Interim Results
Medoro Resources Announces Second Quarter Results
TORONTO, Aug. 29 /CNW/ - Medoro Resources Ltd. (TSX-V/AIM:MRL) announced
today its 2005 second quarter results for the period ending June 30, 2005. For
the quarter ended June 30, 2005, Medoro reported a loss of $423,000 or $0.00
per share as compared to a loss of $1.9 million or $0.02 per share in the
second quarter of 2004. The loss in the quarter reflects ongoing general and
administrative costs, which are less than half the amount in the same period
last year as a result of the disposal of the majority of the former Gold Mines
of Sardinia assets.
For the first six months, the company reported a net loss of $900,000 or
$0.01 per share as compared to a loss of $3 million or $0.05 per share in the
same period last year.
At June 30, 2005 the company had cash of $6.2 million and undiscounted
receivables of $8.2 million.
At Monte Ollasteddu, a geophysical survey to follow up on last year's
drilling results and help better identify targets for this year's program was
completed. Gold Fields had expected to commence a 2,000 metre diamond drilling
program in July, subject to the receipt of a Research Permit. Once again, the
company has encountered delays in obtaining the necessary permissions and
approvals to commence this program and, at this time, it is not possible to
predict when drilling will be able to commence.
The company has been unable to find a suitable joint venture partner for
its Pestarena project and, combined with the difficult regulatory environment
in Italy, has decided it would be more appropriate to allow the property to
revert to its original owners rather than make a significant investment in
exploring the property with its own funds. This investment, which has a book
value at quarter end of $5 million, will be written off in the third quarter.
Elsewhere, the company has been frustrated by significant delays, and
changes in, the process of acquiring certain properties where extensive due
diligence was carried out and has agreed to terminate a joint venture
agreement with our major shareholder, Gold Fields Limited, allowing Gold
Fields to pursue opportunities in the region for their own account.
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.
THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE.
MEDORO RESOURCES LTD.
(formerly Full Riches Investments Ltd.)
Consolidated Balance Sheets
(Expressed in Canadian dollars)
-------------------------------------------------------------------------
June 30, December 31,
2005 2004
------------- -------------
ASSETS (Unaudited) (Audited)
CURRENT
Cash and cash equivalents $ 6,190,759 $ 2,448,813
Accounts receivable 203,973 75,981
Prepaid and deposits 91,081 -
Current portion of note receivable 725,560 747,908
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7,211,373 3,272,702
NOTE AND SHARES RECEIVABLE (Note 2) 5,759,638 5,882,880
MINERAL PROPERTIES 6,083,184 5,979,873
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$ 19,054,195 $ 15,135,455
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES
CURRENT
Accounts payable and accrued liabilities $ 263,978 $ 401,534
FUTURE INCOME TAXES 2,130,031 2,130,031
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2,394,009 2,531,565
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SHAREHOLDERS' EQUITY
Share capital (Note 3) 34,152,795 29,161,976
Contributed surplus (Note 3) 584,622 584,622
Deficit (18,077,231) (17,142,708)
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16,660,186 12,603,890
-------------------------------------------------------------------------
$ 19,054,195 $ 15,135,455
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-------------------------------------------------------------------------
These unaudited interim consolidated financial statements for the period
ended June 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)
-------------------------------------------------------------------------
Six months Eight months
Three months ended ended ended
June 30, June 30,
2005 2004 2005 2004
---------------------------- ----------------------------
Operating
expenses:
General and
admini-
stration $ 448,125 $ 1,182,076 $ 953,573 $ 2,297,859
Exploration - 438,202 - 555,614
------------- ------------- ------------- -------------
