Orosur Mining Regulatory News (OMI)

15 Aug 2007 07:00

Uruguay Mineral Exploration Inc. (TSX VENTURE:UME) (LSE:UGY): Summary of Results -- Gold production was 29,265 ounces for the fourth quarter, bringing year to date production to 96,420 ounces. -- Cash costs were $US 273 per ounce for the quarter and $US 294 for the full year, compared with $US 243 and $US 210 for the comparable periods last year. Cash costs increased due to a higher strip ratio, general industry cost increases, a more abrasive work index for ore mined and processed and marginally lower production compared with the previous year. -- Net profit after tax for the fourth quarter was $US 6.4 million or $US 0.13 basic earnings per share, with net profit for the full year of $US 14.5 million, up 37% year-on-year, or $US 0.30 basic earnings per share. -- Cash flow from operations before non-cash working capital movements was $US 11,356 million for the fourth quarter and $US 24,177 million for the year to date, up 18% year-on-year. -- The higher average realized gold price for the fourth quarter of $US 658 per ounce resulted in increased sales of $US 21.8 million for the quarter, resulting in sales for the full year of $US 63.1 million, up 23% year-on-year, with an average price of $US 610 per ounce for the full year. -- A final dividend of C$ 3.5 cents per share proposed to be paid on 26 October, 2007 to all shareholders on the register as at 12 October, 2007. \* T 3 Months to Full Year to ------------- -------------- May May May May 2007 2006 2007 2006Operating ReviewGold produced Ounces 29,265 25,350 96,420 101,287Average cash cost US$/oz 273 243 294 210Average price received US$/oz 658 543 610 482 ------------------------------- --------- ------ ------ ------ -------Financial ReviewRevenue US$ '000s 21,840 15,992 63,056 51,206Net income for the period US$ '000s 6,337 4,077 14,554 10,583Cash flow from operations* US$ '000s 11,356 7,445 24,177 20,515Basic earnings per share US$ 0.13 0.090 0.30 0.23Cash at the end of the period US$ '000s 13,978 8,931 13,978 8,931Total debt at the end of period US$ '000s 3,385 4,225 3,385 4,225------------------------------- --------- ------ ------ ------ -------\* T * before non-cash working capital movements Tony Shearer, Chairman commented: "The past year has been a very active andsuccessful one for the Group, under the leadership of David Fowler and hismostly new management team. Production is going very well at the rate of about96,000 ounces a year, though the cash costs per ounce for 2006/7 were higherthan we had expected. Gold exploration has already delivered significant resultsin replacing and increasing reserves and resources, with very promisingopportunities to expand them in the year ahead. Exploration at Lascano is goingvery well and the long odds of this being a commercially successful project arereducing. The first steps have been taken to plan for the expansion of the plantat San Gregorio, when exploration results justify the cost and tell us where toexpand the production. In summary, the Group has progressed from being a smallexploration company into an entity of substance with competent employees and avery strong management team. I believe that the Group is now exceptionally wellplaced to develop on these strong foundations." CHIEF EXECUTIVE OFFICER'S REPORT Financial Performance UME reported a net profit after tax for the year ended 31st May 2007 of $US 14.5million or $US 0.30 basic earnings per share. The increase in earnings for thecurrent year is attributed to the higher realized sales price for gold sold. Asshown in the chart below operating costs increased due to a higher strip ratio,general industry cost increases, more abrasive work index for ore mined andprocessed and marginally lower production this financial year than last. Despitethis increase in cash costs UME remained, at $ 294 per ounce, below the averagecash costs for the gold mining industry. Expenses include a non-cash charge of $2.1 million in respect of the write offof exploration costs incurred in previous years on projects that we are nolonger actively progressing. \* TDescription $US per Ounce---------------------------------------------Cash cost 2005/06 financial year $210Change in strip ratio 20Other cost increases 50Impact of lower production 14---------------------------------------------Cash cost 2006/7 $294---------------------------------------------\* T Operational cash flows of $ 25.4 million generated during 2007 allowed us to pay$ 2.3 million back to shareholders as dividends, re-invest $ 19.4 million inplant, equipment and exploration and increase our cash position by $ 5.0 millionto $ 14.0 million. UME had no hedging and $ 3.5 million debt at 31 May 2007. Operations I am pleased to report that we have achieved our production goals whileimproving our safety performance with important reductions in the lost timeinjury frequency and accident severity rates. During the year we had a number ofindependent environmental audits. While there is always room for improvementthese audits confirmed that our environmental performance continued to be of ahigh standard. The final production figure for the financial year was a creditable 96,420ounces of gold. A pit wall slip at Arenal early in 2006 deferred access tohigher grade ore in the first half of the 2006/07 year, and resulted inproduction of only 39,234 ounces for the half. While anticipated, the recoveryof production to 57,186 ounces in the second half of the year resulted from aconcerted effort to develop new ore sources in addition to the recovery inArenal grade as we mined areas of the pit that had not been accessible earlierin the year due to the pit wall slip. Of the second half production 19,353ounces came from Veta A and Veta Sur, neither of which was included in reservesat the half year. The San Gregorio operations team was restructured in the second half of the yearwith Terry Butler promoted to Operations Manager, Simon Hillyard appointed asMining Manager and Ernesto Lamilla appointed as Technical Services Manager.These changes are giving additional focus to improving productivity and nowprovide us with the appropriate level of technical skills to improve planningand convert resources into reserves. Additionally they give John Sadek as VicePresident Operations more time for the strategic development of the business. An important milestone was achieved in the first quarter of the 2007/08financial year with the diversion of the Arroyo Corrales. This was a major civilengineering feat to plan, permit and execute in its own right, requiring aconsiderable degree of skill and expertise. It is a tribute to our staff andmanagement that this $4 million project was completed largely as planned.Accordingly, from the end of July 2007, we have been extracting ore from theexpanded Arenal pit, and expect to produce approximately 95, 000 ounces of goldfrom all sources in the financial year ended 31st May 2008 at a cost ofapproximately $ 345 per ounce. Reserves and Resources As confidence in our reserves and resources position is fundamental to UME'sfuture success we took three important decisions at the beginning of the year.They were to: -- use external, independent consultants to evaluate all published resources. -- convert inferred resources into the higher confidence categories of measured and indicated to allow economic assessments to be made on the resources. -- form a Resources and Reserves Board Committee to oversee the process of evaluating reserves and resources. Our resource drilling in 2007 was therefore initially focused on upgradingresources and the independent review of those resources. Updated reserves andresources were published as at November 2006 and a further update has again beenpublished effective 1 June 2007. In the November 2006 statement an initialresource of 95,000 and 28,700 ounces was added for Argentinita and the Vetasrespectively while resources for Sobresaliente and Zapucay were downgraded. A summary of the movements in Reserves and Resources from 1st November 2006 to 1June 2007 is summarised below: \* T Proven Measured and and Probable Indicated InferredContained ounces Reserves Resources Resources-------------------------------------- --------- ---------- ----------June 1, 2007 353,000 885,900 133,640-------------------------------------- --------- ---------- ----------November 1, 2006 322,000 659,300 250,700-------------------------------------- --------- ---------- ----------Increase/(decrease) 31,000 226,600 (117,060)-------------------------------------- --------- ---------- ----------\* T While the grade of reserves reduced an overall increase of 31,000 ounces wasachieved while producing 63,945 ounces in the same period. Measured andindicated resources increased by 226,600 ounces. Part of this increase reflectsan upgrade of inferred resources with increases for San Gregorio and Vetas A andSur. The San Gregorio resource increase reflects additional drilling and anupdated geological interpretation that joins the areas of San Gregorio, Rielesand the East Extension. Most of our resource drilling over the past year has been focused on near mineprojects to consolidate our medium term mine life. While this will continue wewill increasingly focus on new targets that have the potential to build moresignificant resources. The strengthening of the exploration management