Uruguay Mineral Exploration Inc (''UME'') Announces Results for the Quarter Ended August 31, 2007



    MONTEVIDEO, URUGUAY, October 11 /CNW/ - Uruguay Mineral Exploration Inc.
(TSX VENTURE:UME) (LSE:UGY):

    Summary of Results

    --  Gold production was 18,488 ounces for the first quarter compared to
19,175 ounces in the corresponding quarter of the prior financial year. While
production was approximately 2,500 ounces less than anticipated for the
quarter, the full year production forecast of 95,000 ounces is maintained.

    --  Cash costs were $US 425 per ounce for the quarter compared to $US 332
for the corresponding quarter of the prior financial year. This was in line
with our expectations as a result of the lower production.

    --  Net profit after tax for the first quarter was $US 1.2 million or $US
0.025 basic earnings per share, compared to a net profit after tax of $US 2.6
million or $US 0.054 basic earnings per share for the first quarter of the
2006 financial year.

    --  Cash flow from operations before non-cash working capital movements
was $US 4,111 million for the first quarter. Cash as at 31st August was $US
11.6 million.

    --  The average realized gold price for the first quarter was $US 661 per
ounce.

    --  The interim dividend of C$ 3.5 cents per share, announced with the
results for the annual fiscal year on 14th August 2007, will be paid to
shareholders on 26th October 2007.

    
                                                         3 Months to
                                                   -----------------------
                                                   August 2007 August 2006
    Operating Review
    Gold produced                        Ounces         18,488      19,175
    Average cash cost                    US$/oz            425         332
    Average price received               US$/oz            661         568

    ----------------------------------------------------------------------
    Financial Review
    Revenue                              US$ '000s      13,253      12,177
    Net income for the period            US$ '000s       1,224       2,567
    Cash flow from operations(*)           US$ '000s       4,111       3,503
    Basic earnings per share             US$             0.025       0.054
    Cash at the end of the period        US$ '000s      11,631       8,545
    Total debt at the end of period      US$ '000s       2,331       3,385
    ----------------------------------------------------------------------
    (*) before non-cash working capital movements
    

    David Fowler, Chief Executive commented: "Despite lower than anticipated
production results for the first quarter, we remain on target to produce
95,000 ounces in the current financial year. With the diversion of the Arroyo
Corrales completed and the work areas in the Arenal pit expanding, we are
confident that target production levels will be achieved. Cash costs for the
quarter were in line with expectations, given the lower production volumes
achieved.

    "Field work continues to produce good exploration results within the Isla
Crystalina, Dom Feliciano and Florida belts, and we have defined drill targets
at Papagayo, Argentinita North, Tito Lopez, Veta Rodrigo, Nueva Helvecia,
Presidente Terra and Bragado. Drilling at a number of projects has however
been delayed due to permitting issues. These are being resolved and steps are
being taken to increase drilling rates to more aggressively convert good
initial field results into drill intercepts and ultimately resources. The
second phase of 7,000 meters of diamond drilling at Lascano is scheduled to
start in December using a contractor rig and to be completed within six
months.

    "At the shareholders meeting on 11th October I will expand on the
exploration work and put it into the context of what we are looking to achieve
from each area of activity. The presentation that I will be making will be on
the website from the morning of 11th October 2007."

    Review of the Quarter ended 31 August 2007

    Production

    Production for the quarter was 18,488 ounces compared to 21,000 ounces
forecast on 2nd August 2007. This shortfall was due to lower grades than
anticipated for ore mined in the first benches beneath the Arroyo Corrales.
More tonnes were encountered at lower grade with more overall ounces mined
from the area than estimated. Higher grade ore was fed to the plant as
presented with lower grade material stockpiled for future periods.

    The first benches beneath the Arroyo Corrales were classified as
Indicated Resources as they could not be fully drilled due to access
restrictions. This result has no implications on the remainder of the Arenal
resource estimates and production for September was in line with forecasts
with more than 8,000 ounces produced for the month.

    In July 2007 the channel to divert the Arroyo Corrales was completed and
water started flowing. Flood protection dykes were completed during September
and environmental reclamation commenced. Now that the Arenal pit has been
expanded, ore stocks are being built to increase flexibility in achieving
production targets.

    UME expects to achieve its stated production target of 95,000 ounces with
consistent production for each of the remaining quarters of 2008.

    Financial Performance

    Operating costs for the quarter were $ 425 per ounce. While high on a per
ounce basis due to lower production levels, operating costs were in line with
expectations and the company maintains its full year forecast of $US 345 per
ounce.

    Effective 1st June 2007, UME has adopted new standards based on the
Changes in Canadian Accounting Recommendations with respect to stripping
charges. The impact of applying such recommendations was to decrease the
operating costs used as the basis for the Company's cash cost calculation
relative to the operating costs under the previous method by $136. Had the
previous method of calculating operating costs been used, the cash costs per
ounce would have been $432. This change is further explained in the Management
Discussion and Analysis for the quarter.

    Additional details explaining the evolution of operational cost increases
over the past two years is provided in the Annual General Meeting presentation
which is available for download from the Company's website from 11th October
2007.

    Gold Exploration

    Priority for exploration drilling for the quarter was given to near mine
targets at San Gregorio. Infill drilling was completed for Veta A and Sur to
allow resource modelling and mine planning of these deposits. This material
will be used to blend with Arenal ore over the next two years to maximize
throughput. Step out drilling 400 meters along strike to the southwest of Veta
Sur intersected a weakly mineralized structure. Subsequent to the end of the
quarter, drilling at San Antonio, a further 500 meters along strike to the
southwest, reported a drill intercept of 1 meter at 157 g/t at 24 meters and
an additional 5 meters at 8 g/t starting at 25 meters (not true thickness).

    A number of targets in the footwall and northwest of San Gregorio were
tested in an attempt to expand resources in these areas and allow mine plans
to be finalised. Lower grade intercepts encountered in the footwall will be
followed up.

    During the quarter a deep drill program was designed to test for
mineralization at San Gregorio and Arenal to a depth of 500 meters. The
program commenced in September with the results expected to be reported in the
coming quarter.

    Drilling and trenching at a number of projects in the Zapuchay district
including Papagayo, Nueva Helvecia, Veta Rodrigo, and Presidente Terra have
been delayed pending the grant of exploration permits. These permits are
expected to be received during the second quarter. Further to the east of the
Isla Crystalina belt at Vichadero, an anomalous target, 1.5 km long with rock
chip samples above 5 g/t, has been identified.

    Regional exploration is progressing well with the source of geochemical
anomalies being identified and tested in both the Dom Feliciano and Florida
belts. At Texas (in the Dom Feliciano belt) new quartz veins have been
identified with anomalous grades in rock chip samples. Soil and geophysics
programs are planned for these projects in the coming quarters to identify
drill targets for later in the financial year. Good progress has also been
made in the Florida belt. At Cruzera the final four diamond drill holes in the
initial drill campaign were completed during the quarter. The results of this
program confirm mineralization over a strike length of 800 meters to a depth
of 100 meters. Further strike extensions to mineralization are now being
targeted through soil sampling and encouraging results are being received for
similar vein systems 20 km further to the south at Casupa, where veins are
being mapped and sampled with rock chip samples to 200 grams per tonne.
Drilling is planned for this district for the second half of the financial
year.

    External evaluations have been completed on the performance of UME's own
exploration drilling fleet and plans have been established to increase
utilization and improve drilling efficiency over the remainder of the year.

    Non-Gold Assets

    Lascano

    At Lascano a fifth and final drill hole for the 2007 campaign, targeting
a near surface gravity anomaly, was completed during the quarter. The rocks
encountered were predominantly intrusive in nature and composed of gabbro and
dolerite to granite (granophyre). Though no alteration or mineralization was
observed, the hole is providing us with very valuable information about the
composition of the rocks and the intrusion.

    As a result of the 2007 drill campaign, the Lascano geophysical anomaly
has been interpreted to be created by gabbro to granitic (granophyre)
intrusive rocks underlying a package of magnetic basalt and felsic volcanic
rocks. Down drop of the volcanic rocks outside the feature to the north has
caused an edge effect, which has highlighted the magnetic character of the
magnetic flood basalts. It is theorized at this stage that alteration and
mineralization, with similarities to iron oxide copper gold and porphyry
copper systems, observed in drill hole 2 are directly or indirectly caused by
the intrusive bodies.

    A 7,000 to 10,000 meter drill campaign, to be performed by contractors,
is planned to commence during November and to be completed by the end of the
financial year. The program will offset drill the anomalous mineralization
encountered in hole 2. The program will consist of four to five drill holes to
a depth of about 1,100 metres in and around hole 2 and an additional four to
five drill holes in a similar geophysical settings in other parts of the
anomaly.

    Diamonds and Base metals

    Negotiations have progressed with a number of parties on diamonds and
base metals properties. As a result of these discussions, work on these
projects was scaled back. Drilling of kimberlite targets on the diamond
project is delayed pending the grant of exploration permits.

