Uruguay Mineral Exploration Inc Announces Results for the Quarter and Full Year Ended May 31, 2007



    LONDON, August 15 /CNW/ - Uruguay Mineral Exploration Inc. (TSX
VENTURE:UME) (LSE:UGY):

    Summary of Results

    --  Gold production was 29,265 ounces for the fourth quarter, bringing
year to date production to 96,420 ounces.

    --  Cash costs were $US 273 per ounce for the quarter and $US 294 for the
full year, compared with $US 243 and $US 210 for the comparable periods last
year. Cash costs increased due to a higher strip ratio, general industry cost
increases, a more abrasive work index for ore mined and processed and
marginally lower production compared with the previous year.

    --  Net profit after tax for the fourth quarter was $US 6.4 million or
$US 0.13 basic earnings per share, with net profit for the full year of $US
14.5 million, up 37% year-on-year, or $US 0.30 basic earnings per share.

    --  Cash flow from operations before non-cash working capital movements
was $US 11,356 million for the fourth quarter and $US 24,177 million for the
year to date, up 18% year-on-year.

    --  The higher average realized gold price for the fourth quarter of $US
658 per ounce resulted in increased sales of $US 21.8 million for the quarter,
resulting in sales for the full year of $US 63.1 million, up 23% year-on-year,
with an average price of $US 610 per ounce for the full year.

    --  A final dividend of C$ 3.5 cents per share proposed to be paid on 26
October, 2007 to all shareholders on the register as at 12 October, 2007.

    
                                               3 Months to   Full Year to
                                              ------------- --------------
                                                May    May    May     May
                                                2007   2006   2007    2006
    Operating Review
    Gold produced                   Ounces    29,265 25,350 96,420 101,287
    Average cash cost               US$/oz       273    243    294     210
    Average price received          US$/oz       658    543    610     482

    ------------------------------- --------- ------ ------ ------ -------
    Financial Review
    Revenue                         US$ '000s 21,840 15,992 63,056  51,206
    Net income for the period       US$ '000s  6,337  4,077 14,554  10,583
    Cash flow from operations(*)      US$ '000s 11,356  7,445 24,177  20,515
    Basic earnings per share        US$         0.13  0.090   0.30    0.23
    Cash at the end of the period   US$ '000s 13,978  8,931 13,978   8,931
    Total debt at the end of period US$ '000s  3,385  4,225  3,385   4,225
    ------------------------------- --------- ------ ------ ------ -------
    

    (*) before non-cash working capital movements

    Tony Shearer, Chairman commented: "The past year has been a very active
and successful one for the Group, under the leadership of David Fowler and his
mostly new management team. Production is going very well at the rate of about
96,000 ounces a year, though the cash costs per ounce for 2006/7 were higher
than we had expected. Gold exploration has already delivered significant
results in replacing and increasing reserves and resources, with very
promising opportunities to expand them in the year ahead. Exploration at
Lascano is going very well and the long odds of this being a commercially
successful project are reducing. The first steps have been taken to plan for
the expansion of the plant at San Gregorio, when exploration results justify
the cost and tell us where to expand the production. In summary, the Group has
progressed from being a small exploration company into an entity of substance
with competent employees and a very strong management team. I believe that the
Group is now exceptionally well placed to develop on these strong
foundations."

    CHIEF EXECUTIVE OFFICER'S REPORT

    Financial Performance

    UME reported a net profit after tax for the year ended 31st May 2007 of
$US 14.5 million or $US 0.30 basic earnings per share. The increase in
earnings for the current year is attributed to the higher realized sales price
for gold sold. As shown in the chart below operating costs increased due to a
higher strip ratio, general industry cost increases, more abrasive work index
for ore mined and processed and marginally lower production this financial
year than last. Despite this increase in cash costs UME remained, at $ 294 per
ounce, below the average cash costs for the gold mining industry.

    Expenses include a non-cash charge of $2.1 million in respect of the
write off of exploration costs incurred in previous years on projects that we
are no longer actively progressing.

    
    Description                          $US per
                                            Ounce
    ---------------------------------------------
    Cash cost 2005/06 financial year         $210
    Change in strip ratio                      20
    Other cost increases                       50
    Impact of lower production                 14
    ---------------------------------------------
    Cash cost 2006/7                         $294
    ---------------------------------------------
    

    Operational cash flows of $ 25.4 million generated during 2007 allowed us
to pay $ 2.3 million back to shareholders as dividends, re-invest $ 19.4
million in plant, equipment and exploration and increase our cash position by
$ 5.0 million to $ 14.0 million. UME had no hedging and $ 3.5 million debt at
31 May 2007.

    Operations

    I am pleased to report that we have achieved our production goals while
improving our safety performance with important reductions in the lost time
injury frequency and accident severity rates. During the year we had a number
of independent environmental audits. While there is always room for
improvement these audits confirmed that our environmental performance
continued to be of a high standard.

    The final production figure for the financial year was a creditable
96,420 ounces of gold. A pit wall slip at Arenal early in 2006 deferred access
to higher grade ore in the first half of the 2006/07 year, and resulted in
production of only 39,234 ounces for the half. While anticipated, the recovery
of production to 57,186 ounces in the second half of the year resulted from a
concerted effort to develop new ore sources in addition to the recovery in
Arenal grade as we mined areas of the pit that had not been accessible earlier
in the year due to the pit wall slip. Of the second half production 19,353
ounces came from Veta A and Veta Sur, neither of which was included in
reserves at the half year.

    The San Gregorio operations team was restructured in the second half of
the year with Terry Butler promoted to Operations Manager, Simon Hillyard
appointed as Mining Manager and Ernesto Lamilla appointed as Technical
Services Manager. These changes are giving additional focus to improving
productivity and now provide us with the appropriate level of technical skills
to improve planning and convert resources into reserves. Additionally they
give John Sadek as Vice President Operations more time for the strategic
development of the business.

    An important milestone was achieved in the first quarter of the 2007/08
financial year with the diversion of the Arroyo Corrales. This was a major
civil engineering feat to plan, permit and execute in its own right, requiring
a considerable degree of skill and expertise. It is a tribute to our staff and
management that this $4 million project was completed largely as planned.
Accordingly, from the end of July 2007, we have been extracting ore from the
expanded Arenal pit, and expect to produce approximately 95, 000 ounces of
gold from all sources in the financial year ended 31st May 2008 at a cost of
approximately $ 345 per ounce.

    Reserves and Resources

    As confidence in our reserves and resources position is fundamental to
UME's future success we took three important decisions at the beginning of the
year. They were to:

    --  use external, independent consultants to evaluate all published
resources.

    --  convert inferred resources into the higher confidence categories of
measured and indicated to allow economic assessments to be made on the
resources.

    --  form a Resources and Reserves Board Committee to oversee the process
of evaluating reserves and resources.

    Our resource drilling in 2007 was therefore initially focused on
upgrading resources and the independent review of those resources. Updated
reserves and resources were published as at November 2006 and a further update
has again been published effective 1 June 2007. In the November 2006 statement
an initial resource of 95,000 and 28,700 ounces was added for Argentinita and
the Vetas respectively while resources for Sobresaliente and Zapucay were
downgraded.

