Medoro Resources Announces 2007 Year-end Results
TORONTO, April 30 /CNW/ - Medoro Resources Ltd. ("Medoro") (TSX-V:
MRS/AIM: MRL) announced today results for the year ended December 31, 2007.
For the year ended December 31, 2007, Medoro reported a net loss of
$1.5 million or $0.03 per share as compared to a net loss of $2.1 million or
$0.05 per share in the previous year. The 2007 decrease in net loss of $0.6
million was primarily a result of a increase in operating costs of $0.1
million offset by an increase in other income of $0.6 million and an increase
in future tax recovery of $0.1 million. The loss in the previous year included
a gain on the sale of the Monte Ollasteddu property of $0.3 million, a
recovery on note and share receivable of $0.9 million, foreign exchange gains
and other income of $1.2 million, partially offset by corporate and operating
costs of $4.8 million. Net earnings for the fourth quarter ended December 31,
2007 was $1.0 million or $0.02 per share compared to a net loss of $0.9
million or $0.04 per share in the previous year. As at December 31, 2007 the
company had cash and short-term investments of $2.0 million and no debt.
Subsequent to year-end, the company completed a brokered private
placement of 30,810,000 units at a price of $0.40 per unit, for gross proceeds
of $12,324,000.
The company is continuing its diamond drilling program at its Lo
Increible gold property in Venezuela. The program is intended to increase and
enhance existing resources at La Cruz, La Sofia and Tapon. The company expects
to prepare an updated resource estimate in the fourth quarter of this year. A
drilling program is expected to commence at its Sindo property in Mali this
week.
The company also announced that its report and accounts for the year
ended December 31, 2007 and the information circular, notice of meeting and
proxy for the company's annual meeting to be held on May 27, 2008 at 10:00
a.m. (Toronto time) in the Thames Room at the offices of Blake, Cassels &
Graydon LLP, 199 Bay Street, Suite 2800, Commerce Court West, Toronto Ontario,
Canada, have been sent to its shareholders. Copies of these documents may be
obtained during normal business hours on weekdays (except Saturdays, Sundays
and public holidays) free of charge from the Secretary of the company at the
company's head office at 220 Bay Street, Suite 1400, Toronto, Ontario, M5J
2W4, (416) 603-4653. In addition, these documents are also available on the
SEDAR website at www.sedar.com.
Medoro Resources is a gold exploration and development company focused on
acquiring properties of merit for potential joint ventures with senior
producers. The company holds a 100% interest in the Lo Increible 4A and 4B
concessions in Venezuela and interests in eleven gold exploration areas in the
Republic of Mali. Additional information on the company can be found by
visiting the company's website at www.medororesources.com. Medoro's Nominated
Adviser for the purposes of AIM is Canaccord Adams Ltd. (Ryan Gaffney/Robin
Birchall), +44 (0) 20 7050 6500.
THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS NEWS RELEASE
This press release contains forward-looking statements based on
assumptions, uncertainties and management's best estimates of future events.
Actual results may differ materially from those currently anticipated.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties. Important factors that could cause actual results to differ
materially from those expressed or implied by such forward looking statements
are detailed from time to time in the company's periodic reports filed with
the British Columbia Securities Commission and other regulatory authorities.
The company has no intention or obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
Consolidated financial statements of
Medoro Resources Ltd.
December 31, 2007
Auditors' Report
To the Shareholders of
Medoro Resources Ltd.
We have audited the consolidated balance sheets of Medoro Resources Ltd.
as at December 31, 2007 and 2006 and the consolidated statements of
operations, comprehensive loss and deficit and of cash flows for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly,
in all material respects, the financial position of the Company as at December
31, 2007 and 2006 and the results of its operations and its cash flows for the
years then ended in accordance with Canadian generally accepted accounting
principles.
(Signed) "Deloitte & Touche LLP"
Chartered Accountants
Licensed Public Accountants
Toronto, Ontario
April 29, 2008
Medoro Resources Ltd.
Consolidated statements of operations, comprehensive loss and deficit
Year ended December 31, 2007 and 2006
(Expressed in thousands of Canadian dollars, except share and per share
amounts)
2007 2006
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Operating expenses
General and administrative (Schedule) $ 4,811 $ 3,486
Stock-based compensation (Note 5) 140 1,333
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4,951 4,819
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Other income and expenses
Accreted interest on note and shares
receivable - 34
Foreign exchange gain 2,806 633
Interest income 8 529
Recovery on note and shares receivable - 881
Gain on disposal of mineral properties - 315
Other income 267 38
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3,081 2,430
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Net loss before income taxes (1,870) (2,389)
Future income tax recovery (Note 6) (393) (292)
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Net loss and comprehensive loss for the year (1,477) (2,097)
Deficit, beginning of year (30,262) (28,165)
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Deficit, end of year $ (31,739) $ (30,262)
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Basic and diluted loss per share $ (0.03) $ (0.05)
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Basic and diluted weighted average number
of common shares outstanding 51,329,196 46,018,943
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The accompanying notes are an integral part of the consolidated financial
statements
Medoro Resources Ltd.
