Exhibit 4.3


 





 


RUSORO MINING LTD.

(the “Company”)


 


MANAGEMENT’S DISCUSSION AND ANALYSIS

Year End Report – December 31, 2007


 


General


 


This Management’s Discussion and Analysis
(“MD&A”) forms part of the audited consolidated financial statements of the
Company for the fiscal year ended December 31, 2007. The following
information, prepared as of May 6, 2008, should be read in conjunction
with the December 31, 2007 financial statements, which have been prepared
in accordance with Canadian generally accepted accounting principles.  All amounts are expressed in U.S. dollars
unless otherwise indicated.


 


Accounting Method – Comparative Information


 


On November 7, 2006, the Company
acquired (the “Grupo Acquisition”) all of the issued and outstanding securities
of Grupo Agapov Corp. (“Grupo Agapov”). 
Under Canadian GAAP governing reverse takeover transactions, Grupo Agapov was
considered the acquiring company for accounting purposes and the transaction
was accounted for as an issuance of shares by Grupo Agapov with a
recapitalization of the consolidated entity.


 


Significant Transactions


 


Effective March 5, 2007, the Company
acquired all of the issued and outstanding securities of Mena Resources Inc.
(“Mena”) in consideration of issuing a total of 31,424,255 common shares to the
Mena shareholders, one common share of the Company was issued for every 1.7
issued and outstanding Mena common shares.  In addition, fully vested
share purchase warrants and incentive stock options that were outstanding in
Mena were converted to 9,580,912 warrants and 744,118 options in the
Company.  Mena holds properties in
Venezuela, Honduras, and Chile.  As a
result of the transaction, Mena became a wholly owned subsidiary of the
Company. The non-controlling interest in the subsidiary was eliminated and
Mena’s shares were de-listed from the TSX Venture Exchange.


 


Prior to this acquisition Mena had a 24%
interest in Balandria Ltd which wholly owned four Venezuelan entities. The
remaining 76% interest was owned indirectly by the Company.


 


Immediately prior to the closing of the
Mena Acquisition, Mena completed a brokered private placement, which provided
net proceeds of CDN$67,750,810.


 


This transaction has been accounted for
as an asset purchase.  The consideration
paid has been allocated to the acquired assets based on their fair value at the
date of acquisition. The consolidated


 


1055 Dunsmuir Street, Suite 2164, Four
Bentall Centre, P O Box 49132


Vancouver, BC V7X 1B1


Tel: 
604-632-4044 · Fax:  604-632-4045


www.rusoro.com


 

















 


financial statements of the Company
include the operating results of Mena commencing on the date of its
acquisition.


 


The allocation of the purchase price is
summarized below:


 


	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  57,706,229

  	
   

  
	
  Other
  current assets

  	
   

  	
  143,042

  	
   

  
	
  Mineral
  properties

  	
   

  	
  76,905,021

  	
   

  
	
  Plant and
  equipment

  	
   

  	
  15,788

  	
   

  
	
  Marketable
  securities

  	
   

  	
  106,712

  	
   

  
	
  Long-term
  investments

  	
   

  	
  112,323

  	
   

  
	
  Liabilities

  	
   

  	
  (157,717

  	
  )

  
	
  Future
  income tax liabilities

  	
   

  	
  (23,313,595

  	
  )

  
	
   

  	
   

  	
  111,517,803

  	
   

  



 


	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Consideration 31,424,255 shares issued @
  $3.05

  	
   

  	
  95,781,321

  	
   

  
	
  Fair value of options and warrants

  	
   

  	
  15,666,283

  	
   

  
	
  Acquisition costs

  	
   

  	
  70,199

  	
   

  
	
   

  	
   

  	
  111,517,803

  	
   

  



 


2

















 


Gold Fields Netherlands Services BV


 


Effective November 30, 2007, the
Company acquired all the Venezuelan assets and liabilities of Gold Fields
Netherlands Services BV (“GF Netherlands”), a company existing under the law of
the Netherlands and a wholly owned subsidiary of Gold Fields Limited (“Gold
Fields”) for consideration of $180 million in cash and the issuance of a total
of 140 million common shares. This 100% ownership is subject to the claim on a
subsidiary of GF Netherlands.


 


This transaction has been accounted for
as a business combination using the purchase method with the Company identified
as the acquiror.


 


The allocation of the purchase price is
summarized below:


 


	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  2,712,372

  	
   

  
	
  Inventories - gold

  	
   

  	
  1,390,462

  	
   

  
	
  Inventories - gold in process

  	
   

  	
  3,101,227

  	
   

  
	
  Inventories – stockpile

  	
   

  	
  5,165,080

  	
   

  
	
  Other current assets

  	
   

  	
  10,034,586

  	
   

  
	
  Mineral properties

  	
   

  	
  68,408,016

  	
   

  
	
  Property, plant and equipment

  	
   

  	
  702,834,974

  	
   

  
	
  Other long-term assets

  	
   

  	
  47,787

  	
   

  
	
  Current liabilities

  	
   

  	
  (17,885,421

  	
  )

  
	
  Other long-term liabilities

  	
   

  	
  (2,134,397

  	
  )

  
	
  Future income tax liabilities

  	
   

  	
  (244,475,368

  	
  )

  
	
   

  	
   

  	
  529,199,318

  	
   

  



 


	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  180,000,000

  	
   

  
	
  Consideration 140,000,000 shares issued @
  $2.31

  	
   

  	
  323,400,000

  	
   

  
	
  Acquisition costs

  	
   

  	
  25,799,318

  	
   

  
	
   

  	
   

  	
  529,199,318

  	
   

  



 


In 1998, GF Netherland’s Venezuelan
subsidiary Protomotora Minera de Venezuela, C.A. (“PMV”) entered into an
arrangement with CVG Ferrominera del Orinoco C.A. (“FMO”), a state-owned
company, wherein PMV would participate jointly in the development of mining
activities in Venezuela with FMO; PMV taking a 70% equity interest and FMO
taking a 30% equity interest in Protomotora Minera de Guayana (“PMG”).


