Moto Goldmines Limited
TSX : MGL
AIM : MOE

Moto Goldmines Limited

April 24, 2007 10:39 ET

Moto Goldmines Limited: Issue of March 31, 2007 Interim Quarter Financial Statements and Management Discussion and Analysis

PERTH, WESTERN AUSTRALIA--(CCNMatthews - April 24, 2007) - Moto Goldmines Limited ("Moto")(TSX:MGL)(AIM:MOE) has today issued consolidated financial statements and management's discussion and analysis for the interim quarter ended March 31, 2007. The Management's Discussion and Analysis, and the Consolidated Balance Sheets, Statements of Operations and Statements of Cash Flows are included below.

Complete copies of these documents are available on the Company's website www.motogoldmines.com.


MOTO GOLDMINES LIMITED

MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE QUARTER ENDED MARCH 31, 2007

The following discussion and analysis of the financial position and results of operations of Moto Goldmines Limited ("the Company") is presented as of April 24, 2007. The discussion should be read in conjunction with the Financial Report for the quarter ended March 31, 2007. The Company's consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles. All amounts in the discussion are in Australian dollars unless otherwise stated.

Additional information about the Company and its business activities is available on SEDAR at www.sedar.com.

1. Summary of activities during the quarter ended March 31, 2007

Moto Goldmines Limited is a gold exploration and development company listed on the Toronto Stock Exchange ("TSX") and the AIM Market of the London Stock Exchange ("AIM"). The Company's principal asset is its interest in the Moto Gold Project. The main activities undertaken during the quarter ended March 31, 2007 were:

Bankable Feasibility work continued on schedule during the quarter:

Geological modeling was substantially completed, metallurgical test work was substantially advanced and engineering work continued as planned.

Site investigation activities were substantially completed including sterilisation, hydrogeological and geotech drilling, environmental and hydro power related studies were advanced with base line monitoring on going.

Infill and extension drilling during the quarter continued to support geological modeling and increase confidence levels in inferred resources. Further resource reviews are anticipated in 2007.

Reconstruction of the 160 km road linking the Moto Gold Project to Ugandan infrastructure commenced in January 2007 with completion anticipated in the first half of 2008.

The Company continued with its social and community development programs including major extension works to the local company funded clinic and rehabilitation of local buildings and infrastructure.

2. The Moto Gold Project

Overview

The Moto Gold Project is located in the Moto goldfields in the north-east of the Democratic Republic of Congo ("DRC"), some 560 kms north east of the city of Kisangani and 150 kms west of the Ugandan border town of Arua. The project covers an area of approximately 2,350 sq kms. The Moto Gold Project is a joint venture between L'Office des Mines d'Or de Kilo-Moto ("Okimo")(30%) , Orgaman sprl ("Orgaman")(10%) and the Company(60%). Okimo is the state-owned company that is the registered holder of the mineral rights to the Moto Gold Project. The Company's local subsidiaries are the operators in respect of all activities at the Moto Gold Project. The activities undertaken by the Company and its subsidiaries (collectively "the Group") during the period have continued to highlight the world class potential of this previously under explored project.

Tenure

The Company has entered into a joint venture through a wholly owned subsidiary with the privately owned company Orgaman to form a number of local operating companies, including Borgakim sprl ("Borgakim").

In November 2006 the Company entered into an agreement ("November 2006 Protocol") with Okimo to enter into a consolidated contractual arrangement to replace the existing contracts ("Existing Contracts") that will govern the development of and future production activities at the Moto Gold Project in the north east of the Democratic Republic of Congo ("DRC").

In January 2007, certain of the Company's subsidiaries received letters from the then Chief Executive Officer of Okimo and now Vice Minister of Mines claiming certain obligations under the Existing Contracts had not been satisfied and giving the relevant company sixty or ninety days to rectify matters. No further notices have been issued to the relevant companies to date. The Company strongly disputes that it has failed to satisfy any performance criteria under any of the Group's contracts with Okimo.

