Final Results

Medoro Resources Announces 2007 Year-end Results TORONTO, April 30 /CNW/ - Medoro Resources Ltd. ("Medoro") (TSX-V: MRS/AIM: MRL) announced today results for the year ended December 31, 2007. For the year ended December 31, 2007, Medoro reported a net loss of $1.5 million or $0.03 per share as compared to a net loss of $2.1 million or $0.05 per share in the previous year. The 2007 decrease in net loss of $0.6 million was primarily a result of a increase in operating costs of $0.1 million offset by an increase in other income of $0.6 million and an increase in future tax recovery of $0.1 million. The loss in the previous year included a gain on the sale of the Monte Ollasteddu property of $0.3 million, a recovery on note and share receivable of $0.9 million, foreign exchange gains and other income of $1.2 million, partially offset by corporate and operating costs of $4.8 million. Net earnings for the fourth quarter ended December 31, 2007 was $1.0 million or $0.02 per share compared to a net loss of $0.9 million or $0.04 per share in the previous year. As at December 31, 2007 the company had cash and short-term investments of $2.0 million and no debt. Subsequent to year-end, the company completed a brokered private placement of 30,810,000 units at a price of $0.40 per unit, for gross proceeds of $12,324,000. The company is continuing its diamond drilling program at its Lo Increible gold property in Venezuela. The program is intended to increase and enhance existing resources at La Cruz, La Sofia and Tapon. The company expects to prepare an updated resource estimate in the fourth quarter of this year. A drilling program is expected to commence at its Sindo property in Mali this week. The company also announced that its report and accounts for the year ended December 31, 2007 and the information circular, notice of meeting and proxy for the company's annual meeting to be held on May 27, 2008 at 10:00 a.m. (Toronto time) in the Thames Room at the offices of Blake, Cassels & Graydon LLP, 199 Bay Street, Suite 2800, Commerce Court West, Toronto Ontario, Canada, have been sent to its shareholders. Copies of these documents may be obtained during normal business hours on weekdays (except Saturdays, Sundays and public holidays) free of charge from the Secretary of the company at the company's head office at 220 Bay Street, Suite 1400, Toronto, Ontario, M5J 2W4, (416) 603-4653. In addition, these documents are also available on the SEDAR website at www.sedar.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 and interests in eleven gold exploration areas in the Republic of Mali. Additional information on the company 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/Robin Birchall), +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 This press release contains forward-looking statements based on assumptions, uncertainties and management's best estimates of future events. Actual results may differ materially from those currently anticipated. Investors are cautioned that such forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from those expressed or implied by such forward looking statements are detailed from time to time in the company's periodic reports filed with the British Columbia Securities Commission and other regulatory authorities. The company has no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Consolidated financial statements of Medoro Resources Ltd. December 31, 2007 Auditors' Report To the Shareholders of Medoro Resources Ltd. We have audited the consolidated balance sheets of Medoro Resources Ltd. as at December 31, 2007 and 2006 and the consolidated statements of operations, comprehensive loss and deficit and of cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2007 and 2006 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. (Signed) "Deloitte & Touche LLP" Chartered Accountants Licensed Public Accountants Toronto, Ontario April 29, 2008 Medoro Resources Ltd. Consolidated statements of operations, comprehensive loss and deficit Year ended December 31, 2007 and 2006 (Expressed in thousands of Canadian dollars, except share and per share amounts) 2007 2006 ------------------------------------------------------------------------- Operating expenses General and administrative (Schedule) $ 4,811 $ 3,486 Stock-based compensation (Note 5) 140 1,333 ------------------------------------------------------------------------- 4,951 4,819 ------------------------------------------------------------------------- Other income and expenses Accreted interest on note and shares receivable - 34 Foreign exchange gain 2,806 633 Interest income 8 529 Recovery on note and shares receivable - 881 Gain on disposal of mineral properties - 315 Other income 267 38 ------------------------------------------------------------------------- 3,081 2,430 ------------------------------------------------------------------------- Net loss before income taxes (1,870) (2,389) Future income tax recovery (Note 6) (393) (292) ------------------------------------------------------------------------- Net loss and comprehensive loss for the year (1,477) (2,097) Deficit, beginning of year (30,262) (28,165) ------------------------------------------------------------------------- Deficit, end of year $ (31,739) $ (30,262) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted loss per share $ (0.03) $ (0.05) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Basic and diluted weighted average number of common shares outstanding 51,329,196 46,018,943 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The accompanying notes are an integral part of the consolidated financial statements Medoro Resources Ltd. Consolidated balance sheets as at December 31, 2007 and 2006 (Expressed in thousands of Canadian dollars) 2007 2006 ------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 2,026 $ 910 Short-term investments - 12,520 Prepaid and other assets 1,332 583 ------------------------------------------------------------------------- 3,358 14,013 Property, plant and equipment, net (Note 4) 34,880 19,677 ------------------------------------------------------------------------- $ 38,238 $ 33,690 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities $ 1,881 $ 760 Future income taxes (Note 6) 5,118 5,759 ------------------------------------------------------------------------- 6,999 6,519 ------------------------------------------------------------------------- Shareholders' equity Share capital (Note 5) 57,937 53,663 Contributed surplus (Note 5) 5,041 3,770 Deficit (31,739) (30,262) ------------------------------------------------------------------------- 31,239 27,171 ------------------------------------------------------------------------- $ 38,238 $ 33,690 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Nature of operations (Note 1) The accompanying notes are an integral part of the consolidated financial statements Medoro Resources Ltd. Consolidated statements of cash flows Year ended December 31, 2007 and 2006 2007 2006 ------------------------------------------------------------------------- Operating activities Net loss $ (1,477) $ (2,097) Items not affecting cash Gain on disposal of mineral properties - (315) Depreciation 50 61 Recovery on note and shares receivable - (881) Future income tax recovery (393) (292) Stock-based compensation 140 1,333 Unrealized foreign exchange (gain) loss (3,724) 185 Accreted interest on note and shares receivable - (34) Changes in non-cash working capital items Prepaid and other assets (749) (518) Accounts payable and accrued liabilities 321 412 ------------------------------------------------------------------------- (5,832) (2,146) ------------------------------------------------------------------------- Investing activities Short-term investments 12,520 (7,340) Acquisition of Panwest - (1,402) Proceeds on sale of Sardinia and SGM Ricerche - 2,867 Acquisition of African Gold Resources S.A (3,270) - Acquisition of property, plant and equipment (4,700) (3,201) ------------------------------------------------------------------------- 4,550 (9,076) ------------------------------------------------------------------------- Financing activities Private placement (note 5(d)) 2,250 12,008 Issuance of common shares for cash 36 6 ------------------------------------------------------------------------- 2,286 12,014 ------------------------------------------------------------------------- Effect of exchange rate changes on cash and cash equivalents 112 - ------------------------------------------------------------------------- Increase in cash and cash equivalents 1,116 792 Cash and cash equivalents, beginning of year 910 118 ------------------------------------------------------------------------- Cash and cash equivalents, end of year $ 2,026 $ 910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash and cash equivalents are comprised of: Cash $ 1,452 $ 910 Short-term money market instruments 574 ------------------------------------------------------------------------- $ 2,026 $ 910 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See note 8 for supplemental cash flow information The accompanying notes are an integral part of the consolidated financial statements Medoro Resources Ltd. Notes to the consolidated financial statements December 31, 2007 (Tabular amounts expressed in thousands of Canadian dollars, except share and per share amounts) 1. Nature of operations Medoro Resources Ltd. (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 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. To date, the Company has not generated revenue from its principal business activities and has relied on equity financings to meet its obligations. The ability of the Company to continue as a going concern is dependent on the Company's ability to receive continued financial support, the discovery of economically recoverable reserves and the ability to obtain the necessary financing to complete exploration and ultimately development, and generate profitable operations in the future. If the going concern assumption was not appropriate, the Company may not be able to realize its assets and satisfy its liabilities in the normal course of business. 