    An external review of UME's nickel properties including Mal Abrigo, Paso
de Lugo, Carpentaria and Yatay, has been undertaken by GeoDiscovery, an
external specialized nickel consultant. This review has confirmed the
potential of these properties for nickel discovery. It has also identified key
additional work required to progress the projects to a point of attracting
potential partners. The Group plans to complete this work during the course of
the financial year.

    During the quarter UME submitted an expression of interest to the
Uruguayan government for its tender of Uranium rights. UME's participation
will be on the basis of a minority partner providing data, including
geochemical and geophysical information, equipment resources and
administrative support.

    Exploration Report for the Quarter ended 31 August 2007

    This report provides details of exploration activities during the quarter
ended 31 August 2007.

    Highlights

    --  In fill drilling on Veta Sur has been completed and mine planning has
commenced. The first step out drilling 400 meters along strike of known
mineralization has encountered the structure and anomalous mineralization.
Drilling commenced on the San Antonio prospect, a further 500 meters to the
south also encountered mineralization with assays pending.

    --  Drill programs have been developed to test the down dip extensions of
San Gregorio and Arenal. An initial program of eight holes to approximately
300 meter depth commenced in September.

    --  At Vichadero rock chip sampling has identified an anomalous gold zone
of 1.5 km in length. Soil sampling is planned for the coming quarter to
identify drill targets for the second half of the year.

    --  Drill programs have been developed for anomalous zones between
Zapachay and Argentinita and at Papagayo, Titlo Lopez and Lavadero in the
Zapuchay district. These programs will commence when exploration permits are
received.

    --  At Bragado trenching has shown significant copper mineralization with
values of greater than 1%. Drilling commenced in September to define the
extent of mineralization.

    --  A strongly anomalous vein system 800 meters long has been defined at
Casupa with gold values of up to 207 g/t. Geophysics and soil sampling will be
performed at both Casupa and Cruzera during the current quarter with a drill
program expected to be completed early in 2008.

    --  At Lascano the fifth and final drill hole in the current campaign
targeting a near surface gravity anomaly was completed during the quarter. The
rocks encountered were predominantly intrusive. A 7,000 to 10,000 meter drill
campaign, to be performed by contractors, is planned to commence before the
end of the calendar year and be completed by the end of the financial year.

    --  UME's nickel properties including Mal Abrigo, Paso de Lugo,
Carpentaria and Yatay have been reviewed by GeoDiscovery, an external
specialized nickel consultant. This review has confirmed that a number of
these properties have good exploration potential for nickel and associated
elements.

    --  Seven projects are drill ready and awaiting the granting of permits
by Uruguay's ministry of mines to proceed. This has delayed the commencement
of a number of projects but is expected to progress in the current quarter. A
program to improve exploration drill productivity and utilization has
commenced. It is expected that this process will significantly increase meters
drilled over the remainder of the year.

    Isla Cristalina Belt - Minas Del Corrales District (Arenal and San
Gregorio)

    Drilling during the quarter focused on near-mine targets with the
majority of the meters applied to definition drilling of Vetas A and Sur.
Exploration drilling was also completed in the foot wall of the San Gregorio
structure and along the northwest extension chasing anomalous intercepts
which, if successful, will reduce the strip ratio for underlying resources at
San Gregorio. Results to date have returned weakly mineralized intercepts and
are as follows:

    
    San Gregorio footwall
    ---------------------------------------------------------
    Prospect        Hole Number    From        Intercept
    ---------------------------------------------------------
    San Gregorio    SGRC003        9           2m @ 2.00g/t
    ---------------------------------------------------------
    San Gregorio    SGRC003        19          1m @ 1.10g/t
    ---------------------------------------------------------
    San Gregorio    SGRC003        38          6m @ 0.60g/t
    ---------------------------------------------------------
    San Gregorio    SGRC005        28          5m @ 0.40g/t
    ---------------------------------------------------------
    San Gregorio    SGRC005        129         1m @ 0.80g/t
    ---------------------------------------------------------
    

    An additional round of drilling is planned in the footwall to target
higher grade material.

    The organization of the database combining geochemistry, geophysics and
their relationship to the regional geology has identified and or rediscovered
a number of anomalies. Targets include the extension to the San Gregorio
mineralization and the San Antonio prospect.

    The down dip extensions to the main mineralized ore bodies of San
Gregorio, Arenal and Santa Teresa represent important exploration targets. It
is clear from the historic drilling and resource models that the models are
drill hole constrained and mineralization remains open at depth. The first
drill hole in a campaign to target this deeper mineralization commenced in
September. It is clear that these ore bodies pinch and swell along strike and
down dip. It is expected that additional resources will be added at depth.

    Drilling continued in Veta A and Sur to further define the deposits. It
is believed that additional resources will be added to the model which was
presented at the end of August 2007. An in-house resource and reserve model is
being updated for both vein deposits. This will be used in mine planning and
production in the next 24 months. Mineralization is known to continue under
the tailings dam and San Gregorio waste dumps respectively to the southwest.
Significant results from the Vetas are presented below for the first quarter.
Veta A and Sur results are from a 25 x 25 meter definition drill program.

    
    Prospect  Hole Number    From     Intercept
    ---------------------------------------------------
    Veta A    VARC-088       38       5m @ 2.87g/t
    ---------------------------------------------------
    Veta A    VARC-089       46       5m @ 1.74g/t
    ---------------------------------------------------
    

    (intercepts are composites using 0.5 g/t cut)

    Results used in August 2007 resource model.

    
    Prospect    Hole Number   From    Intercept
    -------------------------------------------------
     Veta Sur   VSRC-049      76      2m @ 1.08g/t
    -------------------------------------------------
     Veta Sur   VSRC-049      80      4m @ 4.97g/t
    -------------------------------------------------
     Veta Sur   VSRC-057      87      3m @ 3.15g/t
    -------------------------------------------------
     Veta Sur   VSRC-059      71      4m @ 10.28g/t
    -------------------------------------------------
     Veta Sur   VSRC-059      78      1m @ 5.30g/t
    -------------------------------------------------
     Veta Sur   VSRC-061      112     6m @ 2.76g/t
    -------------------------------------------------
     Veta Sur   VSRC-064      111     3m @ 1.81g/t
    -------------------------------------------------
     Veta Sur   VSRC-066      117     5m @ 2.15g/t
    -------------------------------------------------
     Veta Sur   VSRC-067      117     5m @ 2.29g/t
    -------------------------------------------------
     Veta Sur    VSRC-076     69       5m @ 1.43g/t
    -------------------------------------------------
     Veta Sur    VSRC-077     58       2m @ 2.50 g/t
    -------------------------------------------------
     Veta Sur    VSRC-078     51       1m @ 17.10g/t
    -------------------------------------------------
     Veta Sur    VSRC-079     21       9m @ 4.90g/t
    -------------------------------------------------
     Veta Sur    VSRC-080     35       5m @ 7.42g/t
    -------------------------------------------------
     Veta Sur    VSRC-083     35       3m @ 2.26g/t
    -------------------------------------------------
     Veta Sur    VSRC-087     94       4m @ 2.72g/t
    -------------------------------------------------
     Veta Sur    VSRC-094     41       1m @ 5.33g/t
    -------------------------------------------------
     Veta Sur    VSRC-095     74       2m @ 2.28g/t
    -------------------------------------------------
     Veta Sur    VSRC-096     76       2m @ 2.06g/t
    -------------------------------------------------
     Veta Sur    VSRC-096     79       5m @ 2.62g/t
    -------------------------------------------------
     Veta Sur    VSRC-098     27       3m @ 1.27g/t
    -------------------------------------------------
     Veta Sur    VSRC-100     74       3m @ 1.87g/t
    -------------------------------------------------
     Veta Sur    VSRC-102     60       1m @ 3.43g/t
    -------------------------------------------------
     Veta Sur    VSRC-102     67       1m @ 20.30g/t
    -------------------------------------------------
     Veta Sur    VSRC-102     76       3m @ 1.67g/t
    -------------------------------------------------
     Veta Sur    VSRC-104     82       6m @ 3.10g/t
    -------------------------------------------------
     Veta Sur    VSRC-105     55       2m @ 6.96g/t
    -------------------------------------------------
     Veta Sur    VSRC-106     77       4m @ 4.16g/t
    -------------------------------------------------
     Veta Sur    VSRC-107     88       2m @ 2.15g/t
    -------------------------------------------------
     Veta Sur    VSRC-108     81       8m @ 1.88g/t
    -------------------------------------------------
     Veta Sur   VSRC-109      50      1m @ 20.5g/t
    -------------------------------------------------
     Veta Sur   VSRC-112      71      8m @ 3.9g/t
    -------------------------------------------------
     Veta Sur   VSRC-113      54      1m @ 8.2g/t
    -------------------------------------------------
     Veta Sur   VSRC-113      56      1m @ 3.3g/t
    -------------------------------------------------
     Veta Sur   VSRC-113      71      3m @ 3.3g/t
    -------------------------------------------------
     Veta Sur   VSRC-114      40      2m @ 1.1g/t
    -------------------------------------------------
     Veta Sur   VSRC-114      74      5m @ 1.5g/t
    -------------------------------------------------
     Veta Sur   VSRC-117      85      6m @ 2.0g/t
    -------------------------------------------------
     Veta Sur   VSRC-118      49      3m @ 2.8g/t
    -------------------------------------------------
     Veta Sur   VSRC-119      70      7m @ 1.4g/t
    -------------------------------------------------
     Veta Sur   VSRC-121      49      3m @ 1.3g/t
    -------------------------------------------------
     Veta Sur   VSRC-121      60      4m @ 2.6g/t
    -------------------------------------------------
     Veta Sur   VSRC-122      27      1m @ 6.6g/t
    -------------------------------------------------
     Veta Sur   VSRC-123      26      2m @2.7g/t
    -------------------------------------------------
    