Consolidated balance sheets
as at December 31, 2007 and 2006
(Expressed in thousands of Canadian dollars)
2007 2006
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Assets
Current assets
Cash and cash equivalents $ 2,026 $ 910
Short-term investments - 12,520
Prepaid and other assets 1,332 583
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3,358 14,013
Property, plant and equipment, net (Note 4) 34,880 19,677
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$ 38,238 $ 33,690
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Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 1,881 $ 760
Future income taxes (Note 6) 5,118 5,759
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6,999 6,519
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Shareholders' equity
Share capital (Note 5) 57,937 53,663
Contributed surplus (Note 5) 5,041 3,770
Deficit (31,739) (30,262)
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31,239 27,171
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$ 38,238 $ 33,690
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Nature of operations (Note 1)
The accompanying notes are an integral part of the consolidated financial
statements
Medoro Resources Ltd.
Consolidated statements of cash flows
Year ended December 31, 2007 and 2006
2007 2006
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Operating activities
Net loss $ (1,477) $ (2,097)
Items not affecting cash
Gain on disposal of mineral properties - (315)
Depreciation 50 61
Recovery on note and shares receivable - (881)
Future income tax recovery (393) (292)
Stock-based compensation 140 1,333
Unrealized foreign exchange (gain) loss (3,724) 185
Accreted interest on note and shares
receivable - (34)
Changes in non-cash working capital items
Prepaid and other assets (749) (518)
Accounts payable and accrued liabilities 321 412
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(5,832) (2,146)
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Investing activities
Short-term investments 12,520 (7,340)
Acquisition of Panwest - (1,402)
Proceeds on sale of Sardinia and SGM Ricerche - 2,867
Acquisition of African Gold Resources S.A (3,270) -
Acquisition of property, plant and equipment (4,700) (3,201)
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4,550 (9,076)
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Financing activities
Private placement (note 5(d)) 2,250 12,008
Issuance of common shares for cash 36 6
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2,286 12,014
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Effect of exchange rate changes on cash and
cash equivalents 112 -
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Increase in cash and cash equivalents 1,116 792
Cash and cash equivalents, beginning of year 910 118
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Cash and cash equivalents, end of year $ 2,026 $ 910
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Cash and cash equivalents are comprised of:
Cash $ 1,452 $ 910
Short-term money market instruments 574
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$ 2,026 $ 910
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See note 8 for supplemental cash flow information
The accompanying notes are an integral part of the consolidated financial
statements
Medoro Resources Ltd.
Notes to the consolidated financial statements
December 31, 2007
(Tabular amounts expressed in thousands of Canadian dollars, except share
and per share amounts)
1. Nature of operations
Medoro Resources Ltd. (the "Company") is currently engaged in the
exploration and development of mineral properties; as such, the
Company is considered to be in the development stage.
On May 24, 2006, the Company completed a share consolidation whereby
7 pre-consolidation shares were exchanged for 1 post-consolidation
share. All information related to common shares has been restated to
give effect to the share consolidation.
These financial statements have been prepared under the assumption
that the Company will be able to realize its assets and discharge its
liabilities in the normal course of business rather than through a
process of forced liquidation. To date, the Company has not generated
revenue from its principal business activities and has relied on
equity financings to meet its obligations. The ability of the Company
to continue as a going concern is dependent on the Company's ability
to receive continued financial support, the discovery of economically
recoverable reserves and the ability to obtain the necessary
financing to complete exploration and ultimately development, and
generate profitable operations in the future. If the going concern
assumption was not appropriate, the Company may not be able to
realize its assets and satisfy its liabilities in the normal course
of business.
2. Significant accounting policies
These consolidated financial statements have been prepared by the
Company in accordance with Canadian generally accepted accounting
principles and are expressed in Canadian dollars. The principal
accounting policies are outlined below:
(a) Basis of consolidation
These consolidated financial statements include the accounts of
the Company and all of its incorporated subsidiaries. All
intercompany transactions and balances have been eliminated.
