Half-yearly Report
Medoro Announces 2007 Second Quarter Results
TORONTO, Aug. 30 /CNW/ - Medoro Resources Ltd. (TSX-V: MRS/AIM: MRL)
announced today results for the three and six-months periods ended June 30,
2007. For the quarter, Medoro reported a net loss of $1.0 million or $0.02 per
share as compared to a loss of $0.7 million or $0.02 per share in the second
quarter of last year. For the six months ended June 30, 2007 the company
reported a loss of $2.0 million or $0.04 per share as compared to a loss of
$0.8 million or $0.03 per share in the same period last year.
The 2007 loss in the quarter largely reflects general and administrative
costs of $1.0 million to support the increased exploration activities compared
to the previous year. At June 30, 2007 the company had cash and short-term
investments of $7.6 million and no debt.
The company is continuing its diamond drilling program at the La Cruz, La
Sofia and El Tapon prospects in Venezuela, which will provide the basis for
reclassifying the existing historical resources and identifying additional
reserves and resources. The company has also completed a geochemical sampling
program that will allow it to start testing new drilling target areas within
the properties. In addition, the company is completing the due diligence phase
of the previously announced option agreement relating to Medoro's acquisition
of rights to nine gold exploration and exploitation areas in Mali. As part of
its due diligence, the company has performed extensive geochemical sampling on
all nine properties and based upon the results has identified at least three
targets. Upon exercise of its option, Medoro anticipates commencing a drill
program in the fourth quarter of this year.
The complete financial statements and management and discussion analysis
for the second quarter ended June 30, 2007 are available on the Company's
web-site at www.medororesources.com.
Medoro Resources is a gold exploration and development company focused on
acquiring properties of merit for potential joint ventures with senior
producers. The company holds a 100% interest in the Lo Increible 4A and 4B
concessions in Venezuela. Additional information on Medoro Resources can be
found by visiting the company's website at www.medororesources.com. Medoro's
Nominated Adviser for the purposes of AIM is Canaccord Adams Ltd. (Ryan
Gaffney), +44 (0) 20 7050 6500.
THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE
Financial Statements follow
Medoro Resources Ltd.
Consolidated statements of operations and deficit
three and six month periods ended June 30,
(Expressed in thousands of Canadian dollars, except share and per share
amounts)
(Unaudited)
Three months ending Six months ending
June 30, June 30,
2007 2006 2007 2006
-------------------------------------------------------------------------
$ $ $ $
Operating expenses
General and administrative
(Schedule) 1,048 908 2,030 1,226
Stock-based compensation
(Note 5) - - 33 -
-------------------------------------------------------------------------
1,048 908 2,063 1,226
-------------------------------------------------------------------------
Other income (expenses)
Accreted interest on note
and shares receivable - 17 - 34
Foreign exchange (loss) gain (33) (37) (106) 103
Interest income 1 122 4 130
Other income 87 103 205 116
-------------------------------------------------------------------------
55 205 103 383
-------------------------------------------------------------------------
Net loss for the period (993) (703) (1,960) (843)
Deficit, beginning of
period (31,229) (28,305) (30,262) (28,165)
-------------------------------------------------------------------------
Deficit, end of period (32,222) (29,008) (32,222) (29,008)
-------------------------------------------------------------------------
Basic and diluted loss per
share (0.02) (0.02) (0.04) (0.03)
-------------------------------------------------------------------------
Basic and diluted weighted
average number of common
shares outstanding 49,423,293 44,230,844 49,411,287 27,629,510
-------------------------------------------------------------------------
These unaudited interim consolidated financial statements of the Company
have been prepared by and are the responsibility of the Company's management.
The Company's independent auditor has not performed a review of these
financial statements in accordance with standards established by the Canadian
Institute of Chartered Accountants for a review of interim financial
statements by an entity's auditor.
Medoro Resources Ltd.