    (Intercepts are composites using 0.5 g/t cut)

    Results through drill hole VSRC-073 used in the August 2007 resource
model

    Drilling has commenced on the extension of the Veta Sur deposit southwest
of the San Gregorio dump and in the area of Cross Hill and San Antonio
prospects some 400 meters and 900 meters south of the last defined
mineralization respectively. Results for these areas are pending, though the
structure was cut just south of the dump with weak to moderate mineralization.
Anomalous mineralized intercepts are expected from the San Antonio prospect.
No significant intercepts are expected at Cross Hill. Exploration drilling
will continue in San Antonio and along the extension of Veta Sur next quarter.

    Isla Cristalina Belt - Argentinita/Zapucay District

    Resource and reserve estimates were completed on the Argentinita deposit
and presented in the full year results. Drilling for metallurgical samples has
been completed during the quarter. Drilling is planned between the Zapucay and
Argentinita deposits as well as at Lavadero, Papagayo and Tito Lopez
prospects. All of these prospects are within 6 kilometers of one another.

    Mapping and sampling at Papagayo over the last 6 months has defined over
a kilometer of anomalous gold mineralization greater than 0.5 g/t Au in rock
chip hosted in a low angle shear zone. A number of trace elements are
associated with gold mineralization including Ag, Pb and Mo, with path finder
elements As, Bi, Hg, Sb, and Tl. A soil sampling survey has further defined
the zone of mineralization using these trace elements.

    An exploration drill program has been designed for the greater district
which includes Papagayo, Tito Lopez, and Laurales and will commence when
exploration permits are received. This is expected to be during the second
quarter.

    Isla Cristalina Belt - West

    Generative exploration has taken place over the western most portion of
the Isla Cristalina belt. Stream sediment sampling has been taken in areas
previously lacking first pass sampling. Results from this program are pending.

    Hand trench sampling, mapping and a reconnaissance IP survey have been
completed over the Veta Rodrigo target. Trench sampling has indicated that
anomalous values are associated with the vein though somewhat less anomalous
than the original surface outcrop samples. Exploration permits have been
received and a negotiation with land owners is underway for access to the
vein. Drilling will commence once access is granted.

    A full review of the Sobresaliente took place in June as a possible
future source of feed for the mill. Additional exploration targets were also
evaluated and have been deemed lower priority at this time.

    Isla Cristalina Belt - Eastern Half

    The generative exploration work continues in the eastern half of the Isla
Cristalina belt. Follow-up sampling of the Vichedero stream sediment anomalies
has defined gold mineralization in small vein sets within the 3 by 6 kilometer
basin area. Outcrop in this end of the belt is scarce and rock chip sampling
was done in road cuts and along a local aqueduct that cuts across the pasture
land. Thin veins have been sampled which are exposed in the aqueduct and have
returned strongly mineralized results which are presented below.

    
    Vichedero
    ------------------------------------------
    Sample ID   Au_g/t  Ag ppm      Cu ppm
    ------------------------------------------
    12051       6.46    14          3.4
    ------------------------------------------
    12095       0.58    0.3         5.4
    ------------------------------------------
    12092       0.65    1.9         2.3
    ------------------------------------------
    12093       0.74    0.2         50.2
    ------------------------------------------
    12094       0.46    0.7         14.8
    ------------------------------------------
    12096       0.87    2.1         2.5
    ------------------------------------------
    12101       2.25    6.7         9.9
    ------------------------------------------
    12076       2.28    6.2         70.4
    ------------------------------------------
    12111       3.59    12          29.2
    ------------------------------------------
    12122       0.43    0.8         6.1
    ------------------------------------------
    12123       2.32    3.1         5.5
    ------------------------------------------
    12126       2.44    0.6         13.2
    ------------------------------------------
    12130       0.41    0.3         10.7
    ------------------------------------------
    

    The anomaly defined by these samples is over 1.5 kilometers long and
strikes to the northwest and runs parallel to lineaments defined by airborne
geophysics. This represents a significant increase in our understanding of the
source of the anomalous stream sediments and could represent a bulk tonnage
target. A detailed soil sampling program is planned to cover the entire area
to help further define drill targets. Drilling is planned for the second half
of the year.

    Florida and Dom Feliciano Belts Au

    Presidente Terra

    Mapping and sampling continued to define drill targets on the property.
Work has concentrated on the contact between the meta-sediments and granite.
There is some evidence that this NNE trending contact may be shear and/or
fault related. Mapping has also defined mineralization within the granites
which is hosted in vein/shears associated with a large NNE trending boundary
structure to the Dom Feliciano Belt. Au mineralization is associated with
hematite, pyrite and magnetite within veins and breccia. Visible gold is found
in most of the vein sets identified. Soil and geophysical surveys are planned
for the second quarter over the main areas of mineralization.

    Trenching and drilling will commence once exploration permits are
approved and land owner agreements completed.

    Surface sampling results for the quarter are presented below.

    
    Presidente Terra
    ------------------------------------------
    Sample ID   Au_g/t    Ag ppm     Cu ppm
    ------------------------------------------
    12051       6.46      14         3.4
    ------------------------------------------
    12095       0.58      0.3        5.4
    ------------------------------------------
    12092       0.65      1.9        2.3
    ------------------------------------------
    12093       0.74      0.2        50.2
    ------------------------------------------
    12094       0.46      0.7        14.8
    ------------------------------------------
    12096       0.87      2.1        2.5
    ------------------------------------------
    12101       2.25      6.7        9.9
    ------------------------------------------
    12076       2.28      6.2        70.4
    ------------------------------------------
    12111       3.59      12         29.2
    ------------------------------------------
    12122       0.43      0.8        6.1
    ------------------------------------------
    12123       2.32      3.1        5.5
    ------------------------------------------
    12126       2.44      0.6        13.2
    ------------------------------------------
    12130       0.41      0.3        10.7
    ------------------------------------------
    

    Bragado

    At the Bragado prospect, detailed mapping, sampling and trenching have
been completed. This work has defined mineralization hosted in veins which cut
the folded meta-sediments, meta-volcanic and associated granitic host rock.
Most veins are parallel to the fold axis and trend NNE, as does the belt.
Mineralization is also found locally concentrated in the nose of the folds.
The prospect is predominately copper with minor gold mineralization. A drill
program is planned for September to test the extent of copper/gold
mineralization. Significant results from the last quarter surface exploration
are presented below.

    Surface Samples

    
    Bragado
    -----------------------------------------------------------
    Sample ID   Au_g/t           Ag ppm           Cu ppm
    -----------------------------------------------------------
    EX10652     0.03             (less than)0.30  58
    -----------------------------------------------------------
    EX10656     (less than)0.005 (less than)0.30  63
    -----------------------------------------------------------
    EX10658     0.59             2.20             962
    -----------------------------------------------------------
    EX10659     0.01             (less than)0.30  170
    -----------------------------------------------------------
    EX10661     0.01             (less than)0.30  653
    -----------------------------------------------------------
    EX10662     0.05             4.70             969
    -----------------------------------------------------------
    EX10664     0.08             1.90             514
    -----------------------------------------------------------
    EX10667     0.01             0.40             509
    -----------------------------------------------------------
    