Variable interest entities ("VIE's"), which include, but are not
limited to, special purpose entities, trusts, partnerships, and
other legal structures, as defined by Canadian Institute of
Chartered Accountants ("CICA") Accounting Guideline 15,
Consolidation of Variable Interest Entities, are subject to
consolidation by the primary beneficiary who will absorb the
majority of the entities' expected losses and/or expected
residual returns. The Company does not have any entities that
qualify for treatment under this guidance.
(b) Use of estimates
The preparation of financial statements, in conformity with
Canadian generally accepted accounting principles, requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting year. On an ongoing basis, management
evaluates its estimates, including those related to the
recoverability of mineral properties, mineral exploration and
development costs and volatility assumptions for stock
compensation valuation. Management bases its estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily available
from other sources. Actual results could differ from those
estimates under different assumptions or conditions.
(c) Cash and equivalents
Cash and cash equivalents consist of cash on hand, deposits in
banks and highly liquid investments, with an original term to
maturity of three months or less.
(d) Short-term investments
Short-term investments include those short-term money market
instruments which, on acquisition, have a term to maturity of
greater than three months but less than one year.
(e) Mineral properties
The Company considers its mineral properties to have the
characteristics of property, plant and equipment. As such, the
Company defers all exploration costs, including acquisition
costs, field exploration and field supervisory costs relating to
specific properties until those properties are brought into
production, at which time they will be amortized on a unit-of-
production basis based on proven and probable reserves or until
the properties are abandoned, sold or considered to be impaired
in value, at which time an appropriate charge will be made.
Administrative costs are expensed as incurred.
The recoverability of the amounts shown for mineral properties is
dependent on the existence of economically recoverable reserves,
the ability to obtain financing to complete the development of
such reserves and meet the Company's obligations under various
agreements and the success of future operations or dispositions.
(f) Impairment of long-lived assets
The Company monitors the recoverability of the carrying amount of
its long-lived assets by estimating the undiscounted cash flows
expected to result from their use and eventual disposition. This
assessment is based on the carrying amount of the asset at the
date it is tested for recoverability, whether it is in use or
under development. If the carrying amount exceeds the sum of the
undiscounted cash flows expected to result, an impairment loss is
recognized and the adjusted carrying amount becomes the new cost
basis.
Non-producing mineral properties are also evaluated for
impairment based on management's intentions and are written down
when the long-term expectation is that the net carrying amount
will not be recovered.
(g) Reclamation and site restoration costs
The Company records the present value of asset retirement
obligations, including reclamation costs, when the obligation is
incurred. It is recorded as a liability with a corresponding
increase in the carrying value of the related mining assets. The
carrying value is amortized over the life of the related mining
asset on a units-of-production basis commencing with initial
commercialization of the asset. The liability is accreted to the
actual liability on settlement through charges each period in the
statement of operations.
(h) Foreign currency translation
The Company's functional currency is the Canadian dollar. The
Company's foreign subsidiaries are considered to be integrated
operations. Accordingly, the Company utilizes the temporal method
to translate the financial statements of these subsidiaries into
Canadian dollars. An exchange gain or loss that arises on
translation or settlement of a foreign currency denominated
monetary item or a non-monetary item carried at market is
included in the determination of net income for the current
period. At each balance sheet date, monetary items denominated in
a foreign currency are adjusted to reflect the exchange rate in
effect at the balance sheet date. Revenues and expenses are
translated into Canadian dollars at the exchange rates prevailing
on the transaction dates. Non-monetary assets and liabilities are
translated using historical rates of exchange.
(i) Income taxes
Future income tax assets and liabilities are recognized for the
future income tax consequences attributable to differences
between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases, and for
net operating loss carryforwards. Future income tax assets and
liabilities are measured using enacted or substantively enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to reverse or be
settled. The effect of a change in tax rates is recognized in the
year that includes the substantive enactment date. A valuation
allowance is recorded against any future income tax asset if it
is not more likely than not that the asset will be realized.
(j) Stock-based compensation
The Company has in effect a stock option plan which is described
in Note 5 - Share Capital. The Company accounts for stock options
granted using the fair value based method of accounting for
stock-based compensation. Accordingly, the fair value of the
options at the date of grant is accrued and charged to
operations, with a corresponding credit to contributed surplus,
on a straight-line basis over the vesting period. If and when the
stock options are ultimately exercised, the applicable amounts of
contributed surplus are transferred to share capital.
