Candente Resource Corp.
TSX : DNT

Candente Resource Corp.

August 16, 2005 17:00 ET

Candente Resource Corp.-Second Quarter 2005 Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 16, 2005) - Candente Resource Corp. - (TSX:DNT) (the "Company") confirms that its unaudited interim financial statements for the second quarter ended June 30th, 2005 were filed on SEDAR on August 15th, 2005 as required by applicable securities laws.

The following discussion and analysis is for the period ended June 30, 2005 compared with the period ended June 30, 2004. This information is current to August 10, 2005 and has not been reviewed by the Company's auditors.

Introduction

The discussion and analysis of the operating results and financial position of the Company should be read in conjunction with the attached Consolidated Financial Statements and related Notes (the "Financial Statements"), which have been prepared in accordance with Canadian generally accepted accounting principles (GAAP) (see Summary of Significant Accounting Policies and Note 1: Nature of Operations) in United States dollars. This discussion and analysis may contain forward-looking statements about the Company's future prospects, and the Company provides no assurance that actual results will meet management's expectations.

Results of Operations

The Net Loss for the Quarter totaled ($152,773), or ($0.00) per share, compared to a loss of (293,674), or ($0.01) per share, in the prior year. The main differences in expenses between the two years are as follows:

- International Security expense of ($0) has decreased compared to ($5,670) in the first quarter of 2004 as the Company had less personnel in the field during this period;

- Legal, audit and accounting of ($22,356) versus ($21,055) in 2004 due to higher legal expenses related to the Company's being listed on the Toronto Stock Exchange;

- Management and Office salaries of ($36,154) versus ($23,663) in 2004;

- Promotion and Travel decreased to ($22,381) from ($24,059) in 2004 and Corporate Development dropped to ($9,729) from ($90,484) in 2004 as management reduced its attendance at industry conferences during the period and traveled to Peru also declined;

- Stock based compensation expense increased to ($19,534) from ($0) in 2004;

The company earned interest income of $5,939 in 2005 compared to $13,268 in 2004 due to lower average cash balances, which was offset by a Foreign Exchange Gain of $55,304 in 2005 compared to a loss of ($65,507) in 2004, which was due to favorable exchange rates for the Canadian dollar against the US Dollar.

The operational effectiveness of the Company's activities in Peru has improved due to an increasingly favourable Canadian to U.S. dollar and Peruvian sole exchange rate. The Company maintains its own equipment, premises and staffing in Peru and as a result management believes that cost control is very good. The Company's properties are located in various climate zones in Peru and as a result the Company is always able to conduct activities on some of its properties.

The following is a summary of the key exploration projects the Company has been working on:

Peru Properties:

Canariaco

The Canariaco property covers three porphyry copper-gold prospects in the Western Cordillera of the Peruvian Andes and was acquired (100% interest) from the Peruvian government in an auction for US$75,000. At that time 10 drill holes had intersected 100 to 300 metres of significant copper mineralization over an area measuring 1 km by 1.2 km.

The property lies in the Canares District of Ferrenafe Province in Northern Peru about 100 km NE of the city of Chiclayo and 700 km NNW of Lima. Access to the property is from Chiclayo along a paved road to Batan Grande and then via gravel road. Travel time to the property from Chiclayo averages 6 hours by four-wheel drive vehicle. There is also a paved highway 12 km north of the property that could be connected to in future to provide better access the property. The area is sparsely populated however; a local labour force is readily available and favourable to exploration and development. Elevations range from 2500 to 3200 m above sea level.

Copper mineralization was first discovered at Canariaco by the British Geological Survey in 1970 through a stream sediment sampling program. In 1973, Ingemmet drilled 5 holes into the Canariaco Norte area of the property. 4 of the 5 holes returned copper intersections. Placer Dome optioned the property in 1994. They conducted additional surface sampling and drilled 3 new diamond drill holes at Canariaco Norte. All 3 holes returned copper intersections. Placer withdrew from their property option in January 1997.