    
                             From  To             Au
    Sample ID     Trench      (m)   (m)  Interval  g/t Ag ppm     Cu ppm
    ----------------------------------------------------------------------
                                                       (less
    EX10829       BR_07_TRN2 17.30 18.54 1.24     0.10  than)0.30 589
    ----------------------------------------------------------------------
                                                       (less
    EX10830       BR_07_TRN2 18.54 19.80 1.26     0.01  than)0.30 1085
    ----------------------------------------------------------------------
                                                       (less
    EX10832       BR_07_TRN2 19.80 21.44 1.64     0.02  than)0.30 1242
    ----------------------------------------------------------------------
    EX10833       BR_07_TRN2 21.44 23.00 1.56     0.10 0.50       6852
    ----------------------------------------------------------------------
                                                                  (greater
                                                                   than)
    EX10834       BR_07_TRN2 23.00 24.50 1.50     0.56 2.70        10000
    ----------------------------------------------------------------------
    EX10835       BR_07_TRN2 24.50 25.50 1.00     0.07 0.90       7278
    ----------------------------------------------------------------------
                                                                  (greater
                                                                   than)
    EX10836       BR_07_TRN2 25.50 26.30 0.80     0.18 5.90        10000
    ----------------------------------------------------------------------
                                                                  (greater
                                                                   than)
    EX10837       BR_07_TRN2 26.30 27.80 1.50     0.09 0.60        10000
    ----------------------------------------------------------------------
    EX10838       BR_07_TRN2 27.80 29.30 1.50     0.02 0.40       9268
    ----------------------------------------------------------------------
    EX10839       BR_07_TRN2 29.30 30.90 1.60     0.01 0.40       8272
    ----------------------------------------------------------------------
    EX10840       BR_07_TRN2 30.90 32.20 1.30     0.01 0.30       7598
    ----------------------------------------------------------------------
                                                       (less
    EX10842       BR_07_TRN2 32.20 33.50 1.30     0.02  than)0.30 9158
    ----------------------------------------------------------------------
                                                       (less
    EX10848       BR_07_TRN2 39.00 39.75 0.75     0.12  than)0.30 2007
    ----------------------------------------------------------------------
    EX10849       BR_07_TRN2 39.75 41.25 1.50     0.01 0.30       1279
    ----------------------------------------------------------------------
    EX10850       BR_07_TRN2 41.25 42.20 0.95     0.02 0.30       1048
    ----------------------------------------------------------------------
                                                       (less
    EX10852       BR_07_TRN2 42.20 43.80 1.60     0.01  than) 0.3 1529
    ----------------------------------------------------------------------
                                                       (less
    EX10853       BR_07_TRN2 43.80 45.50 1.70     0.01  than) 0.3 1055
    ----------------------------------------------------------------------
                                                       (less
    EX10854       BR_07_TRN2 45.50 46.50 1.00     0.01  than) 0.3 2066
    ----------------------------------------------------------------------
                                                       (less
    EX10928       BR_07_TRN9 9.04  10.48 1.44     0.04  than) 0.3 1554
    ----------------------------------------------------------------------
                                                       (less
    EX10929       BR_07_TRN9 10.48 11.87 1.39     0.08  than) 0.3 1523
    ----------------------------------------------------------------------
                                                       (less
    EX10930       BR_07_TRN9 11.87 12.77 0.90     0.03  than) 0.3 1956
    ----------------------------------------------------------------------
    EX10931       BR_07_TRN9 12.77 13.97 1.20     0.02 0.30       1050
    ----------------------------------------------------------------------
                                                       (less
    EX10932       BR_07_TRN9 13.97 15.28 1.31     0.04  than) 0.3 1642
    ----------------------------------------------------------------------
                                                       (less
    EX10933       BR_07_TRN9 15.28 15.92 0.64     0.03  than) 0.3 2325
    ----------------------------------------------------------------------
                                                       (less
    EX10934       BR_07_TRN9 15.92 16.87 0.95     0.01  than) 0.3 63
    ----------------------------------------------------------------------
    EX10935       BR_07_TRN9 16.87 17.82 0.95     0.27 0.70       525
    ----------------------------------------------------------------------
    EX10937       BR_07_TRN9 17.82 18.20 0.38     0.06 0.50       3311
    ----------------------------------------------------------------------
    EX10938       BR_07_TRN9 18.20 19.20 1.00     0.06 0.40       791
    ----------------------------------------------------------------------
    EX10939       BR_07_TRN9 19.20 20.28 1.08     0.10 0.50       1882
    ----------------------------------------------------------------------
                                                                  (greater
                                                                   than)
    EX10940       BR_07_TRN9 20.28 21.28 1.00     0.05 0.50        10000
    ----------------------------------------------------------------------
    EX10941       BR_07_TRN9 21.28 22.32 1.04     0.08 0.60       9166
    ----------------------------------------------------------------------
    EX10942       BR_07_TRN9 22.32 23.15 0.83     0.12 0.50       2328
    ----------------------------------------------------------------------
                                                       (less
    EX10943       BR_07_TRN9 23.15 24.16 1.01     0.05  than) 0.3 4029
    ----------------------------------------------------------------------
    EX10944       BR_07_TRN9 24.16 25.66 1.50     0.06 0.50       4106
    ----------------------------------------------------------------------
    EX10945       BR_07_TRN9 25.66 27.10 1.44     0.03 0.90       4334
    ----------------------------------------------------------------------
    EX10947       BR_07_TRN9 27.10 28.89 1.79     0.04 0.40       2359
    ----------------------------------------------------------------------
    EX10883       BR_07_TRN3 19.77 20.77 1.00     0.01 0.30       4205
    ----------------------------------------------------------------------
    EX10884       BR_07_TRN3 20.77 21.65 0.88     0.07 0.70       7225
    ----------------------------------------------------------------------
                                                                  (greater
                                                                   than)
    EX10885       BR_07_TRN3 21.65 22.70 1.05     1.77 8.30        10000
    ----------------------------------------------------------------------
    EX10893       BR_07_TRN4 21.70 22.70 1.00     0.10 0.40       5294
    ----------------------------------------------------------------------
                                                       (less
    EX10903       BR_07_TRN5 36.66 37.10 0.44     0.85  than)0.30 21
    ----------------------------------------------------------------------
                                                       (less
    EX10917       BR_07_TRN7 26.50 27.06 0.56     0.54  than)0.30 28
    ----------------------------------------------------------------------
    EX10919       BR_07_TRN7 51.18 52.18 1.00     0.12 0.40       4955
    ----------------------------------------------------------------------
                                                       (less
    EX10920       BR_07_TRN7 52.18 53.05 0.87     0.06  than)0.30 3251
    ----------------------------------------------------------------------
                                                       (less
    EX10924       BR_07_TRN8 32.48 33.66 1.18     0.71  than)0.30 21
    ----------------------------------------------------------------------
    

    Clearly the results from trenching show that significant Copper
mineralization does occur to greater than 1%. The drill program in September
will try to define the extent of the mineralization.

    Texas

    Texas prospect has had limited first pass exploration work completed
during the quarter. Mineralization is associated with quartz veins which host
sulfide mineralization. Two additional targets have been identified on the
property outside of the original target area. Mineralization is associated
with quartz veins and gossan ironstones near contacts between granitic
intrusions and meta-sediments. The most significant results from the last
quarter are presented below.

    
    Project   Sample ID     Au g/t   Ag ppm
    --------------------------------------------------
    Texas     EX10685       4.586    (less than).3
    --------------------------------------------------
    Texas     EX10686       4.602    1.7
    --------------------------------------------------
    Texas     EX10687       1.427    2.6
    --------------------------------------------------
    Texas     EX10692       0.462    0.3
    --------------------------------------------------
    Texas     EX10693       0.161    (less than) 0.3
    --------------------------------------------------
    

    Further work is planned on this prospect for later in the year.
Development of drill targets is planned before the end of the fiscal year.

    Florida Belt

    Crucera

    The Crucera vein deposit is one of a number of vein deposits that are
currently being explored and developed in the Crucera/Casupa district of the
Florida Belt. The district lies in the eastern end of the Piedra Alta terrain
and covers an area of 20 by 5 kilometers.

    Resource drilling has been completed and an in-house resource has been
estimated. It is clear from this work that mineralization does continue down
dip and along strike though the mineralized shear pinches and swells. To date
nearly 800 meters of strike length have been drill tested to a depth of 100
meters. Results from this quarter's drill program are presented below.

    
    Prospect   Hole Number    From     Intercept            Type
    -----------------------------------------------------------------
    Crucera    CR_07_018      31       1.05m @ 2.88g/t Au   DDH
    -----------------------------------------------------------------
    Crucera    CR_07_019      18       4m @ 1.94g/t         RC
    -----------------------------------------------------------------
    Crucera    CR_07_020      54       2m @ 1.28 g/t        RC
    -----------------------------------------------------------------
    Crucera    CR_07_022      62.15    7.85m @ 5.24g/t Au   DDH
    -----------------------------------------------------------------
    

    Additional mapping and soil sampling is underway along strike 1 km both
to the northwest and southeast to better define the extent of the
mineralization. A preliminary description of the soil samples taken along
strike indicates that quartz vein material is found within the samples. Once
results are received a drill program will be designed to test the stronger
anomalies.

    Casupa

    Sampling and mapping continues within the southern part of the district
and has concentrated on the Madre Con Hijos vein system deposit. The veins
seem to be folded and carry significant mineralization in both limbs of the
fold. Mineralization has been defined for 800 metes along strike. Significant
results from the first quarter are presented below.

