3rd Quarter Results
Medoro Resources Announces Third Quarter Results
TORONTO, Nov. 29 /CNW/ - Medoro Resources Ltd. (TSX-V/AIM:MRL) announced
today its 2005 third quarter results for the periods ending September 30,
2005.
For the quarter ended September 30, 2005, Medoro reported a loss of
$4.1 million or $0.03 per share as compared to a loss of $1.8 million or $0.02
per share in the same quarter of 2004. The loss in the quarter primarily
relates to the write-off of the investment in Miniere di Pestarena srl during
the quarter.
For the first nine months, the company reported a net loss of
$5.0 million or $0.04 per share as compared to a loss of $4.9 million or $0.08
per share for the eleven months ended September 30, 2004.
At September 30, 2005 the company had cash and short-term investments of
$5.8 million, undiscounted receivables of $8.4 million and working capital of
$7.5 million.
Subsequent to the end of the period, the company was advised by Bolivar
Gold that Gold Fields Ltd. had formally relinquished its right to earn a 60%
interest in the Monte Ollasteddu prospect from Bolivar Gold, primarily as a
result of continuing difficulties in obtaining drilling permits in a timely
fashion. Bolivar Gold has also advised Medoro Resources that it is reviewing
its position with respect to its option to earn a 70% interest in Monte
Ollasteddu and that no decision has been made as to whether Bolivar Gold
intends to maintain its option by funding all costs through completion of a
bankable feasibility study, either alone or in conjunction with a new joint
venture partner, or whether it intends to also relinquish its option.
The company has increased and broadened its search for new opportunities,
both in terms of location and commodity, in the hope of finding a suitable
investment to provide the company with new opportunities without undue funding
obligations.
Financial Statements follow
MEDORO RESOURCES LTD.
(formerly Full Riches Investments Ltd.)
Consolidated Balance Sheets
(Expressed in Canadian dollars)
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September 30, December 31,
2005 2004
------------- -------------
ASSETS (Unaudited) (Audited)
CURRENT
Cash and cash equivalents $ 286,668 $ 2,448,813
Investments (Note 2) 5,500,000 -
Accounts receivable 136,557 75,981
Prepayments and deposits 20,885 -
Current portion of note receivable
(Note 3) 1,555,721 747,908
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7,499,831 3,272,702
NOTE AND SHARES RECEIVABLE (Note 3) 4,408,059 5,882,880
PROPERTY, PLANT AND EQUIPMENT 18,047 -
MINERAL PROPERTIES 1,000,000 5,979,873
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$ 12,925,937 $ 15,135,455
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LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 41,177 $ 401,534
FUTURE INCOME TAXES 356,200 2,130,031
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397,377 2,531,565
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SHAREHOLDERS' EQUITY
Share capital (Note 5) 34,111,117 29,161,976
Contributed surplus (Note 5) 587,392 584,622
Deficit (22,169,949) (17,142,708)
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12,528,560 12,603,890
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$ 12,925,937 $ 15,135,455
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These unaudited interim consolidated financial statements for the periods
ended September 30, 2005 have not been reviewed by the Company's
auditors.
See accompanying Notes to the unaudited interim Consolidated Financial
Statements.
MEDORO RESOURCES LTD.
(formerly Full Riches Investments Ltd.)
