Mano River Resources Inc.
TSX VENTURE : MNO
AIM : MANA

Mano River Resources Inc.

November 28, 2008 15:53 ET

Mano River Reports Q3 2008 Financial Results

LONDON, UNITED KINGDOM--(Marketwire - Nov. 28, 2008) - Mano River Resources Inc (TSX VENTURE:MNO)(AIM:MANA) ("Mano River" or the "Company") -

The Board of Mano River Resources Inc. is pleased to release the Accounts of the Company for the nine months ended June 30th 2008, together with the Management Discussion & Analysis.

On behalf of the Board of Mano River Resources Inc.

Luis da Silva, President and CEO

For further information on Mano River Resources and its exploration programme, you are invited to visit the Company's website at www.manoriver.com or contact one of the following:

Mano River Resources Inc

Management's Discussion and Analysis

For the nine months ended September 30, 2008

The following discussion is management's assessment and analysis of the results and financial condition of Mano River Resources Inc. (the "Company" or "Mano") and should be read in conjunction with the accompanying unaudited consolidated financial statements and related notes for the nine months ended September 30, 2008. This management discussion and analysis has been prepared based on information available to Mano as at November 28, 2008. Unless otherwise indicated all amounts are in US dollars.

Additional information relating to the Company is available on SEDAR at www.sedar.com or on the Company's website at www.manoriver.com.

OVERVIEW

DESCRIPTION OF BUSINESS

Mano is an exploration and development company engaged in the exploration and development of gold, diamond and iron ore properties in Africa. The Company, through its subsidiaries, holds interests in mineral properties in Liberia, Sierra Leone, Guinea and the Democratic Republic of Congo (DRC), with the aim of developing them to a stage where they can be exploited economically or arranging joint ventures whereby partner companies provide the funding and expertise for development and exploitation. Full scale diamond exploration in the DRC started in 2008.

OPERATIONS

Mano's fundamental strategy is to unlock the value of its exploration assets and increase shareholder value by driving these assets towards production. The Company's exploration assets are housed in three divisions: namely iron ore, diamonds and gold.

The Company is targeting a potential resource of up to 900 million tonnes at its Putu Iron Ore Project in southeastern Liberia. In quarter two 2008 the Company signed certain financial and development agreements on the Putu Iron Ore Project with Severstal and applied to convert its exploration licence into an MDA (Mineral Development Agreement). In October 2008 Mano announced that the Government of Liberia had granted the Company a two year extension to its Putu Iron Ore exploration licence, extending it to September 30, 2010. The resource definition drilling programme which commenced in quarter two 2008 is progressing well with over 3,000 metres drilled to-date.

In 2007 diamond assets were transferred into Stellar Diamonds Limited (Stellar). The intention to list Stellar on London's AIM stock exchange has been postponed. Mano currently owns 63.17% of Stellar as a result of private equity financings completed by Stellar. Exploration is currently on hold pending receipt of proceeds from the current private placement. When funding is secured the intention is to progress the two near-term diamond production projects at Kono in Sierra Leone and at Mandala in Guinea. The 49% owned Kono joint venture project with Petra Diamonds has moved into underground trial mining with good diamond grades achieved to date. Valuations on the stones from the first Kono commercial tender in September 2008 resulted in the sale of 866 carats at an average value per carat of US$152. The 100% owned Mandala alluvial diamond project in Guinea has progressed and the DMS processing plant is being transferred to Mancenta.

The key asset in the Gold division is 100% owned New Liberty Gold project (NLGM) in Liberia where Mano has been drilling in order to expand the 2007 NI 43-101 estimated gold resource of 1.4 million contained ounces (13.533 million tonnes of measured and indicated resources grading 3.18 g/t gold). The most recent drill programme was completed in quarter two and in all 4,485 metres was drilled. The results received to date are highly encouraging and confirm that gold mineralisation continues at depth.

EXPLORATION PROJECTS - CURRENT & SUBSEQUENT DEVELOPMENTS

IRON ORE

CURRENT EVENTS

During quarter three of this year progress continued on the 4,000 metre diamond drill programme at Putu. Five holes were completed this quarter with a cumulative total depth of 2160.5 metres. The drilling was in tandem with construction of drill access routes, drill pads, core cutting and general camp construction. Construction started on a new access road 150 metres down the southeast slope from the ridge crest. Rehabilitation of the old Zimbabwe Road started and this will give access to the central portion of the Jiddah Mountain Ridge. The general geological sequence intersected by drilling to date appears to be a surface laterite unit followed by oxidized limonite/goethite/haematite itabarite with decreasing oxidation at depth. The current drill programme should be completed by the end of quarter four 2008. Dependent on the turn around time at the lab we hope to receive the final assay results by the end of quarter one 2009.

SUBSEQUENT EVENTS

On November 28, 2008 the Company announced that the joint Boards of Mano & OAO Severstal would like to confirm 'Closing of the Agreement' on their joint operation of the Putu project. Financial, legal and technical due diligence is substantially complete and Severstal Resources has already advanced project funds, as per the facility in the agreement signed on the 22 May 2008. The amount received by the Company on the 27 October 2008 was the pre-agreed sum of US$1 million.

Completion of the deal is formally set for 10 December 2008.

The monetary terms of the original agreement remain unchanged and on completion Severstal Resources, through its wholly owned subsidiary, will take up its right to become a 61.5% shareholder in the Company's iron ore subsidiary by investing US$30M to advance the Putu iron ore project to a definitive feasibility study. On completion, US$8.3 million will be released to Mano with the balance of US$4.2 million to be paid two years from the date of completion on the 10 December 2010.

The Company announced on October 24 2008 that the Government of Liberia has granted a two year extension to its Putu Range Iron Ore exploration licence, extending it to September 30, 2010. This licence extension enables the Company to proceed to close the agreement previously signed on the May 22, 2008 with its chosen iron ore partner, Severstal, having satisfied all material legal requirements.

DIAMONDS

CURRENT EVENTS

Exploration and trial mining operations at our Kono project in Sierra Leone (a Joint Venture between Stellar (49%) and Petra Diamonds Limited (51%)), continues to yield encouraging results. The first parcel of Kono test production (1,064 carats) was sold on tender in September 2008, with the Pol-K shaft parcel of 866 carats achieving an average value per carat of US$152.

As trial mining and regular sales continue, we will further establish the parameters for a production decision which is expected during quarter one, 2009. A 3,167 line km airborne electromagnetic geophysical survey has been completed by Fugro Airborne Surveys, the objective being the discovery of kimberlite pipes and blows.

Stellar's on-going financial commitment to the Kono project is dependent on the successful closure of the current private placement. Mano's intention is to participate in this private placement along with other Stellar shareholders pending receipt of funds from Severstal.

GOLD

CURRENT EVENTS

There was little activity on the Mano gold projects during quarter three 2008. Plans for the 2009 season have been prepared but are dependent on closing the Severstal agreement and receipt of the $12.5 million in cash under its terms. Following the work completed by consultants earlier in the year the main targets apart from the NLGM project in Liberia are Silverhills, Gondoja and Ndablama. The Company has contracted the services of AMC Consultants (UK) Ltd to review the possible mining methods at NLGM associated with this type of archaean, steeply dipping deposit. On the basis of this the Company is designing an appropriate in-fill drilling programme to an approximate depth of 300 metres.

CORPORATE

CURRENT EVENTS

On September 9, 2008 the Company was notified by Malcolm Burne, a Non-Executive Director of the Company, that he purchased 500,000 common shares at 7.25 pence per share on September 3, 2008. His holding of common shares in the Company has increased to 900,000 shares, representing approximately 0.28% of the Company's issued shared capital.

On July 3, 2008 the Company announced that it was notified by David Evans, Executive Chairman of the Company, that he purchased 200,000 common shares at 10.75 pence per share on June 27, 2008. His holding of common shares in the Company has increased to 1,200,000 shares, representing approximately 0.38% of the Company's issued shared capital.

On July 3, 2008 Mano announced that it was notified by Eastbound Resources Limited, a company controlled by Non Executive Director Guido ('Guy') Pas, that it had acquired 4,645,672 common shares off market for an average consideration of 11.84p per share on June 30, 2008. This brings the total number of shares owned by Eastbound to 28,200,191 shares, and the total number of shares indirectly and directly controlled by Mr Pas to 30,400,191 shares, which represents approximately 9.56% of the Company's issued share capital.