Consolidated balance sheets
(Expressed in thousands of Canadian dollars)
(Unaudited)
June 30, December 31,
2007 2006
-------------------------------------------------------------------------
$ $
Assets
Current assets
Cash 2,646 910
Short-term investments 4,962 12,520
Prepaid and other assets 1,072 583
-------------------------------------------------------------------------
8,680 14,013
Property, plant and equipment, net (Note 4) 22,421 19,677
-------------------------------------------------------------------------
31,101 33,690
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 579 760
Future income taxes 5,250 5,759
-------------------------------------------------------------------------
5,829 6,519
-------------------------------------------------------------------------
Shareholders' equity
Share capital (Note 5) 53,691 53,663
Contributed surplus (Note 5) 3,803 3,770
Deficit (32,222) (30,262)
-------------------------------------------------------------------------
25,272 27,171
-------------------------------------------------------------------------
31,101 33,690
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Nature of operations (Note 1) -
Medoro Resources Ltd.
Consolidated statements of cash flows
three and six month periods ended June 30,
(Expressed in thousands of Canadian dollars)
(Unaudited)
Three Six
months months
2007 2006 2007 2006
-------------------------------------------------------------------------
$ $ $ $
Operating activities
Net loss (993) (703) (1,960) (843)
Items not affecting cash
Depreciation 43 - 89 -
Stock-based compensation - - 33 -
Foreign exchange loss (446) - (509) -
Accreted interest on
note and shares
receivable - (17) - (34)
Changes in non-cash working
capital items
Accounts receivable - (106) - (414)
Prepaid and other assets 333 13 (489) -
Accounts payable and
accrued liabilities (65) 112 (181) 186
-------------------------------------------------------------------------
(1,128) (701) (3,017) (1,105)
-------------------------------------------------------------------------
Investing activities
Short-term investments 4,922 873 7,558 (6,897)
Cash held in escrow (3,130) (3,130)
Acquisition of property,
plant and equipment (1,982) (642) (2,833) (711)
-------------------------------------------------------------------------
2,940 (2,899) 4,725 (10,738)
-------------------------------------------------------------------------
Financing activity
Shares to be issued 3,099 3,099
Issuance of common shares
for cash 28 (98) 28 9,200
-------------------------------------------------------------------------
28 3,001 28 12,299
-------------------------------------------------------------------------
Net (decrease) increase in
cash 1,840 (599) 1,736 456
Cash, beginning of period 806 1,174 910 119
-------------------------------------------------------------------------
Cash, end of period 2,646 575 2,646 575
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplemental cash flow
information
Interest paid - - - -
Income taxes paid - - - -
Medoro Resources Ltd.
Notes to the consolidated financial statements
June 30, 2007
(Tabular amounts expressed in thousands of Canadian dollars, except share
and per share amounts)
1. Nature of operations
The Company is currently engaged in the exploration and development
of mineral properties; as such, the Company is considered to be in
the development stage.
On May 24, 2006, the Company completed a share consolidation whereby
7 pre-consolidation shares were exchanged for 1 post-consolidation
share. All information related to common shares for the current and
prior period has been restated to give effect to the share
consolidation.
These financial statements have been prepared under the assumption
that the Company will be able to realize its assets and discharge its
liabilities in the normal course of business rather than through a
process of forced liquidation. Continued operations of the Company
are dependent on the Company's ability to receive continued financial
support, complete equity financings, and successfully acquire an
interest in assets or a business and the ability to generate
profitable operations in the future.
These financial statements have been reviewed by the Company's audit
committee and approved by its Board of Directors.
2. Basis of presentation
These unaudited interim financial statements have been prepared in
accordance with Canadian generally accepted accounting principles for
interim financial statements. Accordingly, they do not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, the accompanying financial information
reflects all adjustments, consisting primarily of normal recurring
adjustments, which are necessary for a fair presentation of results
for the interim periods. Operating results for the three month period
ended June 30, 2007 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2007. These
interim consolidated financial statements follow the same accounting
policies as the audited consolidated financial statements of the
Company for the year ended December 31, 2006, except for the new
policies disclosed below. Accordingly, these interim consolidated
financial statements should be read in conjunction with the Company's
2006 annual audited consolidated financial statements and notes
thereto.