Consolidated Unaudited Statements of Operations and Deficit
(Expressed in Canadian dollars)
(Unaudited)
Nine Eleven
Three months ended months ended months ended
September 30, September 30,
2005 2004 2005 2004
--------------------------- ---------------------------
Operating expenses:
General and
administration $ 414,192 $ 1,264,335 $ 1,367,765 $ 3,562,194
Stock-based
compensation 2,770 126,600 2,770 126,600
Exploration - 441,858 - 997,472
------------- ------------- ------------- -------------
(416,962) (1,832,793) (1,370,535) (4,686,266)
Other income
(expenses):
Accreted
interest on
note and
shares
receivable 160,839 - 587,879 -
Depreciation
and
amortization - - - (305,870)
Foreign
exchange gain
(loss) (399,446) (13,505) (878,842) 31,923
Loss on
disposal of
investment (3,450,328) - (3,450,328) -
Interest income 13,516 13,192 46,395 93,411
Other income (337) - 38,190 -
------------- ------------- ------------- -------------
(225,428) (313) (206,378) (180,536)
------------- ------------- ------------- -------------
Net income for
the period $ (4,092,718) $ (1,833,106) $ (5,027,241) $ (4,866,802)
Deficit,
beginning of
the period (18,077,231) (9,652,659) (17,142,708) (6,618,963)
------------- ------------- ------------- -------------
Deficit, end of
the period $(22,169,949) $(11,485,765) $(22,169,949) $(11,485,765)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic and
diluted income
per share $ (0.03) $ (0.02) $ (0.04) $ (0.08)
------------- ------------- ------------- -------------
Weighted
average number
of common
Shares
outstanding 124,714,974 84,670,649 112,669,327 57,264,086
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
See accompanying notes to the unaudited interim Consolidated Financial
Statements.
MEDORO RESOURCES LTD.
(formerly Full Riches Investments Ltd.)
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)
(Unaudited)
Nine Eleven
Three months ended months ended months ended
September 30, September 30,
2005 2004 2005 2004
--------------------------- ---------------------------
Cash provided by
(used in):
Operating
activities:
Net loss $ (4,092,718) $ (1,833,106) $ (5,027,241) $ (4,866,802)
Loss on
disposition of
investment 3,450,328 - 3,450,328 -
Items not
affecting cash:
Loss on
disposition
of capital
assets - - - 305,870
Stock-based
compensation 2,770 126,600 2,770 126,600
Unrealized
foreign
exchange on
note receivable 348,147 13,505 920,776 (31,923)
Accreted
interest on
note and
shares
receivable (195,494) - (622,533) -
Changes in
non-cash working
capital (329,475) 489,267 (686,104) (10,103)
------------- ------------- ------------- -------------
$ (816,442) $ (1,203,734) $ (1,962,004) $ (4,476,358)
------------- ------------- ------------- -------------
Investing
activities:
Acquisition of
mineral
properties - - - (1,006,042)
Property, plant
and equipment 85,264 - (18,047) (11,548)
Short-term
investments (5,500,000) - (5,500,000) -
Acquisition of
Sardinia Gold
Mining SpA - - - (2,104,279)
Repayment of
note
receivable 368,765 - 368,765 50,000
------------- ------------- ------------- -------------
$ (5,045,971) $ - $ (5,149,282) $ (3,071,869)
------------- ------------- ------------- -------------
Financing
activities:
Issue of common
shares for
cash net of
share issue
cost (41,678) - 4,949,141 -
Issue of
special
warrants - - - 295,000
Issue of
subscriptions
receipt - - - 8,015,000
Issue cost on
warrants and
subscriptions - - - (781,515)
------------- ------------- ------------- -------------
$ (41,678) $ - $ 4,949,141 $ 7,528,485
Foreign
exchange impact
on cash - (49,419) - (62,205)
------------- ------------- ------------- -------------
Net increase
(decrease) in
cash and cash
equivalents $ (5,904,091) $ (1,253,153) $ (2,162,145) $ (81,947)
Cash and cash
equivalents,
beginning of
the period 6,190,759 4,392,545 2,448,813 3,221,339
------------- ------------- ------------- -------------
Cash and cash
equivalents, end
of the period $ 286,668 $ 3,139,392 $ 286,668 $ 3,139,392
-------------------------------------------------------
-------------------------------------------------------
See accompanying notes to the unaudited interim Consolidated Financial
Statements.
MEDORO RESOURCES LTD.
(formerly Full Riches Investments Ltd.)