(k) Loss per share
Loss per share is computed by dividing the net loss available to
common shareholders by the weighted average number of shares
outstanding during the reporting year. Diluted loss per share is
computed similar to basic loss per share except that the weighted
average shares outstanding are increased to include additional
shares for the assumed exercise of stock options, warrants and
convertible debentures, if dilutive. The number of additional
shares is calculated by assuming that outstanding stock options
and warrants were exercised and convertible debentures converted
and that the proceeds from such exercises and conversion were
used to acquire common stock at the average market price during
the reporting years. Options and warrants as disclosed in Note 5
are anti-dilutive and, therefore, have not been taken into
account in the per share calculations.
(l) Financial instruments and financial risks
The fair values of cash and cash equivalents, short term
investments, and accounts payable and accrued liabilities
approximate their carrying values due to the short term to
maturity of these financial instruments. The Company has no
derivative financial instruments.
(m) Adoption of new accounting standards
Effective January 1, 2007, the Company adopted CICA Handbook
Section 1530, Comprehensive Income, CICA Handbook Section 3855,
Financial Instruments - Recognition and Measurement, CICA
Handbook Section 3861, Financial Instruments - Disclosure and
Presentation, CICA Handbook Section 3865, Hedges, and CICA
Handbook Section 3251, Equity. These accounting policy changes
were adopted on a retrospective basis with no restatement of
prior period financial statements. The new standards and
accounting policy changes are as follows:
(a) Comprehensive income (Section 1530)
Comprehensive income is the change in shareholders' equity
during a period from transactions and other events and
circumstances from non-owner sources. In accordance with
this new standard, the Company now reports a statement of
comprehensive income and a new category, accumulated other
comprehensive income, in the shareholders' equity section of
the consolidated balance sheet. The components of this new
category may include unrealized gains and losses on
financial assets classified as available-for-sale, exchange
gains and losses arising from the translation of financial
statements of a self-sustaining foreign operation and the
effective portion of the changes in fair value of cash flow
hedging instruments.
During the year ended December 31, 2007, there were no
changes in shareholders' equity that resulted from the non-
owner sources and consequently, the adoption of the standard
noted above had no material effect on the presentation of
the Company's consolidated financial statements.
(b) Financial instruments - recognition and measurement (CICA
Handbook Section 3855) and disclosure and presentation (CICA
Handbook Section 3861)
In accordance with these new standards, the Company now
classifies all financial instruments as either held-for-
trading, available for sale, held-to-maturity, loans and
receivables or other financial liabilities. Financial
instruments classified as held-for-trading are measured at
fair value with unrealized gains and losses recognized in
operating results. Financial instruments classified as
available for sale are measured at fair value with
unrealized gains and losses recognized in other
comprehensive income. Financial instruments classified as
held-to-maturity, loans and receivables or other financial
liabilities are measured at amortized cost.
Upon adoption of these new standards, the Company has
designated its cash and cash equivalents and short-term
investments as held-for-trading, which are measured at fair
value. Accounts payable and accrued liabilities are
classified as other liabilities, which are measured at
amortized cost. As at December 31, 2007, the Company did not
have any financial assets classified as available for sale
and did not undertake any hedging activities therefore, the
adoption of the standard noted above had no material effect
on the presentation of the Company's consolidated financial
statements.
(c) Equity (CICA Section 3251)
The Company's adoption of CICA section 3251 resulted in
expanded disclosure of its components of shareholders'
equity in the notes to the consolidated financial
statements.
(d) Hedges (CICA Section 3865)
This section establishes the standard for when and how hedge
accounting may be applied. The Company currently does not
have any hedges in place, and therefore this standard had no
impact on the consolidated financial statements
(e) Transaction costs
Transaction costs with respect to instruments not classified
as held-for-trading are recognized as an adjustment to the
cost of the underlying instruments and are recognized and
amortized using the effective interest method. Application
of this new accounting policy did not have a material impact
on the financial position or results of operations as at or
for the year ended December 31, 2007.
(n) New accounting pronouncements
In November 2006, the CICA issued the new handbook Section 1535,
"Capital Disclosures," effective for annual and interim periods
related to fiscal years beginning on or after October 1, 2007.
This section establishes standards for disclosing information
about a Company's capital and how it is managed in order that a
user of the financial statements may evaluate the Company's
objectives, policies, and processes for managing capital. This
new standard is not expected to have a material effect on the
Company's consolidated financial statements.
In March 2007, the CICA issued a new section 3031, "Inventories",
which is to replace the existing section 3030, "Inventories".
Under the new section, inventories are required to be measured at
the "lower of cost and net realizable value", which is different
from the existing guidance of the "lower of cost and market". The
new section also requires, when applicable, the reversal of any
write-downs previously recognized. The new accounting standard
and any consequential amendments will be effective for the
Company beginning January 1, 2008. The Company is currently
evaluating the implications of the new standard as it relates to
the financial statement presentation of its spare parts and
servicing equipment currently presented as Property, plant and
equipment.
