Morgain Minerals Inc.
TSX VENTURE : MGM

Morgain Minerals Inc.

May 30, 2005 14:18 ET

Morgain Minerals Inc. Reports 1st Quarter 2005 Financial Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 30, 2005) - Morgain Minerals Inc. (TSX VENTURE:MGM) (the "Company") reports on its interim financial results and activities for the first quarter ending March 31, 2005. The following summary should be read in conjunction with the Company's unaudited financial statements and Management Discussion and Analysis available at http://www.sedar.com.

Highlights

- The Company entered into a loan agreement pursuant to which H. Morgan & Company will advance Morgain C$5,000,000. The loan will bear interest at the rate of 12% per annum and will be secured by a floating charge on Morgain's assets and a pledge by Morgain of the shares of its Mexican subsidiaries. This loan will enable the Company to fund the first phase mining and leaching operation of the Castillo property.

- The Company acquired surface rights and mineral concessions required for the long-term production of gold at the Castillo property and filed permit to conduct first phase mining and leaching operation.

- During the quarter $282K was raised from the exercise of warrants and options.

Results of Operations

For the quarter ending March 31, 2005, the Company had a net loss of $316,742 compared to $125,188 during the same period in 2004, an increase of $191,554 in losses. Increased costs were mainly due to the payment of $179,899 in bonuses and severance as final settlements with exiting directors, officers and consultants. Stock based compensation charge was $59,820 for the 200,000 stock options granted to a new director during the quarter. These increased costs were offset by lower expenditures in shareholder communication (-$8,924), travel (-$5,926) and trust and filing (-$3,696) compared to the first quarter in 2004. Legal, audit and accounting fees increased to $41,775 in the first quarter of 2005, up from $19,269 in 2004 as a result of the legal expenses incurred in negotiating the $5.0 million loan from H. Morgan & Company. Office and administration costs of $24,456 (2004- $8,551) reflect the $14,397 expenses incurred in the Company's Mexican office.

Capital Resources and Liquidity

As of March 31, 2005, the Company had $2.6 million in cash and cash equivalents compared to $1.3 million at the end of 2004. During the first quarter of 2005, $282K was raised from the exercise of warrants and options. $1.2 million was spent on the Castillo mainly on securing the surface rights and mineral concessions required for the long-term production of gold and on further preliminary works as the Company is poised to start its 30,000 tonnes heap leach bulk test. Morgain's budget for the duration of the bulk test is US$3.4 million, net of gold sales expected to be generated during the test, after which further financing initiatives will be considered towards expanding the Castillo into a self sufficient and profitable mining operation. As the Company did not have sufficient funds, a loan was signed in March 2005 whereby H. Morgan & Company would advance Morgain C$5.0 million at the rate of 12% per annum, secured by a floating charge on Morgain's assets and a pledge by Morgain of the shares of its Mexican subsidiaries. Under the terms of the loan agreement, C$2.5 million has been advanced to date and the remaining C$2.5 million at a mutually agreeable future date.

Outlook

The Company remains focused on developing its 100% owned Castillo project towards a profitable mining operation. With the successful acquisition of surface rights and mineral concessions required for the long-term production of gold, the Company has filed for a permit to conduct a first phase mining and leaching operation. The information gained from this operation will be used to plan and seek a permit for the full-scale operation of the Castillo Mine. Morgain expects to be in receipt of the necessary permits for mine start up and leaching by the second week of June 2005. Gold sales from the first phase mining operation are expected to commence during the third quarter of 2005.

Morgain is confident it will be able to meet all of its future operating and financial requirements.

The TSX has neither approved nor disapproved of the information contained herein.

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