Notes to the unaudited Consolidated Financial Statements
Three and nine month periods ended September 30, 2005
And three and eleven month periods ended September 30, 2004
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The unaudited interim consolidated financial statements are prepared
in accordance with Canadian generally accepted accounting principles
('GAAP') for interim financial statements. These interim financial
statements do not contain all disclosures required under GAAP and,
accordingly, should be read in conjunction with the Company's audited
financial statements for the fourteen month period ended December 31,
2004. These interim consolidated financial statements have been
prepared following the same accounting policies and method of
computations as the Company's audited financial statements for the
fourteen month period ended December 31, 2004.
Stock-based compensation
Effective November 1, 2003, the Company adopted the recommendations
of the amended Handbook Section 3870, 'Stock-based Compensation and
Other Stock-based Payments' ('Section 3870') for stock options issued
on or after November 1, 2002. Section 3870 established standards for
recognition, measurement and disclosure of stock-based compensation
and other stock-based payments made in exchange for goods and
services provided by employees and non-employees. The standard
requires that a fair value-based method of accounting be applied to
all stock-based payments to non-employees and to employee awards that
are direct awards of stock that call for settlement in cash or other
assets or are appreciation rights that call for settlement by the
issuance of equity instruments. Accordingly the Company has restated
and adjusted the opening deficit of the comparative period to reflect
the cumulative effect of the change in 2003.
Previously, the Company provided note disclosure of pro forma net
loss as if the fair value based method had been used on stock options
granted to employees and directors after January 1, 2002. The amended
recommendations have been applied using the retroactive method
without restatement and had the effect of increasing contributed
surplus and opening deficit at November 1, 2003 by $245,000.
2. INVESTMENTS
Investments are held in guaranteed investment certificates or freely
tradable listed securities, with an original term to maturity greater
than three months, earning approximately the equivalent of short-term
money market investments.
3. NOTES AND SHARES RECEIVABLE
The discounted value as at September 30, 2005 of the notes and shares
receivable from Sargold Resources Corporation ('Sargold') is as
follows:
Note receivable (a)(i) $ 5,360,119
Shares receivable (a)(ii) 603,661
---------------------------------------------------------------------
5,963,780
Current portion of note receivable (1,555,721)
---------------------------------------------------------------------
$ 4,408,059
---------------------------------------------------------------------
---------------------------------------------------------------------
(a) (i) $7,351,575 (euro 5.25 million) discounted using a
3.75% risk free interest rate and a 10% risk premium.
The following schedule represents the amounts receivable,
discounted at September 30, 2005 and the percentage of
shares to be released upon each individual payment:
% of June 30, 2005
Shares -----------------------------------
Released Discounted Discounted
Upon Value Value
Date Amount Payment (Euros) ($)
-------- ----------------- ---------- ----------------- -----------------
August
30,
2006 euro 1,250,000 25.0% euro 1,110,991 $ 1,555,721
August
30,
2007 1,000,000 16.7% 781,356 1,094,133
August
30,
2008 1,500,000 25.0% 1,029,997 1,442,305
August
30,
2009 1,500,000 25.0% 905,492 1,267,960
---------------------------- -----------------------------------
euro 5,250,000 91.7% euro 3,827,836 $ 5,360,119
----------------------------------------------------------------
----------------------------------------------------------------
(ii) Common shares of Sargold to be issued on or by August 30,
2009 for a value 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 September 30, 2005 Sargold
shares had a ten day closing average of $0.20. The
discounted value as at September 30, 2005, using a 13.75%
discount rate, was $603,661.
During the quarter, the Company and Sargold agreed to amend the
payment provisions of Sargold's promissory note in the amount of
euro 5,500,000, dated October 20, 2004. Under the terms of the
amendment, Sargold repaid euro 250,000 (originally euro 500,000)
on August 30, 2005 and on the due date of its second installment
(August 30, 2006) will pay, the amount of euro 1,250,000
(originally euro 1,000,000). The previously scheduled release from
escrow has been deferred to August 30, 2006. The postponed amount
(euro 250,000) will carry simple interest at a rate of 6% per annum
commencing August 30, 2005.
4. DISPOSITION OF MINIERE DE PASTARENA
The Acquisition Agreement entered between the Company and
Investimenti Minerari s.r.l. where the Company agreed to purchase all
the shares issued and outstanding of Miniere de Pastarena s.r.l.