CICA Section 1400, "General Standards of Financial Statement
Presentation", was amended June 2007 to include guidance on an
entity's ability to continue as a going concern. The revised
standard explicitly requires management to assess and disclose
the entity's ability to continue as a going concern. For
clarification, these financial statements have been prepared on
the basis of accounting policies applicable to a going concern,
which assumes that the Company will continue in operation for the
foreseeable future and will be able to realize its assets and
discharge its liabilities in the normal course of business. The
Company is not aware of any material circumstances that would
undermine this assumption.
In February 2008, the CICA issued Section 3064, Goodwill and
intangible assets, replacing Section 3062, Goodwill and other
intangible assets and Section 3450, Research and development
costs. Various changes have been made to other sections of the
CICA Handbook for consistency purposes. The new Sections will be
applicable to financial statements relating to fiscal years
beginning on or after October 1, 2008. Accordingly, the Company
will adopt the new standards for its fiscal year beginning
January 1, 2009. It establishes standards for the recognition,
measurement, presentation and disclosure of goodwill subsequent
to its initial recognition and of intangible assets by profit-
oriented enterprises. Standards concerning goodwill are unchanged
from the standards included in the previous Section 3062. The
Company is currently evaluating the impact of the adoption of
this new section on its consolidated financial statements. The
Company does not expect that the adoption of this new Section
will have a material impact on its consolidated financial
statements.
In 2006, Canada's Accounting Standards Board ratified a strategic
plan that will result in Canadian GAAP, as used by public
companies, being converged with International Financial Reporting
Standards in 2011. The impact of this transition on the Company's
consolidated financial statements is still being determined.
3. 2006 Acquisition
On July 10, 2006, the Company acquired all of the issued and
outstanding shares of Panwest Seas Corporation Ltd. ("Panwest", a
company incorporated in the British Virgin Islands), which holds the
right to the Lo Increible 4A and 4B exploration properties located in
the El Callao area of the State of Bolivar, Venezuela for $10,788,545
(including $276,645 in acquisition costs). In consideration for the
acquisition of Panwest, the Company issued 15,140,000 common shares,
paid $1,125,000 (US$1,000,000) in cash and also agreed to pay to the
sellers a royalty of US$15 per ounce of gold on all production from
the Lo Increible 4A and 4B mining properties. The properties are held
under mining contracts granted by Corporacion Venezolana de Guayana.
The common shares issued have been valued at a price of $0.62 per
common share, being the average closing price of the common shares of
the Company for the two days before, the day of, and two days after
the date of announcement of the acquisition agreement on June 12,
2006.
The business combination has been accounted for as a purchase
transaction with the Company as the acquirer of Panwest. The
allocation of the purchase price is based on the consideration paid
and the fair value of Panwest's net assets acquired.
Net assets acquired at fair values were as follows:
Mineral properties (included in
Property, plant and equipment) $ 16,346
Future income tax liability (5,557)
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$ 10,789
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Total consideration paid consists of the following:
Cash $ 1,125
Common shares 9,387
Acquisition costs 277
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$ 10,789
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4. Property, plant and equipment
a) Asset acquisition
On September 14, 2007 the Company exercised its option to acquire
all the issued and outstanding shares of African Gold Resources,
S.A. ("African Gold") a Panamanian company, which held the
options to acquire seven properties in Mali for $6,245,000
(including $163,000 in acquisition costs). In consideration for
the acquisition of African Gold, the Company paid $2,962,000
(US$2,810,000) and issued 5,200,000 common shares.
The cash consideration consisted of $808,000 (US$720,000) paid on
April 23, 2007 for the option to acquire all of the issued and
outstanding shares of African Gold, and $2,154,000 (US$2,090,000)
cash paid on the exercise of the option. The Company will also
assumed African Gold's obligations under the option arrangements
it has entered into with the holders of the properties, including
cash payments totalling US$224,000 and a one time payment of
US$9.00 per ounce of measured gold resources and US$4.00 per
ounce of indicated gold resources. The agreement also provides
that if any of the individual properties contain an aggregate of
500,000 ounces or more of measured and indicated gold resources,
then Gold Resources, the seller will receive a one-time payment
of US$6.00 per ounce of measured gold resources and US$4.00 per
ounce of indicated gold resources.
The common shares issued have been valued at a price of $0.60 per
common share, being the closing price on the day of the exercise
of the Company's option to acquire African Gold.