    A summary of the movements in Reserves and Resources from 1st November
2006 to 1 June 2007 is summarised below:

    
                                            Proven   Measured
                                              and       and
                                            Probable  Indicated Inferred
    Contained ounces                        Reserves  Resources  Resources
    -------------------------------------- --------- ---------- ----------
    June 1, 2007                             353,000    885,900    133,640
    -------------------------------------- --------- ---------- ----------
    November 1, 2006                         322,000    659,300    250,700
    -------------------------------------- --------- ---------- ----------
    Increase/(decrease)                       31,000    226,600  (117,060)
    -------------------------------------- --------- ---------- ----------
    

    While the grade of reserves reduced an overall increase of 31,000 ounces
was achieved while producing 63,945 ounces in the same period. Measured and
indicated resources increased by 226,600 ounces. Part of this increase
reflects an upgrade of inferred resources with increases for San Gregorio and
Vetas A and Sur. The San Gregorio resource increase reflects additional
drilling and an updated geological interpretation that joins the areas of San
Gregorio, Rieles and the East Extension.

    Most of our resource drilling over the past year has been focused on near
mine projects to consolidate our medium term mine life. While this will
continue we will increasingly focus on new targets that have the potential to
build more significant resources. The strengthening of the exploration
management team over the last 6 months gives me the confidence to believe that
this can be achieved.

    Exploration

    There has been a significant change over the last year in the level of
intensity and quality of our exploration effort. An increase in the number of
geologists from 18 at May 2006 to 30 at May 31 2007 has been accompanied by
clear leadership from George Schroer and two, newly appointed, experienced
Regional Exploration Managers in Alex Raab and Devin Den Boer. The eight teams
that have been formed have been given specific objectives for each project and
a timeframe in which these objectives are to be achieved. As our internal
teams have been built we have also brought in outside experts on structure,
geophysics, petrology, geochemistry and quality control to challenge our ideas
and accelerate our progress.

    One of UME's most significant assets is the database of geological
information for Uruguay. While we have a significant amount of data, it was
not in a consistent format and lacked quality control. Over the past year we
have audited the majority of the Company's data, upgraded from spreadsheets to
a database and as a result new targets are now being identified.

    Our understanding of the San Gregorio mine system and the western half of
the Isla Cristalina belt has increased significantly as a result of bring in
an experienced consultant in structural geology and organizing the data so it
can be used interactively. The first target that we developed as a result of
this work was the Vetas A and Sur (veins in Spanish). Originally gold
mineralisation in these deposits was thought to be confined to the veins. As
drilling progressed during the second half of the year it became clear that
mineralisation was contained, along with the veins, in north east trending
shear structures that intersect the main mineralised trend at San Gregorio.
During the year we mined 20,738 contained ounces from these deposits and have
defined a further 68,600 contained ounces in indicated and inferred resources.
The shears hosting these deposits although restricted by infrastructure in
some areas remain largely unexplored to the south.

    In the Zapucay district at Argentinita we defined an initial indicated
and inferred resource of 2.2 million tonnes at 1.41 g/t for 100,000 ounces
before we stopped drilling to work up additional targets within the district
to build further resources. Drilling will continue in this district during
2008 to build additional resources and scoping studies have commenced on how
these resources will be developed.

    Our greenfields programme in the eastern end of the belt is also starting
to define specific targets that we expect to progress to drilling in 2008. Our
goal is to build resources in the Isla Cristalina belt to 1,500,000 ounces
over the next 2 years and convert 750,000 of these ounces to reserves.

    We now have 11 geologists working in the Don Feliciano and Florida Belts.
The first step has been to review historical work and produce good geological
maps for each project. This work and follow-up sampling has now been done on
the initial projects such as Crucera/Casupa, Presidente Terra and Nueva
Helvecia with new drill targets being defined. We have started drilling at
Crucera/Casupa and will continue to dedicate one to two rigs to projects in
these Belts over the next year. Our goal is to define sufficient resources
over the next two years on at least one project in the Don Feliciano and
Florida belts to justify a new operation.

    Last year we successfully completed an airborne geophysical survey at
Lascano that resolved the initial 30 kilometer by 70 kilometer gravity anomaly
into three separate circular gravity and magnetic anomalies, each
approximately 20 kilometers in diameter. This year we drilled 4 holes that
averaged over 800 meters in depth in and around the central circular feature.
These holes were designed to improve our understanding of the rock units
causing the anomaly and establish whether these rocks were altered or
mineralised.

    While all of the 4 holes drilled to date have contributed to our
understanding of the geology the second hole we drilled was the most
important. This hole showed hydrothermal alteration, characterized by potasic
and iron oxide metasomatism that included weak copper mineralisation over a
zone of 125 meters thick. This alteration and mineralisation is believed to be
consistent with that found in a porphyry copper or IOCG systems. Similar but
weaker alteration was also evident in both of the two holes that were drilled
on the rim of the circular feature. These results mean that the significant
geophysical anomaly at Lascano is now associated with a potentially large
hydrothermal system with copper mineralisation. We are very encouraged by
results to date and believe that they have significantly enhanced the
potential of the project to produce a discovery. We expect to finishing
analysing the results from the current programme, including a fifth drill
hole, in September and intend to drill a further 7,000 to 10,000 meters
commencing in October 2007 using contract drillers. This drilling will
initially be focused on steps outs from hole 2 looking for stronger alteration
and mineralization and will then also test other targets.

    Our diamond exploration programme this year was focused on developing the
project to a point where it could be divested. This programme was successful
in identifying kimberlite pipe targets from aeromagnetic, airborne gravity and
structural datasets. These anomalies are associated locally with positive
indicator minerals including a micro-diamond, G9 and G10 garnets and chrome
spinels in the area. Our objective is to divest the diamond project during
2008.

    We have spoken to a number of parties about our base metal projects, but
to date have not reached agreement for a farm-in on acceptable terms.
Generally the projects have been regarded as green field projects with good
potential but insufficiently advanced. We have brought in an experienced
nickel consultant to evaluate the projects and recommend, if justified, a
focused exploration programme to progress the best projects to a more advanced
stage.

    Our exploration drilling capacity increased during the year with the
addition of the UDR 200 diamond rig and the second DM45 reverse circulation
rig. We have also moved most of the rigs to two shifts. This rapid growth has
however reduced productivity as inexperienced crews are added and has impacted
our capacity to maintain the equipment. Our focus for 2008 will therefore be
on improving productivity on our own rigs and supplementing our own capacity
with contractor rigs.

    With a strengthened exploration team supported by key external advisors
and better management of geological information we are generating the targets
needed to add resources. Our challenge is to now explore these targets in a
disciplined manner and convert the best of them into resources and reserves as
quickly as we can.

    Future Development

    During the year UME commenced a number of conceptual studies that will
assist us in the future development of our business in Uruguay. The purpose of
these studies is to allow rapid development of our business as resources and
reserves are built. These studies have examined the capital and operating
costs of expanding the throughput of our existing plant, building a new
processing plant or heap leach operation and the development of underground
resources. These initial scoping studies indicate that we could;

    --  expand production by 50 per cent at San Gregorio to 1.9 million
tonnes per annum at a capital cost in the region of $ 20 million with a
milling unit cost reduction of approximately 10%.