448,125 1,620,278 953,573 2,853,473
Other income
(expenses):
Accreted
interest on
note and
shares
receivable 212,460 - 427,040 -
Depreciation
and
amortization - (305,870) - (305,870)
Foreign
exchange gain
(loss) (246,830) 33,254 $ (479,396) 45,428
Interest
income 21,152 13,062 32,879 80,219
Other income 38,527 - 38,527 -
------------- ------------- ------------- -------------
25,309 (259,554) 19,050 (180,223)
------------- ------------- ------------- -------------
Net loss for
the period $ (422,816) $ (1,879,832) $ (934,523) $ (3,033,696)
Deficit,
beginning
of the
period $(17,654,415) $ (7,772,827) $(17,142,708) $ (6,618,963)
------------- ------------- ------------- -------------
Deficit, end
of the
period $(18,077,231) $ (9,652,659) $(18,077,231) $ (9,652,659)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Basic and
diluted
loss per
share $ (0.00) $ (0.02) $ (0.01) $ (0.05)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted
average
number of
common
Shares
outstanding 87,115,744 84,670,649 87,077,418 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)
-------------------------------------------------------------------------
Six months Eight months
Three months ended ended ended
June 30, June 30,
2005 2004 2005 2004
---------------------------- ----------------------------
Cash provided
by (used in):
Operating
activities:
Net loss from
operations $ (422,817) $ (1,879,832) $ (934,523) $ (3,033,696)
Items not
affecting
cash:
Loss on
disposition
of capital
assets - 305,870 - 305,870
Unrealized
foreign
exchange on
note
receivable 357,369 (33,254) 572,629 (45,428)
Accreted
interest on
note and
shares
receivable (230,152) - (427,039) -
Changes in
non-cash
working
Capital:
Accounts
receivables (126,253) (58,729) (127,992) (363,938)
Prepaids and
deposits (62,273) (314,191) (91,081) (306,295)
Inventories - (6,069) - (4,436)
Other
long-term
liabilities - (458,331) - 183,527
Accounts
payable and
accruals 223,391 (462,809) (137,556) (8,228)
------------- ------------- ------------- -------------
(260,735) (2,907,345) (1,145,562) (3,272,624)
------------- ------------- ------------- -------------
Investing
activities:
Acquisition
of mineral
properties - (9,752) - (1,006,042)
Property plant
and equipment (103,311) 4,327 (103,311) (11,548)
Acquisition of
Sardinia Gold
Mining SpA - (601,785) - (2,104,279)
Repayment of
promissory
note - - - 50,000
------------- ------------- ------------- -------------
(103,311) (607,210) (103,311) (3,071,869)
------------- ------------- ------------- -------------
Financing
activities:
Issue of
common shares
for cash net
of share
issue cost 3,990,819 - 4,990,819 -
Issue of
special
warrants - - - 295,000
Issue of
subscriptions
receipt - - - 8,015,000
Issue cost on
warrants and
subscriptions - - - (781,515)
------------- ------------- ------------- -------------
3,990,819 - 4,990,819 7,528,485
Foreign
exchange
impact on
cash - 14,632 - (12,786)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net increase
(decrease) in
cash and
Equivalents 3,626,773 (3,499,923) 3,741,946 1,171,206
Cash and cash
equivalents,
beginning of
the period 2,563,986 7,892,468 2,448,813 3,221,339
------------- ------------- ------------- -------------
Cash and cash
equivalents,
end of the
period $ 6,190,759 $ 4,392,545 $ 6,190,759 $ 4,392,545
----------------------------------------------------------
----------------------------------------------------------
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 six month periods ended June 30, 2005
And three and eight month periods ended June 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. NOTES AND SHARES RECEIVABLE
The discounted value as at June 30, 2005 of the notes and shares
receivable from Sargold Resources Corporation ('Sargold') is as
follows:
Note receivable (a)(i) $ 5,900,825
Shares receivable (a)(ii) 584,373
---------------------------------------------------------------------
6,485,198
Current portion of note receivable (725,560)
---------------------------------------------------------------------
$ 5,759,638
---------------------------------------------------------------------
---------------------------------------------------------------------
(a) (i) $8,154,850 (euro 5.5 million) discounted using a 3.75%
risk free interest rate and a 10% risk premium.