    
    Project            Sample #   Au g/t           Ag ppm
    --------------------------------------------------------------------
    Casupa             EX11257    4.06             0.90
    --------------------------------------------------------------------
    Casupa             EX11258    100.60           7.40
    --------------------------------------------------------------------
    Casupa             EX11259    1.56             0.50
    --------------------------------------------------------------------
    Casupa             EX11263    2.02             0.60
    --------------------------------------------------------------------
    Casupa             EX11265    (less than)0.005 (less than) 0.3
    --------------------------------------------------------------------
    Casupa             EX11268    1.01             1.10
    --------------------------------------------------------------------
    Casupa             EX11270    43.20            15.90
    --------------------------------------------------------------------
    Casupa             EX11271    1.13             1.60
    --------------------------------------------------------------------
    Casupa             EX11273    6.07             2.90
    --------------------------------------------------------------------
    Casupa             EX11274    15.40            13.50
    --------------------------------------------------------------------
    Madre con Hijos    EX11158    8.54             7.80
    --------------------------------------------------------------------
    Madre con Hijos    EX11159    207.80           (greater than) 100.00
    --------------------------------------------------------------------
    Madre con Hijos    EX11160    6.69             8.00
    --------------------------------------------------------------------
    Madre con Hijos    EX11161    8.85             7.30
    --------------------------------------------------------------------
    Madre con Hijos    EX11162    0.56             2.80
    --------------------------------------------------------------------
    Madre con Hijos    EX11163    1.20             1.40
    --------------------------------------------------------------------
    Madre con Hijos    EX11164    55.60            10.80
    --------------------------------------------------------------------
    Madre con Hijos    EX11167    9.03             4.50
    --------------------------------------------------------------------
    

    A geophysical survey is planned for the property to further define the
extent of the vein system. Drilling of this vein system is planned in the
second half of the fiscal year along with other vein targets in the district.

    Nueva Helvecia

    UME is earning an interest in the Nueva Helvecia property under an
agreement with Delcosur. The property is located in southeastern Uruguay.
Exploration activity in the quarter consisted of detailed mapping, sampling
and a geophysical survey (IP). Work presented has defined areas for drill
testing. The IP survey has defined areas of high chargeability which may be
associated with sulfide and therefore gold mineralization. The most
significant surface results for the quarter are presented below. It is
reported that mineralization occurs in disseminated sulfides associated with
quartz vein stringers with sericite and ankerite altered host rocks.

    
    Project          Sample ID   Au g/t   Ag ppm
    ------------------------------------------------------
    Nueva Helvecia   EX10697     46.7     4.1
    ------------------------------------------------------
    Nueva Helvecia   EX11836     1.91     6.6
    ------------------------------------------------------
    Nueva Helvecia   EX10700     0.853    (less than) 0.3
    ------------------------------------------------------
    Nueva Helvecia   EX11835     0.303    (less than) 0.3
    ------------------------------------------------------
    Nueva Helvecia   EX11827     0.275    (less than) 0.3
    ------------------------------------------------------
    Nueva Helvecia   EX10699     0.208    (less than) 0.3
    ------------------------------------------------------
    Nueva Helvecia   EX10695     0.127    (less than) 0.3
    ------------------------------------------------------
    

    Historic drill results from REA Gold are presented below.

    
    Hole ID   From (m)    Intercept Au
    ----------------------------------------
    RCCR2     7           1m @ 5.64g/t
    ----------------------------------------
    RCCR3     6           11m @ 2.19g/t
    ----------------------------------------
    RCCR4     39          12m @ 2.94g/t
    ----------------------------------------
    

    Drilling is planned to test the positive results as well as geophysical
and geological targets once exploration permits are granted.

    Base metal Properties

    Three groups are presently interested in our base metal properties. One
junior mining company has signed a Confidentiality Agreement and is reviewing
our data.

    UME's Nickel properties including Mal Abrigo, Carpentaria, Paso de Lugo
and Yatay have been reviewed by GeoDiscovery, an Australia based mineral
exploration group with specific experience in nickel sulphide deposits. A
report received in early September has assessed the projects and confirmed
that a number of the properties have good potential for the discovery of
nickel sulphide deposits. An exploration program will be developed to address
important deficiencies in existing information and an external consulting
group will be contracted to complete the work. The ultimate goal is to
discover significant mineralization so the projects can be developed with a
partner.

    Lascano Geophysical Anomaly

    The Lascano exploration target is composed of three large circular
geophysical features which are each approximately 20 kilometers in diameter.
The anomalies were defined by an airborne geophysical survey flown in 2005 by
Bell Geophysical. The geophysical features are composed of both high and low
gravity gradient and magnetic anomalies which form the three separate circular
patterns. Drilling to date has been designed to explore the center of the
three geophysical anomalies.

    The final hole, LASDDH-005, in the preliminary campaign was completed
this quarter in one of the near surface gravity anomalies. Detailed logging of
this hole has shown that the rocks encountered are predominately intrusive in
nature and composed of gabbro to granite (granophyre) in composition. No
alteration or mineralization was observed though selective samples have been
taken for mineralogical as well as geochemical analysis. This final hole in
the anomaly has helped define the overall environment.

    An evaluation of the results was carried out in the quarter with the
following interpretation being put forward.

    The density anomaly is created by gabbro to granite (granophyre)
intrusive rocks underlying a package of magnetic basalt and felsic volcanic
rocks. Down-drop of the volcanic rocks outside the feature, as evident in
drill hole 4 to the north, has caused an edge effect which has highlighted the
magnetic character of the magnetic flood basalts. It is theorized at this
stage that alteration and mineralization observed in hole 2 are directly or
indirectly caused by the intrusive bodies described above.

    A drill program has been proposed to offset drill the anomalous
mineralization encountered in hole 1. The program will consist of four to five
drill holes in and around hole 2 and an additional four to five drill holes in
similar geophysical setting within the central anomaly.

    Diamond Exploration

    Exploration activities have slowed with respect to diamond properties as
the Company waits for exploration permits to be granted. Several additional
targets have been identified for drill testing and exploration permits have
been submitted.

    Drilling

    UME exploration presently runs a fleet of five drill rigs. Productivity
and utilization of these machines has been below expectations. External
reviews of performance have been completed and a number of options are being
considered to increase utilization and productivity for the remainder of the
financial year.

    Qualified Person's Statement

    The technical information presented in this press release has been
reviewed and verified by Mr. John Sadek, Vice President Operations and a
Mining Engineer, and Mr. George Schroer Vice President Exploration and a
Certified Professional Geologist. Mr. Sadek and Mr. Schroer are the Qualified
Persons for the purposes of the AIM Guidance Note on Mining, Oil and Gas
Companies dated March 2006. Mr. Sadek has a Bachelor of Engineering (Mining)
from the University of Sydney and is a member of the AusIMM and SME. He has
over 20 years of international experience in mining. Mr. Schroer has a Masters
of Science in Geology from Colorado State University and is a member of SEG
and AIPG. He has over 20 years of international experience in exploration.

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

    Editors' note: Uruguay Mineral Exploration Inc. is a gold producer and
exploration company focused on identifying and developing mineral
opportunities in Uruguay. UME is a fully integrated mining company, possessing
the skills necessary to explore and develop its discoveries. The Company
operates the only producing gold mine in Uruguay (San Gregorio), and is also
the leading mineral exploration company in Uruguay having assembled an
exploration portfolio based on gold, base metals (copper, nickel, lead, zinc)
and diamond prospects.

    Uruguay Mineral Exploration Inc. is quoted in Canada (TSXV) and London
(AIM) and RBC Capital Markets is its Nominated Adviser and Broker.

    Uruguay Mineral Exploration Inc.

    Consolidated Interim Financial Statements

    For the three month period ended August 31, 2007

    (Unaudited)

    In accordance with National Instrument 51-102 released by the Canadian
Securities Administrators, the Company discloses that its auditors have not
reviewed the un-audited financial statements for the period ended August 31
2007.