SUBSEQUENT EVENTS

On October 31, 2008 the Company announced the following Director share dealings:

- Eastbound Resources Limited, a company controlled by Non Executive Director Guido ('Guy') Pas, acquired 500,000 common shares for a consideration of 3.75 pence per share on 30 October, 2008. This brings the total number of shares owned by Eastbound to 28,700,191 shares, and the total number of shares indirectly and directly controlled by Mr Pas to 30,900,191 shares, which represents approximately 9.72% of the Company's issued share capital.

- David Evans, Executive Chairman of the Company, purchased 500,000 common shares at 3.5 pence per share on 30 October, 2008. His holding of common shares in the Company has increased to 1,700,000 shares, representing approximately 0.53% of the Company's issued share capital.

- Malcolm Burne, a Non-Executive Director of the Company, purchased 500,000 common shares at 3.375 pence per share on 29 October, 2008. His holding of common shares in the Company has increased to 1,400,000 shares, representing approximately 0.44% of the Company's issued shared capital.

SUMMARY OF PERFORMANCE

SELECTED FINANCIAL INFORMATION

The following table provides a summary of the unaudited financial information of the Company for the nine month period ended September 30, 2008 and the annual audited financial information for the three most recently completed financial years as derived from the audited consolidated financial statements and is prepared in accordance with Canadian generally accepted accounting principles ("GAAP").



----------------------------------------------------------------------------
Nine months
period ended Year ended Year ended Year ended
US Dollars September 30 December 31 January 31 January 31
2008 2007 2007 2006
----------------------------------------------------------------------------
Interest income 72,316 148,041 53,181 117,927
----------------------------------------------------------------------------
Dilution gain 1,830,620 6,207,642 - -
----------------------------------------------------------------------------
Net income/(loss) (7,103,984) 4,017,642 (959,609) (1,348,265)
----------------------------------------------------------------------------
Basic and diluted
income/(loss) per share (0.023) 0.014 (0.004) (0.006)
----------------------------------------------------------------------------
Stock option
compensation expense 1,314,755 190,003 513,361 397,829
----------------------------------------------------------------------------
Working capital (2,389,117) 2,868,877 428,368 3,015,165
----------------------------------------------------------------------------
Total assets 47,082,223 45,501,911 28,866,715 22,287,420
----------------------------------------------------------------------------
Exploration expenditure
in the year 8,171,920 6,526,656 8,443,801 4,291,377
----------------------------------------------------------------------------

SUMMARY OF SELECTED QUARTERLY INFORMATION

The following is the selected financial information of the Company for
the last eight quarters: (unaudited)

----------------------------------------------------------------------------
US Dollars September 30 June 30 March 31 December 31
2008 2008 2008 2007
----------------------------------------------------------------------------
Interest income 21,415 32,676 18,225 79,784
----------------------------------------------------------------------------
Dilution gain - 442,840 1,387,780 6,207,005
----------------------------------------------------------------------------
Net income/(loss) (5,362,222) (996,109) (745,653) 5,257,878
----------------------------------------------------------------------------
Basic and diluted
income/(loss) per share (0.017) (0.003) (0.002) 0.018
----------------------------------------------------------------------------
Total assets 47,082,223 51,393,067 48,617,142 45,501,911
----------------------------------------------------------------------------
October 31 July 31 April 30 January 31
US Dollars 2007 2007 2007 2007
----------------------------------------------------------------------------
Interest income 55,272 5,213 7,772 14,496
----------------------------------------------------------------------------
Dilution gain - - - -
----------------------------------------------------------------------------
Net loss (466,135) (496,668) (277,433) (139,287)
----------------------------------------------------------------------------
Basic and diluted
loss per share (0.002) (0.002) (0.001) (0.001)
----------------------------------------------------------------------------
Total assets 46,105,356 46,672,577 29,813,909 28,866,715
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RESULTS OF OPERATIONS

Review of three months ended September 30, 2008 and the three month period ended October 31, 2007.

The Company earned interest income of $21,415 down $33,857 versus the October 2007 figure reflecting a lower average cash balance in the September quarter. In light of the current market situation it is not possible to continue to explore all the projects on the Company's books. Therefore, management has reviewed its portfolio of projects and their carrying values and has decided to cancel the licences on those projects deemed uneconomic. This has resulted in an impairment charge of $5,161,333 (AAR Liberia diamond project $429,072; Guinea Iron Ore $46,500; gold projects, Missamana/Gueliban (Guinea) $3,847,532 and Pampana (Sierra Leone) $838,229) in quarter three 2008, versus a nil charge in quarter three 2007. The projects that have been impaired in quarter three have received minimal funding over the past two years and are not key assets within the Company's project portfolio. In quarter three 2008 the unrealised gain on the convertible debentures arose of $409,170 due to the weakening of the UK pound in which the debentures are denominated in versus the US dollar. There was no unrealised gain/loss on the convertible debentures in quarter three 2007. Depreciation recorded in quarter one 2008 for the Mandala plant equipment was reversed in quarter three as the equipment is now unlikely to be in operation during the current fiscal year. The loss in the quarter of $5,362,222 (quarter three 2007:$466,135) is $4,896,087 above the quarter three 2007 loss and as explained above is mainly due to the project impairment charge in the period.

Review of the nine months ended September 30, 2008 and the nine month period ended October 31, 2007.

During the nine months ended September 30 2008, the Company incurred a net loss of $7,103,984 or $0.023 loss per share as compared to a loss of $1,240,236 or $0.004 loss per share in the nine months ended October 31, 2007. The increase in loss of $5,863,748 has arisen for a number of reasons which are detailed below:

1. Project impairment charge of $5,161,333 did not feature in nine months ended October 31 2007;

2. Stock based compensation of $1,314,755 relates to stock options granted in January 2008, which in fact relate to 2007, but were not granted due to an extended close period under London AIM stock exchange rules. A minimal charge was recorded in 2007 of $170,656.

3. Directors fees ($258,787) and Management fees ($536,947) are higher than last year reflecting the additional cost of the independent Stellar Board and the recruitment of key management personnel in quarter four 2007 and quarter one 2008.

4. Professional fees of $1,678,447 (2007:$666,937) included expenses related to the proposed listing of Stellar on London's AIM stock exchange such as legal, and audit and accounting services, fees to implement a new accounting and reporting system and consultancy fees.

5. Administrative and office expenses at $825,404 (2007:$7,785) includes the cost of the London office not in the figures last year, additional staff costs and higher public and investor relations. The main cost items are travel ($335,424), salaries and wages ($174,592), public and investor relations ($131,159), office and property costs ($135,539).

The expenses for the period were partly off-set by:

1. A "dilution gain" amounting to $1,830,620 arising from the issue of shares by Stellar to private investors at a price higher than the initial price at which the Company transferred the diamond properties to Stellar in 2007.

2. The non-controlling interest of $742,155 represents the minority shareholders' share of Stellar's loss for the period.

3. Interest income of $72,316 for the period is marginally above last years income ($68,257).

4. An unrealised gain on the convertible debentures has been recognised in the period of $718,210 as the underlying currency is the UK pound which has weakened during the period.

BALANCE SHEET, LIQUIDITY AND CAPITAL RESERVES

The Company had a negative working capital at September 30 2008, of ($2,389,117) compared with a positive working capital of $2,868,877 at 31 December 2007. The reduction in working capital of $5,257,994 is due to lower cash and cash equivalents ($3,099,280) arising from increased exploration expenditure, and higher commitments to related parties and joint venture partners.

Property, plant and equipment increased by $1,822,364 over the 2007 year end figure due primarily to the money spent on the diamond processing plant for the Mandala project in Guinea.

Resource properties at $6,440,092 are down $2,448,500 on December 31, 2007 figure due to the impairment charge recorded at September 30, 2008.

Deferred exploration costs of $35,377,137 are $5,459,087 above the December 31, level. The main project expenditure includes: $2.0 million on the Kono/Petra diamond joint venture in Sierra Leone; $1.6 million spent at the Putu iron ore project in Liberia; $1.5 million in Liberia on the New Liberty Gold Mine, $0.7 million on Kpo/MCA diamond projects; and $0.7 million on the Mandala project in Guinea. At September 30, 2008 an impairment charge of $2,712,833 was recorded against deferred explorations costs.

Share capital increased by $3.9 million following the successful private placement with Severstal in May 2008.

Cash outflow from operating activities during the nine months ended September 30, 2008 is $2,360,727 (2007: $1,279,960) after adjusting for the non-cash activities. Cash outflow on investing activities amounted to $8,961,438 and included deferred exploration expenditure of $8,171,920 and $1,866,503 on the purchase of capital assets principally for the diamond processing plant for the Mandala project. The comparative figure spent on investing activities during the nine month period to October 31, 2007 was $5,859,819.