team overthe last 6 months gives me the confidence to believe that this can be achieved. Exploration There has been a significant change over the last year in the level of intensityand quality of our exploration effort. An increase in the number of geologistsfrom 18 at May 2006 to 30 at May 31 2007 has been accompanied by clearleadership from George Schroer and two, newly appointed, experienced RegionalExploration Managers in Alex Raab and Devin Den Boer. The eight teams that havebeen formed have been given specific objectives for each project and a timeframein which these objectives are to be achieved. As our internal teams have beenbuilt we have also brought in outside experts on structure, geophysics,petrology, geochemistry and quality control to challenge our ideas andaccelerate our progress. One of UME's most significant assets is the database of geological informationfor Uruguay. While we have a significant amount of data, it was not in aconsistent format and lacked quality control. Over the past year we have auditedthe majority of the Company's data, upgraded from spreadsheets to a database andas a result new targets are now being identified. Our understanding of the San Gregorio mine system and the western half of theIsla Cristalina belt has increased significantly as a result of bring in anexperienced consultant in structural geology and organizing the data so it canbe used interactively. The first target that we developed as a result of thiswork was the Vetas A and Sur (veins in Spanish). Originally gold mineralisationin these deposits was thought to be confined to the veins. As drillingprogressed during the second half of the year it became clear thatmineralisation was contained, along with the veins, in north east trending shearstructures that intersect the main mineralised trend at San Gregorio. During theyear we mined 20,738 contained ounces from these deposits and have defined afurther 68,600 contained ounces in indicated and inferred resources. The shearshosting these deposits although restricted by infrastructure in some areasremain largely unexplored to the south. In the Zapucay district at Argentinita we defined an initial indicated andinferred resource of 2.2 million tonnes at 1.41 g/t for 100,000 ounces before westopped drilling to work up additional targets within the district to buildfurther resources. Drilling will continue in this district during 2008 to buildadditional resources and scoping studies have commenced on how these resourceswill be developed. Our greenfields programme in the eastern end of the belt is also starting todefine specific targets that we expect to progress to drilling in 2008. Our goalis to build resources in the Isla Cristalina belt to 1,500,000 ounces over thenext 2 years and convert 750,000 of these ounces to reserves. We now have 11 geologists working in the Don Feliciano and Florida Belts. Thefirst step has been to review historical work and produce good geological mapsfor each project. This work and follow-up sampling has now been done on theinitial projects such as Crucera/Casupa, Presidente Terra and Nueva Helveciawith new drill targets being defined. We have started drilling at Crucera/Casupaand will continue to dedicate one to two rigs to projects in these Belts overthe next year. Our goal is to define sufficient resources over the next twoyears on at least one project in the Don Feliciano and Florida belts to justifya new operation. Last year we successfully completed an airborne geophysical survey at Lascanothat resolved the initial 30 kilometer by 70 kilometer gravity anomaly intothree separate circular gravity and magnetic anomalies, each approximately 20kilometers in diameter. This year we drilled 4 holes that averaged over 800meters in depth in and around the central circular feature. These holes weredesigned to improve our understanding of the rock units causing the anomaly andestablish whether these rocks were altered or mineralised. While all of the 4 holes drilled to date have contributed to our understandingof the geology the second hole we drilled was the most important. This holeshowed hydrothermal alteration, characterized by potasic and iron oxidemetasomatism that included weak copper mineralisation over a zone of 125 metersthick. This alteration and mineralisation is believed to be consistent with thatfound in a porphyry copper or IOCG systems. Similar but weaker alteration wasalso evident in both of the two holes that were drilled on the rim of thecircular feature. These results mean that the significant geophysical anomaly atLascano is now associated with a potentially large hydrothermal system withcopper mineralisation. We are very encouraged by results to date and believethat they have significantly enhanced the potential of the project to produce adiscovery. We expect to finishing analysing the results from the currentprogramme, including a fifth drill hole, in September and intend to drill afurther 7,000 to 10,000 meters commencing in October 2007 using contractdrillers. This drilling will initially be focused on steps outs from hole 2looking for stronger alteration and mineralization and will then also test othertargets. Our diamond exploration programme this year was focused on developing theproject to a point where it could be divested. This programme was successful inidentifying kimberlite pipe targets from aeromagnetic, airborne gravity andstructural datasets. These anomalies are associated locally with positiveindicator minerals including a micro-diamond, G9 and G10 garnets and chromespinels in the area. Our objective is to divest the diamond project during 2008. We have spoken to a number of parties about our base metal projects, but to datehave not reached agreement for a farm-in on acceptable terms. Generally theprojects have been regarded as green field projects with good potential butinsufficiently advanced. We have brought in an experienced nickel consultant toevaluate the projects and recommend, if justified, a focused explorationprogramme to progress the best projects to a more advanced stage. Our exploration drilling capacity increased during the year with the addition ofthe UDR 200 diamond rig and the second DM45 reverse circulation rig. We havealso moved most of the rigs to two shifts. This rapid growth has however reducedproductivity as inexperienced crews are added and has impacted our capacity tomaintain the equipment. Our focus for 2008 will therefore be on improvingproductivity on our own rigs and supplementing our own capacity with contractorrigs. With a strengthened exploration team supported by key external advisors andbetter management of geological information we are generating the targets neededto add resources. Our challenge is to now explore these targets in a disciplinedmanner and convert the best of them into resources and reserves as quickly as wecan. Future Development During the year UME commenced a number of conceptual studies that will assist usin the future development of our business in Uruguay. The purpose of thesestudies is to allow rapid development of our business as resources and reservesare built. These studies have examined the capital and operating costs ofexpanding the throughput of our existing plant, building a new processing plantor heap leach operation and the development of underground resources. Theseinitial scoping studies indicate that we could; -- expand production by 50 per cent at San Gregorio to 1.9 million tonnes per annum at a capital cost in the region of $ 20 million with a milling unit cost reduction of approximately 10%. -- build a second plant with a similar production facility with annual capacity of 1,250,000 tonnes per annum at a capital cost in the order of $ 50 million. -- build a heap leach operation with the capacity to process 750,000 tonnes of ore a year at a capital cost in the order of $ 25 million. -- establish an underground mining operation at a depth of between 200 and 400 meters at a capital cost of the order of $15 million and an operating cost of the order of $ 25 a tonne. A grade of 2.3g/t would allow production at a cash cost of $ 400 per ounce. These options are not mutually exclusive, and which of them we follow willdepend on the results that the exploration team produces, the optimisation ofoperating plans and the conclusion of more definitive studies. Metallurgicaltest work will be performed in the first half of 2007/08 to complete the scopingstudies. Drilling to test the down dip extensions of San Gregorio and Arenalwill commence in the first quarter of 2008. As part of our objective of increasing our production profile we have started toevaluate the acquisition of gold development projects in other South Americancountries. Our focus will be on acquiring projects with measured and indicatedresources that have the potential to be put into production within three years. Uruguay Business Environment With effect from 1st July 2007 a major tax reform was passed into law inUruguay. We believe that these changes will, on the whole, have a neutral effecton the Group. We have regular contact with the Uruguay Government and community leaders atmany levels. We are grateful for their openness in dealing with us, the accessand support they provide, and their constructive interest in our activities.Whilst inevitably there are areas of disagreement and frustration, on the