Further documentation has been prepared by the Company to implement the November 2006 Protocol. However the Company was requested to wait until the appointment of the new Government of the DRC and the appointment of officials to the state companies following the recent elections before progressing the documentation. The relevant appointments have been made. These financial statements have been prepared on the basis of the agreements contained in the November 2006 Protocol.

In light of the above current potential challenges to the Group's title, the Company has been actively updating influential people in the DRC and internationally, including the board and current executive team at Okimo and the new ministers, as to the Company's activities and has engaged both international and local DRC legal experts to prepare and take the appropriate legal action. The Board is also meeting frequently both to review the position and to determine the appropriate action. The Board is seeking to achieve resolution of the issues as soon as practicable.

Exploration

The Company recommenced its programme of infill, extension and technical drilling following a scheduled shut down over the Christmas and new year period. The technical and infill drilling programmes were designed to support feasibility and financing needs and were substantially completed during the quarter. These programmes curtailed exploration and extension drilling until the end of the period at which point the Company was able to increase exploration and extensional drilling which is planned to continue through out 2007.

The Company continued soil sampling programmes on a number of untested gold occurrences and follow up work is planned as a matter of process in respect of significant gold-in-soil anomalies identified to date in a number of potential areas.

In November 2006, independent geological consultants, Cube Consulting Pty Limited ("Cube Consulting"), estimated indicated resources for the Moto Project of 6.163 million ounces at 2.9 g/t of gold and inferred resources of 12.365 million ounces at 4.0 g/t of gold. Cube Consulting utilized the Australian standard of resource classifications, JORC, which are equivalent to the CIM classifications used in Canada. Further resource upgrades are expected during 2007 as new drilling information becomes available and is incorporated into existing geological models.

Moto Gold Project

The Company retained the same team who completed the pre-feasibility study to undertake the bankable feasibility study. The principal engineer Lycopodium Engineering Pty Ltd from Perth, Western Australia (WA) is managing the key elements of and compiling the bankable feasibility study. They are working with a team of WA based consultants including Knight Piesold, Cube Consulting, Ammtech, George Orr & Associates and also Ghana based SGS for environmental and social studies.

The bankable feasibility study progressed on schedule and within budget and the Company continues to work towards completion of the bankable feasibility study by mid to late 2007. A substantial amount of site investigatory work being completed and geological modeling, engineering and metallurgical test work advanced as planned.

The Company has continued with the work to prepare the bankable feasibility study in spite of the above mentioned challenges to some of the Group's title as the Board considers this to be in the best interests of the Company and its stakeholders, including Okimo and the DRC Government. Consequently the Board does not currently envisage any delay in the process, but this will need to be kept under review and the shareholders informed appropriately.

The Company commenced reconstruction works on the Doko to Aru road, a 160 km section of road linking the Moto Gold Project site to Ugandan service infrastructure. The Company continued to build management capability on site, has constructed additional accommodation facilities in preparation for pre-development, is expanding the clinic, birthing centre and health care facilities for the local community and continued the ongoing program of rehabilitating local buildings and infrastructure.

3. Selected Financial Information

The table below sets forth selected financial data relating to the Company's quarter ended March 31, 2007 and March 31, 2006. This financial data is extracted from the Company's unaudited consolidated financial statements, which are prepared in accordance with Canadian GAAP. All amounts in the discussion are in Australian dollars unless otherwise stated.



Quarter
March 31, March 31,
2007 2006
A$ A$

Interest Revenue 744,949 244,728

Employee and consultants expenses 566,011 492,227
Amortization 139,412 68,353
Occupancy 48,354 88,826
Shareholder and listing expenses 82,154 68,250
Marketing and promotion 115,771 268,693
Foreign exchange loss/(gain) 291,865 (394,691)
Stock based compensation 1,048,179 516,728
Interest expense 604,446 -
Other expenses 38,214 64,509

Loss for the period 2,189,457 928,167

Basic loss per share (cents) 3.53 1.98
Weighted average number of shares outstanding 62,013,682 46,959,567


The Company is at the development stage and has no sales revenue. Expenditure is funded by equity raisings. At 31 March 2007 the Company had cash at bank of approximately A$54.5 million.

