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