    --  build a second plant with a similar production facility with annual
capacity of 1,250,000 tonnes per annum at a capital cost in the order of $ 50
million.

    --  build a heap leach operation with the capacity to process 750,000
tonnes of ore a year at a capital cost in the order of $ 25 million.

    --  establish an underground mining operation at a depth of between 200
and 400 meters at a capital cost of the order of $15 million and an operating
cost of the order of $ 25 a tonne. A grade of 2.3g/t would allow production at
a cash cost of $ 400 per ounce.

    These options are not mutually exclusive, and which of them we follow
will depend on the results that the exploration team produces, the
optimisation of operating plans and the conclusion of more definitive studies.
Metallurgical test work will be performed in the first half of 2007/08 to
complete the scoping studies. Drilling to test the down dip extensions of San
Gregorio and Arenal will commence in the first quarter of 2008.

    As part of our objective of increasing our production profile we have
started to evaluate the acquisition of gold development projects in other
South American countries. Our focus will be on acquiring projects with
measured and indicated resources that have the potential to be put into
production within three years.

    Uruguay Business Environment

    With effect from 1st July 2007 a major tax reform was passed into law in
Uruguay. We believe that these changes will, on the whole, have a neutral
effect on the Group.

    We have regular contact with the Uruguay Government and community leaders
at many levels. We are grateful for their openness in dealing with us, the
access and support they provide, and their constructive interest in our
activities. Whilst inevitably there are areas of disagreement and frustration,
on the whole we believe that our relationship is constructive and supportive.

    Conclusion

    I would like to thank all of those who have committed to the success of
UME. Our employees and consultants, shareholders, the local communities in
which we operate and the Uruguayan Government have all supported the Company
over the last year and we look forward to building on this in the coming year.