The total costs capitalized to Mineral properties on the asset
acquisition were as follow:
Cash paid for the option to purchase African Gold $ 808
Cash paid on the exercise of the option 2,154
Common shares issued 3,120
Acquisition costs 163
Future income tax liability 3,363
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$ 9,608
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(b) The following table summarizes the Company's property, plant and
equipment:
December 31, 2007
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Accumulated Net book
Cost depreciation value
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Mineral properties
Lo Increible A
and B $ 24,674 $ - $ 24,674
Mali properties 9,438 - 9,438
Plant and equipment
Lo Increible A and B 484 130 354
Mali properties 433 19 414
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$ 35,029 $ 149 $ 34,880
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December 31, 2006
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Accumulated Net book
Cost depreciation value
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Mineral properties
Lo Increible A
and B $ 19,180 $ - $ 19,180
Plant and equipment 558 61 497
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$ 19,738 $ 61 $ 19,677
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During the year ended December 31, 2007, $38,031 (2006 - $14,312)
of depreciation of plant and equipment used in exploration
activities has been capitalized in mineral properties.
5. Share capital
(a) Common shares
Authorized: an unlimited number of common shares with no par
value
Issued and outstanding
Number of Contributed
shares Amount surplus
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$ $
Balance, December 31, 2005 17,816,425 34,111 587
Issued on acquisition of
Panwest
(Note 3) 15,140,000 9,387 -
Private placement
(Note 5 (b)) 14,285,714 8,305 890
Private placement
(Note 5 (c)) 2,150,000 1,852 962
Exercise of stock options 7,142 8 (2)
Stock-based compensation - - 1,333
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Balance, December 31, 2006 49,399,281 53,663 3,770
Issued on acquisition of
African Gold
(Note 4) 5,200,000 3,120
Private placement
(Note 5 (d)) 3,308,809 1,108 1,141
Exercise of stock options 70,000 46 (10)
Stock-based compensation - - 140
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Balance, December 31, 2007 57,978,090 57,937 5,041
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(b) On February 28, 2006, the Company completed a private placement
of 14,285,714 common shares at $0.70 per share for net proceeds
of $9,195,045. In connection with the private placement, 857,143
agent compensation warrants were issued. Each agent compensation
warrant entitled the holder to purchase one common share of the
Company at a price of $0.70 per common share until August 28,
2007. All securities issued as part of this placement were
subject to a four-month hold. The agent compensation warrants
were fair valued using an option pricing model with the following
assumptions: no dividends are paid, a volatility of the Company's
share price of 140%, an expected life of the warrants of 18
months and an annual risk free rate of 3.96%.
(c) On July 21, 2006, the Company completed a private placement with
Gold Fields Ltd. of 2,150,000 units at a price of $1.40 for net
proceeds of $2,813,943. Each unit consisted of a share and one-
half of a warrant, with each whole warrant being exercisable for
two years at a price of $2.80. The warrants were fair valued
using an option pricing model with the following assumptions: no
dividends are paid, a volatility of the Company's share price of
134%, an expected life of the warrants of two years and an annual
risk free rate of 4.16%.
(d) On November 22, 2007 the Company completed a private placement of
3,308,809 units at a price of $0.68 per unit, for gross proceeds
of $2,249,990. Each unit consists of one common share of the
company and one common share purchase warrant exercisable at a
price of $1.00 for a period of two years. The warrants were fair
valued using an option pricing model with the following
assumptions: no dividends are paid, a volatility of the Company's
share price of 132%, an expected life of the warrants of two
years and an annual risk free rate of 4.22%.
(e) Warrants
December 31, December 31,
2007 2006
-----------------------------------------------------------------
Weighted Weighted
average average
Number exer- Number exer-
of cise of cise
warrants price warrants price
-----------------------------------------------------------------
$ $
Balance, outstanding
beginning of year 4,628,232 2.14 2,837,089 2.38
Issued on private
placement 3,308,809 1.00 1,932,143 1.87
Warrants expired
during the year (3,000,000) 1.40 (141,000) 3.92
-----------------------------------------------------------------
Balance, end of year 4,937,041 1.76 4,628,232 2.14
-----------------------------------------------------------------
-----------------------------------------------------------------
The following table summarizes information concerning outstanding
and exercisable warrants at December 31, 2007:
Outstanding
and Exercise
exercisable price Expiry date
-----------------------------------------
$
553,232 4.90 December 17, 2008
1,075,000 2.80 May 8, 2008
3,308,809 1.00 November 22, 2009
-----------------------------------------
4,937,041
-----------------------------------------
-----------------------------------------
(e) Incentive stock option plan
The Company has an incentive stock option plan. Under the plan,
the exercise price of each option should not be for less than the
discounted market price as defined in the policies of the TSX
Venture Exchange, and an option's maximum term is five years.