2. Significant accounting policies These consolidated financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles and are expressed in Canadian dollars. The principal accounting policies are outlined below: (a) Basis of consolidation These consolidated financial statements include the accounts of the Company and all of its incorporated subsidiaries. All intercompany transactions and balances have been eliminated. Variable interest entities ("VIE's"), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by Canadian Institute of Chartered Accountants ("CICA") Accounting Guideline 15, Consolidation of Variable Interest Entities, are subject to consolidation by the primary beneficiary who will absorb the majority of the entities' expected losses and/or expected residual returns. The Company does not have any entities that qualify for treatment under this guidance. (b) Use of estimates The preparation of financial statements, in conformity with Canadian generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting year. On an ongoing basis, management evaluates its estimates, including those related to the recoverability of mineral properties, mineral exploration and development costs and volatility assumptions for stock compensation valuation. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates under different assumptions or conditions. (c) Cash and equivalents Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid investments, with an original term to maturity of three months or less. (d) Short-term investments Short-term investments include those short-term money market instruments which, on acquisition, have a term to maturity of greater than three months but less than one year. (e) Mineral properties The Company considers its mineral properties to have the characteristics of property, plant and equipment. As such, the Company defers all exploration costs, including acquisition costs, field exploration and field supervisory costs relating to specific properties until those properties are brought into production, at which time they will be amortized on a unit-of- production basis based on proven and probable reserves or until the properties are abandoned, sold or considered to be impaired in value, at which time an appropriate charge will be made. Administrative costs are expensed as incurred. The recoverability of the amounts shown for mineral properties is dependent on the existence of economically recoverable reserves, the ability to obtain financing to complete the development of such reserves and meet the Company's obligations under various agreements and the success of future operations or dispositions. (f) Impairment of long-lived assets The Company monitors the recoverability of the carrying amount of its long-lived assets by estimating the undiscounted cash flows expected to result from their use and eventual disposition. This assessment is based on the carrying amount of the asset at the date it is tested for recoverability, whether it is in use or under development. If the carrying amount exceeds the sum of the undiscounted cash flows expected to result, an impairment loss is recognized and the adjusted carrying amount becomes the new cost basis. Non-producing mineral properties are also evaluated for impairment based on management's intentions and are written down when the long-term expectation is that the net carrying amount will not be recovered. (g) Reclamation and site restoration costs The Company records the present value of asset retirement obligations, including reclamation costs, when the obligation is incurred. It is recorded as a liability with a corresponding increase in the carrying value of the related mining assets. The carrying value is amortized over the life of the related mining asset on a units-of-production basis commencing with initial commercialization of the asset. The liability is accreted to the actual liability on settlement through charges each period in the statement of operations. (h) Foreign currency translation The Company's functional currency is the Canadian dollar. The Company's foreign subsidiaries are considered to be integrated operations. Accordingly, the Company utilizes the temporal method to translate the financial statements of these subsidiaries into Canadian dollars. An exchange gain or loss that arises on translation or settlement of a foreign currency denominated monetary item or a non-monetary item carried at market is included in the determination of net income for the current period. At each balance sheet date, monetary items denominated in a foreign currency are adjusted to reflect the exchange rate in effect at the balance sheet date. Revenues and expenses are translated into Canadian dollars at the exchange rates prevailing on the transaction dates. Non-monetary assets and liabilities are translated using historical rates of exchange. (i) Income taxes Future income tax assets and liabilities are recognized for the future income tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for net operating loss carryforwards. Future income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse or be settled. The effect of a change in tax rates is recognized in the year that includes the substantive enactment date. A valuation allowance is recorded against any future income tax asset if it is not more likely than not that the asset will be realized. (j) Stock-based compensation The Company has in effect a stock option plan which is described in Note 5 - Share Capital. The Company accounts for stock options granted using the fair value based method of accounting for stock-based compensation. Accordingly, the fair value of the options at the date of grant is accrued and charged to operations, with a corresponding credit to contributed surplus, on a straight-line basis over the vesting period. If and when the stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital. (k) Loss per share Loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the reporting year. Diluted loss per share is computed similar to basic loss per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options, warrants and convertible debentures, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and convertible debentures converted and that the proceeds from such exercises and conversion were used to acquire common stock at the average market price during the reporting years. Options and warrants as disclosed in Note 5 are anti-dilutive and, therefore, have not been taken into account in the per share calculations. (l) Financial instruments and financial risks The fair values of cash and cash equivalents, short term investments, and accounts payable and accrued liabilities approximate their carrying values due to the short term to maturity of these financial instruments. The Company has no derivative financial instruments. (m) Adoption of new accounting standards Effective January 1, 2007, the Company adopted CICA Handbook Section 1530, Comprehensive Income, CICA Handbook Section 3855, Financial Instruments - Recognition and Measurement, CICA Handbook Section 3861, Financial Instruments - Disclosure and Presentation, CICA Handbook Section 3865, Hedges, and CICA Handbook Section 3251, Equity. These accounting policy changes were adopted on a retrospective 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 year ended December 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 material 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 cash equivalents and short-term investments as held-for-trading, which are measured at fair value. Accounts payable and accrued liabilities are classified as other liabilities, which are measured at amortized cost. As at December 31, 2007, the Company did not have any financial assets classified as available for sale and did not undertake any hedging activities therefore, the adoption of the standard noted above had no material effect on the presentation of the Company's consolidated financial statements. (c) Equity (CICA Section 3251) The Company's adoption of CICA section 3251 resulted in expanded disclosure of its components of shareholders' equity in the notes to the consolidated financial statements. (d) Hedges (CICA Section 3865) This section establishes the standard for when and how hedge accounting may be applied. The Company currently does not have any hedges in place, and therefore this standard had no impact on the consolidated financial statements (e) Transaction costs Transaction costs with respect to instruments not classified as held-for-trading are recognized as an adjustment to the cost of the underlying instruments and are recognized and amortized using the effective interest method. Application of this new accounting policy did not have a material impact on the financial position or results of operations as at or for the year ended December 31, 2007. (n) New accounting pronouncements In November 2006, the CICA issued the new handbook Section 1535, "Capital Disclosures," effective for annual and interim periods related to fiscal years beginning on or after October 1, 2007. This section establishes standards for disclosing information about a Company's capital and how it is managed in order that a user of the financial statements may evaluate the Company's objectives, policies, and processes for managing capital. This new standard is not expected to have a material effect on the Company's consolidated financial statements. In March 2007, the CICA issued a new section 3031, "Inventories", which is to replace the existing section 3030, "Inventories". Under the new section, inventories are required to be measured at the "lower of cost and net realizable value", which is different from the existing guidance of the "lower of cost and market". The new section also requires, when applicable, the reversal of any write-downs previously recognized. The new accounting standard and any consequential amendments will be effective for the Company beginning January 1, 2008. The Company is currently evaluating the implications of the new standard as it relates to the financial statement presentation of its spare parts and servicing equipment currently presented as Property, plant and equipment. CICA Section 1400, "General Standards of Financial Statement Presentation", was amended June 2007 to include guidance on an entity's ability to continue as a going concern. The revised standard explicitly requires management to assess and disclose the entity's ability to continue as a going concern. For clarification, these financial statements have been prepared on the basis of accounting policies applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. The Company is not aware of any material circumstances that would undermine this assumption. In February 2008, the CICA issued Section 3064, Goodwill and intangible assets, replacing Section 3062, Goodwill and other intangible assets and Section 3450, Research and development costs. Various changes have been made to other sections of the CICA Handbook for consistency purposes. The new Sections will be applicable to financial statements relating to fiscal years beginning on or after October 1, 2008. Accordingly, the Company will adopt the new standards for its fiscal year beginning January 1, 2009. It establishes standards for the recognition, measurement, presentation