013 Property, plant and equipment, net (Note 4) 22,421 19,677 ------------------------------------------------------------------------- 31,101 33,690 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 579 760 Future income taxes 5,250 5,759 ------------------------------------------------------------------------- 5,829 6,519 ------------------------------------------------------------------------- Shareholders' equity Share capital (Note 5) 53,691 53,663 Contributed surplus (Note 5) 3,803 3,770 Deficit (32,222) (30,262) ------------------------------------------------------------------------- 25,272 27,171 ------------------------------------------------------------------------- 31,101 33,690 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nature of operations (Note 1) - Medoro Resources Ltd. Consolidated statements of cash flows three and six month periods ended June 30, (Expressed in thousands of Canadian dollars) (Unaudited) Three Six months months 2007 2006 2007 2006 ------------------------------------------------------------------------- $ $ $ $ Operating activities Net loss (993) (703) (1,960) (843) Items not affecting cash Depreciation 43 - 89 - Stock-based compensation - - 33 - Foreign exchange loss (446) - (509) - Accreted interest on note and shares receivable - (17) - (34) Changes in non-cash working capital items Accounts receivable - (106) - (414) Prepaid and other assets 333 13 (489) - Accounts payable and accrued liabilities (65) 112 (181) 186 ------------------------------------------------------------------------- (1,128) (701) (3,017) (1,105) ------------------------------------------------------------------------- Investing activities Short-term investments 4,922 873 7,558 (6,897) Cash held in escrow (3,130) (3,130) Acquisition of property, plant and equipment (1,982) (642) (2,833) (711) ------------------------------------------------------------------------- 2,940 (2,899) 4,725 (10,738) ------------------------------------------------------------------------- Financing activity Shares to be issued 3,099 3,099 Issuance of common shares for cash 28 (98) 28 9,200 ------------------------------------------------------------------------- 28 3,001 28 12,299 ------------------------------------------------------------------------- Net (decrease) increase in cash 1,840 (599) 1,736 456 Cash, beginning of period 806 1,174 910 119 ------------------------------------------------------------------------- Cash, end of period 2,646 575 2,646 575 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplemental cash flow information Interest paid - - - - Income taxes paid - - - - Medoro Resources Ltd. Notes to the consolidated financial statements June 30, 2007 (Tabular amounts expressed in thousands of Canadian dollars, except share and per share amounts) 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. On May 24, 2006, the Company completed a share consolidation whereby 7 pre-consolidation shares were exchanged for 1 post-consolidation share. All information related to common shares for the current and prior period has been restated to give effect to the share consolidation. 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. 2. Basis of presentation These unaudited interim financial statements have been prepared in accordance with Canadian generally accepted accounting principles for interim financial statements. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying financial information reflects all adjustments, consisting primarily of normal recurring adjustments, which are necessary for a fair presentation of results for the interim periods. Operating results for the three month period ended June 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. These interim consolidated financial statements follow the same accounting policies as the audited consolidated financial statements of the Company for the year ended December 31, 2006, except for the new policies disclosed below. Accordingly, these interim consolidated financial statements should be read in conjunction with the Company's 2006 annual audited consolidated financial statements and notes thereto. Effective January 1, 2007, the Company adopted two new accounting standards related to financial instruments that were issued by the Canadian Institute of Chartered Accountants ("CICA"). These accounting policy changes were adopted on a prospective basis with no restatement of prior period financial statements. The new standards and accounting policy changes are as follows: (a) Comprehensive income (Section 1530) Comprehensive income is the change in shareholders' equity during a period from transactions and other events and circumstances from non-owner sources. In accordance with this new standard, the Company now reports a statement of comprehensive income and a new category, accumulated other comprehensive income, in the shareholders' equity section of the consolidated balance sheet. The components of this new category may include unrealized gains and losses on financial assets classified as available-for-sale, exchange gains and losses arising from the translation of financial statements of a self-sustaining foreign operation and the effective portion of the changes in fair value of cash flow hedging instruments. During the three month period ended March 31, 2007, there were no changes in shareholders' equity that resulted from the non-owner sources and consequently, the adoption of the standard noted above had no effect on the presentation of the Company's consolidated financial statements. (b) Financial instruments - recognition and measurement (CICA Handbook Section 3855) and disclosure and presentation (CICA Handbook Section 3861) In accordance with these new standards, the Company now classifies all financial instruments as either held-for-trading, available for sale, held-to-maturity, loans and receivables or other financial liabilities. Financial instruments classified as held-for-trading are measured at fair value with unrealized gains and losses recognized in operating results. Financial instruments classified as available for sale are measured at fair value with unrealized gains and losses recognized in other comprehensive income. Financial instruments classified as held-to-maturity, loans and receivables or other financial liabilities are measured at amortized cost. Upon adoption of these new standards, the Company has designated its cash and short-term investments as held-for-trading, which are measured at fair value. Accounts payable and accrued liabilities and notes payable are classified as other liabilities, which are measured at amortized cost. As at June 30, 2007, the Company did not have any financial assets classified as available for sale and therefore, the adoption of the standard noted above had no effect on the presentation of the Company's consolidated financial statements. 