Cash in-flow from financing activities for the nine months to-date is $8,195,491 compared to $13,999,460 for the nine months ended October 31, 2007. Besides the $3.9 million raised in the Severstal private placement, $4.7 million was raised through a private placement in Stellar. Interest paid on the convertible debentures amounted to $412,037.

Cash and cash equivalents at September 30, 2008 is $1,000,907, down from $4,100,187 at December 31, 2007.

OTHER INFORMATION

Outstanding share data

The Company is authorised to issue an unlimited number of common shares without par value. As at November 28, 2008 there were 317,810,818 common shares outstanding.

Outstanding share options at September 30, 2008 are outlined below. This includes 9,045,000 share options granted during the period.



Exercise price
Number of Per share
Common Shares (Cdn$) Expiry date
----------------------------------------------------------------------------
2,720,000 0.240 March 23, 2009
2,620,000 0.215 July 25, 2010
2,980,000 0.230 July 31, 2011
600,000 0.230 March 16, 2012
300,000 0.230 May 31, 2012
9,045,000 0.200 Jan 23, 2013
----------------------------------------------------------------------------
18,265,000
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As at September 30, 2008, 20,000,000 share purchase warrants were outstanding at an exercise price of 0.14 with an expiry date of November 29, 2009. These warrants were issued to Severstal as part of the private placement completed on May 29, 2008.

Convertible debentures

On September 27, 2007 the Company entered into convertible subscription agreements to raise Pounds Sterling 2.3 million with certain lenders. The convertible debentures are repayable on August 1, 2010 and bear interest at 9% per annum. The principal amount is convertible by the holders into common shares of the Company at a conversion price of Pounds Sterling 0.14 per share at any time prior to maturity. Alternatively, the Company has the option to demand the conversion after a period of three years, if the common shares of the Company have traded at an average 30% premium to the conversion price for a minimum period of 21 trading days previous to the conversion date.

Off balance sheet arrangements

The Company does not have any off-balance sheet arrangements and does not contemplate having them in the foreseeable future.

Related party transactions

During the nine months ended September 30, 2008 the Company incurred billings of $1,078,153 (October 31, 2007 - $311,785) from related parties for management fees, directors fees and professional services. The increase over 2007 is due to the formation of the Stellar Board of Directors which has been treated as a related party for purposes of the consolidation as well as higher management and director fees. All transactions with related parties have occurred in the normal course of operations. As at September 30, 2008 the amount due to related parties totaled $580,942 (December 31, $174,367). These balances have no fixed terms of repayment and have arisen from the accrued provision of services referred to above and reimbursable expenses.

Impairment

The Company reviews the carrying values of its mineral property interests whenever events or changes in circumstances indicate that the carrying value of the assets may exceed the estimated net recoverable amounts. An asset's carrying value is written down when the carrying value is not recoverable and exceeds its fair value. Impairment reviews for deferred exploration and acquisition costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances apply:

(i) title to the asset is compromised;

(ii) variations in metal prices that render the project uneconomic; and

(iii) unexpected geological occurrences that render the resource uneconomic.

Where estimates of future cash flows are not available and where other factors suggest impairment, Management assesses if the carrying value is recoverable and records an impairment if so indicated. The impairment review undertaken during quarter three identified certain projects that were considered uneconomic and were written off and those projects where there was a reasonable probability that the carrying value of the project exceeded its fair value. The following amounts have been written off at September 30, 2008:



----------------------------------------------------------------------------
Impairment
in the
Carrying Net Income/(loss)
Country value $ Recoverable $ Statement $
----------------------------------------------------------------------------
Acquisition Costs Sierra Leone 1,695,000 1,186,500 508,000
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Guinea 6,873,592 4,933,592 1,940,000
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Total 8,888,592 6,440,092 2,448,500
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----------------------------------------------------------------------------
Impairment
in the
Carrying Net Income/(Loss)
Country value $ Recoverable $ Statement $
----------------------------------------------------------------------------
Deferred Exploration
Costs Liberia 24,462,659 24,033,587 429,072
----------------------------------------------------------------------------
Sierra Leone 9,775,838 9,446,109 329,729
----------------------------------------------------------------------------
Guinea 3,969,926 2,015,894 1,954,032
----------------------------------------------------------------------------
DRC 490,800 490,800 -
----------------------------------------------------------------------------
Total(i) 38,699,223 35,986,396 2,712,833
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(i) Pre 2007 recovery relating to sale of mineral property on consolidation
of Stellar ($1,084,825).


The total impairment charge recorded in the Income/(Loss) Statement is $5,161,333. This relates to the following projects: AAR Liberia diamond project $429,072; Guinea Iron Ore project $46,500, Missamana/Gueliban gold project (Guinea) $3,847,532 and Pampana gold project (Sierra Leone) $838,229. The projects that have been impaired in quarter three have received minimal funding over the past two years and are not key assets within the Company's project portfolio.

Going Concern

Mano

At September 30, 2008 the Company has $1,000,907 in cash and cash equivalents. As mentioned under Iron Ore - Subsequent events, the Company announced on November 28 that it expects the closing of the agreement with Severstal to take place on December 10, 2008. As part of Severstal's commitment to completing the agreement with Mano they advanced $1 million to the Company on October 27, 2008 as part of the agreed loan facility.

The current cash and cash equivalent holding is sufficient to meet the Company's working capital requirements up until the end of February 2009. As stated in a release dated November 28, 2008 the Directors have a high expectation that the Severstal agreement will be completed on December 10 which will provide for US$30 million into AIOG to advance the Putu iron ore project to a definitive feasibility study and simultaneously release US$8.3 million to Mano plus US$4.2 million to be paid two years from the date of completion on the 10 December 2010. These funds will be used primarily to advance the gold and diamond strategy.

Stellar

Stellar, Mano's 63.17% majority owned subsidiary is currently raising finance capital through a private placement which is scheduled to close by the end of quarter four 2008. Exploration is currently on hold pending receipt of proceeds from this private placement. It is the intention of Mano to contribute to this placement along with other Stellar shareholders pending receipt of funds from Severstal.

FORWARD-LOOKING STATEMENTS

Certain information included in this document may constitute forward-looking statements. Forward-looking statements are based on current expectations and entail various risks and uncertainties. These risks and uncertainties could cause or contribute to actual results that are materially different from those expressed or implied. Factors that could cause actual results or events to differ materially from current expectations include but are not limited to: the grade and recovery of ore which is mined varying from estimates; estimates of future production, mine development costs, timing of commencement of operations; changes in exchange rates; access to capital; fluctuations in commodity prices; and adverse political and economic developments in the countries in which we operate. Although the Company believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

TRENDS

Up until recently commodity prices had increased significantly on the back of a steady increase in the worldwide demand for commodities driven by burgeoning demand from Asia, in particular China and India. Despite the increased prices, both the capital expenditure required to build and sustain new production and the ongoing cash operating costs had also risen substantially. Increases in unit costs are attributable mainly to higher prices for energy, labour, equipment, consumables and contractors. Obtaining skilled geologists and other technicians is still difficult leading to higher operating costs especially for exploration companies. The current financial crisis has seen demand for commodities fall and in turn a significant fall in prices has taken place. With access to capital more difficult, fewer companies are now listing on stock markets. The Company's majority owned subsidiary Stellar has decided to postpone its listing on London's AIM stock exchange due to the difficult market conditions for raising finance. Although there is limited funding available, companies with highly prospective projects can still attract the investment. Mano was able to attract investors for its highly prospective Putu iron ore project in Liberia, concluding agreements with Severstal, a leading steel and natural resources company. The financial crisis has also negatively impacted the market value of exploration and mining companies on world markets.

RISKS AND UNCERTAINTIES

The Company is subject to a number of risk factors due to the fundamental nature of the exploration business in which it is engaged, the countries in which it primarily operates and not least adverse movements in commodity prices. In recent months the fall in commodity prices has affected the economics of both existing and potential mines. Mano seeks to counter exploration risk as far as possible by selecting exploration areas on the basis of their recognised geological potential to host high grade gold, diamond and iron ore deposits. The under-explored Archaean terrain on which the Company focuses in West Africa is also subject to a second significant risk, namely, political. While the region has suffered serious civil unrest and armed conflict in the past (which is the basic reason why it remained under-explored), conditions have improved markedly in recent years. Mano's newest exploration territory, the DRC, is currently experiencing increased unrest, but fortunately for now, this is not affecting the areas where the Company has its exploration projects. In addition the DRC forms only a small part of the diamond focus for Stellar. The following risk factors should be given special consideration when evaluating an investment in the Company's shares:

(1) Exploration, development and operating risk

The Company is engaged in the exploration of mineral properties, an inherently risky business, and there is no assurance that an economic mineral deposit will ever be discovered. Most exploration projects do not result in the discovery of commercially mineable ore deposits. The focus of the Company is on areas in which the geological setting is well understood by management. The technological tools employed by the Company are regularly updated to better focus our exploration efforts.