wholewe believe that our relationship is constructive and supportive. Conclusion I would like to thank all of those who have committed to the success of UME. Ouremployees and consultants, shareholders, the local communities in which weoperate and the Uruguayan Government have all supported the Company over thelast year and we look forward to building on this in the coming year. David Fowler, Chief Executive Officer STATEMENT ON RESERVES AND RESOURCES As at June 1, 2007 the Company had Measured and Indicated Resources of20,921,000 tonnes at 1.32 g/t, containing 885,900 ounces of gold in the IslaCristalina Belt. This compares to the previous disclosure as at November 1, 2006of 13,590,000 tonnes at 1.51 g/t, containing 659,000 ounces of gold. Primarilyas a result of conversion to higher resource categories, Inferred Resources havedecreased from 5,619,000 tonnes at 1.4 g/t, containing 250,700 ounces atNovember 1, 2006 to 3,736,000 tonnes at 1.1 g/t containing 133,640 ounces ofgold. Proven and Probable Reserves as at June 1, 2007, and wholly within the statedResources, were 6,933,000 tonnes at 1.58 g/t, containing 353,000 ounces of gold.This compares to the previous disclosure of 5,671,000 tonnes at 1.77 g/t,containing 322,000 ounces of gold. Therefore, the comparative increase ofcontained gold has been 31,000 ounces of reserve, whilst producing 63,945 ouncesduring the intervening period. The significant changes in the current Resource and Reserve position compared tothe previous disclosure are summarised in the table below: \* TDeposit Change----------------------------------------------------------------------Arenal -- Resource updated for excavated topography -- Reserve has been updated for excavated topography -- The completed diversion of the Corrales Stream has now enabled access to the reserve of 2.6 Mt at 1.9g/t Au previously qualified----------------------------------------------------------------------San Gregorio -- Inclusion of data from the latest drilling campaign that has increased resource and upgraded inferred resource to measured and indicated category. -- Updated geological interpretation that joins the areas of San Gregorio, Rieles and the East Extension -- Updated independent resource estimation -- Pit optimisation and design based upon gold price of US$ 550/oz----------------------------------------------------------------------Argentinita -- Inclusion of data from the latest drilling campaign that has increased resource and upgraded inferred resource to the indicated category. -- Updated geological interpretation -- Updated independent resource estimation -- Pit optimisation and design based upon gold price of US$ 500 oz.----------------------------------------------------------------------Vetas A & Sur -- Inclusion of data from the latest drilling campaign -- Updated geological interpretation -- Updated independent resource estimation -- Updated excavated topography -- Pit optimisation and design based upon gold price of US$ 600/oz----------------------------------------------------------------------\* T A significant increase in resources of the San Gregorio deposit has resulted inonly a modest increase in its reserves since most of the additional resourcesare of lower grade near the surface. Other high grade zones are at depthsrequiring uneconomic quantities of waste removal in an open pit configuration.We will be doing more work in this area over the next year, to target additionalmineralization and to determine whether other processing or operating conditionswould convert these resources into reserves. The deposit of Veta A lies adjacent to and partially under the Tailings StorageFacility (TSF) currently in use. Although still open at depth, themineralisation that is situated under the TSF has been included in the MineralResource estimation to the limit of the existing exploration drilling. Pitoptimisation and engineering has shown that the removal of tailings iseconomically feasible to allow extraction of the underlying mineralisation.However, the interference of the operational TSF is problematical in the nearterm and therefore that portion of the Veta A resource has been excluded fromreserve estimation at this time. Future conversion to reserve would be dependentupon extended operation at the San Gregorio project that encompasses theconstruction of an additional TSF superseding the existing facility. The Company is performing several scoping studies to evaluate processalternatives (plant expansion and heap leaching) as well as the viability ofunderground mining. These studies will ensure that resource conversion ismaximised and assist in the development of exploration programmes. Qualified Person's Statement The technical information presented in this Statement has been reviewed andverified by Mr John Sadek, Vice President Operations and a Mining Engineer, andMr. George Schroer Vice President Exploration and a Certified ProfessionalGeologist. Mr. Schroer is the Qualified Person for the purposes of the AIMGuidance Note on Mining, Oil and Gas Companies dated March 2006. Mr. Schroer hasa Masters of Science in Geology from Colorado State University and is a memberof SEG and AIPG. He has over 20 years of international experience inexploration. Mr. Sadek is the Qualified Person for the purposes of the AIMGuidance Note on Mining, Oil and Gas Companies dated March 2006. Mr Sadek has aBachelor of Engineering (Mining) from the University of Sydney and is a memberof the AusIMM and SME. He has over 20 years of international experience inmining. Uruguay Mineral Exploration Inc. (UME) discloses the following update of itsMineral Resources and Mineral Reserves as at 1 June 2007. These MineralResources and Mineral Reserves, as well as the terms used in this disclosure,are fully compliant with NI 43-101 requirements and CIM Definition Standards allresources and reserves are quoted at a cut off of .5 g/t Au, except forSobresaliente where 0.7 g/t Au has been used. \* T Measured Resources Indicated Resources Notes Tonnes Grade Contained Tonnes Grade Contained + (000's) (g/t Ounces (000's) (g/t Ounces Au) Au)Isla Cristalina BeltArenal 2 993 2.52 75,700 5,241 1.46 253,800San Gregorio 2 718 1.24 28,600 8,074 1.04 270,200Santa Teresa 2 497 1.14 18,200 1,434 1.09 50,200Ombu 1 - - - 687 1.33 29,000Sobresaliente 1 - - - 431 1.16 16,000Veta A 1, 5, 6 - - - 507 2.07 34,000Veta Sur 1 - - - 492 1.65 26,000Argentinita 1 - - - 1,701 1.52 83,000Stockpiles 4 - - - 26 1.43 1,200 - - -------------- ------- ------- ----- --------- ------- ----- ---------Total 2,148 1.77 122,500 18,773 1.26 763,400------------- ------- ------- ----- --------- ------- ----- --------- Total Measured and Inferred Resources Indicated Tonnes Grade Contained Tonnes Grade Contained (000's) (g/t Ounces (000's) (g/t Ounces Au) Au)Isla Cristalina BeltArenal 6,354 1.62 329,500 2,932 1.1 105,000San Gregorio 8,792 1.06 298,800 3 1.0 80Santa Teresa 1,931 1.10 68,400 7 0.8 160Ombu 687 1.33 29,000 38 0.9 1,000Sobresaliente 431 1.16 16,000 61 0.9 1,800Veta A 507 2.07 34,000 33 1.5 1,600Veta Sur 492 1.65 26,000 160 1.3 7,000Argentinita 1,701 1.52 83,000 502 1.0 17,000Stockpiles 26 1.43 1,200 ------------- ------- ----- --------- ------- ----- ---------Total 20,921 1.32 885,900 3,736 1.1 133,640------------- ------- ----- --------- ------- ----- ---------\* T \* T Proven Reserves Probable Reserves Notes Tonnes Grade Contained Tonnes Grade Contained + ++ (000's) (g/t Ounces (000's) (g/t Ounces Au) Au)Isla Cristalina BeltArenal 4 870 2.54 71,100 2,234 1.7 123,500San Gregorio 4 381 1.35 16,600 1,931 1.2 72,500Santa Teresa 4 269 1.24 10,700 787 1.2 29,200Veta A 4, 7 127 2.2 9,100Veta Sur 4 34 1.9 2,100Argentinita 4 272 1.9 17,000Stockpiles 4 26 1.43 1,200 ----------- ----- ------- ----- --------- ------- ----- ---------Total 1,520 2.01 98,400 5,412 1.46 254,600----------- ----- ------- ----- --------- ------- ----- --------- Total Proven and Probable Tonnes Grade Contained (000's) (g/t Ounces Au)Isla Cristalina BeltArenal 3,104 1.95 194,600San Gregorio 2,312 1.20 89,100Santa Teresa 1,056 1.17 39,900Veta A 127 2.23 9,100Veta Sur 34 1.91 2,100Argentinita 272 19 17,000Stockpiles 26 1.44 1,200 ----------- ------- ----- ---------Total 6,933 1.58 353,000----------- ------- ----- ---------\* T Notes: + - Totals may not be exact due to rounding ++ - Mineral Reserves are completely within the stated Mineral Resources withmining factors applied. 