    Consolidated Interim Financial Statements

    Consolidated Balance Sheets

    Consolidated Statements of Income, other comprehensive income and
Retained Earnings

    Consolidated Statements of Cash Flows

    Notes to Consolidated Financial Statements

    
                                          Uruguay Mineral Exploration Inc.
                                               Consolidated Balance Sheets
                                                               (Unaudited)
              (Thousands of United States Dollars, except where indicated)

                                                             As at
                                                      --------------------
                                                      August 31,  May 31,
                                                            2007   2007
    ----------------------------------------------------------------------
                                                              $         $
    Assets

    Current assets
      Cash and cash equivalents                          11,631    13,978
      Accounts receivable                                 2,011     2,275
      Inventories                                         9,818     8,484
      Prepaid expenses and other                            499       647
                                                      --------------------
                                                         23,959    25,384

    Property plant and equipment (Note 2)                33,549    30,714
    Deferred exploration (Note 3)                        16,581    16,316
    Future income tax assets                              2,638     2,387
    Other non current assets                                142       140
                                                      --------------------
    Total assets                                         76,869    74,941


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

    Liabilities and Shareholders' Equity

    Current liabilities
      Accounts payable and accrued liabilities            7,211     6,238
      Provision for dividends                             1,625         -
      Current portion of long term debt (Note 4)          2,166     1,231
                                                      --------------------
                                                         11,002     7,469

    Long term tax payable                                 2,414     2,414
    Long term debt (Note 4)                                 165     2,154
    Asset retirement obligation                           2,036     2,036
                                                      --------------------
    Total liabilities                                    15,617    14,073
                                                      --------------------

    Equity instruments (Note 5)                          35,372    34,592
    Warrants (Note 5)                                        12        12
    Contributed surplus (Note 6)                          3,302     3,297
    Accumulated other comprehensive income                  (19)      (19)
    Retained earnings                                    22,585    22,986
                                                      --------------------
    Total shareholder's equity                           61,252    60,868
                                                      --------------------

    Total liabilities and shareholder's equity           76,869    74,941
    ----------------------------------------------------------------------
    

    Approved by the Board of Directors

    
    "David Fowler    Director      "Tony Shearer"     Director
    

    
                                          Uruguay Mineral Exploration Inc.
        Consolidated Statements of Income, other comprehensive income and
                                                         Retained Earnings
                                                               (Unaudited)
    (Thousands of United States Dollars, except for earnings per share an
                            weighted average number of shares outstanding)

                                                     Three months ended
                                                    August 31   August 31
                                                   ----------- -----------
                                                         2007        2006
    ----------------------------------------------------------------------
                                                            $           $

       Sales                                           13,253      12,177

       Operating expenses                               8,323       6,749
       Amortization, depletion and accretion            2,412       2,015
                                                   -----------------------
    Operating expenses                                 10,735       8,764

    Operating profit                                    2,518       3,413

    Other expenses (gains)
      Stock based compensation expense                    192         251
      General and administrative                        1,011         936
      Fair value adjustment for derivatives                 -      (1,247)
      Foreign exchange loss / (gain)                       42          63
      Interest and financing fees (income)               (121)         (3)
      Other expense (income)                              (13)
                                                   -----------------------
                                                        1,111           -

    Income before taxes                                 1,407       3,413

      Current income taxes provision                      434         620
      Future income taxes provision (recovery)           (251)        226
                                                   -----------------------
    Net income and comprehensive income for the
     period                                             1,224       2,567

    Retained earnings, beginning of period             22,986      10,775

    Provision for dividends                            (1,625)     (1,485)

    Retained earnings, end of period                   22,585      11,857
    ----------------------------------------------------------------------

    Basic earnings per share (Note 5f)                  0.025       0.054
    Diluted earnings per share (Note 5f)                0.025       0.053

    Basic weighted average no. of shares           48,926,268  47,971,597
    Diluted weighted average no. of shares         49,893,268  48,763,335


    Other comprehensive income at the beginning             -           -
    Unrealized gain and losses on translating
     financial statements of self-sustaining
     foreign operations (Note 1b)                         (19)          -
    Accumulated other comprehensive income                (19)          -
    

    
                                          Uruguay Mineral Exploration Inc.
                                     Consolidated Statements of Cash Flows
                                                               (Unaudited)
              (Thousands of United States Dollars, except where indicated)

                                                       Three months ended

                                                       August 31 August 31
                                                           2007      2006
    ----------------------------------------------------------------------
                                                              $         $
    Operating activities
       Net income for the period                          1,224     2,567
       Adjustments for:
        Amortization, depletion and accretion             2,412     2,015
        Deferred Stripping                                  453      (354)
        Future Income taxes                                (251)      226
        Fair value adjustment of derivatives                  -    (1,247)
        Compensation expense - stock based                  192       251
        Other                                                80        45
                                                       -------------------
                                                          4,110     3,503
      Net change in non-cash working capital balances
       (Note 8))                                             51      (278)
                                                       -------------------
                                                          4,161     3,225
                                                       -------------------

    Financing activities
      Proceeds from the issue of share capital              593     1,151
      Payments of finance lease                             (46)      (32)
                                                       -------------------
                                                            547     1,119
                                                       -------------------

    Investing activities
      Net proceeds from sale of assets                        -        45
      Purchase of property, plant and equipment and
       development costs                                 (4,747)   (3,399)
      Exploration expenditure                            (2,308)   (1,376)
                                                       -------------------
                                                         (7,055)   (4,730)
                                                       -------------------

    Increase in cash and cash equivalents                (2,347)     (386)

    Cash and cash equivalents, beginning of period       13,978     8,931
                                                       -------------------

    Cash and cash equivalents, end of period             11,631     8,545
    

    Uruguay Mineral Exploration Inc.

    Notes to Consolidated Interim Financial Statements

    Unaudited

    (Thousands of United States Dollars, except where indicated)

    August 31, 2007

    1. Significant Accounting policies

    The unaudited interim financial statements of the Company have been
prepared by management in accordance with Canadian generally accepted
accounting principles. The reference to "the Company" in these consolidated
financial statements includes the parents and all of its subsidiaries.

    The preparation of consolidated financial statements in conformity with
Canadian generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates. The consolidated financial statements have, in management's
opinion, been properly prepared using careful judgment with reasonable limits
of materiality and within the framework of the significant accounting policies
referred in our most recently reported annual consolidated financial
statements with the following exceptions:

    (a) Deferred Stripping Costs

    The Company is engaged in open pit mining incurring in costs of removing
overburden and waste rock (stripping costs) during mine development and
production phase.

    Up to financial statements for the year ended May 2007, when stripping
costs in the production phase were higher with respect to those arising from
applying the expected average stripping ratio (the ratio of waste material to
ore extracted) for the mine life, a portion of the waste removal costs has
been attributed to future production and deferred, as it was considered a
development cost incurred to gain access to the orebody. The amount deferred
was subsequently amortized to the income statement when the actual stripping
ratio falls below the expected average stripping ratio. These costs include
the cost of drilling, blasting, loading and haulage of waste rock from the
open pit to the waste pile.

    Effectively 1st June 2007, the Company adopted the new recommendations
issued by the Canadian Institute of Chartered accountants (EIC 160 "Stripping
costs incurred in the Production Phase of a mining operation"), which require
the costs associated with the removal of overburden and another mine waste
materials that are incurred in the production phase of mining operations to be
charged to income in the period in which they are incurred, except when the
costs represent a betterment to the mineral property. Costs represent
betterment when the stripping activity provides access to reserves that would
not have been accessible in the absence of the stripping activity.

    The new policy has been applied on a prospective basis to stripping costs
incurred since 1st June 2007, and the accumulated deferred costs at the
beginning of the financial year are being amortized over the remaining
reserves accessed by the stripping activity using the units of production
method. The accumulated deferred cost are shown under Property, Plant &
Equipment while in the past have been shown as Other Deferred costs. Figures
for previous financial statements have been adjusted to provide comparative
figures.

    The adoption of this standard had no material financial impact on the
financial statements of the Company.

    (b) Comprehensive income and other comprehensive income

    Effective 1st of June 2007, the Company has applied the Canadian
Institute of Chartered Accountants Handbook Sections 3855, "Financial
Instruments - Recognition and Measurement", 1530, "Comprehensive Income", and
3865, "Hedges".

    Section 3855 prescribes when a financial instrument is to be recognized
on the balance sheet and at what amount. It also specifies how financial
instrument gains and losses are to be presented. This Section requires that:

    - All financial assets be measured at fair value on initial recognition
and certain financial assets to be measured at fair value subsequent to
initial recognition;

    - All financial liabilities be measured at fair value if they are
classified as held for trading purposes. Other financial liabilities are
measured at amortized cost using the effective interest method;

    - All derivative financial instruments be measured at fair value on the
balance sheet, even when they are part of an effective hedging relationship.

    Section 1530 introduces a new requirement to temporarily present certain
gains and losses from changes in fair value outside net income. It includes
unrealized gains and losses, such as: changes in the currency translation
adjustment relating to self-sustaining foreign operations; unrealized gains or
losses on available-for-sale investments; and the effective portion of gains
or losses on derivatives designated as cash flow hedges or hedges of the net
investment in self-sustaining foreign operations.

    Section 3865 provides alternative treatments to Section 3855 for entities
which choose to designate qualifying transactions as hedges for accounting
purposes. It replaces and expands on Accounting Guideline 13 "Hedging
Relationships", and the hedging guidance in Section 1650 "Foreign Currency
Translation" by specifying how hedge accounting is applied and what
disclosures are necessary when it is applied. :

    The Company has not accrued any other comprehensive income during the
quarter but actually carries a historical accumulated currency translation
adjustment for self-sustaining foreign operations that is reclassified to
accumulated other comprehensive income upon transition to the new standard.

    Other than this transition adjustment, the adoption of these standards
had no financial impact on the financial statements of the Company.