Effective January 1, 2007, the Company adopted two new accounting
standards related to financial instruments that were issued by the
Canadian Institute of Chartered Accountants ("CICA"). These
accounting policy changes were adopted on a prospective basis with no
restatement of prior period financial statements. The new standards
and accounting policy changes are as follows:
(a) Comprehensive income (Section 1530)
Comprehensive income is the change in shareholders' equity during
a period from transactions and other events and circumstances
from non-owner sources. In accordance with this new standard, the
Company now reports a statement of comprehensive income and a new
category, accumulated other comprehensive income, in the
shareholders' equity section of the consolidated balance sheet.
The components of this new category may include unrealized gains
and losses on financial assets classified as available-for-sale,
exchange gains and losses arising from the translation of
financial statements of a self-sustaining foreign operation and
the effective portion of the changes in fair value of cash flow
hedging instruments.
During the three month period ended March 31, 2007, there were no
changes in shareholders' equity that resulted from the non-owner
sources and consequently, the adoption of the standard noted
above had no effect on the presentation of the Company's
consolidated financial statements.
(b) Financial instruments - recognition and measurement (CICA
Handbook Section 3855) and disclosure and presentation (CICA
Handbook Section 3861)
In accordance with these new standards, the Company now
classifies all financial instruments as either held-for-trading,
available for sale, held-to-maturity, loans and receivables or
other financial liabilities. Financial instruments classified as
held-for-trading are measured at fair value with unrealized gains
and losses recognized in operating results. Financial instruments
classified as available for sale are measured at fair value with
unrealized gains and losses recognized in other comprehensive
income. Financial instruments classified as held-to-maturity,
loans and receivables or other financial liabilities are measured
at amortized cost.
Upon adoption of these new standards, the Company has designated
its cash and short-term investments as held-for-trading, which
are measured at fair value. Accounts payable and accrued
liabilities and notes payable are classified as other
liabilities, which are measured at amortized cost. As at June 30,
2007, the Company did not have any financial assets classified as
available for sale and therefore, the adoption of the standard
noted above had no effect on the presentation of the Company's
consolidated financial statements.
3. Acquisition
a) On April 23, 2007 paid US$720,000 for the option to acquire all
of the issued and outstanding shares of African Gold Resources,
S.A ("African Gold"), a Panamanian company, which has the options
to acquire nine properties in Mali. Upon the exercise of this
option the Company will pay an additional US$2,430,000 and issue
6,000,000 shares to Gold Resources S.A., the current shareholder
of African Gold. The Company will also assume African Gold's
obligations under the option arrangements it has entered into
with the current holders of the properties, including cash
payments totalling US$224,000 and a one time payment of US$9.00
per ounce of measured gold resources and US$4.00 per ounce of
indicated gold resources. The agreement also provides that if any
of the individual properties contain an aggregate of 500,000
ounces or more of measured and indicated gold resources, then
Gold Resources will receive a one-time payment of US$6.00 per
ounce of measured gold resources and US$4.00 per ounce of
indicated gold resources.
b) On July 10, 2006, the Company acquired all of the issued and
outstanding shares of Panwest Seas Corporation Ltd. ("Panwest",
(a company incorporated in the British Virgin Islands), which
holds the right to the Lo Increible 4A and 4B exploration
properties located in the El Callao area of the State of Bolivar,
Venezuela for $10,788,545 (including $276,645 in acquisition
costs). In consideration for the acquisition of Panwest, the
Company issued 15,140,000 common shares and paid $1,125,000
(US$1,000,000) in cash and also agreed to pay to the sellers a
royalty of US$15 per ounce of gold on all production from the Lo
Increible 4A and 4B mining properties. The properties are held
under mining contracts granted by Corporacion Venezolana de
Guayana.
The common shares issued have been valued at a price of $0.62 per
common share, being the average closing price of the common
shares of the Company for the two days before, the day of, and
two days after the date of announcement of the acquisition
agreement on June 12, 2006.