 


Through negotiations that occurred in
2005, PMV agreed to pay $6 million to a Venezuelan government ministry
(Ministry of Basic Industries and Mining – “MIBAM”) in exchange for an
incremental 25% equity interest in PMG and a provisional permit to produce 500
kg of gold until MIBAM issued the exploitation permit to PMG.


 


PMV has paid $5 million of the $6 million
agreed to under the foregoing 2005 agreement and the Company and its legal
counsel believe that this is the legal basis to assert the ownership right of
Rusoro over 95% of the equity of PMG. In order to complete its commitments
under the 2005 


 


3

















 


agreement, however, the Company’s legal
counsel believes the following steps need to be completed:


 


1.               MIBAM must deliver in writing to PMV the
transfer instructions and PMV must pay the last instalment of $1 million.


 


2.               PMV, FMO and PMG must hold a share-holders
meeting of PMG with the purpose of granting FMO an undilutable 5% freely
transferable equity interest in PMG.


 


Once the foregoing steps are completed
and FMO has formally abandoned any legal action brought against PMV, the
original joint venture agreement must be terminated.


 


The acquisition of the Venezuelan assets
and liabilities of GF Netherlands has been accounted for on the basis that
Rusoro has acquired these net assets with a 5% indilutable equity interest in
PMG owned by the Venezuelan government. In management’s opinion there is
minimal likelihood that the Company will not be successful in completing the
foregoing steps. The final $1 million payment to be made in connection with the
2005 arrangement (which remains outstanding) has been accrued in the financial
statements of the business acquired.


 


Business of the Company


 


The Company has two distinct business
segments; i) exploration of mineral properties and ii) the extraction,
processing and sale of gold ore. The Company’s business operations are mainly
in Latin America, with a primary focus in Venezuela.


 


The following is a summary of work
conducted on the Company’s properties during 2007.   The Company holds the mineral rights of a
group of projects in Bolivar State, southern Venezuela totaling approximately
99,000 hectares.  The projects are located
within a regional belt 200 km long and 50 km wide which includes, from north to
south; the El Callao, El Dorado, Cuyuni, and Km88 mining districts.


 


The most advanced projects are the Choco
10 Mine, the Increible 6 gold deposit, the El Dorado project and the Valle
Hondo project.   Additional projects with
existing advanced exploration data include the Ceiba project, Trinidad project
and the Km88 project.


 


The Company acquired the producing Choco
10 Gold Mine in the fourth quarter of 2007. 
Development work was completed during 2007 at the Increible 6 and El
Dorado projects.  Exploration activities
during 2007 were focused on diamond and RC drilling directed at defining the
known ore bodies and evaluating additional gold mineralized zones.


 


At Choco 10, proven and probable reserves
are 1.66 million ounces contained in 15.4M t @ 3.40 g/t Au.  The company now has a total of 6.63M oz
(84.0M t @ 2.50 g/t Au) ounces measured and indicated and 6.22M oz (108.2Mt @
1.80 g/t Au) ounces inferred.  All
resource and reserve estimates are supported by independent NI 43-110 compliant
technical reports.  A series of updated
resource and reserve estimates are scheduled throughout 2008.


 


Summary of Mining Operations


 


The Company purchased the operating Choco
10 gold mine in November 2007 as part of the Goldfields acquisition.  The mine has produced 9,433 ounces since its
acquisition until December 31, 2007. 
The Choco 10 Mine, located in the El Callao district, which is within
10 km of the Company’s Increíble 6 project, is currently producing
approximately 8,000 to 9,000 ounces of gold per month.  None of the Company’s gold production is
hedged.


 


4

















 


The project has excellent access via well
maintained roads from the town of El Callao. 
The project has a current NI 43-101 compliant resource of 221,000 Au
ounces measured (2.3Mt @ 2.9 g/t), 4,230,000 Au ounces indicated (53.8Mt @
2.4g/t) and 2,870,000 Au ounces inferred (40.8Mt @ 2.2 g/t).  The current 43-101 compliant resource numbers
are based on more than 224,000 metres of drilling in 2,058 drill holes.


 


During 2007, issues regarding the supply
of water to the mine site and the lack of water required to support the milling
operation, were resolved largely through the drilling of several water
wells.  Ample water supplies are now
available for the mine to sustain mill production at levels for 2008.


 


A collective agreement was reached in
2007 with the Choco 10 mine site labour unions. The agreement included wage
increases, related to inflationary adjustments, in addition to certain
production related incentives.   Also
during the year a settlement agreement was reached with the Coacia Small Miners
collective relating to specific areas of Choco 10.


 


During 2007, the Company received the
necessary permit for the completion of an additional waste rock storage area at
the mine covering 120 hectares along with the accompanying operating permit for
three years. A further permit was authorized for the continued operation and
possible expansion of the water wells which are vital to ensure that water is
not an issue now or in the future. The completion of both the waste rock and
water permitting is a significant advancement toward the expansion plans being
contemplated at the mine.


 


The following is a summary of exploration
work conducted on the Company’s properties during the year ended December 31,
2007.


 


	
   

  	
   

  	
  El Dorado

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  San Rafael

  El Placer

  	
   

  	
  Emilia

  	
   

  	
  CEIBA II

  	
   

  	
  Valle

  Hondo

  	
   

  	
  Increible 6

  	
   

  	
  Atlantida

  	
   

  	
  Minoro

  	
   

  	
  El Callao

  	
   

  	
  Other

  Properties

  	
   

  	
  Total

  	
   

  
	
   

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  	
  $000’s

  	
   

  
	
  Balance,
  Dec 31, 2005

  	
   

  	
  11,138

  	
   

  	
  1,006

  	
   

  	
  1,160

  	
   

  	
  828

  	
   

  	
  2,579

  	
   

  	
  10,169

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  2,805

  	
   

  	
  29,685

  	
   

  
	
  Acquisition
  and holding costs

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  233

  	
   

  	
  233

  	
   

  
	
  Exploration
  costs

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Camp,
  equipment and geological fees

  	
   

  	
  —

  	
   

  	
  933

  	
   

  	
  —

  	
   