In 1998, Minero Peru solicited for joint venture partners on the property. Billiton was selected and signed an option agreement in February 1999. Billiton conducted a detailed exploration of the property assisted by the construction of a new access road and camp site at the property. Billiton conducted detailed geological mapping of Canariaco Norte, Canariaco Sur and a third porphyry system they discovered and named Quebrada Verde. Billiton also conducted soil and rock chip sampling as well as IP and ground magnetic surveys over all 3 systems and re-logged all previous drill holes. At the conclusion of the preliminary work, Billiton drilled 7 holes of 1128.20 meters in total. 3 of the new holes were drilled at Canariaco Norte, 3 at Canariaco Sur and 1 hole at Quebrada Verde. The Canariaco North program extended the area of known mineralization 500 m further south that that previously defined. Although the new Canariaco Norte holes returned only near-economic grades of copper mineralization, Billiton did proceed with metallurgical test work, including diagnostic leach tests on 12 samples of core conducted by SGS in Santiago, Chile. The tests determined copper recoveries of 85-90% of material with a head grade of 0.78%. Billiton concluded the resource was potentially leachable. Billiton dropped the property option during a period of low mineral prices where they decided to focus on larger and more advanced properties.

In March 2001, Candente engaged engineering consultants Knight Piesold Ltd. to evaluate the Canariaco property for the necessary infrastructure for developing a SX-EW mine. Knight Piesold identified several suitable sites for heap leach pads and waste stockpiles within relative proximity to the Canariaco Norte Zone.

Due to the rise in copper prices, the Company resumed work on the project during the first quarter of 2004. Initial exploration comprised geological mapping, rock chip and bulk sampling, and a magnetics (geophysical) survey. This exploration helped to delineate drill targets and from September to November 2005, 2648 m of core was drilled in 12 holes which averaged 0.67% copper over 167 m in the Norte Zone.

An independent preliminary inferred mineral resource estimate was completed on March 23rd, 2005 on the Canariaco Norte Zone of the Canariaco property. This estimate is considered to be very preliminary as this resource makes up less than 15% of the volume of known mineralization. The report estimates an inferred resource of 76.5 million tonnes grading 0.614% copper and 0.099 grams per tonne (gpt) gold at a cut-off grade of 0.30% copper. Contained metal in the resource equals 1,035 million pounds of copper and 243,000 ounces of gold.

The surface expression of the preliminary resource is approximately 14 hectares, which is less than 15% of the surface expression of known copper mineralization (114 hectares) in the Norte Zone, as currently defined by 23 drill holes and surface copper showings. This zone extends over a minimum length of 1.2 kilometres (km) and a minimum width of 1 km and remains open laterally. In addition, several drill holes to date have ended in copper grades of 0.55% to 1.00% indicating that the deposit is also open to depth.



PRELIMINARY INFERRED RESOURCE

-------------------------------------------------------------
-------------------------------------------------------------
Cut-off Copper Gold Contained Contained
Grade Tonnes Grade Grade Copper Gold
(% Cu) (Million) (% Cu) gpt (Million lbs) (Ounces)
-------------------------------------------------------------
0.5 58.5 0.672 0.104 866 195,000
-------------------------------------------------------------
0.4 71.0 0.634 0.101 992 230,000
-------------------------------------------------------------
0.3 76.5 0.614 0.099 1,035 243,000
-------------------------------------------------------------
-------------------------------------------------------------


Total silver content has not been estimated yet as analyses were not available for all of the holes. The seven holes analysed to date show an average of 2.5 gpt silver.

The mineral resource estimate is based on assay results from 2891.4 metres of drill core from a total of 3451.4 drilled in 15 holes of which 12 were drilled by Candente in 2004 and 3 were drilled in 1973 and 1995 by Ingemmet and Placer Dome. The Candente holes were drilled at 100 metre spacings. The estimations for the preliminary resource were capped at a copper grade of 2.0% and a gold grade of 0.3 gpt. Independent geologist James A. McCrea, P.Geo., and a Qualified Person as defined by National Instrument (NI) 43-101, was responsible for the mineral resource estimate dated March 23rd, 2005 The resource estimate is classified as an Inferred Mineral Resource, consistent with the CIM definitions referred to in NI 43-101. Mineral resources, which are not mineral reserves, have not demonstrated economic viability. Candente is not aware of any environmental, permitting, legal, title, taxation, socio-political, marketing or other issues which may materially affect its estimate of mineral resources.