3. Acquisition a) On April 23, 2007 paid US$720,000 for the option to acquire all of the issued and outstanding shares of African Gold Resources, S.A ("African Gold"), a Panamanian company, which has the options to acquire nine properties in Mali. Upon the exercise of this option the Company will pay an additional US$2,430,000 and issue 6,000,000 shares to Gold Resources S.A., the current shareholder of African Gold. The Company will also assume African Gold's obligations under the option arrangements it has entered into with the current holders of the properties, including cash payments totalling US$224,000 and a one time payment of US$9.00 per ounce of measured gold resources and US$4.00 per ounce of indicated gold resources. The agreement also provides that if any of the individual properties contain an aggregate of 500,000 ounces or more of measured and indicated gold resources, then Gold Resources will receive a one-time payment of US$6.00 per ounce of measured gold resources and US$4.00 per ounce of indicated gold resources. b) On July 10, 2006, the Company acquired all of the issued and outstanding shares of Panwest Seas Corporation Ltd. ("Panwest", (a company incorporated in the British Virgin Islands), 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 for $10,788,545 (including $276,645 in acquisition costs). In consideration for the acquisition of Panwest, the Company issued 15,140,000 common shares and paid $1,125,000 (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 properties are held under mining contracts granted by Corporacion Venezolana de Guayana. The common shares issued have been valued at a price of $0.62 per common share, being the average closing price of the common shares of the Company for the two days before, the day of, and two days after the date of announcement of the acquisition agreement on June 12, 2006. The business combination has been accounted for as a purchase transaction with the Company as the acquirer of Panwest. The allocation of the purchase price based on the consideration paid and the fair value of Panwest's net assets acquired is: Net assets acquired at fair values is as follows: $ Mineral properties 16,346 Future income tax liability (5,557) --------------------------------------------------------------------- 10,789 --------------------------------------------------------------------- --------------------------------------------------------------------- Total consideration paid consists of the following: Cash 1,125 Common shares 9,387 Acquisition costs 277 --------------------------------------------------------------------- 10,789 --------------------------------------------------------------------- --------------------------------------------------------------------- 4. Property, plant and equipment The following table summarizes the Company's property, plant and equipment as at June 30, 2007 and December 31, 2006: June 30, 2007 --------------------------------------------------------------------- Accumulated Net book Cost depreciation value $ $ $ Mineral properties Lo Increible A and B 20,867 - 20,867 Mali properties 1,104 - 1,104 Plant and equipment 600 150 450 --------------------------------------------------------------------- 22,571 150 22,421 --------------------------------------------------------------------- --------------------------------------------------------------------- December 31, 2006 --------------------------------------------------------------------- Accumulated Net book Cost depreciation value --------------------------------------------------------------------- $ $ $ Mineral properties Lo Increible A and B 19,180 - 19,180 Plant and equipment 558 61 497 --------------------------------------------------------------------- 19,738 61 19,677 --------------------------------------------------------------------- --------------------------------------------------------------------- During the six months ended June 30, 2007, $44,808 of depreciation of plant and equipment used in exploration activities are included in mineral properties. 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, December 31, 2005 17,816,425 34,111 587 Issued on acquisition of Panwest (Note 3) 15,140,000 9,387 - Private placement (Note 5 (b)) 14,285,714 8,305 890 Private placement (Note 5 (c)) 2,150,000 1,852 962 Exercise of stock options 62,142 36 (2) Stock-based compensation - - 1,333 --------------------------------------------------------------------- Balance, December 31, 2006 49,454,281 53,691 3,770 Stock-based compensation - - 33 --------------------------------------------------------------------- Balance, June 30, 2007 49,454,281 53,691 3,803 --------------------------------------------------------------------- --------------------------------------------------------------------- (b) On February 28, 2006, the Company completed a private placement of 14,285,714 common shares at $0.70 per share for net proceeds of $9,195,045. In connection with the private placement, 857,143 agent compensation warrants were issued. Each agent compensation warrant entitles the holder to purchase one common share