  	
  146

  	
   

  	
  978

  	
   

  	
  8

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  158

  	
   

  	
  2,223

  	
   

  
	
  Drilling
  and assays

  	
   

  	
  1,178

  	
   

  	
  1,168

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2,629

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4,975

  	
   

  
	
   

  	
   

  	
  1,178

  	
   

  	
  2,101

  	
   

  	
  —

  	
   

  	
  146

  	
   

  	
  3,607

  	
   

  	
  8

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  158

  	
   

  	
  7,198

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Writedown
  of mineral properties

  	
   

  	
  —

  	
   

  	
  (11

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (10,177

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  (106

  	
  )

  	
  (10,294

  	
  )

  
	
  Balance,
  Dec 31, 2006

  	
   

  	
  12,316

  	
   

  	
  3,096

  	
   

  	
  1,160

  	
   

  	
  974

  	
   

  	
  6,186

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  3,090

  	
   

  	
  26,822

  	
   

  
	
  Acquisition
  of Mena properties

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  18,807

  	
   

  	
  39,319

  	
   

  	
  —

  	
   

  	
  15,215

  	
   

  	
  —

  	
   

  	
  3,564

  	
   

  	
  76,905

  	
   

  
	
  Acquisition
  of Goldfields properties

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  68,408

  	
   

  	
  —

  	
   

  	
  68,408

  	
   

  
	
  Foreign
  exchange gain

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  4,629

  	
   

  	
   

  	
   

  	
  4,629

  	
   

  
	
  Exploration
  costs

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Camp,
  equipment and geological fees

  	
   

  	
  2,520

  	
   

  	
  334

  	
   

  	
  —

  	
   

  	
  506

  	
   

  	
  3,667

  	
   

  	
  —

  	
   

  	
  44

  	
   

  	
  253

  	
   

  	
  236

  	
   

  	
  7,560

  	
   

  
	
  Drilling
  and assays

  	
   

  	
  2,134

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  65

  	
   

  	
  4,748

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  111

  	
   

  	
  7,058

  	
   

  
	
   

  	
   

  	
  4,654

  	
   

  	
  334

  	
   

  	
  0

  	
   

  	
  571

  	
   

  	
  8,415

  	
   

  	
  —

  	
   

  	
  44

  	
   

  	
  253

  	
   

  	
  347

  	
   

  	
  14,618

  	
   

  
	
  Reclassified
  to assets held for sale

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (805

  	
  )

  	
  (805

  	
  )

  
	
  Write-down
  of mineral properties

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (290

  	
  )

  	
  (290

  	
  )

  
	
  Balance,
  Dec 31, 2007

  	
   

  	
  16,970

  	
   

  	
  3,430

  	
   

  	
  1,160

  	
   

  	
  20,352

  	
   

  	
  53,920

  	
   

  	
  —

  	
   

  	
  15,259

  	
   

  	
  73,290

  	
   

  	
  5,906

  	
   

  	
  190,287

  	
   

  



 


5

















 


El Dorado


 


The Company’s mineral titles in the El
Dorado district are comprised of Emilia, Emilia II, El Placer, San Rafael,
Ceiba, and others.  This block of claims
has a history of past gold production and contains the Company’s Emilia mill.


 


The existing Emilia mill, which has been
on care and maintenance since September 2006, is located in the central
portion of the El Dorado project.


 


During 2007, the permitting process was completed
and three permits have been recently authorized for the continued exploration,
development and future start-up of gold production for the El Dorado projects
(San Rafael/ El Placer/ Emilia).


 


Exploration during 2007 primarily
consisted of 82,613 metres of drilling directed at a number of targets.  Additional work in support of the drilling
activities included metallurgical testing, thin section analyses, surveying,
and upgrading of access.   An updated
resource estimate and technical report on the El Dorado projects is currently
being completed by Micon International and is scheduled to be finished in 2008.


 


Valle Hondo


 


The 13,000 hectare Valle Hondo Project is
located 40 km east of the Company’s Emilia mill.  During 2007, the Company drilled a total of
2,461 metres in 16 different holes on the Arenales Anomaly.


 


The current NI 43-101 compliant
resources, completed by Scott Wilson Roscoe Postle Associates in June 2006,
are: indicated 3.49Mt grading 0.92g/t for 103,000 ounces and an additional
inferred resource of 47.0 Mt @ 0.89 g/t containing 1,348,000 ounces.  During 2007, the Company commenced a 50,000
metre drilling program consisting of both in-fill and expansion drilling
targeted to advance this project.


 


Increíble 6


 


The Increíble 6 project is located in the
El Callao Gold District, 10 km northeast of the Choco mill.  Previous work at Increíble 6, including
geochemistry, geophysics trenching, and drilling has outlined a series of gold
targets.  The main gold zones (Culebra,
Cristina, Elisa, and Olga) are contained within a 4.5 km long and 1.0 km
wide east-west trending shear zone, which crosses the central portion of the
project.  A total of 111,965 metres of
additional drilling was completed in 2007.


 


During 2007, an updated resource
estimation was completed by the independent consulting firm of Micon
International.  Current 43-101 compliant
resources are; indicated 1,587,000oz Au (23.45Mt grading 2.11 g/t) and inferred
1,100,000oz Au (17.5Mt grading 1.95 g/t).


 


Additional work in 2007 in support of the
drilling activities included rock sampling, metallurgical testing, thin section
analyses, surveying, construction of a field camp and office, and upgrading of
access.


 


Minoro


 


The Minoro project is located in Honduras
and covers 10,000 hectares.  No field
work was completed during 2007.


 


6

















 


El Callao


 


The El Callao project consists of ten
titles covering 41,644 hectares, seven of these titles; Choco 1, 2, 6, 9, 12
and 13 are located within the central portion of the El Callao district with
the remaining three titles; Bochinche Zero, 1 and 2) located 40 km to the
north-east.


 


Exploration during 2007 consisted of
geological mapping and geochemical sampling designed to prioritize existing
anomalous zones that had been outlined by previous work. A series of target
areas were identified and several subsequently tested by drilling 12 diamond
drill holes totalling 1,421 metres.