4. Results of Operations

Comparison of the quarters ended March 31, 2007 and March 31, 2006

Moto had a net loss for the quarter ended March 31, 2007 of A$2,189,457 compared to a net loss of A$928,167 for the quarter ended March 31, 2006. The result for the quarter ended March 31, 2007 as compared with the corresponding period ended March 31, 2006 reflects the following factors:

- Interest income increased in the March 2007 period as a result of the increased cash balance held by the Company for the entire quarter period and placed in interest bearing accounts. The increased cash balance is a result of the financing completed in March 2006 and the exercise of warrants and stock options during the subsequent periods.

- Employee and consultant expenses increased compared to the comparative period reflecting the increased level of exploration, development (at the Moto Gold Project) and corporate activity (maintaining listings on the TSX and AIM, and the appointment of additional directors in August 2006).

- Amortization expense rose compared to the comparative period due to the increased capital assets associated with the increased level of exploration and development at the Moto Gold Project.

- Marketing and promotion expenses decreased compared to the comparative period due to the higher level of promotional activity associated with the listing of the Company's securities on AIM in March 2006 and the voluntary delisting of the Company's securities on the Australian Securities Exchange in October 2006.

- The Company incurs the majority of its expenditure in United States dollars, Canadian dollars and Australian dollars. The Company maintains its cash holdings in these currencies to match anticipated future expenditure. The foreign exchange loss of A$291,865 for the period primarily reflects the effect of movements in the rates of exchange of these currencies against the reporting currency (Australian dollars) on these cash holdings. The Company experienced exchange gains of A$394,691 for the quarter ended March 31, 2006.

- Stock based compensation during the period ended March 31, 2007 period reflects the issue in May, June and August 2006 of stock options to directors and staff.

- The Company incurred interest expense of A$604,446 in the current quarter compared to A$nil in the comparative period in 2006 arising from the assumption by the Company of debt, in accordance with the November 2006 Protocol, owed by Okimo to Orgaman (See Item 6 - Liquidity, Capital Resources and Commitments).

The loss per share reflects the loss for the specific reported period and the increase in the number of common shares on issue.



5. Summary of Quarterly Results

For the three months ended
(expressed in Australian dollars)

2007 2006 2006 2006
31-Mar 31-Dec 30-Sep 30-Jun
$ $ $ $
Revenue 744,949 848,404 902,461 826,338
Loss 2,189,457 4,713,269 1,809,636 5,977,749
Loss per share (cents) 3.53 7.69 3.0 10.3

2006 2005 2005 2005
31-Mar 31-Dec 30-Sep 30-Jun
$ $ $ $
Revenue 244,728 235,730 77,495 93,015
Loss 928,167 3,647,283 632,291 1,007,103
Loss per share (cents) 1.98 8.38 1.77 3.06


Significant factors in respect of the quarterly results are:

- Increased interest income is a result of the increased cash balance held by the Company for the entire quarter period and placed in interest bearing accounts. The increased cash balance is a result of a $50.7 million placement in March 2006 and the exercise of warrants and stock options.

- The issue of stock based compensation in May and June 2006 (March 31, 2007 quarter expense $530,602), August 2006 (March 31, 2007 quarter expense $421,461) and October 2006 (March 31, 2007 quarter expense $96,116).

- Increasing employee and consultant expenses and shareholder and listing expenses as a result of the increased level of corporate related activity, following commencement of trading of the Company's securities on TSX in May 2005 and on AIM in March 2006, and the appointment of additional directors in August 2006;

- Interest expense of A$604,446 incurred in the current quarter arising in accordance with the November 2006 Protocol (See Item 6 - Liquidity, Capital Resources and Commitments).