and disclosure of goodwill subsequent to its initial recognition and of intangible assets by profit- oriented enterprises. Standards concerning goodwill are unchanged from the standards included in the previous Section 3062. The Company is currently evaluating the impact of the adoption of this new section on its consolidated financial statements. The Company does not expect that the adoption of this new Section will have a material impact on its consolidated financial statements. In 2006, Canada's Accounting Standards Board ratified a strategic plan that will result in Canadian GAAP, as used by public companies, being converged with International Financial Reporting Standards in 2011. The impact of this transition on the Company's consolidated financial statements is still being determined. 3. 2006 Acquisition 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, 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 is based on the consideration paid and the fair value of Panwest's net assets acquired. Net assets acquired at fair values were as follows: Mineral properties (included in Property, plant and equipment) $ 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 a) Asset acquisition On September 14, 2007 the Company exercised its option to acquire all the issued and outstanding shares of African Gold Resources, S.A. ("African Gold") a Panamanian company, which held the options to acquire seven properties in Mali for $6,245,000 (including $163,000 in acquisition costs). In consideration for the acquisition of African Gold, the Company paid $2,962,000 (US$2,810,000) and issued 5,200,000 common shares. The cash consideration consisted of $808,000 (US$720,000) paid on April 23, 2007 for the option to acquire all of the issued and outstanding shares of African Gold, and $2,154,000 (US$2,090,000) cash paid on the exercise of the option. The Company will also assumed African Gold's obligations under the option arrangements it has entered into with the 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, the seller 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. The common shares issued have been valued at a price of $0.60 per common share, being the closing price on the day of the exercise of the Company's option to acquire African Gold. The total costs capitalized to Mineral properties on the asset acquisition were as follow: Cash paid for the option to purchase African Gold $ 808 Cash paid on the exercise of the option 2,154 Common shares issued 3,120 Acquisition costs 163 Future income tax liability 3,363 ----------------------------------------------------------------- $ 9,608 ----------------------------------------------------------------- ----------------------------------------------------------------- (b) The following table summarizes the Company's property, plant and equipment: December 31, 2007 ----------------------------------------------------------------- Accumulated Net book Cost depreciation value ----------------------------------------------------------------- Mineral properties Lo Increible A and B $ 24,674 $ - $ 24,674 Mali properties 9,438 - 9,438 Plant and equipment Lo Increible A and B 484 130 354 Mali properties 433 19 414 ----------------------------------------------------------------- $ 35,029 $ 149 $ 34,880 ----------------------------------------------------------------- ----------------------------------------------------------------- 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 year ended December 31, 2007, $38,031 (2006 - $14,312) of depreciation of plant and equipment used in exploration activities has been capitalized 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 7,142 8 (2) Stock-based compensation - - 1,333 ----------------------------------------------------------------- Balance, December 31, 2006 49,399,281 53,663 3,770 Issued on acquisition of African Gold (Note 4) 5,200,000 3,120 Private placement (Note 5 (d)) 3,308,809 1,108 1,141 Exercise of stock options 70,000 46 (10) Stock-based compensation - - 140 ----------------------------------------------------------------- Balance, December 31, 2007 57,978,090 57,937 5,041 ----------------------------------------------------------------- ----------------------------------------------------------------- (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 entitled 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) On November 22, 2007 the Company completed a private placement of 3,308,809 units at a price of $0.68 per unit, for gross proceeds of $2,249,990. Each unit consists of one common share of the company and one common share purchase warrant exercisable at a price of $1.00 for a period of two years. 