 


Atlantida


 


The Atlantida project is located 30 km
north-east of Emilia. The project covers 4,975 hectares. During 2006, the
Company decided not to pursue further exploration work on this project and all
previously accumulated costs were written down.


 


Km88


 


During 2006, the Company acquired the
Oro88 concessions, which are located in the Km88 district, from a significant
shareholder and director of the Company. 
The acquisition of these concessions has been recorded at their cost to
the related party transferor ($232,652). 
The Company agreed to pay $5,000,000 for the Oro88 concessions and as
such, the $232,652 cost of the concessions has been recorded as other
acquisition costs with the balance of $4,767,348 recorded as a reduction to
contributed surplus.


 


At December 31, 2007, $2,500,000 of
this $5,000,000 remained unpaid.


 


The Km88 project is an 18,000 hectare
block of mineral titles located in the Km88 district approximately 95 km
south of the Emilia mill.  Exploration
drilling was completed on the northern portion of this project during 2007. A
total of 2,074 metres were drilled in 11 diamond drill holes to further
investigate a series of surface targets. Further drilling work is expected to
be performed in 2008.


 


Other Bolivar State Projects


 


At the Trinidad project, field work
including data compilation, soil and rock sampling and trenching, has outlined
five anomalous zones.  During 2007,
drilling was performed on a series of surface gold anomalies and data
compilation, target selection and drilling was also performed on the Increíble
14 project.


 


7

















 


Selected Annual
Information


 


The following table provides information
for each of the three most recently completed financial years:


 


	
   

  	
   

  	
  2007 ($)

  	
   

  	
  2005 ($)

  	
   

  	
  2005 ($)

  	
   

  
	
  Loss before discontinued operations and
  extraordinary items:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  32,243,989

  	
   

  	
  35,989,508

  	
   

  	
  12,051,037

  	
   

  
	
  Per share

  	
   

  	
  0.20

  	
   

  	
  1.93

  	
   

  	
  114,772

  	
   

  
	
  Fully diluted per share *

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
  Net Loss

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  32,243,989

  	
   

  	
  37,496,934

  	
   

  	
  12,605,499

  	
   

  
	
  Per share

  	
   

  	
  0.20

  	
   

  	
  2.01

  	
   

  	
  113,868

  	
   

  
	
  Fully diluted per share *

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  	
  N/A

  	
   

  
	
  Total Assets

  	
   

  	
  1,006,524,217

  	
   

  	
  42,526,479

  	
   

  	
  34,990,696

  	
   

  
	
  Total long-term liabilities

  	
   

  	
  279,036,460

  	
   

  	
  4,986,192

  	
   

  	
  54,672,043

  	
   

  



 






*The Company
uses the treasury stock method to compute the dilutive effect of options,
warrants and similar instruments.  Under
this method, the dilutive effect on earnings per share is recognized to the use
of the proceeds that could be obtained upon exercise of options, warrants and
similar instruments.  It assumes that the
proceeds would be used to purchase common shares at the average market price
during the year.  For the years
presented, however, this proved to be anti-dilutive.  Basic loss per share is calculated using the
weighted average number of common shares outstanding during the year.


 


Results of Operations for the Year Ended December 31, 2007
Compared to the Year Ended December 31, 2006


 


For the year ended December 31, 2007
(“FY07”) the Company had a consolidated net loss of $32.2 million compared to a
net loss of $37.5 million for the year ended December 31, 2006 (“FY06”).


 


Revenue from gold sales amounted to $3.5
million, all revenue in the year was generated as a result of the Company
acquiring the operating Choco 10 mine from Goldfields Netherlands Services BV.
During FY06, the Company had discontinued its gold sales operations, while it
completed the construction of an upgraded and expanded production facility to
process gold material, this upgrade and expansion has not yet been completed.


 


The Company had a gross loss of $3.8
million for FY07, the gross loss is attributable to the under absorption of
production overheads into inventory at the Choco 10 mine.


 


The administration costs for FY07 were
significantly impacted by the stock-based compensation expense associated with
the issuance of stock options in the last quarter of 2006 and by further
issuances of stock options during the current year. Included within
administration expense is $12.2 million of stock-based compensation expense
associated with options granted to various members of the Company’s board of
directors. Also included in administration expense is $2.8 million of expenses
associated with maintaining and staffing corporate offices in Venezuela,
directors fees of $700k and rent and utilities expenses for the Vancouver head
office in the amount of approximately $400k. Furthermore, the Moscow office
incurred expenses of approximately $300k related to rent, utilities, salaries
and general corporate expenditures.


 


Consulting expenses for FY07 includes
$3.8 million in stock-based compensation expense associated with stock options
granted to third parties to assist in the management of the Company.  A further $3.2 million relates to expenses
relating to consultants who provided services to assist in the management and
investor relations functions of the Company.


 


Interest income in the year was $2.5
million (FY06: interest expense $8.2 million) which reflects the 


 


8

















 


interest earned on cash balances held
during the year and in particular the $57.7 million cash balance that was
inherited as part of the Mena acquisition.


 


Professional fees related mainly to
legal, tax, audit and accounting services provided in relation to the Company
being publicly traded.


 


Salary expense for FY07 includes $800k of
stock-based compensation expense associated with stock options granted to key
employees and a further $1.1 million relates to the wages and salaries expense
paid to the Vancouver head office employees.


 


During FY07 the Company made one donation
to a charitable foundation for the sum of $1.1 million.


 


Travel and entertainment expenses during
FY07 were $3.7 million which was a result of the Company having corporate
offices in Canada, Venezuela and Russia and operations in Venezuela. The
additional travelling incurred to secure the Goldfields acquisition in the last
quarter of FY07 directly accounted for $2.0 million of this expense.


 


There was a future income tax recovery in
the year of $2.2 million, this is a non-cash item and arose due to the Gold
Fields acquisition.


 


During FY07, the Company did not hold any
non-bank sponsored asset-backed commercial paper.