(2) Reserve and resource estimates

The estimation of mineral resources and reserves is in part an interpretive process and the accuracy of any such estimates is a function of the quality of available data, and of engineering and geological interpretation and judgement. No assurances can be given that the volume and grade of reserves recovered, and rates of production achieved, will not be less than anticipated. The Company contracts the services of independent professional experts to prepare resource and reserve estimates.

(3) Political and country risks

The political risk in sub-Saharan Africa is significant due to prolonged periods of economic and political instability in the area. However, in recent years there has been considerable progress in rebuilding the government institutions and economy in the three key countries in which we operate, namely Liberia, Guinea and Sierra Leone. These countries will continue to need the support of the international community for security and economic assistance to ensure they are successful in creating a prosperous future for their citizens.

(4) Gold and diamond prices

The price of gold is affected by numerous factors totally beyond the control of the Company, including central bank sales, producer hedging activities, the exchange rate of the U.S. dollar relative to other major currencies, demand, political and economic conditions and production levels. In addition, the price of gold has been volatile over short periods of time due to speculative activities. The prices of diamonds, iron ore and other minerals that the Company may explore for, also have the same or similar price risk factors.

(5) Cash flows and additional funding requirements

Mano currently has no revenues from operations although revenues from diamond production will be recognised when the 49% owned Kono diamond project in Sierra Leone enters full scale production in 2009 as currently projected. The Company has historically entered into joint venture agreements with partners to share the risks and the associated cost of exploration. In addition the Company has raised finance through the sale of equity capital and the placement of unsecured convertible debentures. Although Mano has been successful in the past in obtaining finance, there is no assurance that it will be able to obtain adequate finance in the future or that such finance will be on terms advantageous to the Company. As noted above the Company successfully raised $3.9 million through a private placement with Severstal in May 2008. The agreement with Severstal also provides for a total of $30 million into AIOG and on completion, US$8.3 million is expected to be released to Mano with US$4.2 million to be paid two years from the date of completion on the 10 December 2010.

(6) Exchange rate fluctuations

Fluctuations in currency exchange rates can significantly impact cash flows. The U.S. dollar exchange rate in particular has varied substantially over time. Since quarter two the US dollar has strengthened considerably vis-a-vis the pound. While the Company has historically raised a large proportion of its equity financing in UK pounds most of the Company's exploration costs, are denominated in U.S. dollars. Fluctuations in exchange rates may give rise to foreign currency exposure, either favourable or unfavourable, which may impact financial results. Mano does not engage in currency hedging to offset the risk of exchange rate fluctuation.

(7) Environmental

Mano's exploration and development activities are subject to extensive laws and regulations governing environmental protection. The Company is also subject to various reclamation-related requirements. The Company takes extremely seriously its commitment towards the local communities and the environment in which it operates. The Company's policy is to meet all applicable environmental regulations. A failure to comply may result in enforcement actions causing operations to cease or be curtailed, the imposition of fines and penalties, and may include corrective measures requiring significant capital expenditures. In addition, certain types of operations require the submission and approval of environmental impact assessments. As far as the Company is aware it has complied with all environmental regulations in relation to the licences it holds.

(8) Laws and regulations

Mano's exploration activities are subject to local laws and regulations governing prospecting, development, production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters. Such laws and regulations are subject to change and can become more stringent, and compliance can therefore become more costly. The Company applies the expertise of its management, its advisors, its employees and contractors to ensure compliance with current laws.

(9) Title to mineral properties

While the Company has undertaken all the customary due diligence in the verification of title to its mineral properties, this should not be construed as a guarantee of title. The properties may be subject to prior unregistered agreements or transfers and title may be affected by undetected defects.

(10) Competition

There is constant competition from other mineral exploration companies, with operations similar to those of the Company. Many of the mining companies with which the Company competes have operations and financial resources substantially greater than those of Mano.

(11) Dependence on management

Mano relies heavily on the business and technical expertise of its management team and there is little possibility that this dependence will decrease in the near term. In 2007 changes were made to the management and the composition of the Board which have made the Company stronger and better able to exploit the value of its exploration assets. In 2008 the financial management of the Company has been strengthened with the appointment of a CFO for Mano, a Finance Director for Stellar and a Financial Controller. Mano has no key-man insurance.

MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING AND CONTROLS

The unaudited interim consolidated financial statements of the Company for the three months and nine months periods ended September 30, 2008 have been prepared by management in accordance with Canadian Generally Accepted Accounting Principles (GAAP) and have been approved by the Company's Board of Directors.

Management is responsible for establishing and maintaining a system of controls and procedures over the public disclosure of financial and non-financial information regarding the Company. Management is also responsible for the design and maintenance of effective internal control over financial reporting to provide reasonable assurance regarding the integrity and reliability of the Company's financial information and the preparation of its financial statements in accordance with Canadian generally accepted accounting principles.

Management maintains appropriate information systems, procedures and controls to ensure the integrity of the financial statements and that information used internally and disclosed externally is complete and reliable. Management of the Company, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and internal control procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Mano River have been detected.

However, given the nature of the business and geographical displacement, the management is committed to continuously mitigate any risks and systematically improve operating controls where and when possible in a cost effective manner.

Management recognise the limitation of segregation of duties due to the size of the organisation and are committed to mitigating such risks by introducing compensatory controls.

The Board is responsible for ensuring that Management fulfils its responsibilities for financial reporting and internal control. The Board carries out this responsibility principally through its Audit Committee. The Audit Committee is appointed by the Board and meets periodically with management and the external auditor to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy itself that each party is properly discharging its duties and responsibilities and to review the Consolidated Financial Statements.

OUTLOOK

On the Putu iron ore project in Liberia the Company has been awarded a two year extension to its exploration licence. The key priority in 2009 is to substantially advance the resource drilling programme and metallurgical testing. The process to receive a 25 year Mineral Development Agreement is on-going with talks likely to resume in 2009. We believe our partner on Putu, Severstal, gives Mano the financial and technical ability necessary to take the Putu project forward to feasibility.

As soon as Stellar secures its financing requirements it will focus on fast tracking the Kono project, in Sierra Leone, operated by its partner Petra, and the Mandala project in Guinea, through to commercial production and cash flow. A listing by Stellar on London's AIM stock exchange has been postponed until market conditions improve. Mano's strategy in diamonds is to continue to dilute its investment in Stellar as Stellar becomes more autonomous and creates value enhancing options for Mano.

In the gold division, the Company's objectives, once funds from Severstal have been received, are to upgrade the current 1.4 million ounce gold resource at the NLGM project in Liberia to Measured category
and define a substantial new resource in the Indicated category. Following this, a new feasibility study will be prepared with the objective of taking NLGM to a production decision. The Company has the skills to take projects like NLGM into production with a Board that has proven experience in successfully bringing developments to fruition.

The outlook for the mining and exploration industry is uncertain over the short term. Therefore, the Company is reviewing all costs and refocusing its activities on its key projects and dropping those projects it deems uneconomic. Finalising the Severstal agreement is the key priority for the Company as this will secure our medium term funding requirements and enable the Company to implement its operational initiatives.



On Behalf of the Board,
MANO RIVER RESOURCES INC.
LUIS G. CABRITA da SILVA President and CEO



Interim Consolidated Financial Statements

Mano River Resources Inc.

For The Nine Months Ended September 30, 2008
and Nine Months ended October 31, 2007
(Stated in U.S. Dollars)

(Unaudited)



MANO RIVER RESOURCES INC.
6th Floor, 890 West Pender Street, Vancouver, B.C. V6C 1J9
Telephone: (604) 689-1700 Fax: (604) 687-1327


NOTICE TO READER

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its auditors have not reviewed the unaudited interim consolidated financial statements for the nine months ended September 30, 2008.

The accompanying unaudited interim financial statements of the Company have been prepared by and are the responsibility of the Company's management.