The NQ-size core from the 2004 drill program was cut in half with a diamond saw and sampled at two metre intervals on the property. One half of the split core was collected by Candente's Peruvian geologists in accordance with industry standards and submitted to Actlabs in Lima, Peru for copper. Copper was analyzed by a four acid leach process on a 50 g split to give values for total copper, acid soluble copper, cyanide soluble copper and residual sulphide copper. Pulps from some of the same samples were sent to Actlabs laboratory in Ancaster, Ontario, Canada and analysed for an additional 36 elements (including silver) using Inductively Coupled Plasma (ICP). Gold analyses on all the holes were carried out by Actlabs, Lima using Fire Assay Fusion and Atomic Absorption method on a 50g split. Five percent of all core samples were also sent to a second laboratory for check assays of total copper and total gold. Quality Assurance and Quality Control (QA/QC), including the use of sample standards, blanks and duplicates as well as chain of custody was monitored by Candente.

The core from the 1973 drill program was collected along 2 metre lengths and analysed for copper and molybdenum. The core sizes were NCD to 50 m depth, NXWL to 170 m depth and BXWL for the remainder of the hole. A total of 66 composite geological samples were analysed for total copper, molybdenum, silver and gold. The "frio de la dithizina-benceno" assay method (colorimetric analysis) was used. Analyses were carried out by Plenge Laboratory in Lima and the laboratory of INGEMMET. Candente cannot comment on the reliability of the sampling and analyses carried out, however, the fact that this INGEMMENT hole (73-001) was twinned by Candente's 04-008 hole and the results are very similar indicate that the data is reliable.

The core from Placer Dome's 1995 drill program was sent to and analysed by SGS-XRAL labs in Lima for copper, gold and molybdenum. No specific information on how they handled the core is available, however data from professional geologists of large companies is considered to be of high quality. In addition, Joanne Freeze has direct experience working with Placer Dome and believes that they would have had detailed QA/QC programs in place at Canariaco. These would have included the use of blanks, standards, and check assays.

Drilling is currently underway to expand the resource at Canariaco Norte. Approximately 5,000 metres are planned to be drilled in 12 to 14 holes to depths of 350 m to 500 m. The first drill hole in this phase was collared 150 m south of the area included in the Preliminary Inferred Resource. The next 4 hole have been drilled on a north-south line at approximately 150 m spacings. The most southerly hole is 750 m south of the Phase I drilling grid.

The first drill hole, DDH-05-013, was stopped in copper mineralization short of the objective depth due to drilling difficulties. DDH-05-014 intersected copper mineralization to the bottom of the hole at 501 m. DDH-05-15 appears to have followed steeply dipping post mineral dykes for most of the hole. DDH-05-16 also ended in copper mineralization at 375 m and showed an increase in molybdenum content. Estimates of potential copper and molybdenum grades based on visual appearances will not be reported due to the common inaccuracy of such. The results will be released once they have been received and compiled.

Alto Dorado/Toril, El Tigre and Las Sorpresas

Refer to Management Discussion and Analysis for the first quarter ended March 31, 2005. There have been no changes to the status of those properties since March 28, 2005.

Newfoundland Properties:

Staghorn

The Staghorn property is located in Southwestern Newfoundland, approximately 60 kilometres southeast of the seaport of Stephenville. The property comprises 3 licenses with 196 claims covering approximately 4900 hectares. The claims were staked by Edwin Northcott and Gilbert Lushman, two local prospectors, between 1998 and 2004. Candente Resource Corp (Candente) has an option to purchase 100% interest in the claims from the prospectors. On March 15, 2004, Candente entered into an agreement with Goldcorp Inc. ("Goldcorp"), whereby Goldcorp has the right to earn a 70% interest in the Staghorn property by financing all exploration and acquisition costs and completing a bankable feasibility study by January 2010. Bankable feasibility must be reached by January 2010 or Goldcorp must spend a minimum of $1,000,000 per year starting in 2009 to keep the option current.

Large tonnage gold potential with similarities to intrusion-hosted orogenic deposits in the Tien Shans in Central Asia (Muruntau and Kumtor: 175 and 19 Moz) has been recognized on the Staghorn Property. Similarities include host rocks, structural setting, alteration, mineralization and metal suites.

During the summer of 2003, Candente carried out exploration on the property which included: an interpretation of a 1981 Airborne magnetic/EM Survey for structure, geology and magnetic anomalies; collection of 15 lake bottom sediment samples; 89 rock float, grab and channel samples; and geological mapping. The 89 rock samples comprise: 49 one meter outcrop channel samples from trenches TR-02-1 to TR-02-3 in Area 1; 5 subcrop samples from historic pits dug in 2001 in deep overburden east and west of Area 1; 12 selected outcrop samples from various traverses along the area to the south of Wood Lake; and 23 angular, locally derived rock float samples.

