Romarco Minerals Inc.
TSX VENTURE : R

Romarco Minerals Inc.

September 01, 2005 08:45 ET

Romarco Announces Second Quarter Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Sept. 1, 2005) - ROMARCO MINERALS INC. (TSX VENTURE:R) (the "Company") reports its second quarter financial results. All figures are in Canadian dollars unless otherwise noted. Complete quarterly results are available on SEDAR and on the Company's website at www.romarco.com.



Selected Financial Data (unaudited)

Three months ended June 30, Six months ended June 30,
2005 2004 2005 2004

Net loss $ (709,618) $ (295,874) $ (1,016,209) $ (436,615)
Loss per share (0.03) (0.01) (0.04) (0.02)

Cash flows used in
operating activities (535,746) (95,249) (831,096) (315,131)
Cash flows from
(used in) investing
activities (212,701) 1,319,005 (312,638) 1,190,251
Cash flows from
financing activities - - - 6,500
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Increase (decrease)
in cash and cash
equivalents $ (748,447) $ 1,223,756 $ (1,143,734) $ 881,620
---------------------------------------------------
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June 30, December 31,
2005 2004
Current assets:
Cash and cash
equivalents $ 213,825 $ 1,357,559
Amounts receivable 22,637 19,092
Prepaid expenses 58,611 47,423
--------------------------
Total current
assets 295,073 1,424,074
Mineral property
interests 1,121,750 761,255
Equipment 32,085 25,630
Deferred financing
costs 149,856 -
--------------------------
Total assets $ 1,598,764 $ 2,210,959
--------------------------
--------------------------

Current liabilities:
Accounts payable
and accrued
liabilities $ 106,389 $ 87,695
--------------------------

Shareholders'
equity:
Share capital 31,617,367 31,364,047
Contributed
surplus 672,446 672,446
Stock Options 391,500 259,500
Deficit (31,188,938) (30,172,729)
--------------------------
Total shareholders'
equity 1,492,375 2,123,264
--------------------------

Total liabilities
and shareholders'
equity $ 1,598,764 $ 2,210,959
--------------------------
--------------------------


The loss from operations of the Company primarily reflects the overhead costs incurred by the Company as it oversees exploration at its projects and evaluates precious metals properties for acquisition as well as costs incurred in the process of merging with Western Goldfields. The exploration and development costs incurred at the Company's projects have been capitalized to mineral property interests.

The Company had a net loss of $709,618 for the three months ended June 30, 2005 and $1,016,209 for the six months ended June 30, 2005 compared to a loss of $295,874 and $436,615 for the same periods of the previous year.

In 2004, the Company wrote-off $815,114 of its mineral property interests. The Company gave notice to Seabridge Gold Inc. in February 2005 that it was terminating the option agreement on the Hog Ranch Gold Project. In accordance with CICA Handbook Section 3063, "Impairment of Long-Lived Assets", the accumulated acquisition, land holding and deferred exploration costs spent at Hog Ranch to December 31, 2004 were written-off. The Company incurred, and wrote-off, $1,572 of additional costs at Hog Ranch in the second quarter of 2005 for a total of $7,523 for the six months ended June 30, 2005.

General and administrative costs for the first six months of 2005 are comparable to those of the first six months of the previous year except for the following. Shareholder relations and transfer agent costs increased in 2005 primarily due to increased shareholder relations activities by the Company as it seeks to increase public awareness of its projects and activities. While the Company's insurance rates remain the same in 2005 as in 2004, insurance costs for 2005 will be greater than for 2004 due to the increased activity and thus, added exposure, of the Company. Travel costs and consulting fees for the second quarter of 2005 are much greater than in the second quarter of 2004 due to the extra activity involved as the Company works to complete its merger with Western Goldfields.