Mano River Resources Inc.
Consolidated Balance Sheet
As at September 30, 2008
(Stated in U.S. dollars)

----------------------------------------------------------------------------
Nine months Year
ended ended
September 30, December 31,
2008 2007
$ $
(unaudited) (audited)
----------------------------------------------------------------------------
Assets
Current assets
Cash and cash equivalents 1,000,907 4,100,187
Amounts receivable 168,373 296,591
Due from joint venture partners (Note 3) 87,140 112,281
----------------------------------------------------------------------------
1,256,420 4,509,059

Investments (Note 4) 184,090 184,090
Property, plant and equipment 3,824,484 2,002,120
Resource properties (Note 5) 6,440,092 8,888,592
Deferred exploration costs (Note 5) 35,377,137 29,918,050
----------------------------------------------------------------------------
Total Assets 47,082,223 45,501,911
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Liabilities
Current liabilities
Accounts payable and
accrued liabilities 1,650,760 1,010,169
Interest payable on convertible
debenture (Note 8) 62,500 181,296
Due to related parties (Note 7) 580,942 174,367
Due to joint venture partners (Note 3) 1,351,335 274,350
----------------------------------------------------------------------------
3,645,537 1,640,182
Convertible debenture (Note 8) 1,504,150 2,260,738
----------------------------------------------------------------------------
Total Liabilities 5,149,687 3,900,920
----------------------------------------------------------------------------

Non-controlling interest (Note 9) 9,287,307 7,147,317
----------------------------------------------------------------------------
Shareholders' equity
Share capital (Note 6) 38,511,124 34,596,114
Equity component of convertible
debenture (Note 8) 2,676,180 2,637,802
Contributed surplus 3,219,220 1,904,465
Accumulated other comprehensive loss (21,755) (21,755)
Translation reserve 27,396 -
Deficit (11,766,936) (4,662,952)
----------------------------------------------------------------------------
Total shareholders' equity 32,645,229 34,453,674
----------------------------------------------------------------------------
Total Liabilities, non-controlling
interest and shareholders' equity 47,082,223 45,501,911
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nature of operations and continuation of business (Note 1)
Approved by the Board

(Signed) LUIS G. CABRITA da SILVA,DIRECTOR
-------------------------------------------
Luis G. Cabrita da Silva

(Signed) DAVID B. EVANS, DIRECTOR
-------------------------------------------
David B. Evans



Mano River Resources Inc.
Consolidated Statements of Income/(Loss) and Comprehensive Income/(Loss)
For the nine months ended September 30, 2008
(Stated U.S. dollars)

----------------------------------------------------------------------------
Nine
Three months Three month months Nine months
ended ended ended ended
Sept. 30, Oct 31, Sept. 30, Oct. 31,
2008 2007 2008 2007
$ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------

Expenses

Administrative and
office expenses 216,225 2,906 825,404 7,785
Directors fees 46,314 20,509 258,787 54,908
Foreign exchange
loss/(gain) 190,074 20,422 279,339 (14,774)
Management fees 152,038 92,188 536,947 221,167
Interest on convertible
debenture 96,719 105,864 293,241 105,864
Professional fees 140,763 244,583 1,678,447 666,937
Stock-based compensation - - 1,314,755 170,656
Transfer agent and
filing fees 37,364 34,935 74,892 95,950
Project impairment
(Note 10) 5,161,333 - 5,161,333 -
Depreciation (111,312) - 44,140 -
----------------------------------------------------------------------------
5,929,518 521,407 10,467,285 1,308,493
----------------------------------------------------------------------------
Dilution gain on
shares issued by
controlled company - - (1,830,620) -
Unrealised gain on
convertible debenture (409,170) - (718,210) -
Interest Income (21,415) (55,272) (72,316) (68,257)
----------------------------------------------------------------------------

Loss before
non-controlling interest (5,498,933) (466,135) (7,846,139) (1,240,236)

Non-controlling interest 136,711 - 742,155 -
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Loss and
comprehensive loss (5,362,222) (466,135) (7,103,984) (1,240,236)
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Basic and diluted
loss per share (0.017) (0.002) (0.023) (0.004)
Weighted average number
of shares outstanding 317,810,818 297,810,818 306,934,906 297,137,116
----------------------------------------------------------------------------



Mano River Resources Inc.
Consolidated Statements of Cash Flow
For the nine months ended September 30, 2008
(Stated U.S. dollars)

----------------------------------------------------------------------------
----------------------------------------------------------------------------
Three Three Nine Nine
months months months months
ended ended ended ended
Sept. 30, Oct 31, Sept. 30, Oct. 31,
2008 2007 2008 2007
$ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
Operating Activities

Loss and comprehensive loss (5,362,222) (466,135) (7,103,984 (1,240,236)

Items not involving cash:
Dilution gain on
shares issued by
controlled company - - (1,830,620 -
Non-controlling interest (136,711) - (742,155) -
Stock-based compensation - - 1,314,755 170,656
Interest on
convertible debentures 96,719 - 293,241 -
Unrealised loss on
convertible debt (409,170) - (718,210) -
Project impairment 5,161,333 5,161,333
Depreciation of
fixed assets (111,311) - 44,140 -
Changes in Non-Cash
Working Capital:
Amounts receivable and
prepaid expenses 66,726 20,369 153,359 (162,724)
Due to related parties (295,335) 18,779 406,575 (16,554)
Accounts payable and
accrued liabilities 376,594 (102,167) 660,839 (31,102)
----------------------------------------------------------------------------
(613,377) (529,154) (2,360,727) (1,279,960)
----------------------------------------------------------------------------
Investing Activities

Deferred exploration
expenditures (2,551,771) (2,320,604) (8,171,920) (4,941,922)
Due from/(to) joint
venture partners 933,925 (563,516) 1,076,985 (917,897)
Purchase of
capital assets (41,675) - (1,866,503) -
----------------------------------------------------------------------------
(1,659,521) (2,884,120) (8,961,438) (5,859,819)
----------------------------------------------------------------------------

Financing Activities

Issuance of share capital
(net of costs) - - 3,915,010 437,836
Convertible debenture - - - 4,641,860
Interest paid on
convertible debenture - - (412,037) -
Proceeds from issue of
shares in subsidiary - 143,249 4,692,518 8,919,764
----------------------------------------------------------------------------
- 143,249 8,195,491 13,999,460
----------------------------------------------------------------------------
Foreign exchange
differences on
translation of
overseas operations 25,143 - 27,396 -
----------------------------------------------------------------------------
Net cash inflow (2,247,756) (3,270,025) (3,099,280) 6,859,681

Cash, Beginning of Period 3,248,663 11,315,226 4,100,187 1,185,520
----------------------------------------------------------------------------

Cash , End of Period 1,000,907 8,045,201 1,000,907 8,045,201
----------------------------------------------------------------------------

Mano River Resources Inc.
Consolidated Statements of Shareholders' Equity
For the nine months ended September 30, 2008
(Stated U.S. dollars)

(Expressed in U.S. dollars)
Common shares
Number Amount Contributed Share
surplus subscriptions
----------------------------------------------------------------------------
$ $ $

Balance at
January 31, 2006 253,418,318 28,643,487 1,201,101 -
Net loss for the year - - - -
Cash transactions:
Private placement at
$0.08 per share 39,562,500 5,502,741 - -
Exercise of options
at $0.086 140,000 12,050 - -
----------------------------------------------------------------------------
39,702,500 5,514,791 - -

Non-cash transactions: -
Share subscription - - 788,461
Stock-based
compensation - - 513,361 -
----------------------------------------------------------------------------
Balance as at
January 31, 2007 293,120,818 34,158,278 1,714,462 788,461
Net income for
the period - - - -
Cash transactions:
Equity component
of convertible
debenture - - - -
Exercise of options
at $0.093 4,690,000 437,836 - -
----------------------------------------------------------------------------
4,690,000 437,836 - -
Non-cash transactions: -
Share subscription - - (788,461)
Stock-based compensation - - 190,003 -
----------------------------------------------------------------------------
Balance at
December 31, 2007 297,810,818 34,596,114 1,904,465 -

Net loss for the year - - - -

Non-cash transaction:
Equity component of - - - -
convertible debenture

Shares issued on private
placement 20,000,000 3,915,010 - -

Stock-based compensation - - 1,314,755 -

Translation reserve
on foreign operations - - - -
----------------------------------------------------------------------------
Balance at
September 30, 2008 317,810,818 38,511,124 3,219,220 -
----------------------------------------------------------------------------