 


Quarterly Information


 


The following table provides information
for the Company for the quarters ended December 31, 2007, March 31,
2007, June 30, 2007, September 30, 2007 and December 31, 2007
and for Grupo Agapov (now called Rusoro Mining (Panama) Inc.) for the fiscal
quarters of 2006 prior to being acquired by the Company in late 2006:


 


	
   

  	
   

  	
  Quarter Ended

  Dec. 31, 2007

  	
   

  	
  Quarter Ended

  Sept. 30, 2007

  	
   

  	
  Quarter Ended

  June 30, 2007

  	
   

  	
  Quarter Ended

  Mar. 31, 2007

  	
   

  
	
   

  	
   

  	
  ($000’s)

  	
   

  	
  ($000’s)

  	
   

  	
  ($000’s)

  	
   

  	
  ($000’s)

  	
   

  
	
  Revenue

  	
   

  	
  3,495

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Loss before discontinued operations

  	
   

  	
  (12,980

  	
  )

  	
  (11,187

  	
  )

  	
  (4,167

  	
  )

  	
  (3,910

  	
  )

  
	
  Net Loss

  	
   

  	
  (12,980

  	
  )

  	
  (11,187

  	
  )

  	
  (4,167

  	
  )

  	
  (3,910

  	
  )

  
	
  Loss per share

  	
   

  	
  (0.06

  	
  )

  	
  (0.08

  	
  )

  	
  (0.03

  	
  )

  	
  (0.03

  	
  )

  



 


	
   

  	
   

  	
  Quarter Ended

  Dec. 31, 2006

  	
   

  	
  Quarter Ended

  Sept. 30, 2006

  	
   

  	
  Quarter Ended

  June 30, 2006

  	
   

  	
  Quarter Ended

  Mar. 31, 2006

  	
   

  
	
   

  	
   

  	
  ($000’s)

  	
   

  	
  ($000’s)

  	
   

  	
  ($000’s)

  	
   

  	
  ($000’s)

  	
   

  
	
  Revenue

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  Loss before discontinued operations

  	
   

  	
  (24,136

  	
  )

  	
  (2,679

  	
  )

  	
  (5,554

  	
  )

  	
  (3,621

  	
  )

  
	
  Net Loss

  	
   

  	
  (25,362

  	
  )

  	
  (3,010

  	
  )

  	
  (5,273

  	
  )

  	
  (3,853

  	
  )

  
	
  Loss per share

  	
   

  	
  (0.85

  	
  )

  	
  (28,662

  	
  )

  	
  (80,219

  	
  )

  	
  (36,693

  	
  )

  



 


The trend in the net losses before
discontinued operations reflects the Company’s continued efforts to develop the
mineral properties within its portfolio and to progress from being a mineral
exploration company to a mineral exploitation company.


 


Revenue in FY07-Q4 is due to the Gold
Fields acquisition which included the Choco 10 mine.


 


9














 


The FY07-Q4 loss per share has been
impacted by the approximately 240 million shares issued in the quarter in
relation to the Gold Fields acquisition.


 


The additional issuance of stock options
in September 2007 mainly accounts for the increase in the reported net
loss when compared to the two previous quarters.


 


The FY06-Q4 loss before discontinued
operations has been considerably impacted by the transition to becoming a
public company and by the mineral property impairment charge.


 


The loss per share figures reflect the
share recapitalization upon the RTO and the issuance of shares to effect the
Mena acquisition in March 2007 and the further issuance of shares in November 2007
to effect the Gold Fields acquisition.


 


There are no seasonal factors that could
significantly influence the results of the Company.


 


Results of Operations for the Quarter Ended December 31, 2007
Compared to the Quarter Ended December 31, 2006


 


For FY07-Q4 the Company had a
consolidated net loss of $13.0 million compared to a net loss of $25.4 million
for FY06-Q4.


 


Revenue from gold sales amounted to $3.5
million, all revenue was generated as a result of the Company acquiring the
Gold Fields Venezuelan assets, including the operating Choco 10 mine. During
FY06, the Company had discontinued its gold sales operations, while it
completed the construction of an upgraded and expanded production facility to
process gold material, this upgrade and expansion has not yet been completed.


 


The Company had a gross loss of $3.8
million for FY07-Q4, the gross loss is attributable to the under absorption of
production overheads into inventory at the Choco 10 mine.


 


The administration costs for FY07-Q4 were
significantly impacted by the stock-based compensation expense associated with
the issuance of stock options in the last quarter of 2006 and by further
issuances of stock options during the current year. Included within
administration expense is $5.9 million of stock-based compensation expense
associated with options granted to various members of the Company’s board of
directors. Also included in administration expense is $1.1 million of expenses
associated with maintaining and staffing corporate offices in Venezuela,
directors fees of $100k and expenses for the Vancouver head office in the
amount of approximately $600k. Furthermore, the Moscow office incurred expenses
of approximately $300k related to rent, utilities, salaries and general
corporate expenditures.


 


Consulting expenses for FY07-Q4 included
$1.2 million in stock-based compensation expense associated with stock options
granted to third parties to assist in the management of the Company.  A further $800k relates to expenses relating
to consultants who provided services to assist in the management and investor
relations functions of the Company.


 


A foreign exchange gain of $3.8 million
was recorded in FY07-Q4 which was attributable to a $5.9 million gain due to a
reduction in the future income tax liability related to the Mena acquisition
partly offset by a realised foreign exchange loss of $1.4 million which was
attributable to a CDN$ denominated bank account and a $700k loss attributable
to the depreciation of the Venezuelan bolivar in the quarter.


 


Interest income in the period was $900k
which reflected the interest earned on the cash balances 


 


10

















 


held during the quarter.


 


Professional fees related mainly to
legal, tax, audit and accounting services provided in relation to the Company
being publicly traded.


 


Salary expense for FY07-Q4 includes $200k
of stock-based compensation expense associated with stock options granted to
key employees and a further $500k relates to the wages and salaries expense
paid to the Vancouver head office employees.


 


During FY07-Q4, the Company made a
donation to a charitable foundation for the sum of $1.1 million.