Stock-based compensation for the six months ended June 30, 2005 is considerably higher than it was for the same period in the previous year. During the six months ended June 30, 2005 the Company issued 1,000,000 options to staff, directors and consultants, while its previous grant of options was in 2003. The Company calculates stock-based compensation as the estimated fair value of stock options and recognizes this cost during the period that the options vest. As a result, stock-based compensation in 2005 includes the cost of options issued in both 2003 and 2005, while in 2004, stock-based compensation only includes the cost of the options issued in 2003. For the three months ended June 20, 2004, the Company recognized $45,600 of stock based compensation, of which $9,100 was capitalized as mineral property expenditures and $36,500 was expensed as stock based compensation, with a corresponding increase in the separate component of shareholders' equity. For the six months ended June 20, 2004, the Company recognized $78,600 of stock based compensation, of which $12,400 was capitalized as mineral property expenditures and $66,200 was expensed as stock based compensation, with a corresponding increase in the separate component of shareholders' equity.

Interest income earned in the first quarter of 2005 is lower than the same quarter of 2004 due to decreased cash levels.

Prior to entering into the agreements to merge with Western Goldfields and U.S. Gold, Romarco entered into an agreement with Quest Capital Corp. to provide a US$6.0 million standby facility to Romarco. The Facility was put in place to enable Romarco to proceed with negotiations regarding potential mergers and acquisitions. As consideration for Quest providing the Facility, Romarco issued 1,248,800 common shares to Quest in June 2005. The value of these shares was recorded as deferred financing costs and will be amortized over the 5 month life of the facility.

The terms of the agreement to merge with Western Goldfields and U.S. Gold included the obligation for Romarco to provide US$1.5 million in short-term funding to U.S. Gold. This funding was to be in the form of a loan to U.S. Gold and was to be paid in two tranches of US$200,000 and US$1,300,000 with the US$200,000 payable immediately and the US$1,300,000 payable within 30 days of signing the agreement to merge. The loan would be cancelled upon completion of the merger. If the merger was not completed, the loan would be repayable by U.S. Gold in cash or shares.

The US$200,000 was initially to be treated as a non-refundable fee for the exclusive right to conduct due diligence on U.S. Gold. Upon payment of the remaining US$1,300,000, U.S. Gold would cancel the fee and convert the US$200,000 to a loan, which, together with the US$1,300,000, would form a loan to U.S. Gold of US$1,500,000.

In August 2005 Romarco was notified by U.S. Gold that U.S. Gold was withdrawing from the planned merger. Since U.S. Gold withdrew from the merger plans before Romarco paid the additional US$1,300,000, the original US$200,000 was not converted to a loan and remained in the form of the non-refundable fee. As a result, Romarco has expensed the US$200,000 fee paid to U.S. Gold in June 2005.

At June 30, 2005, the Company had cash and short-term deposits totalling $213,825 as compared to $2,510,715 at June 30, 2004. During the second quarter of 2005, the Company spent $205,749 (2004 - $408,526) on its mineral property interests and $6,952 (2004 - $17,975) on additional field, computer and office equipment. For the six months ended June 30, 2005, the Company spent $302,018 (2004 - $537,280) on its mineral property interests and $10,620 (2004 - $17,975) on additional field, computer and office equipment.

Romarco begins the third quarter of 2005 with $213,825 in cash and no debt. Comprehensive exploration programs, including drilling, are planned for the Buckskin-National, Cori Puncho, Roberts Mountains, and Pine Grove projects. At Golden Zebra, exploration will be limited to geological mapping and geochemical sampling.

The Company is also continuing to work on completing the merger with Western Goldfields and expects to complete the merger in October 2005. Upon completion of the merger, the merged company's primary focus will be to complete a feasibility study on the start up of new mining operations at the Mesquite Mine. The merged company will also re-asses and re-prioritize its expanded portfolio of exploration properties.

In order to carry out its planned exploration programs and meet its contractual obligations, the Company must raise additional funds. The Company has announced its intention to raise up to $10,000,000 by means of a private placement of its shares. Funds raised from this private placement are to be used for the Company's ongoing requirements as it relates to the merger of Romarco and Western Goldfields, Inc., for exploration expenditures in relation to Romarco's Nevada properties, for initiating a feasibility study on the Mesquite Mine, and for general working capital.

ON BEHALF OF ROMARCO MINERALS INC.

"Diane R. Garrett"

Diane R. Garrett, President and C.E.O.

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