Equity Total
component of Accumulated other Trans- share-
convertible comprehensive lation holders
debenture Deficit income Reserve equity
----------------------------------------------------------------------------
$ $ $ $ $

Balance at
January 31, 2006 - (7,720,985) (21,755) - 22,101,848
Net loss for
the year - (959,609) - - (959,609)

Cash transactions:
Private placement
at $0.08 per share - - - - 5,502,741

Exercise of options
at $0.086 - - - - 12,050
----------------------------------------------------------------------------
- - - 5,514,791
Non-cash
transactions:
Share subscription - - - - 788,461
Stock-based
compensation - - - - 513,361
----------------------------------------------------------------------------
Balance as at
January 31, 2007 - (8,680,594) (21,755) - 27,958,852

Net income for
the period - 4,017,642 - - 4,017,642

Cash transactions:
Equity component
of convertible
debenture 2,637,802 - - - 2,637,802

Exercise of options
at $0.093 - - - - 437,836
----------------------------------------------------------------------------
2,637,802 - - - 3,075,638
Non-cash
transactions: - -
Share subscription - - (788,461)
Stock-based
compensation - - - - 190,003
----------------------------------------------------------------------------
Balance at
December 31, 2007 2,637,802 (4,662,952) (21,755) - 34,453,674
----------------------------------------------------------------------------
Net loss for
the year - (7,103,984) - - (7,103,984)

Non-cash
transaction:
Equity component of
convertible
debenture 38,378 - - - 38,378

Shares issued
on private
placement - - - - 3,915,010

Stock-based
compensation - - - - 1,314,755

Translation
reserve
on foreign
operations - - - 27,396 27,396
----------------------------------------------------------------------------
Balance at
September 30, 2008 2,676,180 (11,766,936) (21,755) 27,396 32,645,229
----------------------------------------------------------------------------



Mano River Resources Inc.
Notes to consolidated financial statements
For the nine months ended September 30, 2008


1. Nature of operations

Mano River Resources Inc. ("Mano River" or "the Company") commenced operations on July 10, 1996 and is engaged in the acquisition, exploration and development of gold, iron and diamond properties. The Company is in the development stage and has no source of cash flows other than loans from related parties or equity offerings.

These consolidated financial statements are prepared on a going concern basis which assumes that the Company will be able to realise assets and discharge liabilities in the normal course of business. The Company's ability to continue on a going concern basis depends on its ability to successfully raise additional financing. If the Company cannot obtain additional financing it may be forced to realise its assets at amounts significantly lower than the current carrying value.

Uncertainty also exists with respect to the recoverability of the carrying value of certain resource properties. The ability of the Company to realise its investment in resource properties is contingent upon resolution of the uncertainties and continuing confirmation of the Company's title to the resource properties.

In August 2007, the Company changed its fiscal year end from January 31, to December 31, effective as of December 31, 2007.

2. Significant accounting policies

These financial statements have been prepared in accordance with generally accepted accounting principles in Canada and reflect the following significant accounting policies. The United States dollar has been identified as the Company's currency of measurement and is used for external reporting purposes.

(a) Principles of consolidation

These financial statements include the accounts of Mano River Resources Inc. and its principal subsidiaries, Mano Gold Investments Ltd. (formerly Mano River Resources Ltd.) including sub-group Mano River Iron Ore Holdings Ltd. ("MARIOH"), and Mano Diamonds Ltd.

African Iron Ore Ltd. (AIOG) is 80% owned by MARIOH. One-half of the remaining 20% is held by Eastbound Resources Ltd., a company controlled by G Pas a director of the Company.

The financial statements of entities which are controlled by the Company through voting equity interests, referred to as subsidiaries, are consolidated. Variable interest entities ("VIEs"), which include, but are not limited to, special purpose entities, trusts, partnerships, and other legal structures, as defined by the Accounting Standards Board in Accounting Guideline ("AcG") 15, Consolidation of Variable Interest Entities ("AcG 15"), are entities in which equity investors do not have the characteristics of a "controlling financial interest" or there is not sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. VIEs are subject to consolidation by the primary beneficiary who will absorb the majority of the entities' expected losses and/or expected residual returns. As of September 30, 2008, the Company does not hold an interest in any VIEs.

All intercompany balances and transactions have been eliminated upon consolidation.

The shares not legally owned by the Company in it's subsidiaries, other than:

AIOG - 80% held,

Stellar Diamonds Ltd. (Stellar) - 63.17% held,

Weasua Diamonds Ltd - 50% held,

Basama Diamonds Ltd - 49% held,

are held by a third party company. This third party has no beneficial interest in the shares and is holding the shares for the Company's benefit until the Company and the third party agree on their ultimate distribution. As the Company retains the beneficial interest in these shares no non-controlling interest exists at September 30, 2008 in respect of these shares.

(b) Non-controlling interests

Non-controlling interests exist in less than wholly-owned subsidiaries of the Company and represent the outside interest's share of the carrying values of the subsidiaries. When the subsidiary company issues its own shares to outside interests, a dilution gain or loss arises as a result of the difference between the Company's share of the proceeds and the carrying value of the underlying equity.

(c) Cash

Cash and cash equivalents include cash, and those short-term money market instruments that are readily convertible to cash with an original term of less than 90 days.

(d) Property, plant and equipment

Property, plant and equipment is comprised of office furniture, automobiles and various equipment used in the field, that are stated at cost and depreciated at 30% per annum on a declining balance basis.

(e) Long-term investments

Investments are recorded at cost, subject to a provision for any impairment that is determined to be other than temporary.

(f) Resource properties and deferred exploration costs

The Company follows the method of accounting for its mineral properties whereby all costs related to acquisition, exploration and development are capitalised by property. The carrying value of pre-production and exploration properties is reviewed periodically and either written off when it is determined that the expenditures will not result in the discovery of economically recoverable mineral reserves or transferred to producing mining property, plant and equipment when commercial development commences.

The recoverability of amounts shown for pre-production and exploration properties is dependent upon the discovery of economically recoverable mineral reserves, confirmation of the Company's interest in the underlying mineral claims, the ability of the Company to finance the development of the properties and on the future profitable production or proceeds from the disposition thereof.

The success and ultimate recovery of the Company's exploration costs of its mineral exploration properties is influenced by significant financial risks, legal and political risks, commodity prices, and the ability of the Company to discover economically recoverable mineral reserves and to bring such reserves into future profitable production.

(g) Measurement uncertainty

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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant balances and transactions affected by management estimates include the valuation of investments, resource properties, deferred exploration costs, future income tax and stock-based compensation. Actual results could differ from those estimates.

The amounts used to estimate fair values of stock options issued are based on estimates of future volatility of the Company's share price, expected lives of the options, expected dividends to be paid by the Company and other relevant assumptions.

By their nature, these estimates are subject to measurement uncertainty and the effect of changes in such estimates on the consolidated financial statements of future periods could be significant.

(h) Loss per share

The basic loss per share is computed by dividing the loss and comprehensive loss by the weighted average number of common shares outstanding during the year. The diluted loss per share reflects the potential dilution by including other common share equivalents, such as outstanding stock options and share purchase warrants, in the weighted average number of common shares outstanding during the year. Options and warrants as disclosed in Note 6 are anti-dilutive and therefore have not been taken into account in the per share calculations.

(i) Foreign currency translation

The Company's foreign currency transactions and the financial position and results of operations of the Company's integrated subsidiaries are translated into U.S. dollars using the temporal method. Under this method, monetary assets and liabilities are translated at the rate in effect at the balance sheet date. Other balance sheet items, revenues and expenses are translated at the rates prevailing on the respective transaction dates.

(j) Stock-based compensation

The Company follows Canadian Institute of Chartered Accountants Handbook Section 3870, Stock-Based Compensation, which requires that all stock-based awards made to non-employees and employees be measured and recognised using a fair value based method. Accordingly, the fair value of options at the date of grant is accrued and charged to operations, with an offsetting credit to contributed surplus, on a straight-line basis over the vesting period. If the stock options are ultimately exercised, the applicable amounts of contributed surplus is transferred to share capital.

(k) Joint ventures

The Company has entered into certain joint venture agreements whereby the Company earns or allows a third party to earn an interest in certain mineral properties. These joint venture agreements generally provide for the acquiring party to incur exploration costs to earn an interest. Currently certain joint ventures in which the Company has an interest are used to hold the property interest solely; while certain others have operations or exploration programs conducted by the joint venture.