6. Discussion of Cash Flows, Liquidity and Financial Position

Quarter
March 31, March 31,
2007 2006
$ $

Operating activities (986,278) (213,084)

Investing activities (7,582,439) (4,788,473)

Financing activities 736,785 56,563,465


Cash Flows - Comparison of the quarters ended March 31, 2007 and March 31, 2006

- Increased employee and consultant expenses and shareholder and listing expenses as a result of listing on AIM, maintaining listings on TSX and AIM, increased number of executive directors, and maintenance of an additional office (Johannesburg). Additionally the Company experienced foreign exchange losses of $291,865 during the quarter ended March 31, 2007 compared to gains of $394,691 in the comparative quarter to March 31, 2006. These costs were offset by increased interest income (due to increased cash balances).

- Increased exploration and development expenditure as the Company continues with its significant exploration and development activities, including an increasing level of bankable feasibility study related work.

- Receipt of $0.7 million from the exercise of warrants during the quarter ended March 31, 2007 compared to receipt of $50.7 million from the private placement in March 2006 (less issue costs paid during quarter of $2.88 million) and $8.75 million from the exercise of warrants during the quarter ended March 31, 2006.

Liquidity and Capital Resources and Commitments

The Company funds its exploration and development activities primarily through equity fund raisings. During the quarter ended March 31, 2007 the Company raised approximately $0.7 million in cash from the exercise of warrants compared to approximately A$56.5 million in the quarter ended March 31, 2006.

The Company had working capital as at March 31, 2007 of A$34.8 million (as at December 31, 2006 A$41.8 million). The decrease in working capital is due to the ongoing activities of the Company with no significant equity issues during the quarter.

Under the terms of the agreements pursuant to which the Group has acquired its interests in the Moto Gold Project in the north east of the DRC, the Company's DRC subsidiaries were required to fund exploration activities through to completion of a feasibility study. These agreements were amended and restated by the November 2006 Protocol entered into with Okimo in November 2006. The main terms of this restated agreement comprise:

(i) the consolidation of the lease areas covering 2,350 sq kms into one lease held by Borgakim with the balance of the areas held by the Group being returned to Okimo;

(ii) the interests of the partners in the Moto Gold Project, through Borgakim, a subsidiary of the Company, or a new joint venture company to be created ("JV Co"), to be Okimo 30% (non-dilutable), the Company 60% and Orgaman 10%.

(iii) payment by the Company through Borgakim to Okimo of US$5.0 million (A$6,188,119) and ongoing monthly rentals in respect of the consolidated lease of US$350,000 as from the execution of such consolidated lease until the commencement of production;

(iv) the assumption by the Company of the debt owed by Okimo to Orgaman of which the principal amount outstanding as at August 31, 2006 was US$21,048,330 (A$26,049,913 at March 31, 2007). The Company has agreed to purchase this debt from Orgaman on terms to be negotiated in an agreement between the Company, Borgakim, Okimo and Orgaman. It is the Company's understanding that this debt will be payable by Borgakim or JV Co and will be recoverable from the project revenues before any distributions to the joint venture partners. Capitalised interest to the date of the November 2006 Protocol was US$8,110,272 (A$10,037,465), and interest accrued to March 31, 2007 of US$787,333 (A$974,422). Under the terms of the agreement between the Company and Okimo this interest had been released due to force majeure, but continues accruing under the terms of the agreement between the Company and Orgaman. The loan due to Orgaman will be paid in three tranches, each comprising 100% in cash or at the Company's election up to 50% in common shares of the Company ("Common Shares") as follows a) US$10 million upon the latter of signing the formalized consolidated lease agreement or June 25, 2007, b) US$10 million by June 30, 2008, and c) the balance (including any accrued interest) three years following payment of the first tranche; and

(v) Borgakim to provide Okimo with the funding required to pay the arrears and balance due to its employees of retirement age according to the findings of an audit to be conducted by Okimo; such funds will form a non-interest loan to Okimo which is to be repaid by Okimo with its share of income generated by the Moto Gold Project.