1 - Qualified Persons Steven Ristorcelli (C.P.Geo) of Mine DevelopmentAssociates (MDA) and Peter Ronning (P.Eng) an associate of MDA 2 - Qualified Person for Mineral Resources Dr Marcelo Godoy of Golder Associates 3 - Qualified Person for Mineral Resources George Schroer of UME Inc. 4 - Qualified Person for Mineral Reserves John Sadek of UME Inc. 5 - Includes 336kt @ 1.94gpt of Indicated Resource situated under the operatingTailings Storage Facility 6 - Includes 29kt @ 1.17gpt of Inferred Resource situated under the operatingTailings Storage Facility 7 - Excludes all Mineral Resources situated under the operating Tailings StorageFacility EXPLORATION REPORT FOR 2007 A full version of this report and the operations report for the 2007 financialyear including images is available on the company's website atwww.uruguayminerals.com.and at www.sedar.com Uruguay has considerable potential for gold, nickel, zinc, copper and diamonddiscoveries. The prospective terrains include the Isla Cristalina Belt, FloridaBelt, Arroyo Grande Belt, Don Feliciano Belt, Rivera Diamonds project and theLascano project in the Marin Basin. The Company has researched, acquired and developed mineral projects during its10 years in Uruguay and has reached a stage where future cash flow fromoperations allows the aggressive exploration and development of these projects.UME has invested $US 7 million in exploration in 2006/07 which included 60,000meters of drilling and the company, intends to spend a similar amount in 2007/8.Details of the drilling results are available in quarterly press releases. Isla Cristalina Belt Description of Geology and Projects The Isla Cristalina Belt is located 450 km from Montevideo in Northern Uruguayand hosts the Company's one operating gold mine at San Gregorio, in the Minas deCorrales District. This belt is an erosional window of crystalline Proterozoicbasement rocks of northern Uruguay, approximately 110km in length and 40 km inwidth. The belt is composed of Proterozoic granites and greenstones ranging inmetamorphic grade from greenschist to amphibolite facies. Anomalous goldmineralization exists along the entire 110 km strike length of the belt. The San Gregorio Operation in the northwest end of the belt is dominated byproduction from the Arenal deposit. Arenal and two historic deposits, SanGregorio and Santa Teresa host the largest concentration of gold that has beenfound to date in the district and are located along the same west north-westtrending structural system. Several smaller deposits occur between the largerdeposits and the most important currently are the shear hosted, "Veta A" and"Veta Sur" deposits. These trend northeast at nearly right angles to the mainstructural trend and, have been intensely explored and mined during in the pastyear. These deposits are characterized by low to moderate dip angles to thesoutheast and do not appear to cross the main San Gregorio thrusts. The Zapucay district is located 20 kilometers to the southeast of the SanGregorio Operation and is the second most important district to date in the IslaCristalina Belt. Gold mineralization is hosted in two main deposits, Argentinitaand Zapucay. Historic production from the Zapucay deposit was 35,700 ounces atan average grade of 2.1 g/t and the Argentinita deposit presently has anindicated and inferred resource at 31 May 2007 of 100,000 ounces at an averagegrade of 1.41 g/t. Both deposits lie within the same low angle shear structurethat cut gneissic augen granite. The hosting structure dips gently to thenortheast and strikes to the north-northwest. Limited historical drilling hasbeen performed on the anomalous 1.5Km long structural trend between Zapucay andArgentinita and at other prospects in the district such as Tito Lopez, Lavaderoand Papagayo. Progress in 2007 Devin Den Boer was appointed as Exploration Manager for the Isla Cristalina Beltin the second half of the 2007 financial year and four separate explorationteams have been formed to focus on exploration in the near mine, central,eastern and western regions of the Belt. A fifth team is dedicated to datamanagement and resources estimation. Additional experienced expatriates andlocal geologists were recruited during the year to complete staffing for allteams. The structural setting of the western half of the Isla Cristalina Belt includingthe San Gregorio system was re-interpreted during the year. The bulk of theeconomic gold mineralization discovered to date is hosted in low to moderateangle thrust structures that trend west northwest. Minor gold mineralizationalso occurs in northeast as well as northwest trending structures. The highangle Rivera shear system that cuts the belt from east to west is believed to beyounger than other structures and is spatially associated with the anomalousgold mineralization. A closed spaced ground magnetic survey of 5,900 line kilometers was completedcovering most of the western half of the belt. This survey, combined with thehistorical airborne magnetic and radiometric surveys, has provided importantassistance in mapping the low angle thrust system and other structures. During the year all historical data including geochemistry, geophysics,drilling, mapping and structural data were validated and integrated into onecommon access database for the entire Isla Cristalina Belt. The Veta A and Veta Sur deposits were the first projects to be re-evaluated aspart of our structural re-interpretation work. Drilling defined 68,000 ounces inresources in addition to the 20,700 ounces mined during the year. Whilst thezones drilled to date have not been as wide as the main San Gregorio shearpackage there is good scope for further resource expansion. These shears havebeen mapped for up to three kilometers to the south and our database shows goldanomalies associated with these structures. An initial indicated and inferred resource of 100,000 ounces was defined atArgentinita during the year. Drilling during 2008 will focus resource expansionon the 1.5 kilometer anomalous zone between Argentinita and Zapucay. New teams focusing on the under explored parts of the Isla Cristalina belt havecommenced with more detailed stream sediment sampling and regional mapping.Targets generated from stream sediment sampling in the east near Vichadero havedefined an anomalous area of approximately ten sq.km. In the west of the IslaCristalina mapping and sampling have defined the 1 km long vein system at VetaRodrigo that has returned rock chip values of up to 5.1 g/t gold. We enter 2008 with a renewed confidence about our ability to make furtherdiscoveries in the Isla Cristalina Belt and increase our reserves and resources.We now have a better understanding of the system that is hosting our major golddeposits having mapped the geology for over 40 kilometers in the western end ofthe belt. Recent work has demonstrated the potential for further resourceexpansion in and around the existing operations and we have a number of advancedtargets that are ready for drilling. Green field exploration is also generatingnew targets. Don Feliciano Belt and Florida Greenstone Belts Description of Geology and Projects The southern end of the Don Feliciano mobile belt lies 95 kilometers east ofMontevideo and trends north-northwest. The belt is exposed for over 250kilometers along strike, with 40-50 kilometers in width and comprisesstructurally deformed Proterozoic meta-sediments, greenstones and granitoidswhich are bound on the east and west by two major north trending shears. Thismobile terrain formed as a result of the collision between South America andAfrica at the end of the Proterozoic period and has seen limited historicprecious and base metal production. A number of UME's precious metal projectsincluding Presidente Terra, Bragado, and Texas are located in the belt as arethe lead, zinc and nickel properties by Retamosa, Isla Patrulla and MariaAlbina. Presidente Terra, the primary exploration property in the Don Feliciano Belt ischaracterized by granite, quartzite and meta-sediments which are cut bynortheast trending high-angle shear zones. These shear zones are sub parallel tothe main belt-bounding fault located just east of the property. Goldmineralization is found associated with the shears and hosted in the granite andat the contact between the granite and the quartzite. Historic and recentsamples have defined mineralization over a strike length of 9 kilometers withvalues reported up to 336 g/t Au on outcrop. One third of the 250 samples takenon the property have reported gold assay results above 1 g/t. The lead and zinc prospects located within the belt are characterized byreplacement bodies within limestone units and can be classed as MississippiValley type. Limited work has identified small pod shaped replacement bodies andUME is presently seeking partnerships with base metal companies to take theprojects forward. The Florida and Arroyo Grande greenstone belts are composed of Proterozoicmeta-volcanic and meta-sedimentary rocks interspersed through granitic terrainand occupy the southwestern third of the country (also referred to as the PiedraAlta Terrain). These rocks are exposed for 240 kilometers from the western sideof the Don Feliciano Mobile Belt to nearly the western border of Uruguay andfrom the coast line near Montevideo to a point 175 kilometers northwards wherethey are covered by younger Paleozoic and Mesozoic sediments and basaltic lavaflows. UME projects in the Piedra Alta Terrain include Casupa/Crucera, Paso deLugo, and Nueva Helvecia. Projects are hosted in granitic rocks as well asgreen-stone terrains. The Casupa/Crucera projects are 20 kilometers apart and located 110 to 130kilometers north of Montevideo. Both projects are characterized by multiple highangle veins and shears that cut granitic host rock and individually range inwidth from 1 to 15 meters. High grade samples have been reported from bothproject areas from quartz veins and associated shear zones. The Mal Abrigo and Cerros Negros nickel prospects also with in the Piedra AltaTerrain, 120 kilometers northwest of Montevideo are contained within layeredmafic complexes of gabbro and norite. The intrusive bodies clearly show cumulatelayering and weak disseminated sulphide mineralization in outcrop and from drillhole samples. Some of the sulfidic outcrops are weekly anomalous in