Gold values ranging from 0.5 to 25.7 grams per tonne (gpt) - (many in the 3 to 5 gpt range) occur in Area 1 in rocks comprising 1 m channels in trenches, selected samples and angular float in pits over a 70 by 30 m area. The trenched portion extends 42 meters (m) in length and 10 to 20 m in width. This recently discovered zone was exposed by the removal of 10 metres of overburden. Locally derived angular, mineralized float can be found for several hundreds of meters on either side of the trenched bedrock mineralization. Overburden masks outcrop exposure outside the trenched area and on much of the property.

In June 2004 Candente identified several high chargeability zones. These zones appear to be associated with gold mineralization as they both occur within the same structural trend. The high chargeability signature also fits that expected for a sulphide bearing gold system similar to the type of mineralization found to date on the property. The high chargeability zones were identified by a recently completed Induced Polarization (IP) survey and covered 3.2 km of strike length. Gold has been identified to date at several locations over 2.5 km of the same trend.

In April 2005 Candente conducted a 12 hole, 1868 metre drill program. The program was funded by Goldcorp and was carried out by Petro Drilling Company Limited of Newfoundland. Drilling targeted combinations of Induced Polarization chargeability highs, gold bearing structures interpreted from ground magnetics and airphoto interpretation, and associated anomalous gold values from trenches, rock float and lake bottom sediments. Several targets remain untested due to problems with weather and drilling.

Of the twelve holes drilled, nine tested for gold in a number of different target combinations along the main trend of gold mineralization. Two holes tested the potential for Buchans and Messina style volcanogenic massive sulphide (VMS) stratigraphy. The final hole was located to test a unit of felsic volcanic rocks that trend into the north end of Wood Lake where elevated base metals values occur in lake-bottom sediments. This hole did not reach bedrock due to overburden drilling difficulties.

The following grades and widths of gold mineralization were intersected in two holes that tested a felsic sill/dyke along a major structure: 1.49 grams per tonne (gpt) over 1.5 m, 1.69 gpt over 1.5 m, 2.01 gpt over 0.9 m, 6.25 gpt over 1.0 m and 11.25 gpt over 1.5 m within two larger intervals of 1.47 gpt over 22.5 m and 0.23 gpt over 52.9 m from the respective holes. While these results are considered to be anomalous, the possibility of encountering a large bulk tonnage gold deposit within the explored area has been reduced.

The two holes that tested for VMS style stratigraphy did not intersect any base metal mineralization within interbedded mafic volcanic and sedimentary rocks. IP chargeability highs were explained by the presence of thinly banded pyrite within the sedimentary units. The more favourable felsic volcanic stratigraphy in the northern portion of the Staghorn property remains untested.

In light of the results obtained and the recent base and precious metal VMS discovery made by Messina Minerals Inc., 35 km to the northeast of the Staghorn property, the sequence of felsic volcanic and sedimentary rocks found in the northern portion of the Staghorn property, is considered to have the best potential for further exploration on the property.

Linear and Virgin Arm

Refer to Management Discussion and Analysis for the first quarter ended March 31, 2005. There have been no changes to the status of those properties since March 28, 2005.



Summary of Quarterly Results

Net loss by quarter

Q1 Q2 Q3 Q4 Total
--------------------------------------------------
$ $ $ $ $
2005 (320,344) (152,773) - - (473,117)
2004 (446,656) (293,674) (98,676) (717,926) (1,556,932)
2003 (103,997) (115,483) (80,290) (1,301,728) (1,601,498)


As the Company is still in the exploration and development stage, variances in its quarterly losses are not affected by sales or production-related factors. Year over year increased costs are generally attributed to successful financing activities which result in the Company being able to conduct more exploration, which results in additional overhead costs to maintain.

Capital Resources and Liquidity

Subsequent to the first quarter the company raised gross proceeds of Cdn$3,725,000 on closing the private placement on April 22, 2005 the company issued 7,450,000 shares @ $0.50. In consideration of introductions made to two of the placees, Meridian Capital International Inc. received a commission in the amount Cdn$173,250 and 300,000 share purchase warrants. The commission is 7% of proceeds from the two placees and the warrants are equal to 6% of the number of the shares sold to the two placees. Each warrant entitles the holder to purchase one common share of Candente at a price of $0.70 for a period of eighteen months until October 22, 2006.