The following schedule represents the amounts receivable, discounted
at June 30, 2005 and the percentage of shares to be released upon
each individual payment:
% of June 30, 2005
Shares ----------------------------
Released Discounted Discounted
Upon Value Value
Date Amount Payment (Euros) ($)
---------- ----------------- ------------- ------------- -------------
August 30,
2005 (euro) 500,000 8.3% (euro) 489,350 $ 725,560
August 30,
2006 1,000,000 16.7% 860,395 1,275,707
August 30,
2007 1,000,000 16.7% 756,391 1,121,501
August 30,
2008 1,500,000 25.0% 997,087 1,478,381
August 30,
2009 1,500,000 25.0% 876,560 1,299,676
--------------------------------------------------------------
(euro) 5,500,000 91.7% (euro) 3,979,782 $ 5,900,825
--------------------------------------------------------------
--------------------------------------------------------------
(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 June 30, 2005 Sargold shares
had a ten day closing average of $0.286. The discounted
value as at June 30, 2005, using a 13.75% discount rate,
was $584,373.
(b) Subsequent to quarter end an agreement in principle was reached
with the debt holder where a portion of the installment payment
scheduled for August 30, 2005 was postponed. See subsequent
events note 5(b).
3. 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
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Closing balance as at
December 31, 2004 87,022,667 $ 29,161,976 $ 584,622
-------------------------------------------------------------------------
Issued under private
placement 37,692,307 4,990,818 -
-------------------------------------------------------------------------
Balance at June 30, 2005 124,714,974 $ 34,152,794 $ 584,622
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(b) Escrow shares
As at June 30, 2005, there were 750,000 (December 31, 2004 -
1,713,000) common shares of the Company held in escrow.
(c) 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
Warrant issued in conjunction with private
placement 15,000,000 0.23
Warrants expired during the period (352,890) 3.30
-------------------------------------------------------------------------
Balance, June 30, 2005 21,128,028 $ 0.44
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(d) Incentive stock option plan
A summary of the changes in the Company's incentive share
option plan for the periods ended June 30, 2005 and December
31, 2004 are as follows:
June 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 - - 2,475,000 0.25
Options
cancelled (1,143,874) 1.97 (19,098) 2.76
Issued in
replacement
of GMS
Options - - 1,182,888 2.16
-------------------------------------------------------------------------
Outstanding,
end of period 4,994,916 $ 0.52 6,138,790 $ 0.79
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The following table summarizes information concerning outstanding and
exercisable options at June 30, 2005:
Options outstanding and exercisable
-------------------------------------------------------------------------
Weighted Weighted
Average Average
Number Remaining Exercise
Outstanding Life in Years Price
----------------------- ----------------------- -----------------------
2,485,000 3.28 $ 0.70
184,916 1.05 1.81
2,325,000 4.12 0.23
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4,994,916 3.57 $ 0.52
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
During the six months period ended June 30, 2005 and the eight month
period ended June 30, 2004, the Company paid the following amounts to
related parties:
(a) Consulting fees of $87,900 (2004 - $29,600) to a company in
which two directors of the Company are officers.
(b) Consulting fees of $39,489 (2004 - $127,223) to officers of the
Company for professional services.
(c) Consulting fees of $77,164 (2004 - $141,300) 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.
5. SUBSEQUENT EVENTS
(a) Disposition of Miniere de Pestarena:
The Acquisition Agreement entered between the Company and
Investimenti Minerari s.r.l. (the 'Vendor') where the Company
agreed to purchase all the shares issued and outstanding of
Miniere de Pestarena s.r.l. ('MDP') requires 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 Pestarena 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 Board also approved the payment of a maximum of (euro)
250,000 to the Vendor in consideration of the assumption by the
Vendor of all outstanding liabilities incurred by MDP.
(b) Note receivable rescheduling:
Subsequent to quarter end the Company and Sargold Resources
Corporation ('Sargold') agreed in principle 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 will repay (euro) 250,000 (originally
(euro) 500,000) on August 30, 2005 and on the due date of its
second installment, (August 30, 2006) the amount of (euro)
1,250,000 (originally (euro) 1,000,000). The amount postponed
((euro) 250,000) will carry simple interest at a rate of 6% per
annum, commencing August 30, 2005.
For further information: Peter Volk, Secretary, (416) 603-4653,
info(at)medororesources.com
(MRL)
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