of the Company at a price of $0.70 per common share until August 28, 2007. All securities issued as part of this placement were subject to a four-month hold. The agent compensation warrants were fair valued using an option pricing model with the following assumptions: no dividends are paid, a volatility of the Company's share price of 140%, an expected life of the warrants of 18 months and an annual risk free rate of 3.96%. (c) On July 21, 2006, the Company completed a private placement with Gold Fields Ltd. of 2,150,000 units at a price of $1.40 for net proceeds of $2,813,943. Each unit consisted of a share and one- half of a warrant, with each whole warrant being exercisable for two years at a price of $2.80. The warrants were fair valued using an option pricing model with the following assumptions: no dividends are paid, a volatility of the Company's share price of 134%, an expected life of the warrants of two years and an annual risk free rate of 4.16%. (d) Warrants June 30, December 31, 2007 2006 --------------------------------------------------------------------- Weighted Weighted average average Number of exercise Number of exercise warrants price warrants price --------------------------------------------------------------------- $ $ Balance, outstanding beginning of period 4,628,232 2.14 2,837,089 2.38 Issued on private placement - - 1,932,143 1.87 Warrants expired during the period (2,142,857) 1.68 (141,000) 3.92 --------------------------------------------------------------------- Balance, end of period 2,485,375 2.88 4,628,232 2.14 --------------------------------------------------------------------- --------------------------------------------------------------------- The following table summarizes information concerning outstanding and exercisable warrants at June 30, 2007: Outstanding and Exercise exercisable price Expiry date $ ----------------------------------------------- 857,143 0.70 August 28, 2007 553,232 4.90 December 17, 2008 1,075,000 2.80 May 8, 2008 ----------------------------------------------- 2,485,375 ----------------------------------------------- ----------------------------------------------- (e) 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, 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 six months ended June 30, 2007 and the year ended December 31, 2006 are as follows: June 30, December 31, 2007 2006 --------------------------------------------------------------------- Weighted Weighted average average exercise exercise Options price Options price --------------------------------------------------------------------- $ $ Outstanding, beginning of period 4,638,571 0.92 720,097 3.64 Options granted 80,000 0.53 3,970,000 0.52 Options cancelled (40,714) 0.71 (44,384) 8.05 Options exercised (55,000) 0.51 (7,142) 0.77 --------------------------------------------------------------------- Outstanding, end of period 4,622,857 0.92 4,638,571 0.92 --------------------------------------------------------------------- --------------------------------------------------------------------- The following table summarizes information concerning outstanding and exercisable options at June 30, 2007: Options outstanding and exercisable ----------------------------------------------- Weighted average Weighted remaining average Number life exercise outstanding in years price ----------------------------------------------- $ 382,857 1.31 4.90 2,144 1.28 2.66 272,856 2.13 1.26 90,000 4.13 0.82 80,000 4.53 0.53 3,740,000 4.05 0.51 10,000 4.32 0.48 45,000 4.30 0.45 ----------------------------------------------- 4,622,857 3.73 0.92 ----------------------------------------------- ----------------------------------------------- The fair value of options issued by the Company in 2007 and 2006 was determined using the Black-Scholes option pricing model using the following weighted average assumptions: June 30, December 31, 2007 2006 ----------------------------------------------------------------- Weighted average risk-free rate 3.98% 4.10% Dividend yield Nil Nil Volatility factor of the expected market price of the Company's shares 147% 110% Average expected option life - years 2.5 2.5 Weighted average grant date fair value per share of options issued during the year $0.41 $0.34 6. Related party transactions During the six month periods ended June 30, 2007 and 2006, the Company paid the following amounts to related parties: (a) Consulting fees of $31,668 (2006 - $50,058) to a company in which a director of the Company is an officer; and (b) Consulting fees of $99,105 (2006 - $168,476) to directors of the Company. (c) The Company paid $14,060 (2006 - $Nil) to a related party controlled by three directors of the Company in respect of its office lease in Caracas, Venezuela. 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, 2007, the Company's mineral properties are in Venezuela and Mali. During the year ended December 31, 2006, the Company disposed of all its property in Italy. Medoro Resources Ltd. Consolidated schedules of general and administrative expenses three and six month periods ended June 30, (Expressed in thousands of Canadian dollars) (Unaudited) Three Six months months 2007 2006 2007 2006 ------------------------------------------------------------------------- General and administrative $ $ $ $ Office and administration 315 293 421 353 Consulting fees 254 124 736 261 Director fees 20 22 43 31 Investor relations, transfer agent and filing fees 80 188 100 230 Legal and accounting fees 130 141 200 155 Salaries and benefits 179 76 322 114 Travel and promotion 45 61 153 78 Depreciation 21 - 44 - Bank charges and interest 4 3 11 4 ------------------------------------------------------------------------- 1,048 908 2,030 1,226 ------------------------------------------------------------------------- -------------------------------------------------------------------------

For further information: Nelson Lee, Chief Financial Officer at (416) 603-4653, nlee(at)medororesources.com (MRS. MRL)