    2. Property, Plant and Equipment

    
                                                  August 31, 2007
                                          --------------------------------
                                            Cost    Accumulated   Net Book
                                                    Amortization    Value
                                                    and Depletion
                                          -------- -------------- --------
    Land and lease rights (a)             $  2,081 $              $  2,081
    Plant and equipment (b)                 25,408         12,197   13,211
    Asset retirement obligation              2,044          1,446      598
    Deferred stripping (Note 2a)             4,829            453    4,376
    Development costs (c)                   21,539          8,256   13,283
                                          -------- -------------- --------
                                          $ 55,901 $       22,352 $ 33,549
                                          -------- -------------- --------
                                                    May 31, 2007
                                          --------------------------------
                                            Cost    Accumulated   Net Book
                                                    Amortization   Value
                                                    and Depletion
                                          -------- -------------- --------
    Land and lease rights                 $  2,077 $            - $  2,077
    Plant and equipment                     25,411         12,391   13,020
    Asset retirement obligation              2,044          1,385      659
    Deferred stripping costs                 4,829              -    4,829
    Development costs                       17,210          7,081   10,129
                                          -------- -------------- --------
                                          $ 51,571 $       20,857 $ 30,714
                                          -------- -------------- --------
    

    (a) The plant is located on leased land. The lease expires in 2026. No
further payments are due on the lease.

    (b) Included in plant and equipment is $ 1,062 (May 2007 - $1,114) of
major spare parts that are amortized over 5 years. These major spare parts are
maintained to ensure the uninterrupted operation of the production equipment
before an unexpected breakdown or equipment failure.

    (c) Included in development costs are $ 2,825 (May 2007 - $2,830) of
pre-production stripping costs that have not yet began to be amortized as are
costs related to deposit from which production has not commenced.

    3. Deferred Exploration and Development Costs

    
                                                       August 31, May 31,
                                                          2007      2007
                                                       ---------- --------
    Acquisition costs and option payments              $     967  $   917
    Exploration, development and other property costs     13,814   13,729
    Capitalized indirect overheads                         1,800    1,670
                                                       ---------- --------
                                                       $  16,581  $16,316
                                                       ---------- --------

    Movements on deferred exploration and evaluation expenditure are shown
     hereinafter:

                                                       August 31, May 31,
                                                          2007      2006
                                                       ---------- --------
    Capitalized exploration and evaluation expenditure
     at beginning                                      $  16,316  $11,184
    Payments for exploration during the year               2,308    7,076
    Transfer to Mine properties                           (2,043)     185
    Write off                                                  -   (2,129)
                                                       ---------- --------
    Capitalized exploration and evaluation expenditure
     at end                                            $  16,581  $16,316
                                                       ---------- --------
    

    (a) Explorations agreements & commitments:

    a1) The Company has signed in previous years a farm-in agreement giving
it the option to acquire a 100% interest in exploration permits along the
Florida Greenstone Belt of southern Uruguay owned by a Uruguayan-based mineral
exploration called Delcosur S.A. Upon execution of the contract, the Company
acquired exploration information on the tenements for a consideration of $ 132
comprised of cash of $ 120 and 20,000 non-transferable warrants to purchase
common shares of the Company, exercisable for a period of two years from the
date of issuance, with a fair value of $ 12.

    The Company is required to spend $ 1,050 on exploration over three years
to exercise its option to acquire 100% of Delcosur tenements. Upon exercising
this option, the Company is required to grant Delcosur a 1% Net Smelter Return
on metal sales resulting from production sourced from the Delcosur tenements.
Additionally, in the event that the Company develops a mining operation on the
tenements, it will issue Delcosur or its nominees a further 350,000
non-transferable warrants to purchase common shares of the Company at a price
calculated at a 20% premium over the five day average trading price prior to
the issuance and will be exercisable for a period of two years from the date
of issuance.

    a2) The Company has the right to purchase shares of a Uruguayan company,
Davinco S.A (Presidente Terra project) pursuant to an agreement dated May 14,
1997. Under this agreement the Company has the option to purchase 80% of
Davinco shares for the amount of $ 750 payable in installments, and the 20%
once a decision has been made to continue mineral exploration, at a variable
price.

    The initial installments for the purchase of the 80% of Davinco shares
have been settled in the past, and a remaining last installment per $ 275 is
due within five days after Davinco issues a feasibility study on the mineral
properties.

    a3) The Company has purchased in the past a Uruguayan diamond database to
Southern Era Diamonds Inc. Under the terms of the agreement Southern Era was
paid $ 20 and is entitled to an additional 0.8% royalty on any net diamond
sales from any diamond deposit discovered by the Company in Uruguay. A further
0.2% royalty will be paid to a third party, who has an interest in the
database.

    a4) For the Texas and Mal Abrigo projects the Company has committed to a
2% net profits interest and a 2% net smelter return respectively, payable to
the vendor. The Company may repurchase the net smelter return of the Mal
Abrigo project at any time by paying a lump sum of $ 650.

    (b) The Uruguay Mining legislation requires all mining titles to be
supported by guarantees for any environmental rehabilitation requirements
resulting from exploration activities. The Company has facility agreements
with Uruguayan local insurance companies and banks to support the required
guarantees. The total guarantees provided at August 31, 2007 were
approximately $ 1,673 (May 2007 - $ 1,618).

    4. Long Term Debt

    
                                                        August 31, May 31,
                                                              2007    2007
                                                        ---------- -------
    Drawn debt facilities
    Deferred payment on net profit interest acquisition
     (a)                                                    1,978   2,985
    Finance lease (b)                                         353     400
                                                        ---------- -------
                                                            2,331   3,385
    Less current portion                                   (2,166) (1,231)
                                                        ---------- -------
                                                         $    165   2,154
                                                        ---------- -------
    

    (a) On November 30, 2005 a subsidiary of the Company issued three
unsecured convertible notes with a face value of $ 1,050 pursuant to the
acquisition of the 10% net profit interest over key tenements within the Minas
de Corrales project. The three convertible notes are payable on or before July
30, 2006, July 30, 2007 and July 30, 2008 respectively. Each convertible note
can be converted into 250,000 ordinary shares during a 30 day period prior to
the final payment date for each installment. No interest accrues on the notes.
As a part of the agreement, an additional $ 1,050 is also payable after the
third anniversary date if the average monthly price of gold for the previous
36 months exceeds $ 400 per ounce. Management believes this condition will be
met and the additional contingent payment has been recognized as a liability.

    The two unsecured convertible notes expiring July 30, 2006 and 2007 were
paid in cash and not converted into shares. The remaining convertible note
plus the additional contingent payment (for a total nominal value of $ 2,100)
are recorded at their net present value using an 8.5% discount rate.

    (b) On May 31, 2006 a subsidiary of the Company signed a financial lease
facility agreement of $ 500 with ABN AMRO N.V. Sucursal Montevideo for the
purchase of light vehicles. The facility is payable in equal monthly
installments over a three year period at 180 days LIBOR plus 2.5% rate of
interest. As at 31 August 2007, $ 353 has been drawn under this facility. The
vehicles purchased are included under Property, Plant & Equipment as expressed
in note 5...

    (c) Long term debt repayments are as follows:

    
                               Net profit interest    Lease installments
    Financial year ending       debt Nominal Value       Nominal value
    ----------------------------------------------------------------------
    2008                                                      142
    2009                              2,100                   187
    2010                                                      24
    2011 and beyond                     -
                              --------------------------------------------
    Total Nominal debt                2,100                   353
                              --------------------------------------------
    

    5. Equity Instruments

    (a) Authorized

    Unlimited number of Common Shares

    (b) Issued

    
    Common shares                        August 31, 2007    May 31, 2007
                                         ---------------------------------
                                         Number           Number
                                         (000s)   Amount  (000s)   Amount
                                         ---------------------------------
    Issued and outstanding, beginning of
     period                              48,531  $35,517  47,525  $33,595
    Issued for stock options exercised      395      780     756      910
    Issued for exercise of warrants for
     cash                                     -        -     250    1,012
                                         ---------------------------------
    Issued and Outstanding               48,926  $36,297  48,531  $35,517
    Less: cumulative share issue costs
     (1)                                      -     (925)      -     (925)
                                         ---------------------------------
    Balance, end of period               48,926  $35,372  48,531  $34,592
                                         ---------------------------------
    Weighted average number of shares    48,926           48,259
                                         ------           ------

    Warrants & convertible notes         August 31, 2007    May 31, 2007
                                         ---------------------------------
                                         Number   Amount  Number   Amount
                                         ---------------------------------
    Issued and outstanding, beginning of
     period                                 520  $    12   1,000  $   188
    Issued for farm-in agreements                             20       12
    Expired                                (250)       -    (250)       -
    Exercised                                          -    (250)    (188)
                                         ---------------------------------
    Issued and outstanding, end of
     period                                 270  $    12     520  $    12
                                         ---------------------------------

    Total equity instruments             49,196  $35,384  48,779  $34,604
                                         ---------------------------------

    (1) These costs have been recorded gross of any related tax effect, as
     the ultimate utilization of any related tax benefit is currently
     uncertain.
    