 


Travel and entertainment expenses for
FY07-Q4 were $2.8 million which is a result of the Company having corporate
offices in Canada, Venezuela and Russia and operations in Venezuela. The
additional travelling incurred to secure the Goldfields acquisition in FY07-Q4
directly accounted for $2.0 million of this expense.


 


There was a future income tax recovery in
the year of $2.2 million, this is a non-cash item and arose due to the Gold
Fields acquisition.


 


Liquidity and Capital Resources


 


The Company’s cash position increased
from $11.1 million at December 31, 2006 to $31.4 million at December 31,
2007.


 


Non-cash working capital increased from
$(5.9) million at December 31, 2006 to $6.2 million at December 31,
2007.


 


A private placement was completed in
FY07-Q4 for $225 million and commission of $13.5 million was paid on this
transaction. From the monies raised, $205 million was used to acquire Gold
Fields with the balance used to fund on-going working capital requirements,
including the repayment of short-term borrowings of $2.4 million.


 


Additionally, as part of financing
activities, a private placement financing was completed by Mena just prior to
it being acquired by the Company which raised net proceeds of $57.7 million.


 


The Company also received $764k during
FY07 from the exercising of warrants and stock options.


 


Investing activities included $11.5
million spent on developing the mineral property portfolio. Additionally, plant
and equipment was purchased for $11 million.


 


Management expects that the Company will
be able to fund its corporate and exploration commitments over the next 12
months by generating sufficient cash flow from its mining operations.  Actual funding requirements may vary from
those planned due to a number of factors, including the progress of exploration
and development activity.  Management
believes it will be able to raise equity capital as required in the long term,
but recognizes the uncertainty attached thereto.  The Company continues to use various
strategies to minimize its dependence on equity capital, including the securing
of joint venture partners where appropriate.


 


11

















 


Related Party Transactions


 


Related party transactions are recorded
at the exchange amount which is the consideration agreed to between the
parties.


 


During FY07, the Company paid a security
deposit of $41,373 for a lease on the Moscow representative office to a company
controlled by the CEO and a director. A further amount of $65,267 was paid to
the same company to cover the cost of leasehold improvements and for the
provision of office equipment. A further amount of $468,997 was paid to this
company to reimburse it for the administrative costs incurred by the Moscow
office. Additionally, this company was also reimbursed during the year for an
amount of $552,095 which relates to the provision of consulting and
professional fees as well as travel expenses.


 


Companies which are controlled by the
Chairman and the CEO and certain senior managers of the Company provided
drilling and geological services during FY07 in the amount of $2,774,738. This
amount has been capitalised as part of mineral properties.


 


A company controlled by the Chairman and
the CEO owns the office building which houses the administration and accounting
functions in Venezuela for which the Company paid $120,966.


 


The Chairman was paid $251,951 during
FY07 for the provision of management services in accordance with the terms of
the consulting contract that he has with the Company.


 


The CEO was paid $323,070 during FY07 for
the provision of management services in accordance with the terms of the
consulting contract that he has with the Company.


 


A company owned by the Chairman which
specialises in aircraft charters provided travel services amounting to
$2,074,570 during FY07. The provision of these services assisted in the
completion of the Gold Fields acquisition.


 


A law firm, of which a director is a
partner, provided general legal advice and services to the Company during FY07
which amounted to $169,075.


 


Other Data


 


Additional information related to the
Company is available for viewing at www.sedar.com.


 


Disclosure of Outstanding Share Data as at May 6, 2008


 


	
  Designation of Securities

  	
   

  	
  Number or Principle

  Amount Outstanding

  	
   

  	
  If Convertible, Exercisable or

  Exchangeable for Common Shares,

  Maximum Number of

  Common Shares Issuable

  	
   

  
	
  Common shares

  	
   

  	
  387,182,165

  	
   

  	
  387,182,165

  	
   

  
	
  Stock options

  	
   

  	
  19,041,178

  	
   

  	
  19,041,178

  	
   

  
	
  Share purchase warrants

  	
   

  	
  108,800,129

  	
   

  	
  108,800,129

  	
   

  
	
  Total (maximum number of
  common shares) – fully diluted

  	
   

  	
   

  	
   

  	
  515,023,472

  	
   

  



 


12

















 


Change in Accounting Policies


 


Effective January 1, 2007, the
Company adopted the Canadian Institute of Chartered Accountants (“CICA”)
Handbook Section 1530: Comprehensive Income, CICA Handbook Section 3251,
Equity, CICA Handbook Section 3855, Financial Instruments – Recognition
and Measurement, CICA Handbook Section 3861, Financial Instruments –
Disclosure and Presentation and CICA Handbook Section 3865, Hedges.  These new Handbook Sections, which apply to
fiscal years beginning on or after October 1, 2006, provide standards for
recognition, measurement, disclosure and presentation of financial assets,
financial liabilities, derivatives, and hedge accounting.


 


Handbook Section 1530, Comprehensive
Income, establishes standards for reporting and displaying Comprehensive
Income, Comprehensive Income is defined as the change in equity from
transactions and other events from non-owner sources.  Other comprehensive income refers to items
recognized in comprehensive income but that are excluded from net income
calculated in accordance with Canadian generally accepted accounting principles.


 


Handbook Section 3251, Equity, establishes
standards for the presentation of equity in the reporting period.


 


Handbook Section 3855, Financial
Instruments – Recognition and Measurement, establishes standards for
recognizing and measuring financial instruments, namely financial assets, financial
liabilities and derivatives.  It requires
that financial instruments be classified into one of the following five
categories: held for trading, held-to-maturity investments, loans and
receivables, available-for-sale financial assets or other financial
liabilities.  Subsequent measurement and
recognition of changes in the fair value of financial instruments depends on
their initial classifications.


 


The Company has implemented the following
classifications:


 


·                  Cash and cash equivalents are classified as held
for trading and are measured at fair value.


 


·                  Accounts receivable are classified as loans and
receivables and are measured at amortized costs.


 


·                  Accounts payable, accrued liabilities and loan
payable on acquisition are classified as other financial liabilities and are
recorded at amortized costs.