    David Fowler, Chief Executive Officer

    STATEMENT ON RESERVES AND RE

SOURCES As at June 1, 2007 the Company had Measured and Indicated Resources of 20,921,000 tonnes at 1.32 g/t, containing 885,900 ounces of gold in the Isla Cristalina Belt. This compares to the previous disclosure as at November 1, 2006 of 13,590,000 tonnes at 1.51 g/t, containing 659,000 ounces of gold. Primarily as a result of conversion to higher resource categories, Inferred Resources have decreased from 5,619,000 tonnes at 1.4 g/t, containing 250,700 ounces at November 1, 2006 to 3,736,000 tonnes at 1.1 g/t containing 133,640 ounces of gold. Proven and Probable Reserves as at June 1, 2007, and wholly within the stated Resources, were 6,933,000 tonnes at 1.58 g/t, containing 353,000 ounces of gold. This compares to the previous disclosure of 5,671,000 tonnes at 1.77 g/t, containing 322,000 ounces of gold. Therefore, the comparative increase of contained gold has been 31,000 ounces of reserve, whilst producing 63,945 ounces during the intervening period. The significant changes in the current Resource and Reserve position compared to the previous disclosure are summarised in the table below: Deposit Change ---------------------------------------------------------------------- Arenal -- Resource updated for excavated topography -- Reserve has been updated for excavated topography -- The completed diversion of the Corrales Stream has now enabled access to the reserve of 2.6 Mt at 1.9g/t Au previously qualified ---------------------------------------------------------------------- San Gregorio -- Inclusion of data from the latest drilling campaign that has increased resource and upgraded inferred resource to measured and indicated category. -- Updated geological interpretation that joins the areas of San Gregorio, Rieles and the East Extension -- Updated independent resource estimation -- Pit optimisation and design based upon gold price of US$ 550/oz ---------------------------------------------------------------------- Argentinita -- Inclusion of data from the latest drilling campaign that has increased resource and upgraded inferred resource to the indicated category. -- Updated geological interpretation -- Updated independent resource estimation -- Pit optimisation and design based upon gold price of US$ 500 oz. ---------------------------------------------------------------------- Vetas A & Sur -- Inclusion of data from the latest drilling campaign -- Updated geological interpretation -- Updated independent resource estimation -- Updated excavated topography -- Pit optimisation and design based upon gold price of US$ 600/oz ---------------------------------------------------------------------- A significant increase in resources of the San Gregorio deposit has resulted in only a modest increase in its reserves since most of the additional resources are of lower grade near the surface. Other high grade zones are at depths requiring uneconomic quantities of waste removal in an open pit configuration. We will be doing more work in this area over the next year, to target additional mineralization and to determine whether other processing or operating conditions would convert these resources into reserves. The deposit of Veta A lies adjacent to and partially under the Tailings Storage Facility (TSF) currently in use. Although still open at depth, the mineralisation that is situated under the TSF has been included in the Mineral Resource estimation to the limit of the existing exploration drilling. Pit optimisation and engineering has shown that the removal of tailings is economically feasible to allow extraction of the underlying mineralisation. However, the interference of the operational TSF is problematical in the near term and therefore that portion of the Veta A resource has been excluded from reserve estimation at this time. Future conversion to reserve would be dependent upon extended operation at the San Gregorio project that encompasses the construction of an additional TSF superseding the existing facility. The Company is performing several scoping studies to evaluate process alternatives (plant expansion and heap leaching) as well as the viability of underground mining. These studies will ensure that resource conversion is maximised and assist in the development of exploration programmes. Qualified Person's Statement The technical information presented in this Statement 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. Schroer is the Qualified Person for the purposes of the AIM Guidance Note on Mining, Oil and Gas Companies dated March 2006. 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. Mr. Sadek is the Qualified Person 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. Uruguay Mineral Exploration Inc. (UME) discloses the following update of its Mineral Resources and Mineral Reserves as at 1 June 2007. These Mineral Resources and Mineral Reserves, as well as the terms used in this disclosure, are fully compliant with NI 43-101 requirements and CIM Definition Standards all resources and reserves are quoted at a cut off of .5 g/t Au, except for Sobresaliente where 0.7 g/t Au has been used. Measured Resources Indicated Resources Notes Tonnes Grade Contained Tonnes Grade Contained + (000's) (g/t Ounces (000's) (g/t Ounces Au) Au) Isla Cristalina Belt Arenal 2 993 2.52 75,700 5,241 1.46 253,800 San Gregorio 2 718 1.24 28,600 8,074 1.04 270,200 Santa Teresa 2 497 1.14 18,200 1,434 1.09 50,200 Ombu 1 - - - 687 1.33 29,000 Sobresaliente 1 - - - 431 1.16 16,000 Veta A 1, 5, 6 - - - 507 2.07 34,000 Veta Sur 1 - - - 492 1.65 26,000 Argentinita 1 - - - 1,701 1.52 83,000 Stockpiles 4 - - - 26 1.43 1,200 - - - ------------- ------- ------- ----- --------- ------- ----- --------- Total 2,148 1.77 122,500 18,773 1.26 763,400 ------------- ------- ------- ----- --------- ------- ----- --------- Total Measured and Inferred Resources Indicated Tonnes Grade Contained Tonnes Grade Contained (000's) (g/t Ounces (000's) (g/t Ounces Au) Au) Isla Cristalina Belt Arenal 6,354 1.62 329,500 2,932 1.1 105,000 San Gregorio 8,792 1.06 298,800 3 1.0 80 Santa Teresa 1,931 1.10 68,400 7 0.8 160 Ombu 687 1.33 29,000 38 0.9 1,000 Sobresaliente 431 1.16 16,000 61 0.9 1,800 Veta A 507 2.07 34,000 33 1.5 1,600 Veta Sur 492 1.65 26,000 160 1.3 7,000 Argentinita 1,701 1.52 83,000 502 1.0 17,000 Stockpiles 26 1.43 1,200 ------------- ------- ----- --------- ------- ----- --------- Total 20,921 1.32 885,900 3,736 1.1 133,640 ------------- ------- ----- --------- ------- ----- --------- Proven Reserves Probable Reserves Notes Tonnes Grade Contained Tonnes Grade Contained + ++ (000's) (g/t Ounces (000's) (g/t Ounces Au) Au) Isla Cristalina Belt Arenal 4 870 2.54 71,100 2,234 1.7 123,500 San Gregorio 4 381 1.35 16,600 1,931 1.2 72,500 Santa Teresa 4 269 1.24 10,700 787 1.2 29,200 Veta A 4, 7 127 2.2 9,100 Veta Sur 4 34 1.9 2,100 Argentinita 4 272 1.9 17,000 Stockpiles 4 26 1.43 1,200 ----------- ----- ------- ----- --------- ------- ----- --------- Total 1,520 2.01 98,400 5,412 1.46 254,600 ----------- ----- ------- ----- --------- ------- ----- --------- Total Proven and Probable Tonnes Grade Contained (000's) (g/t Ounces Au) Isla Cristalina Belt Arenal 3,104 1.95 194,600 San Gregorio 2,312 1.20 89,100 Santa Teresa 1,056 1.17 39,900 Veta A 127 2.23 9,100 Veta Sur 34 1.91 2,100 Argentinita 272 19 17,000 Stockpiles 26 1.44 1,200 ----------- ------- ----- --------- Total 6,933 1.58 353,000 ----------- ------- ----- --------- Notes: + - Totals may not be exact due to rounding ++ - Mineral Reserves are completely within the stated Mineral Resources with mining factors applied. 1 - Qualified Persons Steven Ristorcelli (C.P.Geo) of Mine Development Associates (MDA) and Peter Ronning (P.Eng) an associate of MDA 2 - Qualified Person for Mineral Resources Dr Marcelo Godoy of Golder Associates 3 - Qualified Person for Mineral Resources George Schroer of UME Inc. 4 - Qualified Person for Mineral Reserves John Sadek of UME Inc. 5 - Includes 336kt @ 1.94gpt of Indicated Resource situated under the operating Tailings Storage Facility 6 - Includes 29kt @ 1.17gpt of Inferred Resource situated under the operating Tailings Storage Facility 7 - Excludes all Mineral Resources situated under the operating Tailings Storage Facility EXPLORATION REPORT FOR 2007 A full version of this report and the operations report for the 2007 financial year including images is available on the company's website at www.uruguayminerals.com.and at www.sedar.com Uruguay has considerable potential for gold, nickel, zinc, copper and diamond discoveries. The prospective terrains include the Isla Cristalina Belt, Florida Belt, Arroyo Grande Belt, Don Feliciano Belt, Rivera Diamonds project and the Lascano project in the Marin Basin. The Company has researched, acquired and developed mineral projects during its 10 years in Uruguay and has reached a stage where future cash flow from operations allows the aggressive exploration and development of these projects. UME has invested $US 7 million in exploration in 2006/07 which included 60,000 meters of drilling and the company, intends to spend a similar amount in 2007/8. Details of the drilling results are available in quarterly press releases. Isla Cristalina Belt Description of Geology and Projects The Isla Cristalina Belt is located 450 km from Montevideo in Northern Uruguay and hosts the Company's one operating gold mine at San Gregorio, in the Minas de Corrales District. This belt is an erosional window of crystalline Proterozoic basement rocks of northern Uruguay, approximately 110km in length and 40 km in width. The belt is composed of Proterozoic granites and greenstones ranging in metamorphic grade from greenschist to amphibolite facies. Anomalous gold