The business combination has been accounted for as a purchase
transaction with the Company as the acquirer of Panwest. The
allocation of the purchase price based on the consideration paid
and the fair value of Panwest's net assets acquired is:
Net assets acquired at fair values is as follows:
$
Mineral properties 16,346
Future income tax liability (5,557)
---------------------------------------------------------------------
10,789
---------------------------------------------------------------------
---------------------------------------------------------------------
Total consideration paid consists of the following:
Cash 1,125
Common shares 9,387
Acquisition costs 277
---------------------------------------------------------------------
10,789
---------------------------------------------------------------------
---------------------------------------------------------------------
4. Property, plant and equipment
The following table summarizes the Company's property, plant and
equipment as at June 30, 2007 and December 31, 2006:
June 30, 2007
---------------------------------------------------------------------
Accumulated Net book
Cost depreciation value
$ $ $
Mineral properties
Lo Increible A and B 20,867 - 20,867
Mali properties 1,104 - 1,104
Plant and equipment 600 150 450
---------------------------------------------------------------------
22,571 150 22,421
---------------------------------------------------------------------
---------------------------------------------------------------------
December 31, 2006
---------------------------------------------------------------------
Accumulated Net book
Cost depreciation value
---------------------------------------------------------------------
$ $ $
Mineral properties
Lo Increible A and B 19,180 - 19,180
Plant and equipment 558 61 497
---------------------------------------------------------------------
19,738 61 19,677
---------------------------------------------------------------------
---------------------------------------------------------------------
During the six months ended June 30, 2007, $44,808 of depreciation of
plant and equipment used in exploration activities are included in
mineral properties.
5. Share capital
(a) Common shares
Authorized: an unlimited number of common shares with no par
value
Issued and outstanding:
Number of Contributed
shares Amount surplus
-------------------------------------------------------------------------
$ $
Balance, December 31, 2005 17,816,425 34,111 587
Issued on acquisition of
Panwest (Note 3) 15,140,000 9,387 -
Private placement (Note 5 (b)) 14,285,714 8,305 890
Private placement (Note 5 (c)) 2,150,000 1,852 962
Exercise of stock options 62,142 36 (2)
Stock-based compensation - - 1,333
---------------------------------------------------------------------
Balance, December 31, 2006 49,454,281 53,691 3,770
Stock-based compensation - - 33
---------------------------------------------------------------------
Balance, June 30, 2007 49,454,281 53,691 3,803
---------------------------------------------------------------------
---------------------------------------------------------------------
(b) On February 28, 2006, the Company completed a private placement
of 14,285,714 common shares at $0.70 per share for net proceeds
of $9,195,045. In connection with the private placement, 857,143
agent compensation warrants were issued. Each agent compensation
warrant entitles the holder to purchase one common share of the
Company at a price of $0.70 per common share until August 28,
2007. All securities issued as part of this placement were
subject to a four-month hold. The agent compensation warrants
were fair valued using an option pricing model with the following
assumptions: no dividends are paid, a volatility of the Company's
share price of 140%, an expected life of the warrants of
18 months and an annual risk free rate of 3.96%.
(c) On July 21, 2006, the Company completed a private placement with
Gold Fields Ltd. of 2,150,000 units at a price of $1.40 for net
proceeds of $2,813,943. Each unit consisted of a share and one-
half of a warrant, with each whole warrant being exercisable for
two years at a price of $2.80. The warrants were fair valued
using an option pricing model with the following assumptions: no
dividends are paid, a volatility of the Company's share price of
134%, an expected life of the warrants of two years and an annual
risk free rate of 4.16%.
(d) Warrants
June 30, December 31,
2007 2006
---------------------------------------------------------------------
Weighted Weighted
average average
Number of exercise Number of exercise
warrants price warrants price
---------------------------------------------------------------------
$ $
Balance, outstanding
beginning of period 4,628,232 2.14 2,837,089 2.38
Issued on private
placement - - 1,932,143 1.87
Warrants expired
during the period (2,142,857) 1.68 (141,000) 3.92
---------------------------------------------------------------------
Balance, end of
period 2,485,375 2.88 4,628,232 2.14
---------------------------------------------------------------------
---------------------------------------------------------------------
The following table summarizes information concerning outstanding
and exercisable warrants at June 30, 2007:
Outstanding and Exercise
exercisable price Expiry date
$
-----------------------------------------------
857,143 0.70 August 28, 2007
553,232 4.90 December 17, 2008
1,075,000 2.80 May 8, 2008
-----------------------------------------------
2,485,375
-----------------------------------------------
-----------------------------------------------
(e) Incentive stock option plan
The Company has an incentive stock option plan. Under the plan,
the exercise price of each option should not be less than the
discounted market price as defined in the policies of the TSX
Venture Exchange, and an option's maximum term is five years.