 


Handbook Section 3861, Financial
Instruments – Disclosures and Presentation, establishes standards for
presentation of financial instruments, namely financial assets, financial
liabilities and derivatives.


 


Handbook Section 3865, Hedges,
specifies how to apply hedge accounting and the needed disclosures when it is
applied.


 


The adoption of the foregoing new
standards had no impact on the Company’s financial position or results of
operations.


 


Recent Pronouncements in Accounting Standards


 


a)              Handbook Section 1400, General Standards of
Financial Presentation, was amended to include the requirements for assessing
and disclosing an entity’s ability to continue as a going concern. The
amendment is based upon International Accounting Standard IAS1, Presentation of
Financial Statements.


 


This section is
applicable to interim and annual financial reporting statements relating to
fiscal 


 


13

















 


years
beginning on or after January 1, 2008 with earlier adoption
encouraged.  The Company will adopt this
section in fiscal 2008 but this will not have an impact on the financial
statement disclosures as the Company is currently complying with this requirement.


 


b)             Handbook Section 1535, Capital Disclosures,
requires disclosures about capital and is harmonized with recently amended
International Accounting Standard IAS1. 
The standard is applicable to all entities, regardless of whether or not
that they have financial instruments.


 


Entities are
required to disclose information about their objectives, policies and processes
for managing capital as well as their compliance with any externally imposed
capital requirements, where they may exist.


 


This section is
applicable to interim and annual financial statements relating to fiscal years
beginning on or after October 1, 2007 with earlier adoption
encouraged.  The Company will adopt this
section in fiscal 2008.


 


The Company is
currently investigating the impact that this section will have on the Company’s
disclosures. The impact is currently not known.


 


c)              Handbook Section 3031, Inventories,
replaces Handbook Section 3030, Inventories and provides Canadian
equivalent to International Accounting Standard IAS2, Inventories.


 


This section
provides guidance on the determination of cost and requires the allocation of
overheads and other costs to inventory, allocation of fixed production overhead
based on normal capacity levels, with unallocated overhead expensed as
incurred.  The section requires the
consistent use (by type of inventory with similar nature and use) of either
first-in, first-out (FIFO) or weighted average cost formula to measure the cost
of other inventories.  The use of the
last-in, last-out (LIFO) formula to measure the cost of inventories is no
longer acceptable.  Under this section,
when the circumstances that previously caused inventories to be written down
below cost no longer exist or where there is clear evidence of an increase in
net realizable value because of changed economic circumstances, the amount of
the write-down is reversed, but the reversal is limited to the amount of the
original write-down.  This section also
includes expanded disclosure requirements.


 


This section is
applicable to interim and annual financial reporting statements relating to
fiscal years beginning on or after January 1, 2008.  When applying the section for the first time,
an entity can either apply this section to the opening inventory for the period
and adjusts opening retained earnings by the difference in the measurement of
opening inventory (prior periods are not restated) or apply the section
retrospectively and restates prior periods in accordance with Handbook Section 1506,
Accounting Changes.  The Company will
adopt this section in fiscal 2008. 


 


The Company is
currently investigating the impact that this section will have on the Company’s
financial position and results of operations. The impact is currently not
known.


 


d)             Handbook Section 3064, Goodwill and
Intangible Assets, replaces Handbook Sections 3062, Goodwill and Other
Intangible Assets and 3450, Research and Development costs.


 


This section
establishes standards for the recognition, measurement, presentation, and
disclosure of goodwill and intangible assets. 
Certain items are specifically excluded from the scope of the Section including
the initial recognition, measurement and disclosure of goodwill and intangible
assets acquired in a business combination, the establishment of a new cost
basis for intangible assets as part of a comprehensive revaluation, intangible
assets held by an entity for sale in the ordinary course of business,
non-current intangible assets classified as held for sale or included in a
disposal group that is classified as held for sale, etc.


 


This section is
applied to interim and annual financial statements relating to fiscal years


 


14

















 


beginning on or
after October 1, 2008.  Earlier
adoption is encouraged.  The Company will
adopt this Section in fiscal 2009. 


 


The Company is
currently investigating the impact that this section will have on the Company’s
financial position and results of operations. The impact is currently not
known.


 


e)              Handbook Section 3862, Financial
Instruments – Disclosures


 


Section 3862
replaces the disclosure requirements of previous Section 3861 Financial
Instruments – Disclosure and Presentation and converges with International
Financial Reporting Standard IFRS7, Financial Instruments – Disclosures.  This Section applies to interim and
annual financial reporting statements relating to fiscal years beginning on or
after October 1, 2007.  The Company
will adopt this Section in fiscal 2008.


 


The Company is
currently investigating the impact that this section will have on the Company’s
disclosures. The impact is currently not known.


 


f)                Handbook Section 3863, Financial
Instruments – Presentation


 


Section 3863
is consistent with previous Section 3861, which was based on International
Financial Reporting Standard IFRS7.  This
section applies to interim and annual financial reporting statements relating
to fiscal years beginning on or after October 1, 2007.


 


The Company
will adopt this section in fiscal 2008. The Company is currently investigating
the impact that this section will have on the Company’s financial position and
results of operations. The impact is currently not known.


 


Forward Looking Information


 


Certain statements contained in this
MD&A and elsewhere constitute forward-looking statements. Such
forward-looking statements involve a number of known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
of achievements of the Company to materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as
of the date the statements were made, and readers are advised to consider such
forward-looking statements in light of the risks set forth below.


 


Legal Contingencies


 


Corporación Cabello Galvez


 


The Company has been named as a defendant
in two legal matters outstanding in relationship to the disputed ownership of
shares of Corporación Cabello Galvez. 
The plaintiff expresses rights that would effectively give that party
full ownership of the mining property held by the Company.  The Company denies these ownership rights and
asserts full ownership of Corporación Cabello Galvez.  The outcome of this matter cannot be
estimated at this time and no accrual for any provisions has been made.  Corporación Cabello Galvez’s single asset is
the mineral property concession of Atlántida which has a carrying value of $Nil
at December 31, 2007 (2006 - $Nil).