Options may be granted by the board of directors at any time, to
directors, senior officers or employees of the Company and
consultants to the Company or any of its designated affiliates,
who, by the nature of their position or duties are, in the
opinion of the board, upon recommendation of the Compensation
Committee, in a position to contribute to the success of the
Company.
A summary of the changes in the Company's incentive stock option
plan are as follows:
December 31, December 31,
2007 2006
-----------------------------------------------------------------
Weighted Weighted
average average
exer- exer-
cise cise
Options price Options price
-----------------------------------------------------------------
Outstanding, beginning
of year 4,638,571 $ 0.92 720,097 $ 3.64
Options granted 257,000 0.73 3,970,000 0.52
Options cancelled (40,714) 0.71 (44,384) 8.05
Options exercised (70,000) 0.51 (7,142) 0.77
-----------------------------------------------------------------
Outstanding, end of
year 4,784,857 $ 0.92 4,638,571 $ 0.92
-----------------------------------------------------------------
-----------------------------------------------------------------
The following table summarizes information concerning outstanding
and exercisable options at December 31, 2007:
Options outstanding and exercisable
------------------------------------------------
Weighted Weighted
average average
Number remaining exercise
outstanding life in years price
------------------------------------------------
382,857 0.80 $ 4.90
2,144 0.77 2.66
272,856 1.63 1.26
100,000 4.40 0.91
90,000 3.63 0.82
77,000 4.74 0.70
80,000 4.03 0.53
3,725,000 3.55 0.51
10,000 3.82 0.48
45,000 3.79 0.45
------------------------------------------------
4,784,857 3.27 $ 0.92
------------------------------------------------
------------------------------------------------
The fair value of options issued by the Company in 2007 and 2006
was determined using the Black-Scholes option pricing model using
the following weighted average assumptions:
December 31, December 31,
2007 2006
-----------------------------------------------------------------
Weighted average risk-free rate 4.14% 4.10%
Dividend yield Nil Nil
Volatility factor of the expected
market price of the Company's shares 147% 110%
Average expected option life - years 2.5 2.5
Weighted average grant date fair value per
share of options issued during the year $0.54 $0.34
6. Income taxes
The provision for income taxes reported differs from the amounts
computed by applying the cumulative Canadian federal and provincial
income tax rates to the loss before tax provision due to the
following:
Years ended December 31,
---------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------
$ $
Statutory tax rate 36.12% 36.12%
---------------------------------------------------------------------
---------------------------------------------------------------------
Recovery of income taxes from continuing
operations computed at standard rates 675 757
Differences in tax rates in foreign jurisdiction (9)
Effect of non-deductible income and expenses 1,323 (147)
Differences in future tax rates (552)
Tax losses not recognized in the period that the
benefit arose (1,044) (318)
---------------------------------------------------------------------
Future income tax recovery 393 292
---------------------------------------------------------------------
---------------------------------------------------------------------
The approximate tax effect of each type of temporary difference that
gives rise to the Company's future tax assets and liabilities are as
follows:
Years ended December 31,
---------------------------------------------------------------------
2007 2006
---------------------------------------------------------------------
$ $
Future income tax assets
Operating loss carryforwards 3,016 2,089
Capital loss carryforwards 1,297 1,182
Other temporary differences 315 324
---------------------------------------------------------------------
4,628 3,595
Less: Valuation allowance (4,628) (3,595)
---------------------------------------------------------------------
- -
---------------------------------------------------------------------
Future income tax liability
Accumulated cost base differences of assets $5,118 $5,759
---------------------------------------------------------------------
---------------------------------------------------------------------
The Company has reduced the value of the potential future income tax
asset to $Nil through the application of a valuation allowance as the
Company does not have any current source of income to which the tax
losses can be applied.
Included in the future income tax liability are future income taxes
relating to the 2006 Panwest acquisition (maintained in the
Venezuelan Bolivars currency) and the 2007 African Gold acquisition
(maintained in the Mali CFA currency). An unrealized foreign exchange
gain of $3.7 million resulted upon the translation at December 31,
2007 of these balances to the Canadian dollar.