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 132%, an expected life of the warrants of two years and an annual risk free rate of 4.22%. (e) Warrants December 31, December 31, 2007 2006 ----------------------------------------------------------------- Weighted Weighted average average Number exer- Number exer- of cise of cise warrants price warrants price ----------------------------------------------------------------- $ $ Balance, outstanding beginning of year 4,628,232 2.14 2,837,089 2.38 Issued on private placement 3,308,809 1.00 1,932,143 1.87 Warrants expired during the year (3,000,000) 1.40 (141,000) 3.92 ----------------------------------------------------------------- Balance, end of year 4,937,041 1.76 4,628,232 2.14 ----------------------------------------------------------------- ----------------------------------------------------------------- The following table summarizes information concerning outstanding and exercisable warrants at December 31, 2007: Outstanding and Exercise exercisable price Expiry date ----------------------------------------- $ 553,232 4.90 December 17, 2008 1,075,000 2.80 May 8, 2008 3,308,809 1.00 November 22, 2009 ----------------------------------------- 4,937,041 ----------------------------------------- ----------------------------------------- (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 for 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 stock option plan are as follows: December 31, December 31, 2007 2006 ----------------------------------------------------------------- Weighted Weighted average average exer- exer- cise cise Options price Options price ----------------------------------------------------------------- Outstanding, beginning of year 4,638,571 $ 0.92 720,097 $ 3.64 Options granted 257,000 0.73 3,970,000 0.52 Options cancelled (40,714) 0.71 (44,384) 8.05 Options exercised (70,000) 0.51 (7,142) 0.77 ----------------------------------------------------------------- Outstanding, end of year 4,784,857 $ 0.92 4,638,571 $ 0.92 ----------------------------------------------------------------- ----------------------------------------------------------------- The following table summarizes information concerning outstanding and exercisable options at December 31, 2007: Options outstanding and exercisable ------------------------------------------------ Weighted Weighted average average Number remaining exercise outstanding life in years price ------------------------------------------------ 382,857 0.80 $ 4.90 2,144 0.77 2.66 272,856 1.63 1.26 100,000 4.40 0.91 90,000 3.63 0.82 77,000 4.74 0.70 80,000 4.03 0.53 3,725,000 3.55 0.51 10,000 3.82 0.48 45,000 3.79 0.45 ------------------------------------------------ 4,784,857 3.27 $ 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: December 31, December 31, 2007 2006 ----------------------------------------------------------------- Weighted average risk-free rate 4.14% 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 $0.54 $0.34 6. Income taxes The provision for income taxes reported differs from the amounts computed by applying the cumulative Canadian federal and provincial income tax rates to the loss before tax provision due to the following: Years ended December 31, --------------------------------------------------------------------- 2007 2006 --------------------------------------------------------------------- $ $ Statutory tax rate 36.12% 36.12% --------------------------------------------------------------------- --------------------------------------------------------------------- Recovery of income taxes from continuing operations computed at standard rates 675 757 Differences in tax rates in foreign jurisdiction (9) Effect of non-deductible income and expenses 1,323 (147) Differences in future tax rates (552) Tax losses not recognized in the period that the benefit arose (1,044) (318) --------------------------------------------------------------------- Future income tax recovery 393 292 --------------------------------------------------------------------- --------------------------------------------------------------------- The approximate tax effect of each type of temporary difference that gives rise to the Company's future tax assets and liabilities are as follows: Years ended December 31, --------------------------------------------------------------------- 2007 2006 --------------------------------------------------------------------- $ $ Future income tax assets Operating loss carryforwards 3,016 2,089 Capital loss carryforwards 1,297 1,182 Other temporary differences 315 324 --------------------------------------------------------------------- 4,628 3,595 Less: Valuation allowance (4,628) (3,595) --------------------------------------------------------------------- - - --------------------------------------------------------------------- Future income tax liability Accumulated cost base differences of assets $5,118 $5,759 --------------------------------------------------------------------- --------------------------------------------------------------------- The Company has reduced the value of the potential future income tax asset to $Nil through the application of a valuation allowance as the Company does not have any current source of income to which the tax losses can be applied. Included in the future income tax liability are future income taxes relating to the 2006 Panwest acquisition (maintained in the Venezuelan Bolivars currency) and the 2007 African Gold acquisition (maintained in the Mali CFA currency). An unrealized foreign exchange gain of $3.7 million resulted upon the translation at December 31, 2007 of these balances to the Canadian dollar. At December 31, 2007, the Company has approximately $8,945,000 in capital losses available to reduce future capital gains. At December 31, 2007, the Company has approximately $8,191,000 in Canadian loss carryforwards available for tax purposes that expire between 2008 and 2027 as follows: $ 2008 94 2009 216 2010 230 2011 1,963 2012 1,455 2026 471 2027 3,948 --------------------------------------------------------------------- 8,377 --------------------------------------------------------------------- --------------------------------------------------------------------- 7. Related party transactions During the years ended December 31, 2007 and 2006, the Company paid the following amounts to related parties: (a) Consulting fees of $ 62,640 (2006 - $50,058) to a company in which a director of the Company is an officer; (b) Consulting fees of $ nil (2006 - $337,637) to directors of the Company; and (c) The Company paid $133,956 (2006 - $323,000) 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. 