In addition, the Company must issue a further 100,000 Common Shares for every 250,000 ounces of gold identified within the Agbarabo and Tangold licence areas, up to a maximum of a further 800,000 Common Shares.

The table below set forth the contractual obligations of the Group, including the liabilities arising from the agreements contained in the November 2006 Protocol.



---------------------------------------------------------------------------
Principle Payments Due by Period (A$ million)
-------------------------------------------------
Less
Contractual Obligations Total than 1 1 - 3 4 - 5 After 5
Year years years years
---------------------------------------------------------------------------
Loan due to joint venture
partner 37.06 12.38 12.38 12.30 -
---------------------------------------------------------------------------
Consolidation payment due
to Okimo 6.19 6.19 - - -
---------------------------------------------------------------------------
License rental payments 15.96 5.32 10.64 - -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total Contractual 59.21 23.89 23.02 12.30 -
Obligations
---------------------------------------------------------------------------


7. Proposed Transactions and Transactions Subsequent to March 31, 2007

The Company is working towards finalising the formalized consolidated lease agreements over the Moto Gold Project properties in the DRC and progressively settling the transactions that occurred under the terms of the November 2006 Protocol (See Item 6 - Discussion of Cash Flows, Liquidity and Financial Position).

8. Critical Accounting Estimates

The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates relate to the determination of the carrying value or impairment in mineral properties.

9. Outstanding Share Data

As at April 24, 2007 the Company had 62,129,358 Common Shares on issue. The Company also had 7,160,000 stock options and 3,525,660 warrants in issue, and a commitment to issue (a) up to 800,000 Common Shares in connection with an agreement relating to the acquisition by the Company of its interests in the Agbarabo and Tangold licences, (b) further stock options to the Company's Chairman, Mr. Jonah, subject to compliance with stock exchange rules and receipt of any required regulatory and shareholder approvals, on the basis that if the Company makes a material further issuance of shares, the Company will grant stock options at the prevailing market price expiring 6 years after grant such that the total number of stock options granted to Mr. Jonah from the date of his appointment is 5 per cent of the total number of Common Shares issued by the Company; and (c) 1,000,000 stock options to Mr. Andrew Dinning, the Company's Chief Operating Officer, upon completion of a bankable feasibility study. These stock options would exercisable at the then current market price within 6 years of issue.

10. Cautionary Statement Regarding Forward-Looking Statements

Certain statements contained in this discussion and analysis that are not historical facts constitute "forward-looking statements", including but not limited to those statements with respect to the development of mineral deposits, the price of mineral commodities and the Company's financial resources. These statements involve known or unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from those projected by such forward-looking statements. Such factors include, among others, the actual results of current exploration activities, access to capital and future prices of gold. There can be no assurance that the forward-looking statements contained in this discussion and analysis will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.

11. Additional Notes

Scientific or technical information in this Annual Report has been prepared under the supervision of Greg Smith, technical consultant for the Company and a qualified person under National Instrument 43-101 and a member of the Australasian Institute of Mining and Metallurgy (AusIMM). Greg Smith has sufficient experience which is relevant to the style of mineralisation under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (the JORC Code).

The Information in this report that relates to Mineral Resources is based on a resource estimate compiled by Rick Adams who is a member of the Australasian Institute of Mining and Metallurgy (AusIMM) and a qualified person under National Instrument 43-101. Rick Adams is a director of Cube Consulting Pty Ltd. Rick Adams has sufficient experience which is relevant to gold mineralisation and resource estimation to qualify as a competent Person as defined in the December 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" (the JORC Code). Rick Adams consents to the inclusion in this report of the Information, in the form and context in which it appears.