At December 31, 2007, the Company has approximately $8,945,000 in
capital losses available to reduce future capital gains. At
December 31, 2007, the Company has approximately $8,191,000 in
Canadian loss carryforwards available for tax purposes that expire
between 2008 and 2027 as follows:
$
2008 94
2009 216
2010 230
2011 1,963
2012 1,455
2026 471
2027 3,948
---------------------------------------------------------------------
8,377
---------------------------------------------------------------------
---------------------------------------------------------------------
7. Related party transactions
During the years ended December 31, 2007 and 2006, the Company paid
the following amounts to related parties:
(a) Consulting fees of $ 62,640 (2006 - $50,058) to a company in
which a director of the Company is an officer;
(b) Consulting fees of $ nil (2006 - $337,637) to directors of the
Company; and
(c) The Company paid $133,956 (2006 - $323,000) to a related party
controlled by three directors of the Company in respect of its
office lease in Caracas, Venezuela.
These transactions are in the normal course of operations and are
measured at the exchange amounts, which is the amount of
consideration established and agreed to by the related parties.
8. Supplemental cash flow information
2007 2006
---------------------------------------------------------------------
a) Interest paid $ - $ -
Income taxes paid - -
b) Non-cash transactions
Acquisition of Panwest (note 3) $ - $ (14,944)
Acquisition of African Gold (note 4) (6,483)
Issue of common shares 3,120 9,387
Increase in future tax liability 3,363 5,557
9. Segmented information
(a) The Company currently operates in one reportable operating
segment, being the acquisition and exploration of mineral
properties.
(b) As at December 31, 2007 the Company's mineral properties are in
Venezuela and Mali. As at December 31, 2006 all of the Company's
mineral properties were in Venezuela. During the year ended
December 31, 2006, the Company disposed of all its properties in
Italy. The Company's assets and results of operations by
geographic areas are as follows:
As at December 31, 2007
Venezuela Mali Canada Total
---------------------------------------------------------------------
Property, plant and
equipment $ 25,028 $ 9,849 $ 3 $ 34,880
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets $ 25,955 $ 10,485 $ 1,798 $ 38,238
---------------------------------------------------------------------
As at December 31, 2006
Venezuela Mali Canada Total
---------------------------------------------------------------------
Property, plant and
equipment $ 19,678 $ - $ - $ 19,678
---------------------------------------------------------------------
---------------------------------------------------------------------
Total assets $ 20,004 $ - $ 13,686 $ 33,690
---------------------------------------------------------------------
For the year ended December 31, 2007
Venezuela Mali Canada Total
---------------------------------------------------------------------
General and administrative
expenses $ 547 $ 1,370 $ 2,894 $ 4,811
Stock based compensation - - 140 140
Other income (expenses) 4,302 (16) (1,205) 3,081
Future income tax (recovery) (393) - - (393)
---------------------------------------------------------------------
Net earnings (loss) $ 4,148 $ (1,386) $ (4,239) $ (1,477)
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital expenditures
net of non-cash
transactions $ 4,581 $ 3,389 $ - $ 7,970
---------------------------------------------------------------------
For the year ended December 31, 2006
Venezuela Mali Canada Total
---------------------------------------------------------------------
General and administrative
expenses $ 611 $ - $ 2,875 $ 3,486
Stock based compensation - - 1,333 1,333
Other income (expenses) 173 - 2,257 2,430
Future income tax (recovery) - - (292) (292)
---------------------------------------------------------------------
Net earnings (loss) $ (438) $ - $(1,659) $ (2,097)
---------------------------------------------------------------------
---------------------------------------------------------------------
Capital expenditures
net of non-cash
transactions $ 4,603 $ - $ - $ 4,603
---------------------------------------------------------------------
10. Subsequent events
(i) On March 20, 2008 the Company completed a brokered private
placement of 30,810,000 units at a price of $0.40 per unit, for
gross proceeds of $12,324,000. Each unit consists of one common
share of the Company and one-half of a common share purchase
warrant, with each whole share purchase warrant being exercisable
at a price of $0.60 for a period of two years.
(ii) On April 2, 2008 the Company granted 1,832,000 stock option to
its employees. The options have an exercise price of $0.40,
vest
immediately and expire April 2, 2013.
Consolidated schedules of general and administrative expenses
Year ended December 31, 2007 and 2006
(Expressed in thousands of Canadian dollars)
2007 2006
---------------------------------------------------------------------
$ $
General and administrative
Office and administration 1,820 1,422
Consulting fees 1,689 714
Directors' fees 90 358
Investor relations, transfer agent
and filing fees 145 347
Legal and accounting fees 384 264
Salaries and benefits 437 191
Travel and promotion 171 137
Depreciation 50 47
Bank charges and interest 25 6
---------------------------------------------------------------------
4,811 3,486
---------------------------------------------------------------------
---------------------------------------------------------------------
For further information: Robert Doyle, Chief Executive Officer, (416)
603-4653, rdoyle(at)medororesources.com
(MRL MRS.)
END
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