mineralization exists along the entire 110 km strike length of the belt. The San Gregorio Operation in the northwest end of the belt is dominated by production from the Arenal deposit. Arenal and two historic deposits, San Gregorio and Santa Teresa host the largest concentration of gold that has been found to date in the district and are located along the same west north-west trending structural system. Several smaller deposits occur between the larger deposits and the most important currently are the shear hosted, "Veta A" and "Veta Sur" deposits. These trend northeast at nearly right angles to the main structural trend and, have been intensely explored and mined during in the past year. These deposits are characterized by low to moderate dip angles to the southeast and do not appear to cross the main San Gregorio thrusts. The Zapucay district is located 20 kilometers to the southeast of the San Gregorio Operation and is the second most important district to date in the Isla Cristalina Belt. Gold mineralization is hosted in two main deposits, Argentinita and Zapucay. Historic production from the Zapucay deposit was 35,700 ounces at an average grade of 2.1 g/t and the Argentinita deposit presently has an indicated and inferred resource at 31 May 2007 of 100,000 ounces at an average grade of 1.41 g/t. Both deposits lie within the same low angle shear structure that cut gneissic augen granite. The hosting structure dips gently to the northeast and strikes to the north-northwest. Limited historical drilling has been performed on the anomalous 1.5Km long structural trend between Zapucay and Argentinita and at other prospects in the district such as Tito Lopez, Lavadero and Papagayo. Progress in 2007 Devin Den Boer was appointed as Exploration Manager for the Isla Cristalina Belt in the second half of the 2007 financial year and four separate exploration teams have been formed to focus on exploration in the near mine, central, eastern and western regions of the Belt. A fifth team is dedicated to data management and resources estimation. Additional experienced expatriates and local geologists were recruited during the year to complete staffing for all teams. The structural setting of the western half of the Isla Cristalina Belt including the San Gregorio system was re-interpreted during the year. The bulk of the economic gold mineralization discovered to date is hosted in low to moderate angle thrust structures that trend west northwest. Minor gold mineralization also occurs in northeast as well as northwest trending structures. The high angle Rivera shear system that cuts the belt from east to west is believed to be younger than other structures and is spatially associated with the anomalous gold mineralization. A closed spaced ground magnetic survey of 5,900 line kilometers was completed covering most of the western half of the belt. This survey, combined with the historical airborne magnetic and radiometric surveys, has provided important assistance in mapping the low angle thrust system and other structures. During the year all historical data including geochemistry, geophysics, drilling, mapping and structural data were validated and integrated into one common access database for the entire Isla Cristalina Belt. The Veta A and Veta Sur deposits were the first projects to be re-evaluated as part of our structural re-interpretation work. Drilling defined 68,000 ounces in resources in addition to the 20,700 ounces mined during the year. Whilst the zones drilled to date have not been as wide as the main San Gregorio shear package there is good scope for further resource expansion. These shears have been mapped for up to three kilometers to the south and our database shows gold anomalies associated with these structures. An initial indicated and inferred resource of 100,000 ounces was defined at Argentinita during the year. Drilling during 2008 will focus resource expansion on the 1.5 kilometer anomalous zone between Argentinita and Zapucay. New teams focusing on the under explored parts of the Isla Cristalina belt have commenced with more detailed stream sediment sampling and regional mapping. Targets generated from stream sediment sampling in the east near Vichadero have defined an anomalous area of approximately ten sq.km. In the west of the Isla Cristalina mapping and sampling have defined the 1 km long vein system at Veta Rodrigo that has returned rock chip values of up to 5.1 g/t gold. We enter 2008 with a renewed confidence about our ability to make further discoveries in the Isla Cristalina Belt and increase our reserves and resources. We now have a better understanding of the system that is hosting our major gold deposits having mapped the geology for over 40 kilometers in the western end of the belt. Recent work has demonstrated the potential for further resource expansion in and around the existing operations and we have a number of advanced targets that are ready for drilling. Green field exploration is also generating new targets. Don Feliciano Belt and Florida Greenstone Belts Description of Geology and Projects The southern end of the Don Feliciano mobile belt lies 95 kilometers east of Montevideo and trends north-northwest. The belt is exposed for over 250 kilometers along strike, with 40-50 kilometers in width and comprises structurally deformed Proterozoic meta-sediments, greenstones and granitoids which are bound on the east and west by two major north trending shears. This mobile terrain formed as a result of the collision between South America and Africa at the end of the Proterozoic period and has seen limited historic precious and base metal production. A number of UME's precious metal projects including Presidente Terra, Bragado, and Texas are located in the belt as are the lead, zinc and nickel properties by Retamosa, Isla Patrulla and Maria Albina. Presidente Terra, the primary exploration property in the Don Feliciano Belt is characterized by granite, quartzite and meta-sediments which are cut by northeast trending high-angle shear zones. These shear zones are sub parallel to the main belt-bounding fault located just east of the property. Gold mineralization is found associated with the shears and hosted in the granite and at the contact between the granite and the quartzite. Historic and recent samples have defined mineralization over a strike length of 9 kilometers with values reported up to 336 g/t Au on outcrop. One third of the 250 samples taken on the property have reported gold assay results above 1 g/t. The lead and zinc prospects located within the belt are characterized by replacement bodies within limestone units and can be classed as Mississippi Valley type. Limited work has identified small pod shaped replacement bodies and UME is presently seeking partnerships with base metal companies to take the projects forward. The Florida and Arroyo Grande greenstone belts are composed of Proterozoic meta-volcanic and meta-sedimentary rocks interspersed through granitic terrain and occupy the southwestern third of the country (also referred to as the Piedra Alta Terrain). These rocks are exposed for 240 kilometers from the western side of the Don Feliciano Mobile Belt to nearly the western border of Uruguay and from the coast line near Montevideo to a point 175 kilometers northwards where they are covered by younger Paleozoic and Mesozoic sediments and basaltic lava flows. UME projects in the Piedra Alta Terrain include Casupa/Crucera, Paso de Lugo, and Nueva Helvecia. Projects are hosted in granitic rocks as well as green-stone terrains. The Casupa/Crucera projects are 20 kilometers apart and located 110 to 130 kilometers north of Montevideo. Both projects are characterized by multiple high angle veins and shears that cut granitic host rock and individually range in width from 1 to 15 meters. High grade samples have been reported from both project areas from quartz veins and associated shear zones. The Mal Abrigo and Cerros Negros nickel prospects also with in the Piedra Alta Terrain, 120 kilometers northwest of Montevideo are contained within layered mafic complexes of gabbro and norite. The intrusive bodies clearly show cumulate layering and weak disseminated sulphide mineralization in outcrop and from drill hole samples. Some of the sulfidic outcrops are weekly anomalous in Cu and Ni and chalcopyrite has been noted along with phyrrohotite. These properties with other Ni projects are currently under review by a consulting geological group who specializes in nickel deposits. An exploration plan will be developed from this work and then UME will seek partnership to advance the project through the next phase of exploration. Progress in 2007 An experienced Regional Exploration Manager for the Florida and Don Feliciano Belts, Alex Raab was appointed in November 2006. Since then, three separate exploration teams have been formed, two for the Florida Belt and one for the Don Feliciano Belt. Six new geologists have been recruited to complete the staffing for these teams. At Presidente Terra mapping and structural interpretation over the full 9 km strike length of the project have better defined controls to the mineralization with new exploration targets being developed. Recent sampling has expanded the Au mineralization to the southwest by two kilometers. Veins hosting grades greater than 10 g/t have been identified with visible gold reported locally. Trenching and drill programmes have been designed to test anomalous areas during the later half of the 2007 calendar year. Mapping, surface sampling, a detailed ground magnetic programme, trenching and drilling have been completed at Crucera during the year. The vein system has been surface mapped for over 750 meters and ground geophysics indicate a continuation