Medoro Resources to acquire Colombia Goldfields

Medoro Resources (MRS-V), which has exploration properties in Venezuela and Mali, plans to combine forces with Colombia Goldfields (GOL-T), which is exploring in the historic Marmato Mountain gold district on the eastern edge of the Western Cordillera of the Colombian Andes.

Under the proposed agreement of arrangement, which is still subject to regulatory and shareholder approval, Medoro will issue 29,266,856 shares and 940,720 warrants to stockholders of Colombia Goldfields in exchange for 104,524,486 outstanding shares of Colombia Goldfields.

The share exchange ratio is 0.28 of a share plus 0.009 of a consideration warrant of Medoro for each share of Colombia Goldfields.

Each full warrant is exercisable into one Medoro share at a subscription price of 50 per share of Medoro for a two-year term.

If the deal is approved, Colombia Goldfields’ shareholders will own about 25% of Medoro.

Colombia Goldfields must have reached agreements with its key creditors on the repayment of its outstanding debt and accounts payable, however, before the agreement can move ahead.

At the end of March the company said it was reviewing strategic alternatives, had terminated all but essential personnel in its Toronto and Medellin offices, and suspended additional drilling. It was unable to make its interest payments in the fourth quarter of 2008 on its short-term promissory note with Global Resource Fund.

For the financial year ended Dec. 31, 2008, Colombia Goldfields posted a loss of US$60.2 million or $0.64 per share, up from its 2007 loss of US$14.6 million or $0.21 per share. As of Dec. 31 2008 shareholder equity was US$7 million, compared with US$51.1 million at Dec. 31, 2007. The company’s working capital deficiency rose from US$3.7 million at the end of 2007 to US$19.1 million at the end of 2008.

Medoro’s finances have also taken a beating. Last year the company reported a net loss of US$14 million or $0.17 per share compared to a net loss of $1.5 million or $0.03 per share in 2007.

The increase in net loss ($12.5 million) was largely due to a write-down of properties in Mali ($10.7 million), an increase in operating costs of $0.9 million, an increase in foreign exchange loss of $4.7 million and an increase in future income tax recovery of $3.9 million.

Medoro now says it does not have adequate resources to continue with its eleven gold exploration areas in the Republic of Mali at the same time as it develops its Lo Increible properties in Venezuela and has decided to use its available funds to bring the Lo Increible properties to the production stage.

Currently the company is negotiating with the Venezuelan People’s Power Ministry of Environment to get permits required to start exploitation activities.

As at Mar. 31 Medoro had cash and short-term investments of $1.3 million and no debt.

In the first quarter, Medoro reported a net loss of US$0.6 million or US$0.01 per share, down from its net loss of US$2.2 million or US$0.04 per share in the first quarter of 2008.

Medoro holds a 100% interest in the Lo Incredible 4A and 4B properties in Venezuela in the El Callao area of Bolivar state and is made up of two adjacent mining contracts covering a total of 2,217 hectares.

Lo Increible’s three key prospects are La Cruz, La Sofia and El Tapon. The data base used to produce the mineral and resource estimate was comprised of some 581 drill holes, representing about 90,000 meters of drilling.

A National Instrument 43-101 compliant report (Apr. 27, 2009) demonstrated a measured and indicated resource of 13.4 million tonnes at a grade of 2.2 grams gold per tonne for contained gold of 940,000 ounces.

In addition there is an inferred resource of 0.84 million tonnes grading 3.3 grams gold per tonne for 90,000 ounces of gold. These resources were estimated using a cut-off of 0.5 gram gold per tonne, apart from a deep high grade zone at La Cruz, which has the potential to be exploited by underground mining, and which has been reported using a 4 gram per tonne cut-off grade.

Medoro has about a US$4 million exploration budget for 2009. That money will be spent on additional targeted drilling, metallurgical test work and environmental management costs, as well as on a feasibility report. The company believes that Lo Increible will be mined first as an open pit operation using contract miners and contract milling.

Colombia Goldfields has been developing a large gold resource in Colombia’s historic Marmato Mountain gold district. Its Marmato project is roughly 80 km south of the city of Medellin and is accessible via the Pan American Highway.

Colombia Goldfields has completed about 46,000 meters of core drilling at Zona Alta. The first 12,126 meters of drilling, as well as 1,171 meters of cross cuts and 504 meters of underground sampling, was used to prepare the National Instrument 43-101 resource calculation at the end of May last year; an initial inferred resource of 2.6 million ounces of gold at a 0.3 gram gold per tonne cut-off grade.

Colombia is targeting bulk tonnage, low-grade gold and silver deposits at Marmato and Caramanta that are potentially amenable to open pit mining and recovery by milling and cyanide leaching or by heap leaching.

Marmato is known locally as “Golden Mountain” and is believed to have been mined by local miners for more than 500 years.

The area however has seen little modern exploration or development until recently. Colombia Goldfields is convinced of the potential to discover multi-million gold deposits in the district.

Medoro closed down 2 or 11.76% to 15 per share. The company has a 52-week trading range of 3-28 with 88.78 million shares outstanding.

Colombia Goldfields remained unchanged at 6 per share. It has a 52-week trading range of 1-83 with 104.22 million shares outstanding.