(l) Income taxes

The Company accounts for income taxes whereby future income tax assets and liabilities are computed based on differences between the carrying amount of assets and liabilities on the balance sheet and their corresponding tax values using the enacted income tax rates at each balance sheet date. Future income tax assets also result from unused loss carryforwards and other deductions. The valuation of future income tax assets is reviewed annually and adjusted, if necessary, by use of a valuation allowance to reflect the estimated realisable amount.

3. Due to/from joint venture partners

During the nine month period ended September 30, 2008, certain exploration and development expenditures were carried out by joint venture partners.

The amount owing to Petra Diamonds, who is the operator of the Kono joint venture diamond project in Sierra Leone, is $1,168,336 as at September 30, 2008. The amount owing to Kpo Resources Inc, the joint venture entity of a diamond project in Liberia, is $182,999 as at September 30, 2008.

As at September 30, 2008 the amount due from joint venture partners amounted to $87,140.

4. Investments



Sept. 30, Oct. 31,
2008 2007
$ $
----------------------------------------------------------------------------

Mifergui-Nimba 184,090 184,090
----------------------------------------------------------------------------
----------------------------------------------------------------------------


The Mifergui-Nimba investment consists of 8,654 shares representing a 3.7% interest in a Guinean company that holds an interest in a mining license over a Guinean iron ore property. The company is a private company with no available market value. Management has reviewed the carrying value at September 30, 2008 and do not consider that there has been any indication of impairment.

5. Resource properties and deferred exploration costs



Sept. 30, Oct. 31,
2008 2007
$ $
----------------------------------------------------------------------------
Acquisition costs:
Liberia, West Africa:
Bea 210,000 210,000
Kpo 110,000 110,000
Sierra Leone, West Africa:
Pampana, Sonfon and Nimini South 1,695,000 1,695,000
Guinea, West Africa
Missamana/Gueliban 1,940,000 1,940,000
Bouro/ Mandala 4,933,592 4,933,592
---------------------------
8,888,592 8,888,592
Provision for impairment (2,448,500) -
---------------------------
---------------------------

Closing balances 6,440,092 8,888,592
---------------------------
---------------------------

A provision for impairment on certain of these acquisition costs was made
at September 30, 2008 (see Note 10).


----------------------------------------------------------------------------
----------------------------------------------------------------------------
Nine Nine
Three months Three months months months
ended ended ended ended
Sept. 30, Oct. 31, Sept. 30, Oct. 31,
2008 2007 2008 2007
$ $ $ $
(unaudited) (unaudited) (unaudited) (unaudited)
----------------------------------------------------------------------------
Deferred exploration
expenditures
Feasibility 55 - 55 4,992
Assays incl.
shipment 72,625 74,800 110,447 118,067
Communications incl.
equipment 39,412 21,001 114,311 79,521
Community relations 46,241 26,814 146,101 100,243
Consultants 468,429 388,281 917,837 499,688
Data, images,
reports and maps 37 4,388 5,435 10,014
Drilling 319,767 650,925 1,530,734 650,925
Geologists' support - 91,352 11,045 157,910
Infrastructure incl.
roads and bridges 15,056 13,267 83,253 87,450
Licenses and permit
fees 69,732 71,620 112,107 230,471
Metallurgy - - - 14,887
Project/field
office costs,
incl. field equip. 270,747 553,003 648,632 695,400
Reconnaissance
and geochemical - 19,667 - 53,461
Salaries and wages 573,600 316,951 1,858,415 931,200
Subsistence 33,135 26,441 149,219 100,246
Transportation
incl. vehicles 130,372 62,094 309,291 217,039
Net Trans-Hex
JV expenditure - - - -
Kono (Petra)
joint venture 988,135 - 2,175,038 990,408
Transfer to
Mifergui-Nimba
investment 46,500 - - -
----------------------------------------------------------------------------

Net expenditure
during the period 3,073,843 2,320,604 8,171,920 4,941,922
Write off of
project expenditure &
Impairment provision (2,712,833) - (2,712,833) -

Balance, Beginning
of period 35,016,127 26,012,712 29,918,050 23,391,394
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Balance, End
of period 35,377,137 28,333,316 35,377,137 28,333,316
----------------------------------------------------------------------------
----------------------------------------------------------------------------

A provision for impairment on certain of these deferred exploration costs
was made at September 30, 2008 (see Note 10).

6. Share capital

(a) Authorised

Unlimited number of common shares without par value.

(b) Issued

Shares Amount
----------------------------------------------------------------------------
$
Balance at January 31, 2005 213,405,818 21,461,793
Shares issued on private placement
(net of costs) 40,000,000 7,180,800
Shares issued on exercise of warrants 12,500 894
----------------------------------------------------------------------------
Balance at January 31, 2006 253,418,318 28,643,487
Shares issued on private placement
(net of share issue costs) 39,562,500 5,502,741
Shares issued on exercise of stock options 140,000 12,050
----------------------------------------------------------------------------
Balance at January 31, 2007 293,120,818 34,158,278
Shares issued on exercise of stock options 4,690,000 437,836
----------------------------------------------------------------------------
Balance at December 31, 2007 297,810,818 34,596,114
----------------------------------------------------------------------------
Shares issued on private placement
(net of share issue costs) on May 29, 2008 20,000,000 3,915,010
----------------------------------------------------------------------------
Balance at September 30, 2008 317,810,818 38,511,124
----------------------------------------------------------------------------


During the nine month period ended September 30, 2008:

(a) On May 29, 2008 the Company completed a private placement of 20,000,000 common shares with a wholly owned subsidiary of Severstal, a leading Russian steel and natural resources company, at Pounds Sterling 0.10p ($0.20 USD) each for gross proceeds of Pounds Sterling 2,000,000 ($4,000,000). Associated costs charged to shareholders equity amounted to $84,990. In addition, 20 million warrants were granted at an exercise price of Pounds Sterling 0.14p, which are exercisable at any time over a period of 18 months from the completion of the private placement. Upon exercise of all the warrants, Severstal's holding in Mano would increase to 11.84 per cent (assuming no further issuances of common shares prior to that time) and provide the Company with a further Pounds Sterling 2,800,000 in financing (equivalent to $5.1 million).

(b) On March 31, 2008, 2,375,000 common shares of Stellar Diamonds Ltd. Mano's majority owned subsidiary, were issued at Pounds Sterling 1 each for gross proceeds of Pounds Sterling 2,375,000 ($4,724,571). Associated costs charged to shareholders equity amounted to $32,053. All other professional fees incurred on the postponed AIM listing of Stellar Diamonds Ltd. during the period, have been charged to the consolidated statement of income/(loss).

During the nine months period ended October 31, 2007:

(a) The Company issued 2,100,000 common shares on exercise of stock options at a price of Cdn$0.11 per share and 100,000 common shares at a price of Cdn$0.10 per share. Cash proceeds of $198,276 for exercise of these stock options were received by the Company on January 31, 2007 and recorded as subscriptions under shareholders' equity.

(b) 590,000 stock options were exercised at a price of CDN$0.10 per share and 15,000 options expired unexercised; and 2,000,000 stock options were exercised at a price of CDN$0.11 per share and 1,000,000 options expired unexercised. Total option exercise proceeds were $239,560.

(c) Stock options

As at September 30, 2008 the following stock options were outstanding:



Number of
stock options Exercise price
Outstanding per share Expiry date
---------------------------------------------------------------------------
Cdn$
2,720,000 0.240 March 23, 2009
2,620,000 0.215 July 25, 2010
2,755,000 0.230 July 31, 2011
600,000 0.230 March 16,2012
300,000 0.230 May 20, 2012
9,045,000 0.230 January 17, 2013
---------------------------------------------------------------------------
---------------------------------------------------------------------------
18,040,000
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(d) Stock warrants

As at September 30, 2008, 20,000,000 warrants were outstanding at an exercise price of Pounds Sterling 0.14p with an expiry date of November 29, 2009. These warrants were granted to Severstal as part of the private placement completed on May 29, 2008.

7. Related party transactions

During the nine month period ended September 30, 2008, the Company incurred billings of $1,078,153 (2007: $311,785) from related parties for management fees and professional services. The increase over 2007 is due to the formation of the Stellar Board of Directors which has been treated as a related party for the purposes of the consolidation as well as higher management and director fees. All transactions with related parties have occurred in the normal course of operations. As at September 30, 2008, the amount due to related parties totalled $580,942 (2007:$117,153). These balances have no fixed terms of repayment and have arisen from the accrued provision of services and reimbursable expenses.