('MDP') required the Company to incur euro 1.7 million in exploration
costs by March 2006.
Since the Company has been unsuccessful in finding a joint venture
partner to fund the exploration of MDP, the Board of Directors agreed
on August 3, 2005 to revert the shares to the Vendor in order to
cease ongoing maintenance and permitting obligations, which were
increasing as time passed.
The Company also paid euro 250,000 to the Vendor in consideration of
the assumption by the Vendor of all outstanding liabilities incurred
by MDP.
The Company has recorded a loss of $3,450,328 on the disposition of
this investment.
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, October 31, 2003
and 2002 5,935,925 $ 6,706,001 $ -
Cumulative effect of change
in accounting policy 245,000
------------- -------------- --------------
Adjusted balance, October 31,
2003 5,935,925 6,706,001 245,000
---------------------------- --------------
Issued prior to amalgamation 75,626,261 19,941,692 117,950
Fair value of options and
warrants exchanged - - 61,403
Issued as consideration for
services in connection with
the amalgamation 319,857 63,971 -
Issued in settlement of
accrued liabilities 140,624 70,312 -
Issued to acquire Miniere
di Pestarena srl 4,000,000 2,200,000 -
Issued as consideration for
services in connection with
the sale of GMS Australia 1,000,000 180,000 -
Stock-based compensation - - 160,269
-------------------------------------------
Closing balance as at
December 31, 2004 87,022,667 $ 29,161,976 $ 584,622
Issued under private
placement, net of share
issue costs 37,692,307 4,949,141 -
Stock-based compensation - - 2,770
------------- -------------- --------------
Balance at September 30,
2005 124,714,974 $ 34,111,117 $ 587,392
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(b) Warrants
Number of Exercise
Warrants Price
Balance, October 31, 2003 and 2002 - $ -
GMS England warrants exchanged for
Warrants of the Company 5,793,918 1.14
Agent's warrants 687,000 0.70
-------------------------------------------------------------------------
Balance, December 31, 2004 6,480,918 1.10
Warrants issued in conjunction with private
placement 15,000,000 0.23
Warrants expired during the period (352,890) 3.30
-------------------------------------------------------------------------
Balance, September 30, 2005 21,128,028 $ 0.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(c) Incentive stock option plan
A summary of the changes in the Company's incentive share
option plan for the periods ended September 30, 2005 and
December 31, 2004 are as follows:
September 30, 2005 December 31, 2004
---------------------------- ----------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------------- ---------------------------- -------------
Outstanding,
beginning of
period 6,138,790 $ 0.79 2,500,000 $ 0.70
Options granted 50,000 0.11 2,475,000 0.25
Options
cancelled (1,148,109) 1.97 (19,098) 2.76
Issued in
replacement
of GMS options - - 1,182,888 2.16
-------------------------------------------------------------------------
Outstanding,
end of period 5,040,681 $ 0.52 6,138,790 $ 0.79
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The following table summarizes information concerning outstanding and
exercisable options at September 30, 2005:
Options outstanding and exercisable
-------------------------------------------------------------------------
Weighted Weighted
Average Average
Number Remaining Exercise
Outstanding Life in Years Price
-------------------------------------------------------------------------
2,485,000 2.98 $ 0.70
180,681 0.75 1.81
2,375,000 3.70 0.23
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5,040,681 3.24 $ 0.52
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6. RELATED PARTY TRANSACTIONS
During the nine months ended September 30, 2005 and the eleven month
period ended September 30, 2004, the Company paid the following
amounts to related parties:
(a) Consulting fees of $124,508 (2004 - $29,600) to a company in
which two directors of the Company are officers.
(b) Consulting fees of $62,006 (2004 - $130,344) to officers of the
Company for professional services.
(c) Consulting fees of $143,953 (2004 - $211,833) to directors of
the Company.
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.
For further information: Peter Volk, Secretary, (416) 603-4653,
info(at)medororesources.com
(MRL.)
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