8. Supplemental cash flow information 2007 2006 --------------------------------------------------------------------- a) Interest paid $ - $ - Income taxes paid - - b) Non-cash transactions Acquisition of Panwest (note 3) $ - $ (14,944) Acquisition of African Gold (note 4) (6,483) Issue of common shares 3,120 9,387 Increase in future tax liability 3,363 5,557 9. Segmented information (a) The Company currently operates in one reportable operating segment, being the acquisition and exploration of mineral properties. (b) As at December 31, 2007 the Company's mineral properties are in Venezuela and Mali. As at December 31, 2006 all of the Company's mineral properties were in Venezuela. During the year ended December 31, 2006, the Company disposed of all its properties in Italy. The Company's assets and results of operations by geographic areas are as follows: As at December 31, 2007 Venezuela Mali Canada Total --------------------------------------------------------------------- Property, plant and equipment $ 25,028 $ 9,849 $ 3 $ 34,880 --------------------------------------------------------------------- --------------------------------------------------------------------- Total assets $ 25,955 $ 10,485 $ 1,798 $ 38,238 --------------------------------------------------------------------- As at December 31, 2006 Venezuela Mali Canada Total --------------------------------------------------------------------- Property, plant and equipment $ 19,678 $ - $ - $ 19,678 --------------------------------------------------------------------- --------------------------------------------------------------------- Total assets $ 20,004 $ - $ 13,686 $ 33,690 --------------------------------------------------------------------- For the year ended December 31, 2007 Venezuela Mali Canada Total --------------------------------------------------------------------- General and administrative expenses $ 547 $ 1,370 $ 2,894 $ 4,811 Stock based compensation - - 140 140 Other income (expenses) 4,302 (16) (1,205) 3,081 Future income tax (recovery) (393) - - (393) --------------------------------------------------------------------- Net earnings (loss) $ 4,148 $ (1,386) $ (4,239) $ (1,477) --------------------------------------------------------------------- --------------------------------------------------------------------- Capital expenditures net of non-cash transactions $ 4,581 $ 3,389 $ - $ 7,970 --------------------------------------------------------------------- For the year ended December 31, 2006 Venezuela Mali Canada Total --------------------------------------------------------------------- General and administrative expenses $ 611 $ - $ 2,875 $ 3,486 Stock based compensation - - 1,333 1,333 Other income (expenses) 173 - 2,257 2,430 Future income tax (recovery) - - (292) (292) --------------------------------------------------------------------- Net earnings (loss) $ (438) $ - $(1,659) $ (2,097) --------------------------------------------------------------------- --------------------------------------------------------------------- Capital expenditures net of non-cash transactions $ 4,603 $ - $ - $ 4,603 --------------------------------------------------------------------- 10. Subsequent events (i) On March 20, 2008 the Company completed a brokered private placement of 30,810,000 units at a price of $0.40 per unit, for gross proceeds of $12,324,000. Each unit consists of one common share of the Company and one-half of a common share purchase warrant, with each whole share purchase warrant being exercisable at a price of $0.60 for a period of two years. (ii) On April 2, 2008 the Company granted 1,832,000 stock option to its employees. The options have an exercise price of $0.40, vest immediately and expire April 2, 2013. Consolidated schedules of general and administrative expenses Year ended December 31, 2007 and 2006 (Expressed in thousands of Canadian dollars) 2007 2006 --------------------------------------------------------------------- $ $ General and administrative Office and administration 1,820 1,422 Consulting fees 1,689 714 Directors' fees 90 358 Investor relations, transfer agent and filing fees 145 347 Legal and accounting fees 384 264 Salaries and benefits 437 191 Travel and promotion 171 137 Depreciation 50 47 Bank charges and interest 25 6 --------------------------------------------------------------------- 4,811 3,486 --------------------------------------------------------------------- --------------------------------------------------------------------- For further information: Robert Doyle, Chief Executive Officer, (416) 603-4653, rdoyle(at)medororesources.com (MRL MRS.)

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Marlowe (MRL)
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