of the structure hosting the mineralisation for over 5 kilometers. Drilling during the year confirmed mineralisation extending further down dip within the hosting structure and an initial resource calculation for the district is expected to be completed in the coming year. At Casupa, 20 kilometers south of Crucera seven vein sets are being mapped and sampled. Mineralization is strong with up to 100 g/t Au reported from sampling this year During the year all historical data including geochemistry, geophysics, drilling, mapping and structural data were integrated into an access database for each project with a common set of co-ordinates. Significant additional data relating to the Florida belt was purchased from Delcosur and will be integrated into the UME project databases. Historical exploration information, representing approximately $US 5 million in expenditure, was also purchased from the previous explorers of prospects in the Paso de Lugo Belt. This information will be reviewed and integrated into UME databases in the first half of 2008. UME and previous explorers have historically generated a significant number of quality exploration projects in the Florida and Don Feliciano Belts and the initial focus has been to re-evaluate these historical projects such as Presidente Terra and the Casupa/Crucera area. This work has involved more intense mapping and sampling that is generating good targets. Concurrently the team is generating new projects from the database many of which have encouraging early field results. The corporate objective is to generate a significant, stand alone mining operation in one of the southern mineral belts. Lascano Geophysical Anomaly Description of Project The Lascano project is based on a large geophysical anomaly located in the department of Rocha 240 kilometers northeast of Montevideo. The Lascano project area is approximately 70 kilometers long and 40 kilometers wide and covers a large magnetic and gravity composite feature that was originally discovered in the late 1980's during a government performed regional geophysical survey. The anomaly sits in a major northeast structural corridor, and has been interpreted to be caused by a large cluster of intrusive bodies. There is no surface expression of the anomaly due to a thick cover of coastal plain alluvial material. In June 2002 UME, in conjunction with BHP drilled a 450 meter deep, diamond drill hole that intersected conglomerate and basalt that did not adequately explain the anomaly. During 2006 UME completed a detailed airborne gravity gradient and magnetic survey comprising 10,400 line kilometers flown at a line spacing of 400 meters. The survey defined three large circular geophysical features each of which is about 20 kilometers in diameter. Progress in 2007 A programme of 4 diamond drill holes was designed to test the rock units causing the strongest of the circular geophysical anomalies. The results of this programme are described below. -- LASDDH-01 was drilled into the northern rim of the central anomaly. The hole reached 927.55 meters and in the upper portion encountered intrusive units including gabbro, pyroxene bearing granite, quartz-monzonite and quartz-feldspar porphyry. These rocks are underlain by basalt lava flows which exhibit weak biotite, chalcedony and carbonate alteration. LASDDH-03, 13.5 kilometers to the west on the rim of the anomaly, cut similar rocks as the first hole and was terminated at 827 meters. -- LASDDH-02, which was drilled to 690.7 meters in the interior of the central geophysical anomaly., Rocks encountered in this hole are predominately intermediate to mafic in composition and consist of quartz-monzonite to gabbro intruded into a pile of amygdaloidal basaltic lava flows. Alteration occurs in all of these units and is most intense between 200 and 375 meters. The alteration types are moderate to strong potassic with associated quartz-chalcedony veins and replacement silicification. Mineralization associated with this alteration is characterized by moderate to abundant magnetite and hematite veinlets and replacements (iron oxide metasomatism) along with trace to 2% sulphides. This sulphide mineralization is characterized by pyrite and/or chalcopyrite. Visible gold mineralization has been identified in one sample hosted in chalcedony veins. The intercept between 201 and 327 meters was geochemicaly anomalous and averaged 168 ppm Cu. with a higher grade intercept between 295 and 303 meters averaging 543 ppm Cu. The highest individual value was 0.1 % Cu. No significant gold values were reported. The alteration and mineralization assemblage encountered to date has similarities to iron oxide copper gold and porphyry copper mineralized systems. -- The fourth hole, LASDDH-04, was drilled to 825.3 meters just outside of the central geophysical anomaly and in a gravity and magnetic low to investigate its cause. The hole encountered less magnetic and lower density rocks. The first 486 meters was dominated by conglomerates and sandstones with local interbeds of basalt. The remainder of the drill hole was composed of intermediate to felsic volcanics and sub volcanics. These units are predominately different than those units intercepted in the drill holes located with in the geophysical anomaly and help define the geophysical signature. Results from this drill programme and petrographic and geophysical studies have further defined the anomaly and indicate that: -- the circular magnetic feature along the northern boundary of the anomaly is at least partially due to an edge effect of highly magnetic rocks encountered within the anomaly (LASDDH-001, 002, and 003) and the, relatively non-magnetic, clastic rocks encountered in LASDDH-004 outside the anomaly. -- a dense, most likely intrusive rock lies underneath the predominantly basaltic package of rocks which make up the centre of the anomaly. These rocks as a whole are dense relative to the rocks encountered outside the anomaly in hole LASDDH-004. The gravity anomaly is partially due to this density contrast. -- the intrusion of the basalts by granites to gabbros and their subsequent alteration indicate intrusive units most likely underlie the basaltic package of rocks encountered in the centre of the anomaly. -- the hydrothermal alteration and mineralisation encountered in LASDDH-002 and the similar weaker alteration in LASDDH-001, 12.5 kilometers to the northeast demonstrate that the system has the potential to host mineralised bodies. `The area around the LASDDH-002 drill hole provides a priority target for copper and or gold mineralisation. Follow up drilling of this target will help define the hydrothermal system and potentially lead to a discovery. Results from this drilling will be used to further define the appropriate geophysical technique to explore the area. Analysis and interpretation of the results from this years programme, including the fifth hole will be completed in September. A further programme of 7000 to 10,000 meters will then be scheduled to commence October 2007. Cinco Rios Diamond Project Description of Geology and Projects The Cinco Rios diamond project is located on the Rio de la Plata craton in the departments of Rivera and Tacuarembo in northern Uruguay, approximately 500 kilometers north of Montevideo. The Rio de la Plata Craton, which is considered to be Paleo-Proterozoic age, in northern Uruguay, hosts kimberlites and related rocks in southern Brazil and Paraguay. The Cinco Rios project area which consists of Upper Palaeozoic and Mesozoic sediments, and which borders the Cretaceous Parana Basin, is considered prospective for diamondiferous kimberlites. The potential for kimberlite discovery in northern Uruguay is shown by the reported historic recovery of alluvial micro- and macro-diamonds. In addition peridotitic and eclogitic garnets and chrome spinels were recovered during the period 1993 - 2004. These results are spatially associated with a prominent northwest-southeast trending structural corridor. Kimberlite emplacement typically occurs within these types of structural corridors, and at the intersection of such structures. Progress in 2007 A regional exploration programme during the March to November 2006 period covering Rivera, Tacuarembo and Cerro Largo collected a total of 310 stream samples. The results of this programme indicate the Rivera region is the most prospective for diamondiferous kimberlites. A decision was therefore taken to cease regional exploration work in other areas and focus on Rivera. Stream and soil sampling in the second half of the year was focused on closer spaced sampling in areas that had previously returned encouraging indicator minerals. A total of 418 samples were collected which have reported one micro-diamond, and G9 and G10 garnets, together with chrome spinels, some of which have chemistry indicative of the diamond stability field. The gravity and magnetic survey completed during 2006 and the magnetic survey acquired from Southern Era were analysed for prospective targets with a total of 43 priority targets identified for ground investigation. A further 18 targets were also generated from an air photo interpretation. Many of the targets identified are located within a northwest-southeast trending structural corridor. Detailed ground magnetic surveys have been completed over the primary exploration area defined by positive sample results with coincidental airborne magnetic survey anomalies. Further ground magnetic surveys are planned for the first half of 2008 with follow-up drilling planned. It is our intention to spin this project out, by issuing existing shareholders in the Group with new shares in a listed company that is dedicated only to diamond exploration. UME is in the early stages of talks with