Cu and Niand chalcopyrite has been noted along with phyrrohotite. These properties withother Ni projects are currently under review by a consulting geological groupwho specializes in nickel deposits. An exploration plan will be developed fromthis work and then UME will seek partnership to advance the project through thenext phase of exploration. Progress in 2007 An experienced Regional Exploration Manager for the Florida and Don FelicianoBelts, Alex Raab was appointed in November 2006. Since then, three separateexploration teams have been formed, two for the Florida Belt and one for the DonFeliciano Belt. Six new geologists have been recruited to complete the staffingfor these teams. At Presidente Terra mapping and structural interpretation over the full 9 kmstrike length of the project have better defined controls to the mineralizationwith new exploration targets being developed. Recent sampling has expanded theAu mineralization to the southwest by two kilometers. Veins hosting gradesgreater than 10 g/t have been identified with visible gold reported locally.Trenching and drill programmes have been designed to test anomalous areas duringthe later half of the 2007 calendar year. Mapping, surface sampling, a detailed ground magnetic programme, trenching anddrilling have been completed at Crucera during the year. The vein system hasbeen surface mapped for over 750 meters and ground geophysics indicate acontinuation of the structure hosting the mineralisation for over 5 kilometers.Drilling during the year confirmed mineralisation extending further down dipwithin the hosting structure and an initial resource calculation for thedistrict is expected to be completed in the coming year. At Casupa, 20kilometers south of Crucera seven vein sets are being mapped and sampled.Mineralization is strong with up to 100 g/t Au reported from sampling this year During the year all historical data including geochemistry, geophysics,drilling, mapping and structural data were integrated into an access databasefor each project with a common set of co-ordinates. Significant additional datarelating to the Florida belt was purchased from Delcosur and will be integratedinto the UME project databases. Historical exploration information, representingapproximately $US 5 million in expenditure, was also purchased from the previousexplorers of prospects in the Paso de Lugo Belt. This information will bereviewed and integrated into UME databases in the first half of 2008. UME and previous explorers have historically generated a significant number ofquality exploration projects in the Florida and Don Feliciano Belts and theinitial focus has been to re-evaluate these historical projects such asPresidente Terra and the Casupa/Crucera area. This work has involved moreintense mapping and sampling that is generating good targets. Concurrently theteam is generating new projects from the database many of which have encouragingearly field results. The corporate objective is to generate a significant, standalone mining operation in one of the southern mineral belts. Lascano Geophysical Anomaly Description of Project The Lascano project is based on a large geophysical anomaly located in thedepartment of Rocha 240 kilometers northeast of Montevideo. The Lascano projectarea is approximately 70 kilometers long and 40 kilometers wide and covers alarge magnetic and gravity composite feature that was originally discovered inthe late 1980's during a government performed regional geophysical survey. Theanomaly sits in a major northeast structural corridor, and has been interpretedto be caused by a large cluster of intrusive bodies. There is no surfaceexpression of the anomaly due to a thick cover of coastal plain alluvialmaterial. In June 2002 UME, in conjunction with BHP drilled a 450 meter deep, diamonddrill hole that intersected conglomerate and basalt that did not adequatelyexplain the anomaly. During 2006 UME completed a detailed airborne gravitygradient and magnetic survey comprising 10,400 line kilometers flown at a linespacing of 400 meters. The survey defined three large circular geophysicalfeatures each of which is about 20 kilometers in diameter. Progress in 2007 A programme of 4 diamond drill holes was designed to test the rock units causingthe strongest of the circular geophysical anomalies. The results of thisprogramme are described below. -- LASDDH-01 was drilled into the northern rim of the central anomaly. The hole reached 927.55 meters and in the upper portion encountered intrusive units including gabbro, pyroxene bearing granite, quartz-monzonite and quartz-feldspar porphyry. These rocks are underlain by basalt lava flows which exhibit weak biotite, chalcedony and carbonate alteration. LASDDH-03, 13.5 kilometers to the west on the rim of the anomaly, cut similar rocks as the first hole and was terminated at 827 meters. -- LASDDH-02, which was drilled to 690.7 meters in the interior of the central geophysical anomaly., Rocks encountered in this hole are predominately intermediate to mafic in composition and consist of quartz-monzonite to gabbro intruded into a pile of amygdaloidal basaltic lava flows. Alteration occurs in all of these units and is most intense between 200 and 375 meters. The alteration types are moderate to strong potassic with associated quartz-chalcedony veins and replacement silicification. Mineralization associated with this alteration is characterized by moderate to abundant magnetite and hematite veinlets and replacements (iron oxide metasomatism) along with trace to 2% sulphides. This sulphide mineralization is characterized by pyrite and/or chalcopyrite. Visible gold mineralization has been identified in one sample hosted in chalcedony veins. The intercept between 201 and 327 meters was geochemicaly anomalous and averaged 168 ppm Cu. with a higher grade intercept between 295 and 303 meters averaging 543 ppm Cu. The highest individual value was 0.1 % Cu. No significant gold values were reported. The alteration and mineralization assemblage encountered to date has similarities to iron oxide copper gold and porphyry copper mineralized systems. -- The fourth hole, LASDDH-04, was drilled to 825.3 meters just outside of the central geophysical anomaly and in a gravity and magnetic low to investigate its cause. The hole encountered less magnetic and lower density rocks. The first 486 meters was dominated by conglomerates and sandstones with local interbeds of basalt. The remainder of the drill hole was composed of intermediate to felsic volcanics and sub volcanics. These units are predominately different than those units intercepted in the drill holes located with in the geophysical anomaly and help define the geophysical signature. Results from this drill programme and petrographic and geophysical studies havefurther defined the anomaly and indicate that: -- the circular magnetic feature along the northern boundary of the anomaly is at least partially due to an edge effect of highly magnetic rocks encountered within the anomaly (LASDDH-001, 002, and 003) and the, relatively non-magnetic, clastic rocks encountered in LASDDH-004 outside the anomaly. -- a dense, most likely intrusive rock lies underneath the predominantly basaltic package of rocks which make up the centre of the anomaly. These rocks as a whole are dense relative to the rocks encountered outside the anomaly in hole LASDDH-004. The gravity anomaly is partially due to this density contrast. -- the intrusion of the basalts by granites to gabbros and their subsequent alteration indicate intrusive units most likely underlie the basaltic package of rocks encountered in the centre of the anomaly. -- the hydrothermal alteration and mineralisation encountered in LASDDH-002 and the similar weaker alteration in LASDDH-001, 12.5 kilometers to the northeast demonstrate that the system has the potential to host mineralised bodies. `The area around the LASDDH-002 drill hole provides a priority target for copper and or gold mineralisation. Follow up drilling of this target will help define the hydrothermal system and potentially lead to a discovery. Results from this drilling will be used to further define the appropriate geophysical technique to explore the area. Analysis and interpretation of the results from this years programme, includingthe fifth hole will be completed in September. A further programme of 7000 to10,000 meters will then be scheduled to commence October 2007. Cinco Rios Diamond Project Description of Geology and Projects The Cinco Rios diamond project is located on the Rio de la Plata craton in thedepartments of Rivera and Tacuarembo in northern Uruguay, approximately 500kilometers north of Montevideo. The Rio de la Plata Craton, which is consideredto be Paleo-Proterozoic age, in northern Uruguay, hosts kimberlites and relatedrocks in southern Brazil and Paraguay. The Cinco Rios project area whichconsists of Upper Palaeozoic and Mesozoic sediments, and which borders theCretaceous Parana Basin, is considered prospective for diamondiferouskimberlites. The potential for kimberlite discovery in northern Uruguay is shown by thereported historic recovery of alluvial micro- and macro-diamonds. In additionperidotitic and eclogitic garnets and chrome spinels were recovered during theperiod 1993 - 2004. These results are spatially associated with a prominentnorthwest-southeast trending