 


In addition, Corporación Cabello Galvez’s
term of incorporation elapsed under Venezuelan law on February 1,
1997.  This subsidiary remains in wind-up
stage unless shareholders resolve to reactivate it pursuant to Venezuelan law.


 


15

















 


Ferrominera del Orinoco


 


Ferrominera del Orinoco (“FMO”), a
Venezuelan government entity, has instigated legal proceedings against a
subsisiary of the Company asking for the annulment of a shareholders meeting
whereby FMO’s equity stake in Promotora Mineria de Guyana (“PMG”) was diluted
from 30% to 0.02%. The Company’s legal counsel believes that there is no merit
to the proceedings and the probability of the Company losing the legal action
is very low, although FMO in their statement of claim has asked for $9 million
as compensation. No amount has been accrued in these financial statements for
the claim by FMO since management and the Company’s legal counsel have assessed
that it is unlikely that FMO will be successful in their claim.


 


Included in the costs to acquire the
Venezuelan assets and liabilities of GF Netherlands is $11.6 million paid to a
BVI incorporated entity which acted as intermediary consultant and advisor for
the Company in completing this acquisition. 
The services provided by the company were the negotiation of release
from this legal action in return for an indilutable 5% ownership interest by
FMO in PMG.  However, certain steps
remain outstanding to firmly document the completion of the transaction and
until documented this action is not legally released and remains outstanding.


 


Other Matters


 


In the normal course of business, the
Company has been named as a defendant in nine matters before the courts and a
mediator within Venezuela.  Total claims
on these matters are $729,765.  The
outcome of these matters cannot be determined at this time and the Company has
not accrued for any losses on these matters.


 


Risks and Uncertainties


 


Financial Instruments and Risks


 


The carrying value of the Company’s
financial instruments, consisting of cash, loans and other receivables,
advances to related companies, accounts payable and accrued liabilities, and
amounts due to related parties approximate their fair value due to the
short-term maturity of such instruments. 
The carrying value of the long-term payable approximates to its fair
value.  Unless otherwise noted, it is
management’s opinion that the Company is not exposed to significant interest
rate risk arising from these financial instruments.


 


Title Risk


 


Title to mineral properties and mining
rights involves certain inherent risks due to the difficulties of determining
the validity of certain claims as well as the potential for problems arising
from the frequently ambiguous conveyancing history characteristic of many
mining properties.  Although the Company
has investigated title to all of its mineral properties for which it holds
concessions or other mineral leases or licenses, the Company cannot give any
assurance that title to such properties will not be challenged or impugned and
cannot be certain that it will have valid title to its mining properties.  The Company relies on title opinions by legal
counsel who base such opinions on the laws of countries in which the Company
operates.  The Company’s principal
mineral properties and mining rights are located in Venezuela.  In 2005, the Government of Venezuela
announced that it would be changing the mining title regime from a system where
title was granted in the form of either concessions or operating contracts to a
system where all new titles would be granted in the form of operating
contracts.  In order to effect this
change, the Government advised that it would need to create a national mining
company which would be the nation’s contracting party covering the entire 


 


16

















 


country of Venezuela.  The Government also indicated that, given
this change in title regime, it would also be appropriate to review all
existing mining companies in a single comprehensive exercise to ensure that only
companies found to be in compliance with their existing title terms and
conditions would qualify for the new title.


 


Country Risk


 


The Company’s mineral exploration and
exploitation activities may be adversely affected by political instability and
legal and economic uncertainty in the countries where the Company has
operations.  The risks associated with
the Company’s foreign operations may include political unrest, labour disputes,
invalidation of governmental orders and permits, corruption, war, civil
disturbances and terrorist actions, arbitrary changes in laws, regulation and
policies, taxation, price controls, exchange controls, delays in obtaining or
the inability to obtain necessary permits, opposition to mining from
environmental or other nongovernmental organizations, limitations on foreign
ownership, limitations on the repatriation of earnings, limitations on mineral
exports and increased financing costs. These risks may limit or disrupt the
Company’s projects or operations, restrict the movement of funds or result in the
deprivation of contractual rights or the taking of property by nationalization,
expropriation or other means without fair compensation.  The Company’s mineral properties and mining
rights are located in Venezuela and as such, the Company may be affected by
political or economic instabilities.


 


Currency Risk


 


The Company is exposed to currency risk
as certain of its assets are denominated in foreign currencies.  Unfavourable changes in the applicable
exchange rate may result in a decrease or increase in foreign exchange gains or
losses.  The Company does not use
derivative instruments to reduce its exposure to foreign currency risk.


 


The Company’s Venezuelan operations and
cash holdings are currently subject to currency and exchange controls.  These government imposed controls may
adversely affect the Company as such controls restrict the Company’s ability to
flow U.S. dollars out of the country.


 


As at December 31, 2007, the Company
holds cash of $516,268 (2006: $1,384,420) in Venezuelan Bolivars.


 


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SUBSEQUENT EVENTS


 


Disposition of Mena Chile


 


On April 4, 2008, The Company
announced that it had completed the sale of its 100% own subsidiary, Compania
Minera Mena Resources (Chile) Limitada (“Mena Chile”) to Iron Creek Capital
Corp (“Iron Creek”), an unrelated company listed on the TSX Venture Exchange.


 


The consideration consisted of 2,000,000
common shares in Iron Creek at a deemed price of $0.265 per common share and
$325,000 in cash representing the repayment of a loan advanced by the Company
to Mena Chile. In addition and pursuant to the terms of a royalty agreement,
Mena Chile has granted a net smelter returns royalty to the Company, on any
metals recovered equal to 1% on the Vaquillas Property and 2% on mining and
mineral interests held by Mena Chile with respect to the Emilia &
Pampa property, the Gavi & Mena 1-2 properties and the Suerte
property.


 


The Company has reclassified the Mena
Chile assets to assets held for sale at their net realizable value of $855,000
as follows:


 


	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  37,857

  	
   

  
	
  Prepaids

  	
   

  	
  12,075

  	
   

  
	
  Mineral properties

  	
   

  	
  805,068

  	
   

  
	
   

  	
   

  	
  855,000

  	
   

  



 


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