a number of parties and, whilst no guarantees can be given, it is hoped that alternative funding can be achieved for this project in 2008. EXPLORATION REPORT FOR THE QUARTER ENDED 31 MAY 2007 This report provides details of gold exploration activities during the quarter ending 31 May 2007. It should be read in conjunction with the exploration Report contained in the company's 2007 Annual Report. Detailed comments on the progress of Lascano, diamonds and other non gold exploration projects have been provided in the Exploration Report in the 2007 Annual report available on the company's website. Highlights -- Devin Den Boer commenced as Exploration Manager for the Isla Cristalina Belt in the fourth quarter of 2006/07. -- Additional resources have been defined from drilling at Veta A and Veta Sur Projections of the structures to the south have indicated that historic soil anomalies may be associated with the structures. Drilling will target mineralization along these structures and down dip in the first half of 2008. -- A new structural interpretation of the western end of the Isla Cristalina Belt has been made. The importance of this work has been to identify the structural setting that hosts the most productive gold deposits. All gold deposits discovered to date are associated with a low angle thrust system. This work has re-focused exploration efforts in the district with respect to the correct geologic setting. On going research into the structural controls to mineralization continues to refine the model. -- New exploration targets were developed at Cerro Papagayo during the quarter. Drilling is planned for the first quarter of the new financial year. -- Regional stream sediment and rock chip sampling continued at Vichadero with a prospective area of 10 km2 identified for detailed soil sampling in the first half of 2008. -- Sampling of Veta Rodrigo, in the western end of the belt returned anomalous values along the 1 km strike length of the vein. Drilling is planned for the first half of 2008. -- New anomalous gold mineralization zones have been discovered at President Terra in the southern third of the property. This mineralization is hosted in quartz veins within granites that trends north northeast parallel to the main shear zone. . These veins report up to 10 g/t Au and locally report visible gold. This mineralization is associated with hematite, pyrite and magnetite within veins and breccia. -- Mapping and trenching at Crucera and 20 km to the south at Casupa has identified a number of new veins targets. Drilling at Crucera during the quarter extended mineralization down dip with the first step out of 100 meters encountering additional mineralization. Isla Cristalina Gold Exploration Veta A and Veta Sur Exploration drilling continued to define resource within Veta A and Veta Sur. It has become apparent that these deposits are located in low angle thrusts which are oblique to the main San Gregorio mineralized structural system and were over looked by previous mining operations. An inferred resource of 28,700 ounces was estimated for these veins as of January 2007 and has been updated to 34,000 in Veta A and 26,000 Veta Sur ounces of indicated resource at a 0.5 g/t cut off as of 31 May 2007. While the deposits are restricted by present infrastructure it is clear from the results that mineralization in these mineralized structures continue along strike and down dip. The following table lists the most significant results in the last quarter. Veta Sur Hole From Intercept Au g/t ---------------------------------------- VSRC-039 53 4m @ 4.5 ---------------------------------------- VSRC-036 30 3m @ 4.2 ---------------------------------------- VSRC-041 43 5m @ 4.0 ---------------------------------------- VSRC-042 50 2m @ 7.3 ---------------------------------------- VSRC-047 61 5m @ 2.8 ---------------------------------------- VSRC-055 19 2m @ 6.7 ---------------------------------------- VSRC-056 40 8m @ 5.9 ---------------------------------------- Veta A Hole From Intercept Au g/t ---------------------------------------- VARC-067 30 5m @ 4.1 ---------------------------------------- VARC-068 25 15m @ 3.0 ---------------------------------------- VARC-071 29 7m @ 5.0 ---------------------------------------- VARC-072 22 8m @ 2.7 ---------------------------------------- VARC-073 65 5m @ 4.0 ---------------------------------------- VARC-074 54 10m @ 2.3 ---------------------------------------- VARC-083 74 8m @ 12.2 ---------------------------------------- VARC-084 41 7m @ 15.6 ---------------------------------------- VARC-086 41 7m @ 11.2 ---------------------------------------- VARC-087 66 4m @ 4.3 ---------------------------------------- (intercepts are drill hole composites using 0.5 g/t cut) Argentinita District Drilling during the quarter was predominantly infill and geotechnical in nature. Prospecting permits are being converted into exploration permits to allow drilling between Zapucay and Argentinita, as well as Tito Lopez, Lavadero and Papagayo prospects. Drilling is expected to recommence in the first quarter of 2007/2008 to test these targets. Re-logging of drill holes was completed to better define the mineralized zones. All holes have been re-logged and entered into the database and used in the year end resource estimate update. An update of resource estimates has been completed and has reported a combined indicated and inferred resource of 100,000 ounces averaging 1.4 g/t. Drill results for the quarter include: Argentinita Hole ID From Intercept Au g/t --------------------------------------- RCARG-242 132 11m @ 5.9 --------------------------------------- RCARG-243 170 1m @ 5.1 --------------------------------------- RCARG-243 174 1m @ 3.5 --------------------------------------- RCARG-244 139 1m @ 7.8 --------------------------------------- RCARG-244 157 2m @ 1.1 --------------------------------------- RCARG-244 161 1m @ 5.3 --------------------------------------- RCARG-244 164 1m @ 3.3 --------------------------------------- RCARG-244 166 1m @ 2.2 --------------------------------------- RCARG-257 5 1m @ 1.3 --------------------------------------- RCARG-257 8 2m @ 1.3 --------------------------------------- RCARG-268 164 3m @ 1.9 --------------------------------------- RCARG-268 178 1m @ 1.4 --------------------------------------- RCARG-272 154 1m @ 0.7 --------------------------------------- (intercepts are drill hole composites using 0.5 g/t cut) Mapping, surface rock chip and soil sampling has been progressed in the Papagayo prospect. It has been confirmed that mineralization is associated with low to moderate angled thrust system similar to the San Gregorio District. Results during the period have further defined the anomaly. First pass exploration drilling is planned for the prospect in September 2007. Significant surface rock chip results for the quarter Prospect Sample ID Au g/t --------------------------------------------------------- Cerro Papagayo CP0780 6.28 --------------------------------------------------------- Cerro Papagayo CP0724 2.75 --------------------------------------------------------- Cerro Papagayo CP0773 1.91 --------------------------------------------------------- Cerro Papagayo CP0746 1.87 --------------------------------------------------------- Cerro Papagayo CP0518 1.26 --------------------------------------------------------- Cerro Papagayo CP0752 1.03 --------------------------------------------------------- Isla Cristalina Belt - Regional Exploration Devin den Boer was appointed as Exploration Manager for the Isla Cristalina Belt. Devin has been selected to lead the exploration efforts through out the belt. Devin brings 10 years of international exploration experience to the on site management of the belt. His experience ranges from green field to production geologist. This experience fits well with the challenges faced in the Isla Cristalina Belt. Completion of an all encompassing database has been completed for the district. Mining of this information has led to the discovery of additional exploration targets and areas which less obvious before the compilation was completed. Further refinements of the database will be made in the coming year. Quality assurance of the data we currently use is part of the process of database compilation and management. The process has led to a better control on quality assurance as well. Dr. Rod Holcomb has continued his research in the Isla Cristalina Belt and has prepared a new regional geologic map and structural setting for the mineralized deposits. The larger mineralized bodies are all hosted within low to moderately dipping thrust faults which predate the Rivera high-angle shear system. The definition of the structural setting has refocused exploration efforts into the proper structural setting. Mapping has been completed between the San Gregorio mining district and Zapucay. The thrust system has been defined and confirms the corridor between San Gregorio and Zapucay as being highly prospective for similar deposit types. This would include Laurales and Papagayo. During the forth quarter a new exploration team was formed to work on the 20 kilometer section of the belt west and north of the San Gregorio Operation. An initial structural and geological map has been prepared for this area. This map has more effectively identified the western strike extension of the thrust/shear package that hosts the San Gregorio system. Resent sampling have confirmed ore grade values of 5.1 g/t. Exploration efforts have been concentrated around the Veta Rodrigo vein system. The vein has been mapped and sampled on surface for over 1.0 kilometer and is anomalous along its entire exposed NNW strike length. Visible gold has been observed in surface samples with values up