During the Quarter the Company did not issue any shares on the exercise of options or warrants.

The Company has adequate financial resources to conduct its activities for the balance of the year and currently does not anticipate difficulties in raising additional funding if needed. Of the total 4,467,250 options outstanding 1,737,400 options are "in the money" at August 10, 2005, and are potentially exercisable to generate $706,915 in additional funding.

There is however, no assurance that any future funding can be accomplished as it would be wholly dependent on the state of the capital markets for junior gold exploration companies. The Company does not anticipate the payment of dividends in the future.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Related Party Transactions

Details of these related party transactions, including the purpose and recorded amounts of the transactions are identified in Note 5 to the Financial Statements.

Changes in Accounting Policy

The Company adopted in 2003 the transitional provisions of Canadian Institute of Chartered Accountants' Handbook Section 3870 on stock-bases compensation on a prospective basis. The Company accounts for the derived value of stock-based compensation to all employees and consultants.

Financial and Other Instruments

The Company's financial assets and liabilities consist of cash, gold, short-term investments, receivables, accounts payable and accrued liabilities, some of which are denominated either in Canadian dollars, U.S. dollars or Peruvian soles. These accounts are recorded at their fair market value. The Company is at risk for a financial gain or loss as a result of foreign exchange movements against the United States dollar. In the three months ended June 30, 2005, the Company recorded a foreign exchange Gain of $55,304 compared to a loss of $65,507 in the same period in 2004. The Company does not have major commitments to acquire assets in foreign currencies at this time, but does expect that certain significant future expenditures will be denominated in soles or U.S. dollars.

The Company has placed its cash and cash equivalents in liquid bank deposits which provide a variable rate of interest.

Outstanding Share Data

The Company has one class of common shares: as at August 10, 2005 there were 43,718,954 common shares outstanding. The Company has a stock option plan: As at August 10, 2005, there were 4,467,250 stock options outstanding, of which 3,474,750 have vested. The Company has 612,500 warrants outstanding as at August 10, 2005.

Risk and Uncertainties

Except for historical information contained in this discussion and analysis, disclosure statements contained herein are forward-looking, which statements are subject to risks and uncertainties, which could cause actual results to differ materially from those in such forward-looking statements.

The Company is a mineral exploration and development company and is exposed to a number of risks and uncertainties that are common to other companies in the same business; some of these risks have been discussed elsewhere in this report.

The Company's financial success is subject to general market conditions which affect mining and exploration companies. The value of the Company's mineral resources and future operating profit and loss is affected by fluctuations in gold prices, over which the Company has no control, although it may choose to hedge some of its future production. The cost of exploration and future capital and operating costs are affected by foreign exchange rates for the U.S. dollar and Peruvian sole. The Company can mitigate the effects of these rate fluctuations, to some extent, through forward purchases. The Company's ability to hedge future foreign exchange rates is affected by its creditworthiness. Because of its limited operating record and history of losses, it may not be able to hedge future risk to the extent it feels is warranted. The Company also competes with other mining companies which are larger and have more economic resources to acquire prospective exploration properties or producing mines.

The Company also faces certain risks and uncertainties specific to its circumstances. The Company's ability to obtain financing to explore for mineral deposits and to continue and complete the development of those properties it has classified as assets is not assured; nor is there assurance that the expenditure of funds will result in the discover of an economic mineral deposit. The Company has not completed a feasibility study on any of its deposits to determine if it hosts a mineral resource that can be economically developed and profitably mined. While the Company has used its best efforts to endure title to all its properties and secured access to surface rights, these titles or rights may be disputed.

Candente is a diversified copper and gold exploration company. Our focus is to increase shareholder value through discovery. Candente has an advanced exploration stage copper project, Canariaco, and several other gold and gold-copper projects in Peru. Candente's directors have individual track records in both the discovery and development of multi-million ounce gold and silver, and multi-billion pound copper deposits. Candente subscribes to principles, which ensure that its exploration and development activities are beneficial to the local communities.

ON BEHALF OF THE BOARD OF DIRECTORS

Joanne C. Freeze, President & CEO

Candente Resource Corp. - Release No. 135

This News Release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. Candente relies upon litigation protection for forward-looking statements.


Contact Information