Summary Financial Information

The following financial statements should be read in conjunction with the Consolidated Financial Statements for the First Quarter - March 31, 2007, and the 2006 Consolidated Financial Statements and Management's Discussion and Analysis available on the Company's website at www.motogoldmines.com.



MOTO GOLDMINES LIMITED

CONSOLIDATED BALANCE SHEETS
As at March 31, 2007 (Unaudited) and December 31, 2006
(Stated in Australian Dollars)

March 31, December 31,
2007 2006
$ $
ASSETS
Current Assets
Cash and cash equivalents 54,504,149 62,336,081
GST recoverable and other recoverable debts 235,088 229,263
------------- -------------
54,739,237 62,565,344
------------- -------------

Receivable 26,049,913 26,667,085
Capital assets 1,046,261 1,003,859
Mineral properties 73,631,577 66,511,552
------------- -------------
100,727,751 94,182,496
------------- -------------
155,466,988 156,747,840
------------- -------------
------------- -------------

LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities 1,347,809 1,788,052
Loan due to joint venture partner 12,376,238 12,669,454
Consolidation payment due to Okimo 6,188,119 6,334,727
------------- -------------
19,912,166 20,792,233
------------- -------------
Non Current Liabilities
Loan due to joint venture partner 24,685,563 24,668,446
------------- -------------
24,685,563 45,460,679
------------- -------------
SHAREHOLDERS' EQUITY
Share capital 136,329,429 135,479,418
Warrants 1,939,926 2,053,152
Contributed surplus 13,077,963 12,043,193
Deficit (40,478,059) (38,288,602)
------------- -------------
110,869,259 111,287,161
------------- -------------

155,466,988 156,747,840
------------- -------------
------------- -------------


MOTO GOLDMINES LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
For the quarters ended March 31, 2007 and March 31, 2006 (Unaudited)
(Stated in Australian Dollars)

Quarter
2007 2006
$ $

Interest Revenue 744,949 244,728
------------ -----------
Operating Expenses
Employee and consultants 566,011 492,227
Amortization 139,412 68,353
Occupancy 48,354 88,826
Shareholder and listing 82,154 68,250
Marketing and promotion 115,771 268,693
Foreign exchange loss/(gain) 291,865 (394,691)
Stock based compensation 1,048,179 516,728
Interest 604,446 -
Other 38,214 64,509
------------ -----------
2,934,406 1,172,895
------------ -----------

Loss for period 2,189,457 928,167

Deficit - beginning of period 38,288,602 24,859,782
------------ -----------

Deficit - end of period 40,478,059 25,787,949
------------ -----------

Cents Cents

Basic loss per share 3.53 1.98

Weighted average number of shares
outstanding 62,013,682 46,959,567
------------ -----------


MOTO GOLDMINES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the quarters ended March 31, 2007 and March 31, 2006 (Unaudited)
(Stated in Australian Dollars)

Quarter
2007 2006
$ $

Cash flows used in operating activities
Loss for the period (2,189,457) (928,167)
Items not affecting cash:
Amortization 139,412 68,353
Stock based compensation 1,048,179 516,728

Changes in non-cash working capital
balances
Decrease (increase) in GST recoverable and
other recoverable debts 5,825 34,816
Increase (decrease) in accounts payable and
accrued liabilities 23,171 95,186
------------ -------------
(972,870) (213,084)
------------ -------------

Cash flows used in investing activities
Expenditures on mineral properties (7,399,302) (4,703,453)
Payments for capital assets (183,137) (85,020)
------------ -------------
(7,582,439) (4,788,473)
------------ -------------

Cash flows provided by financing activities
Proceeds from issue of shares and warrants 723,377 59,440,627
Share issue costs - (2,877,162)
------------ -------------
723,377 56,563,465
------------ -------------

Net increase / (decrease) in cash and cash
equivalents (7,831,932) 51,561,908

Cash and cash equivalents - beginning of
period 62,336,081 24,474,298

------------ -------------

Cash and cash equivalents - end of period 54,504,149 76,036,206
------------ -------------


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