8. Convertible debentures

On September 27, 2007 the Company entered into convertible subscription agreements to raise Pounds Sterling 2.3 million with certain lenders. The convertible debentures are repayable on August 1, 2010 and bear interest at 9% per annum. The principal amount is convertible by the holders into common shares of the Company at a conversion price of Pounds Sterling 0.14 per share at any time prior to maturity. Alternatively, the Company has the option to demand the conversion after a period of three years, if the common shares of the Company have traded at an average 30% premium to the conversion price for a minimum period of 21 trading days previous to the conversion date.

The convertible debentures have been segregated into debt and equity components. The financial liability component, representing the value allocated to the liability at inception, is recorded as a long-term liability. The remaining component, representing the value ascribed to the holders' option to convert the principal balance into common shares, is classified in shareholders' equity as "Equity component of convertible debenture". These components have been measured at their respective fair values on the date the convertible debenture was originally issued.

As the debentures are convertible into common shares at the option of the holder, they have been accounted for in their component parts. At September 30, 2008 the Company has determined the fair value of the liability to make future payments of principal and interest to be $1,504,150 and the fair value of the holders' conversion option to be $2,676,180. The fair value of the conversion option was based on using the Black-Scholes option pricing model with the following assumptions: no dividends were paid, a weighted average volatility of the Company's share price of 172%, a weighted average annual risk free rate of 4.64% and an expected life of three years. The residual was allocated to the debt component.

During the nine months ended September 30, 2008, the Company incurred interest expense relating to the convertible debenture of $293,241. Interest has been paid up to August 1, 2008 and therefore an accrual of $62,500 is included at the period end.

9. Non-controlling interest



Mano Non Controllin Carrying value September 30,
Ownership Interest of net equity 2008
% % $ $
Stellar Diamonds Ltd. 63.17 36.83 24,275,128 8,941,302
African Iron Ore Ltd. 80.00 20.00 2,472,918 346,005
---------
9,287,307
---------


(a) In 2007, the Company transferred its diamonds properties which had a book value of $8,276,081 to Stellar in exchange for 19,239,541 shares of Stellar. The exchange was recorded at book value as it was a transaction between companies under common control. In 2007, Stellar completed two private placements in order to raise funds to finance the development of its diamond interests. In the first placement 1,211,890 shares were issued at an effective price of Pounds Sterling 0.87 per share. 918,484 of those shares were issued for cash consideration, raising proceeds of Pounds Sterling 800,000 (US$1,571,438), while the remaining 293,406 shares were issued to the subscribers in consideration for forfeiture of certain benefits as a result of the diamond reorganisation. In the second placement 4,822,044 shares were issued at a price of Pounds Sterling 0.871 per share for proceeds of Pounds Sterling 4,200,000 (US$8,611,361). In addition, Stellar issued 2,411,022 warrants with a two year term and an exercise price of Pounds Sterling 1.20 per share as well as 260,390 adviser's options with a two year term and an exercise price of Pounds Sterling 0.871 per share. As a result of these shares issuances by Stellar, the Company recorded a dilution gain of $6,207,005 in the year ended December 31, 2007.

In the nine months to September 30, 2008 Stellar issued a further 2,375,000 common shares at a price of Pounds Sterling 1 per share for gross proceeds of Pounds Sterling 2,375,000 ($4,724,571). As a result of this issuance, Stellar recorded a dilution gain of $1,830,620.

Gains on shares issued by affiliated companies arise when the ownership interest of the Company in a controlled entity is diluted as a result of shares issuances of the investee company. The Company does not receive any cash proceeds (nor is required to make any payments) in these transactions.

(b) African Iron Ore Ltd., the holding company for the Company's iron ore interests, is 80% owned by Mano. One-half of the remaining 20% is held by Eastbound Resources Ltd., a company controlled by G Pas a director of the Company.

10. Provision for impairment

The Company reviews the carrying values of its mineral property interests whenever events or changes in circumstances indicate that the carrying value of the assets may exceed the estimated net recoverable amounts. An asset's carrying value is written down when the carrying value is not recoverable and exceeds its fair value. Impairment reviews for deferred exploration and acquisition costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances apply:

(i) title to the asset is compromised;

(ii) variations in metal prices that render the project uneconomic; and

(iii) unexpected geological occurrences that render the resource uneconomic.

Where estimates of future cash flows are not available and where other factors suggest impairment, Management assesses if the carrying value is recoverable and records an impairment if so indicated. The impairment review undertaken during quarter three identified certain projects that were considered uneconomic and were written off and those projects where there was a reasonable probability that the carrying value of the project exceeded its fair value. The following amounts have been written off at September 30, 2008:



----------------------------------------------------------------------------
Impairment
in the
Carrying Net Income/(loss)
Country value $ Recoverable $ Statement $
----------------------------------------------------------------------------
Acquisition
Costs Sierra Leone 1,695,000 1,186,500 508,000
----------------------------------------------------------------------------
Guinea 6,873,592 4,933,592 1,940,000
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Total 8,888,592 6,440,092 2,448,500
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Impairment
in the
Carrying Net Income/(loss)
Country value $ Recoverable $ Statement $
----------------------------------------------------------------------------
Deferred
Exploration
Costs Liberia 24,462,659 24,033,587 429,072
----------------------------------------------------------------------------
Sierra Leone 9,775,838 9,446,109 329,729
----------------------------------------------------------------------------
Guinea 3,969,926 2,015,894 1,954,032
----------------------------------------------------------------------------
DRC 490,800 490,800
----------------------------------------------------------------------------
Total(i) 38,699,223 35,986,390 2,712,833
----------------------------------------------------------------------------

(i) Pre 2007 recovery relating to sale of mineral property on consolidation
of Stellar ($1,084,825).


The total impairment charge recorded in the Income/(Loss) Statement is $5,161,333. This relates to the following projects: AAR Liberia diamond project $429,072; Guinea Iron Ore project $46,500, Missamana/Gueliban gold project (Guinea) $3,847,532 and Pampana gold project (Sierra Leone) $838,229. The projects that have been impaired in quarter three have received minimal funding over the past two years and are not key assets within the Company's project portfolio.

11. Fair value of financial instruments

The Company's financial assets and liabilities are cash, amounts receivable, investments, accounts payable and due to related parties. The fair values of these financial instruments are estimated to approximate their carrying values due to their immediate or short-term nature except for investments whose fair value is not readily determinable. Due to the nature of the Company's operations, there is no significant credit or interest rate risk. As at September 30, 2008, the Company held approximately $755,380 (2007 - $6,350,062) cash in bank accounts denominated in U.K. pounds. The Company has taken no action to reduce its exposure to foreign currency risk.

12. Subsequent Events

On November 28, 2008 the Company announced that the joint Boards of Mano & OAO Severstal would like to confirm 'Closing of the Agreement' on their joint operation of the Putu project. Financial, legal and technical due diligence is substantially complete and Severstal Resources has already advanced project funds, as per the facility in the agreement signed on the 22 May 2008. The amount received by the Company on the 27 October 2008 was the pre-agreed sum of US$1 million.

Completion of the deal is formally set for 10 December 2008.

The monetary terms of the original agreement remain unchanged and on completion Severstal Resources, through its wholly owned subsidiary, will take up its right to become a 61.5% shareholder in the Company's iron ore subsidiary by investing US$30M to advance the Putu iron ore project to a definitive feasibility study. On completion, US$8.3 million will be released to Mano with the balance of US$4.2 million to be paid two years from the date of completion on the 10 December 2010.

The Company announced on October 24 2008 that the Government of Liberia has granted a two year extension to its Putu Range Iron Ore exploration licence, extending it to September 30, 2010. This licence extension enables the Company to proceed to close the agreement previously signed on May 22, 2008 with its chosen iron ore partner, Severstal, having satisfied all material legal requirements.

The TSX Venture Exchange has not reviewed and does not take responsibility for the adequacy or accuracy of this release

Contact Information

  • Mano River Resources Inc.
    Luis da Silva
    +44 (0)20 7299 4212
    Email: mano@manoriver.com
    or
    Mano River Resources Inc.
    Bevan Metcalf
    +44 (0)20 7299 4212
    Email: bevan.metcalf@manoriver.com
    or
    Panmure Gordon (UK) Limited
    Edward Farmer
    +44 (0) 20 7614 8384
    or
    GMP Securities Europe LLP,
    James Hannon
    +44 (0)20 7647 2803
    or
    Pelham PR Ltd
    Charles Vivian / James MacFarlane
    +44 (0)20 7743 6670 / 6375