    At August 31, 2007, the Company has 20,000 (May 31, 2007 -20,000)
warrants outstanding and 250,000 convertible notes (May 31, 2007 - 500,000).
During the period, the Company issued nil (2007 - 20,000) warrants. The
outstanding warrants are exercisable as follows:

    
      Number of Warrants      Warrant Price       Expiry Date
                                  CDN$
    ------------------------------------------------------------
            20,000                4.56          March 23, 2009
    

    (c) Net profit interest acquisition convertible notes: The Company issued
three convertible notes that provided the holder with the option to convert
the note, with a face value of $ 1,050, into 250.000 ordinary shares. The note
may be converted during a 30 day period prior to the expiry date. The fair
value of the option to convert the notes into ordinary shares was calculated
as the difference between the nominal and fair value of the notes.

    The convertible notes expire as follows:

    
    Ordinary shares to be issued   Option price $        Expiry date
     on conversion of promissory
                 note
    ----------------------------------------------------------------------
               250,000                  4.20            July 30, 2008
    

    The first two convertible notes expired in July 30, 2006 and 2007 and
were not exercised.

    (d) Warrants issued for farm-in agreements: On March 23, 2007, in
accordance with an agreement with Delcosur the Company issued 20,000
non-transferable warrants to purchase common shares of the Company at an
exercise price of CDN$ 4.56, and exercisable for a period of two years from
the date of issuance. The fair value of these warrants was estimated using the
Black Scholes option pricing model with the following assumptions: Dividend
yield (CAD$ 0.035), Expected volatility (41%), risk free rate (3.97%) and a
weighed average life of two years. As such, a fair value of $ 12 was
attributed to these warrants.

    (e) Employee Stock Options

    The Company has an option Plan for its officers, directors, employees and
consultants of the Company and its subsidiaries. Options under the plan are
typically granted in such numbers as reflects the responsibility of the
particular optionee and his or her contribution to the business and activities
of the Company. Options granted under the plan have a term of up to 5 years.
Except in specified circumstances, options are not assignable and terminate on
the optionee ceasing to be employed by or associated with the Company. The
terms of the Plan further provide that the price at which shares may be issued
under the Plan cannot be less than the market price (net of permissible
discounts) of the shares when the relevant options were granted.

    For the quarter ending 31 August 2007, no options were granted and $ 192
(August 31, 2006 $ 251) of compensation expense was recorded for the vesting
of previous issues. At August 31, 2007 the aggregate unamortized fair value of
unvested stock options granted amounted to $ 989 (May 31 2007 - $ 1,181)".

    The following table summarizes information regarding the Company's
outstanding options as at August 31, 2007:

    
                                           Number  Option Price  Weighted
                                             of      per Share   Average
                                            Shares     Range      Exercise
                                           (000's)     CDN $       Price
                                                                   CDN $
                                           -------------------------------
    Balance at beginning of period           3,304 $0.75 - $5.50   $4.06
    Options - granted                            -       -           -
    Options - exercised or cancelled         (400) $1.50 - $3.40   $1.74
                                           -------
    Balance at end of year                   2,904 $0.75 - $5.50   $4.38
                                           -------
    

    At year end there were 2,904,000 options outstanding, of which 1,389,333
are exercisable. The weighted average exercise price of the options
outstanding at August 31, 2007 is CDN$ 4.38 (May 31, 2007 $ 4.06).

    The following table summarizes information about the stock options
outstanding at August 31, 2007:

    
                         Outstanding                        Exercisable
    ----------------------------------------------------- ----------------
                                               Weighted
                                     Weighted   average           Weighted
                          Range of    average  remaining           average
                            option   Exercise contractual         Exercise
          Options           price      Price      life    Options   Price
            000s            CDN $     CDN $      Years     000s    CDN $
    ----------------------------------------------------- ----------------
                      91 0.75 - 3.00   2.63      1.56          91   2.63
                   1,170 3.01 - 4.00   3.81      3.76         230   3.92
                     963 4.01 - 5.00   4.55      3.22         428   4.53
                     680 5.01 - 5.50   5.34      3.31         641   5.33
    --------------------                                  -------
                   2,904                                    1,390
    --------------------                                  -------
    

    (f) Earnings per share

    The reconciliation of basic and diluted earnings per share where relevant
are as follows:

    
                                                   August 31,  August 31,
                                                      2007        2006
                                                   ----------- -----------
    Basic earnings per share
    Numerator
        Net earnings available to shareholders     $     1,224 $     2,567
    Denominator
        Weighted average earnings per share         48,926,268  47,971,597
    Basic earnings per share (cents per share)           0.025       0.054

                                                   August 31,  August 31,
                                                      2007        2006
                                                   ----------- -----------
    Diluted earnings per share
    Numerator
        Net earnings available to shareholders     $     1,224 $     2,567
    Denominator
        Weighted average shares outstanding         48,926,268  47,971,597
        Potential net incremental issue of shares
         from warrants                                       -           -
        Potential net incremental issue of shares
         from stock options                            967,000     291,738
        Potential net incremental issue of shares
         from convertible notes                              -     500,000
                                                   ----------- -----------
        Shares outstanding plus assumed conversions 49,893,268  48,763,335

    Diluted earnings per share (cents per share)         0.025       0.053
    

    6. Contributed Surplus

    The following table summarizes the movements in contributed surplus for
the period ended August 31, 2007.

    
                                                    August 31,   May 31,
                                                        2007       2007
                                                    ----------------------
    Balance at beginning of year                       $ 3,297  $   1,625
    Stock based compensation                               192        975
    Commitment to issue a stock options                               917
    Transfer on exercise of options                       (187)      (220)
                                                    ----------------------
    Balance at end of year                             $ 3,302  $   3,297
                                                    ----------------------
    

    7. Segment Information

    The Company has three reportable segments: Gold, exploration and
corporate. The corporate segment is responsible for corporate financing and
other business development activities for the Company. The Gold segment
operates the San Gregorio gold mine and the exploration segment is devoted to
the acquisition and exploration of mineral properties.

    
                                    Gold   Exploration Corporate   Total
                                   ---------------------------------------
    For three months ending August
     2007
    Net Sales                      13,253           -         -    13,253
    Amortization and depletion     (2,264)       (148)        -    (2,412)
    Net interest gain (loss)          121           -         -       121
    Income tax                        183           -         -       183
    Net income (loss)               2,320        (766)     (330)    1,224
    Capital Expenditure including
     exploration                    4,747       2,308         -     7,055

    As at 31 August 2007
    Property, plant and equipment  30,429       1,885     1,235    33,549
    Deferred exploration                -      16,581         -    16,581

                                    Gold   Exploration Corporate   Total
                                   ---------------------------------------
    For three months ending August
     2006
    Net Sales                      12,177           -         -    12,177
    Amortization and depletion     (2,015)          -         -    (2,015)
    Net interest gain (loss)            3           -         -         3
    Income tax                        846           -         -       846
    Net income (loss)               3,385        (509)     (309)    2,567
    Capital Expenditure             3,399       1,376         -     4,775

    As at 31 May 2007
    Property, plant and equipment  27,507       1,972     1,235  2 30,714
    Deferred exploration                -      16,316         -    16,316
    

    8. Supplementary Cash Flow Information

    
    (a) The net change in working capital items is as follows:
                                                    Three months ended

                                                   August 31    August 31
                                                        2007         2006
    ----------------------------------------------------------------------

       Prepaid expenses and other                $       148    $    (116)
       Accounts receivable                               264         (488)
       Accounts payable and accrued liabilities          973        1,259
       Inventory                                      (1,334)        (933)
                                                --------------------------
       Net change in non-cash working capital
        balances                                 $        51    $    (278)
                                                --------------------------

    (b) Other information
                                                    Three months ended

                                                   August 31    August 31
                                                        2007         2006
    ------------------------------------------- ------------- ------------
    Cash interest paid                           $         6    $       -
    Cash taxes paid                                        -           28
    




For further information:

For further information: Uruguay Mineral Exploration Inc Tony Shearer,
Chairman: +44 20 7602-1570 tonyshearer@btinternet.com or David Fowler, CEO:
598 2 6016354 urumin@ume.com.uy or Investor/Media Relations Emily Bruning,
Shared Value Ltd: +44 (0) 20 7321 5027 ebruning@sharedvalue.net or RBC Capital
Markets Andrew Smith: +44 (0) 20 7029 7882 andrew.smith@rbccm.com or Sarah
Wharry: +44 (0) 20 7653 4667 sarah.wharry@rbccm.com or Martin Eales: +44 (0)
20 7029 7881 martin.eales@rbccm.com

Organization Profile

URUGUAY MINERAL EXPLORATION INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890