Options may be granted by the board of directors at any time, to
directors, senior officers or employees of the Company and
consultants to the Company or any of its designated affiliates,
who, by the nature of their position or duties are, in the
opinion of the board, upon recommendation of the Compensation
Committee, in a position to contribute to the success of the
Company.
A summary of the changes in the Company's incentive share option
plan for the six months ended June 30, 2007 and the year ended
December 31, 2006 are as follows:
June 30, December 31,
2007 2006
---------------------------------------------------------------------
Weighted Weighted
average average
exercise exercise
Options price Options price
---------------------------------------------------------------------
$ $
Outstanding, beginning
of period 4,638,571 0.92 720,097 3.64
Options granted 80,000 0.53 3,970,000 0.52
Options cancelled (40,714) 0.71 (44,384) 8.05
Options exercised (55,000) 0.51 (7,142) 0.77
---------------------------------------------------------------------
Outstanding, end
of period 4,622,857 0.92 4,638,571 0.92
---------------------------------------------------------------------
---------------------------------------------------------------------
The following table summarizes information concerning outstanding
and exercisable options at June 30, 2007:
Options
outstanding
and
exercisable
-----------------------------------------------
Weighted
average Weighted
remaining average
Number life exercise
outstanding in years price
-----------------------------------------------
$
382,857 1.31 4.90
2,144 1.28 2.66
272,856 2.13 1.26
90,000 4.13 0.82
80,000 4.53 0.53
3,740,000 4.05 0.51
10,000 4.32 0.48
45,000 4.30 0.45
-----------------------------------------------
4,622,857 3.73 0.92
-----------------------------------------------
-----------------------------------------------
The fair value of options issued by the Company in 2007 and 2006
was determined using the Black-Scholes option pricing model using
the following weighted average assumptions:
June 30, December 31,
2007 2006
-----------------------------------------------------------------
Weighted average risk-free rate 3.98% 4.10%
Dividend yield Nil Nil
Volatility factor of the expected market
price of the Company's shares 147% 110%
Average expected option life - years 2.5 2.5
Weighted average grant date fair value
per share of options issued during the year $0.41 $0.34
6. Related party transactions
During the six month periods ended June 30, 2007 and 2006, the
Company paid the following amounts to related parties:
(a) Consulting fees of $31,668 (2006 - $50,058) to a company in which
a director of the Company is an officer; and
(b) Consulting fees of $99,105 (2006 - $168,476) to directors of the
Company.
(c) The Company paid $14,060 (2006 - $Nil) to a related party
controlled by three directors of the Company in respect of its
office lease in Caracas, Venezuela.
These transactions are in the normal course of operations and are
measured at the exchange amounts, which is the amount of
consideration established and agreed to by the related parties.
7. Segmented information
The Company currently operates in one reportable operating segment,
being the acquisition and exploration of mineral properties. As at
June 30, 2007, the Company's mineral properties are in Venezuela and
Mali. During the year ended December 31, 2006, the Company disposed
of all its property in Italy.
Medoro Resources Ltd.
Consolidated schedules of general and administrative expenses
three and six month periods ended June 30,
(Expressed in thousands of Canadian dollars)
(Unaudited)
Three Six
months months
2007 2006 2007 2006
-------------------------------------------------------------------------
General and administrative $ $ $ $
Office and administration 315 293 421 353
Consulting fees 254 124 736 261
Director fees 20 22 43 31
Investor relations, transfer
agent and filing fees 80 188 100 230
Legal and accounting fees 130 141 200 155
Salaries and benefits 179 76 322 114
Travel and promotion 45 61 153 78
Depreciation 21 - 44 -
Bank charges and interest 4 3 11 4
-------------------------------------------------------------------------
1,048 908 2,030 1,226
-------------------------------------------------------------------------
-------------------------------------------------------------------------
For further information: Nelson Lee, Chief Financial Officer at (416)
603-4653, nlee(at)medororesources.com
(MRS. MRL)
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