structural corridor. Kimberlite emplacementtypically occurs within these types of structural corridors, and at theintersection of such structures. Progress in 2007 A regional exploration programme during the March to November 2006 periodcovering Rivera, Tacuarembo and Cerro Largo collected a total of 310 streamsamples. The results of this programme indicate the Rivera region is the mostprospective for diamondiferous kimberlites. A decision was therefore taken tocease regional exploration work in other areas and focus on Rivera. Stream and soil sampling in the second half of the year was focused on closerspaced sampling in areas that had previously returned encouraging indicatorminerals. A total of 418 samples were collected which have reported onemicro-diamond, and G9 and G10 garnets, together with chrome spinels, some ofwhich have chemistry indicative of the diamond stability field. The gravity and magnetic survey completed during 2006 and the magnetic surveyacquired from Southern Era were analysed for prospective targets with a total of43 priority targets identified for ground investigation. A further 18 targetswere also generated from an air photo interpretation. Many of the targetsidentified are located within a northwest-southeast trending structuralcorridor. Detailed ground magnetic surveys have been completed over the primaryexploration area defined by positive sample results with coincidental airbornemagnetic survey anomalies. Further ground magnetic surveys are planned for thefirst half of 2008 with follow-up drilling planned. It is our intention to spin this project out, by issuing existing shareholdersin the Group with new shares in a listed company that is dedicated only todiamond exploration. UME is in the early stages of talks with a number ofparties and, whilst no guarantees can be given, it is hoped that alternativefunding can be achieved for this project in 2008. EXPLORATION REPORT FOR THE QUARTER ENDED 31 MAY 2007 This report provides details of gold exploration activities during the quarterending 31 May 2007. It should be read in conjunction with the exploration Reportcontained in the company's 2007 Annual Report. Detailed comments on the progressof Lascano, diamonds and other non gold exploration projects have been providedin the Exploration Report in the 2007 Annual report available on the company'swebsite. Highlights -- Devin Den Boer commenced as Exploration Manager for the Isla Cristalina Belt in the fourth quarter of 2006/07. -- Additional resources have been defined from drilling at Veta A and Veta Sur Projections of the structures to the south have indicated that historic soil anomalies may be associated with the structures. Drilling will target mineralization along these structures and down dip in the first half of 2008. -- A new structural interpretation of the western end of the Isla Cristalina Belt has been made. The importance of this work has been to identify the structural setting that hosts the most productive gold deposits. All gold deposits discovered to date are associated with a low angle thrust system. This work has re-focused exploration efforts in the district with respect to the correct geologic setting. On going research into the structural controls to mineralization continues to refine the model. -- New exploration targets were developed at Cerro Papagayo during the quarter. Drilling is planned for the first quarter of the new financial year. -- Regional stream sediment and rock chip sampling continued at Vichadero with a prospective area of 10 km2 identified for detailed soil sampling in the first half of 2008. -- Sampling of Veta Rodrigo, in the western end of the belt returned anomalous values along the 1 km strike length of the vein. Drilling is planned for the first half of 2008. -- New anomalous gold mineralization zones have been discovered at President Terra in the southern third of the property. This mineralization is hosted in quartz veins within granites that trends north northeast parallel to the main shear zone. . These veins report up to 10 g/t Au and locally report visible gold. This mineralization is associated with hematite, pyrite and magnetite within veins and breccia. -- Mapping and trenching at Crucera and 20 km to the south at Casupa has identified a number of new veins targets. Drilling at Crucera during the quarter extended mineralization down dip with the first step out of 100 meters encountering additional mineralization. Isla Cristalina Gold Exploration Veta A and Veta Sur Exploration drilling continued to define resource within Veta A and Veta Sur. Ithas become apparent that these deposits are located in low angle thrusts whichare oblique to the main San Gregorio mineralized structural system and were overlooked by previous mining operations. An inferred resource of 28,700 ounces wasestimated for these veins as of January 2007 and has been updated to 34,000 inVeta A and 26,000 Veta Sur ounces of indicated resource at a 0.5 g/t cut off asof 31 May 2007. While the deposits are restricted by present infrastructure itis clear from the results that mineralization in these mineralized structurescontinue along strike and down dip. The following table lists the mostsignificant results in the last quarter. Veta Sur \* THole From Intercept Au g/t----------------------------------------VSRC-039 53 4m @ 4.5----------------------------------------VSRC-036 30 3m @ 4.2----------------------------------------VSRC-041 43 5m @ 4.0----------------------------------------VSRC-042 50 2m @ 7.3----------------------------------------VSRC-047 61 5m @ 2.8----------------------------------------VSRC-055 19 2m @ 6.7----------------------------------------VSRC-056 40 8m @ 5.9----------------------------------------\* T Veta A \* THole From Intercept Au g/t----------------------------------------VARC-067 30 5m @ 4.1----------------------------------------VARC-068 25 15m @ 3.0----------------------------------------VARC-071 29 7m @ 5.0----------------------------------------VARC-072 22 8m @ 2.7----------------------------------------VARC-073 65 5m @ 4.0----------------------------------------VARC-074 54 10m @ 2.3----------------------------------------VARC-083 74 8m @ 12.2----------------------------------------VARC-084 41 7m @ 15.6----------------------------------------VARC-086 41 7m @ 11.2----------------------------------------VARC-087 66 4m @ 4.3----------------------------------------\* T (intercepts are drill hole composites using 0.5 g/t cut) Argentinita District Drilling during the quarter was predominantly infill and geotechnical in nature.Prospecting permits are being converted into exploration permits to allowdrilling between Zapucay and Argentinita, as well as Tito Lopez, Lavadero andPapagayo prospects. Drilling is expected to recommence in the first quarter of2007/2008 to test these targets. Re-logging of drill holes was completed tobetter define the mineralized zones. All holes have been re-logged and enteredinto the database and used in the year end resource estimate update. An updateof resource estimates has been completed and has reported a combined indicatedand inferred resource of 100,000 ounces averaging 1.4 g/t. Drill results for the quarter include: Argentinita \* T Hole ID From Intercept Au g/t---------------------------------------RCARG-242 132 11m @ 5.9---------------------------------------RCARG-243 170 1m @ 5.1---------------------------------------RCARG-243 174 1m @ 3.5---------------------------------------RCARG-244 139 1m @ 7.8---------------------------------------RCARG-244 157 2m @ 1.1---------------------------------------RCARG-244 161 1m @ 5.3---------------------------------------RCARG-244 164 1m @ 3.3---------------------------------------RCARG-244 166 1m @ 2.2---------------------------------------RCARG-257 5 1m @ 1.3---------------------------------------RCARG-257 8 2m @ 1.3---------------------------------------RCARG-268 164 3m @ 1.9---------------------------------------RCARG-268 178 1m @ 1.4---------------------------------------RCARG-272 154 1m @ 0.7---------------------------------------\* T (intercepts are drill hole composites using 0.5 g/t cut) Mapping, surface rock chip and soil sampling has been progressed in the Papagayoprospect. It has been confirmed that mineralization is associated with low tomoderate angled thrust system similar to the San Gregorio District. Resultsduring the period have further defined the anomaly. First pass explorationdrilling is planned for the prospect in September 2007. Significant surface rock chip results for the quarter \* T Prospect Sample ID Au g/t--------------------------------------------------------- Cerro Papagayo CP0780 6.28--------------------------------------------------------- Cerro Papagayo CP0724 2.75--------------------------------------------------------- Cerro Papagayo CP0773 1.91--------------------------------------------------------- Cerro Papagayo CP0746 1.87--------------------------------------------------------- Cerro Papagayo CP0518 1.26--------------------------------------------------------- Cerro Papagayo CP0752 1.03---------------------------------------------------------\* T Isla Cristalina Belt - Regional Exploration Devin den Boer was appointed as Exploration Manager for the Isla CristalinaBelt. Devin has been selected to lead the exploration efforts through out thebelt. Devin brings 10 years of international exploration experience to the onsite management of the belt. His experience ranges from green field toproduction geologist. This experience fits well with the challenges faced in theIsla Cristalina Belt. Completion of an all encompassing database has been completed for the district.Mining of this information has led to the discovery of additional explorationtargets and areas which less obvious before the compilation was completed.Further refinements of the database will be made in the coming year. Qualityassurance of the data we currently use is part of the process of databasecompilation and management. The process has led to a better control on qualityassurance as well. Dr. Rod Holcomb has continued his research in the Isla Cristalina Belt and hasprepared a new regional geologic map and structural setting for the mineralizeddeposits. The larger mineralized bodies are all hosted within low to moderatelydipping thrust faults which predate the Rivera high-angle shear system. Thedefinition of the structural setting has refocused exploration efforts into theproper structural setting. Mapping has been completed between the San Gregoriomining district and Zapucay. The thrust system has been defined and confirms thecorridor between San Gregorio and Zapucay as being highly prospective forsimilar deposit types. This would include Laurales and Papagayo. During the forth quarter a new exploration team was formed to work on the 20kilometer section of the belt west and north of the San Gregorio Operation. Aninitial structural and geological map has been prepared for this area. This maphas more effectively identified the western strike extension of the thrust/shearpackage that hosts the San Gregorio system. Resent sampling have confirmed oregrade values of 5.1 g/t. Exploration efforts have been concentrated around the Veta Rodrigo vein system.The vein has been mapped and sampled on surface for over 1.0 kilometer and isanomalous along its entire exposed NNW strike length. Visible gold has beenobserved in surface samples with values up to 5.14 g/t Au reported. Historicresults have reported Au assays of up to 36 g/t. This vein sits in the low anglethrust system approximately 10 kilometers east of the San Gregorio operations. Regional exploration work continued in the fourth quarter in the extreme easternend of the belt around the Vichadero prospect. Stream sediment samplingconfirmed historic results and follow up sampling has started. A total of 67stream sediment samples were taken and results received. This programme isapproximately 50% complete. The most significant results from surface samplingfor the quarter are presented below. Quarter results Rock Chip \* T District Sample ID Au g/t---------------------------------Vichedero 10050 4.0---------------------------------Vichedero 10409 5.2---------------------------------\* T Quarter results Stream Sediments \* T District Sample ID Au ppb--------------------------------Vichedero 20469 125.8--------------------------------Vichedero 20116 174.3--------------------------------Vichedero 20085 201.5--------------------------------Vichedero 20079 249.6--------------------------------Vichedero 20043 328.3--------------------------------\* T Other Gold Projects outside the Isla Cristalina belt Florida and Don Feliciano Belts Au Exploration continued in the southern projects at an accelerated pace comparedto previous years. Three exploration teams are currently exploring the region.Four projects have been evaluated during the quarter. Presidente Terra More detailed mapping and sampling has been completed across the PresidenteTerra prospect. Results obtained to date have confirmed historic samplingresults. Mapping and sampling have confirmed the existence of a 7 km NNEtrending mineralized trend that parallels the contact between meta-sediments andgranitic rock. Over a third of the samples collected along this trend report Auvalues above 1 g/t. Au mineralization has been discovered 2 km south of the maintrend Detailed mapping has been completed over these areas. Mineralization inthe southern third of the property is hosted in quartz veins within granites andtrend parallel to the main shear zone which trends NNE. Visible gold has beendiscovered in a number of the veins in this sector and report assay values ofgreater then 10 g/t Au locally. This mineralization is associated with hematite,pyrite and magnetite within veins and breccia. Trenching and followed updrilling will take place once exploration permits are granted. This should takeplace in the first half of the financial year. The most significant resultsreceived this quarter are reported below. \* T District Sample ID Au g/t----------------------------------Pte. Terra EX10707 23.2----------------------------------Pte. Terra EX10618 1.0----------------------------------Pte. Terra EX10617 7.4----------------------------------Pte. Terra EX10584 11.4----------------------------------Pte. Terra EX10582 1.1----------------------------------Pte. Terra EX10558 5.0----------------------------------Pte. Terra EX10557 4.0----------------------------------Pte. Terra EX10531 6.8----------------------------------Pte. Terra EX10530 2.2----------------------------------Pte. Terra EX10529 5.6----------------------------------Pte. Terra EX10503 336.2----------------------------------Pte. Terra EX10502 35.8----------------------------------Pte. Terra EX10501 16.3----------------------------------\* T Crucera / Casupa These properties are located in Piedra Alta terrain which hosts the FloridaBelt. Mapping has been completed over the main vein/shear system at Crucera.Drilling commenced in late April to further define the known resource andincrease the resource down dip and 100 meters along strike. Mapping and samplinghave discovered additional veins on the property which will be drilled tested inthe first half of the new financial year. The table below reports the mostsignificant intercepts encountered in the last quarter. \* T Hole ID From Intercept Au g/t-----------------------------------------CR_07_002 90 12m @ 2.2-----------------------------------------CR_07_003 87 5m @ 2.4-----------------------------------------CR_07_004 87 3m @ 2.3-----------------------------------------CR_07_005 84 2m @ 1.9-----------------------------------------CR_07_006 78 2m @ 1.7-----------------------------------------CR_07_007 85 2m @ 0.8-----------------------------------------CR_07_008 98 1m @ 1.6-----------------------------------------CR_07_009 37 1m @ 2.6-----------------------------------------CR_07_009 66 1m @ 1.8-----------------------------------------CR_07_011 144 5m @ 2.2-----------------------------------------CR_07_012 60 1m @ 1.0-----------------------------------------CR_07_013 42 2m @ 3.2-----------------------------------------CR_07_014 38 3m @ 5.6-----------------------------------------CR_07_015 38 3m @ 2.0-----------------------------------------CR_07_016 37 1m @ 0.9-----------------------------------------CR_07_017 74 1m @ 4.5-----------------------------------------\* T A number of vein sets have been identified in the south of Crucera in Casupa.Results are encouraging and drilling of defined targets is planned before theend of the fiscal year. The most significant surface and trench sampling resultsfrom this quarter are presented in the table below. \* T Project Sample ID Au g/t Type Project Sample ID Au g/t Type--------- --------- ------ ------- -------- --------- ------- --------Chamizo EX11005 0.8 Surface Crucera EX11375 6.5 Trench--------- --------- ------ ------- -------- --------- ------- --------Chamame EX11251 1.7 Surface Crucera EX11453 6.0 Trench--------- --------- ------ ------- -------- --------- ------- --------Chamame EX11107 1.2 Surface Crucera EX11434 5.7 Trench--------- --------- ------ ------- -------- --------- ------- --------Chamame EX11149 1.0 Surface Crucera EX11359 5.0 Trench--------- --------- ------ ------- -------- --------- ------- --------Chamame EX11109 0.6 Surface Crucera EX11290 4.1 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11129 13.8 Surface Crucera EX11358 4.0 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11130 10.8 Surface Crucera EX11299 3.9 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11131 10.0 Surface Crucera EX11430 3.3 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11112 7.7 Surface Crucera EX11362 2.9 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11101 6.7 Surface Crucera EX11452 2.8 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11127 6.2 Surface Crucera EX11291 2.6 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11128 5.8 Surface Crucera EX11373 2.6 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11254 4.6 Surface Crucera EX11455 2.4 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11089 3.3 Surface Crucera EX11437 2.3 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11253 1.1 Surface Crucera EX11451 2.1 Trench--------- --------- ------ ------- -------- --------- ------- --------Casupa EX11226 0.6 Surface Crucera EX11454 2.0 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11140 1.8 Surface Crucera EX11287 1.7 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11094 0.9 Surface Crucera EX11429 1.4 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11456 10.4 Trench Crucera EX11457 1.2 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11374 10.3 Trench Crucera EX11376 1.2 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11436 9.8 Trench Crucera EX11361 1.0 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11360 9.1 Trench Crucera EX11295 0.9 Trench--------- --------- ------ ------- -------- --------- ------- --------Crucera EX11431 6.7 Trench Crucera EX11433 0.7 Trench--------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11286 0.6 Trench--------- --------- ------ ------- -------- --------- ------- --------\* T Bragado At the Bragado prospect, located in the province of Treinta y Tres, explorationactivity has identified a number of targets for follow up trenching anddrilling. Mineralization is associated with NE to E-W striking veins inassociation with a gabbroic intrusion into the folded meta-sediments. Drillingis planned in the first half of 2008 designed to test the veins and the contactsbetween the gabbro and meta-sediments. The most significant results arepresented below. \* TDistrict Sample ID Au g/t----------------------------------Bragado EX 10559 22.7----------------------------------Bragado EX 10562 8.7----------------------------------Bragado EX 10563 5.3----------------------------------Bragado EX 10604 0.5----------------------------------Bragado EX 10658 0.6----------------------------------\* T Qualified Person's Statement The technical information presented in this press release has been reviewed andverified by Mr. John Sadek, Vice President Operations and a Mining Engineer, andMr. George Schroer Vice President Exploration and a Certified ProfessionalGeologist. Mr. Sadek and Mr. Schroer are the Qualified Persons for the purposesof the AIM Guidance Note on Mining, Oil and Gas Companies dated March 2006. Mr.Sadek has a Bachelor of Engineering (Mining) from the University of Sydney andis a member of the AusIMM and SME. He has over 20 years of internationalexperience in mining. Mr. Schroer has a Masters of Science in Geology fromColorado State University and is a member of SEG and AIPG. He has over 20 yearsof international experience in exploration. Conference Call Details The management of Uruguay Mineral Exploration inc. will host a conference callto discuss the results at 11.00 EDT, 16.00 BST on Wednesday 15th August 2007.The dial-in numbers are: +44 (0)20 7138 0824 / +1 416 915 1269 and participantsshould give the following code to access the call: 7640957. A live audio streamof the conference call can also be accessed at www.uruguayminerals.com. Pleasedial in / log on five minutes prior to the start of the call to allow time forregistration. A recording of the conference call will be available for 7 daysafterwards, from approximately 1 hour after the live call has finished, on : +44(0)20 7806 1970 / +1 718 354 1112, access code:7640957#. A recording will alsobe available at www.uruguayminerals.com. ENDS The TSX Venture Exchange has not reviewed and does not accept responsibility forthe adequacy or accuracy of this news release. Editor's note: Uruguay Mineral Exploration Inc. is a gold producer andexploration company focused on identifying and developing mineral opportunitiesin Uruguay. UME is a fully integrated mining company, possessing the skillsnecessary to explore and develop its discoveries. The Company operates the onlyproducing gold mine in the country (San Gregorio), and is also the leadingmineral exploration company in Uruguay having assembled an exploration portfoliobased on gold, base metals (copper, nickel, lead, zinc) and diamond prospects.In the first half of 2003, the Company discovered the Arenal deposit, currentlythe largest known gold resource in Uruguay. Uruguay Mineral Exploration Inc. is quoted in Canada (TSXV) and London (AIM) andCollins Stewart Europe Limited is the Nominated Adviser and broker. \* T Uruguay Mineral Exploration Inc. Consolidated Balance Sheets Thousands of United States Dollars, except where indicated As at May 31 2007 2006------------------------------------------------------ --------------- Assets Current assets Cash and cash equivalents $13,978 $8,931 Accounts receivable (Note 3) 2,275 1,699 Inventories (Note 4) 8,484 8,108 Prepaid expenses 647 612 ------- ------- 25,384 19,350 Property, plant and equipment and development costs (Note 5) 25,885 22,896Deferred exploration and evaluation (Note 6) 16,316 11,184Future income tax assets (Note 13) 2,387 1,855Other assets and deferred costs (Note 7) 4,969 4,723 ------- -------Total assets $74,941 $60,008 ------------------------------------------------------ --------------- Liabilities and Shareholder's Equity Current liabilitiesAccounts payable and accrued liabilities $6,238 $5,076Current portion of long term debt (Note 8) 1,231 2,058Unrealized fair value of derivatives (Note 15) - 2,317 ------- ------- 7,469 9,451 Long term tax payable (Note 13(d)) 2,414 1,486Long term debt (Note 8) 2,154 2,167Asset retirement obligation (Note 9) 2,036 1,665 ------- -------Total liabilities 14,073 14,769 Equity instruments (Note 10) 34,592 32,670Warrants (Note 10) 12 188Contributed surplus (Note 11) 3,297 1,625Cumulative translation adjustment (19) (19)Retained earnings 22,986 10,775 ---------------Total shareholders' equity 60,868 45,239 ------- -------Total liabilities and shareholders' equity $74,941 $60,008\* T Commitments and contingencies (Note 12) Approved on behalf of the Board: \* TDavid Fowler, Director Tony Shearer, Director\* T These Consolidated Balance Sheets should be read in conjunction with the FullNotes to the Financial Statements which are available at www.sedar.com andwww.uruguayminerals.com. \* T Uruguay Mineral Exploration Inc. Consolidated Statements of Income and Retained Earnings Thousands of United States Dollars, except for earnings per share amounts and weighted average number of shares outstanding For the years ended May 31 2007 2006---------------------------------------------------------------------- Sales $63,056 $51,206Net profit interest - (635) ---------- ----------Net sales 63,056 50,571 Operating expenses 31,537 22,014Amortization, depletion and accretion 8,752 8,742 ---------- ----------Operating expenses 40,289 30,756 Sub-total 22,767 19,815 Other expenses (gains) Stock based compensation 975 1,453 Fair value adjustment for derivatives (2,317) 2,138 Exploration written off 2,129 - General and administrative 4,347 3,483 Interest and financing fees 314 339 Gain on settlement of net profit interest - (888) Interest and other income (510) (64) Foreign exchange loss 225 128 ---------- ---------- 5,163 6,589 Income before taxes 17,604 13,226 Current income taxes (Note 13) 3,582 2,711Future income taxes (Note 13) (532) (68) ---------- ---------- Net income for the year 14,554 10,583 Retained earnings beginning of year 10,775 192Dividend distribution (2,343) ---------- ---------- Retained earnings end of year $22,986 $10,775 ---------------------------------------------------------------------- Basic earnings per share (Note 10.g) $0.30 $0.23Diluted earnings per share (Note 10.g) $0.30 $0.22 Basic weighted average number of shares 48,258,892 46,661,234Diluted weighted average number of shares 48,668,269 48,548,859\* T These Consolidated Statements of Income and Retained Earnings should be read inconjunction with the Full Notes to the Financial Statements which are availableat www.sedar.com and www.uruguayminerals.com. \* T Uruguay Mineral Exploration Inc. Consolidated Statements of Cash Flows Thousands of United States Dollars, except where indicated For the years ended May 31 2007 2006------------------------------------------------------------ --------- Operating activities Net income for the year $14,554 $10,583 Adjustments for non cash items: Amortization, depletion and accretion 8,752 8,742 Exploration written off 2,129 - Accretion of net profit interest acquisition liability 159 - Future income taxes (531) (68) Deferred stripping (391) (3,870) Tax deferred payment (Note 13.d) 928 1,486 Fair value adjustment of derivatives (2,317) 2,137 Stock based compensation 975 1,453 Others (81) 52 -------- -------- 24,177 20,515 Net change in non-cash working capital balances (Note 16) 1,181 (2,129) -------- -------- 25,358 18,386 -------- -------- Financing activities Proceeds from the issue of share capital 1,515 1,473 Proceeds from borrowings, net of costs 106 457 Lease/Loan payments (163) - Dividends payments (2,343) - -------- -------- (885) 1,930 -------- -------- Investing activities Purchase of property, plant and equipment and development costs (12,401) (12,058) Sales of capital assets 51 650 Payments for exploration (7,076) (5,478) -------- -------- (19,426) (16,886) -------- -------- Increase in cash and cash equivalents 5,047 3,430 Cash and cash equivalents, beginning of year 8,931 5,501 -------- -------- Cash and cash equivalents, end of year 13,978 8,931\* T These Consolidated Statements of Cash Flows should be read in conjunction withthe Full Notes to the Financial Statements which are available at www.sedar.comand www.uruguayminerals.com. \* TCONTACT: Uruguay Mineral Exploration Inc Tony Shearer, Chairman, +44 20 7602 1570 tonyshearer@btinternet.com or David Fowler, CEO, 598 2 6016354 urumin@ume.com.uy or Shared Value Ltd Emily Bruning, +44 20 7321 5027 ebruning@sharedvalue.net or Collins Stewart Europe Ltd Chris Rollason, +44 20 7523 8308 crollason@collins-stewart.com\* T Copyright Business Wire 2007