to 5.14 g/t Au reported. Historic results have reported Au assays of up to 36 g/t. This vein sits in the low angle thrust system approximately 10 kilometers east of the San Gregorio operations. Regional exploration work continued in the fourth quarter in the extreme eastern end of the belt around the Vichadero prospect. Stream sediment sampling confirmed historic results and follow up sampling has started. A total of 67 stream sediment samples were taken and results received. This programme is approximately 50% complete. The most significant results from surface sampling for the quarter are presented below. Quarter results Rock Chip District Sample ID Au g/t --------------------------------- Vichedero 10050 4.0 --------------------------------- Vichedero 10409 5.2 --------------------------------- Quarter results Stream Sediments District Sample ID Au ppb -------------------------------- Vichedero 20469 125.8 -------------------------------- Vichedero 20116 174.3 -------------------------------- Vichedero 20085 201.5 -------------------------------- Vichedero 20079 249.6 -------------------------------- Vichedero 20043 328.3 -------------------------------- Other Gold Projects outside the Isla Cristalina belt Florida and Don Feliciano Belts Au Exploration continued in the southern projects at an accelerated pace compared to previous years. Three exploration teams are currently exploring the region. Four projects have been evaluated during the quarter. Presidente Terra More detailed mapping and sampling has been completed across the Presidente Terra prospect. Results obtained to date have confirmed historic sampling results. Mapping and sampling have confirmed the existence of a 7 km NNE trending mineralized trend that parallels the contact between meta-sediments and granitic rock. Over a third of the samples collected along this trend report Au values above 1 g/t. Au mineralization has been discovered 2 km south of the main trend Detailed mapping has been completed over these areas. Mineralization in the southern third of the property is hosted in quartz veins within granites and trend parallel to the main shear zone which trends NNE. Visible gold has been discovered in a number of the veins in this sector and report assay values of greater then 10 g/t Au locally. This mineralization is associated with hematite, pyrite and magnetite within veins and breccia. Trenching and followed up drilling will take place once exploration permits are granted. This should take place in the first half of the financial year. The most significant results received this quarter are reported below. District Sample ID Au g/t ---------------------------------- Pte. Terra EX10707 23.2 ---------------------------------- Pte. Terra EX10618 1.0 ---------------------------------- Pte. Terra EX10617 7.4 ---------------------------------- Pte. Terra EX10584 11.4 ---------------------------------- Pte. Terra EX10582 1.1 ---------------------------------- Pte. Terra EX10558 5.0 ---------------------------------- Pte. Terra EX10557 4.0 ---------------------------------- Pte. Terra EX10531 6.8 ---------------------------------- Pte. Terra EX10530 2.2 ---------------------------------- Pte. Terra EX10529 5.6 ---------------------------------- Pte. Terra EX10503 336.2 ---------------------------------- Pte. Terra EX10502 35.8 ---------------------------------- Pte. Terra EX10501 16.3 ---------------------------------- Crucera / Casupa These properties are located in Piedra Alta terrain which hosts the Florida Belt. Mapping has been completed over the main vein/shear system at Crucera. Drilling commenced in late April to further define the known resource and increase the resource down dip and 100 meters along strike. Mapping and sampling have discovered additional veins on the property which will be drilled tested in the first half of the new financial year. The table below reports the most significant intercepts encountered in the last quarter. Hole ID From Intercept Au g/t ----------------------------------------- CR_07_002 90 12m @ 2.2 ----------------------------------------- CR_07_003 87 5m @ 2.4 ----------------------------------------- CR_07_004 87 3m @ 2.3 ----------------------------------------- CR_07_005 84 2m @ 1.9 ----------------------------------------- CR_07_006 78 2m @ 1.7 ----------------------------------------- CR_07_007 85 2m @ 0.8 ----------------------------------------- CR_07_008 98 1m @ 1.6 ----------------------------------------- CR_07_009 37 1m @ 2.6 ----------------------------------------- CR_07_009 66 1m @ 1.8 ----------------------------------------- CR_07_011 144 5m @ 2.2 ----------------------------------------- CR_07_012 60 1m @ 1.0 ----------------------------------------- CR_07_013 42 2m @ 3.2 ----------------------------------------- CR_07_014 38 3m @ 5.6 ----------------------------------------- CR_07_015 38 3m @ 2.0 ----------------------------------------- CR_07_016 37 1m @ 0.9 ----------------------------------------- CR_07_017 74 1m @ 4.5 ----------------------------------------- A number of vein sets have been identified in the south of Crucera in Casupa. Results are encouraging and drilling of defined targets is planned before the end of the fiscal year. The most significant surface and trench sampling results from this quarter are presented in the table below. Project Sample ID Au g/t Type Project Sample ID Au g/t Type --------- --------- ------ ------- -------- --------- ------- -------- Chamizo EX11005 0.8 Surface Crucera EX11375 6.5 Trench --------- --------- ------ ------- -------- --------- ------- -------- Chamame EX11251 1.7 Surface Crucera EX11453 6.0 Trench --------- --------- ------ ------- -------- --------- ------- -------- Chamame EX11107 1.2 Surface Crucera EX11434 5.7 Trench --------- --------- ------ ------- -------- --------- ------- -------- Chamame EX11149 1.0 Surface Crucera EX11359 5.0 Trench --------- --------- ------ ------- -------- --------- ------- -------- Chamame EX11109 0.6 Surface Crucera EX11290 4.1 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11129 13.8 Surface Crucera EX11358 4.0 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11130 10.8 Surface Crucera EX11299 3.9 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11131 10.0 Surface Crucera EX11430 3.3 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11112 7.7 Surface Crucera EX11362 2.9 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11101 6.7 Surface Crucera EX11452 2.8 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11127 6.2 Surface Crucera EX11291 2.6 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11128 5.8 Surface Crucera EX11373 2.6 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11254 4.6 Surface Crucera EX11455 2.4 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11089 3.3 Surface Crucera EX11437 2.3 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11253 1.1 Surface Crucera EX11451 2.1 Trench --------- --------- ------ ------- -------- --------- ------- -------- Casupa EX11226 0.6 Surface Crucera EX11454 2.0 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11140 1.8 Surface Crucera EX11287 1.7 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11094 0.9 Surface Crucera EX11429 1.4 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11456 10.4 Trench Crucera EX11457 1.2 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11374 10.3 Trench Crucera EX11376 1.2 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11436 9.8 Trench Crucera EX11361 1.0 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11360 9.1 Trench Crucera EX11295 0.9 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11431 6.7 Trench Crucera EX11433 0.7 Trench --------- --------- ------ ------- -------- --------- ------- -------- Crucera EX11286 0.6 Trench --------- --------- ------ ------- -------- --------- ------- -------- Bragado At the Bragado prospect, located in the province of Treinta y Tres, exploration activity has identified a number of targets for follow up trenching and drilling. Mineralization is associated with NE to E-W striking veins in association with a gabbroic intrusion into the folded meta-sediments. Drilling is planned in the first half of 2008 designed to test the veins and the contacts between the gabbro and meta-sediments. The most significant results are presented below. District Sample ID Au g/t ---------------------------------- Bragado EX 10559 22.7 ---------------------------------- Bragado EX 10562 8.7 ---------------------------------- Bragado EX 10563 5.3 ---------------------------------- Bragado EX 10604 0.5 ---------------------------------- Bragado EX 10658 0.6 ---------------------------------- 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. Conference Call Details The management of Uruguay Mineral Exploration inc. will host a conference call to discuss the results at 11.00 EDT, 16.00 BST on Wednesday 15th August 2007. The dial-in numbers are: +44 (0)20 7138 0824 / +1 416 915 1269 and participants should give the following code to access the call: 7640957. A live audio stream of the conference call can also be accessed at www.uruguayminerals.com. Please dial in / log on five minutes prior to the start of the call to allow time for registration. A recording of the conference call will be available for 7 days afterwards, from approximately 1 hour after the live call has finished, on : +44 (0)20 7806 1970 / +1 718 354 1112, access code:7640957#. A recording will also be available at www.uruguayminerals.com. ENDS The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release. Editor's 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 the country (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. In the first half of 2003, the Company discovered the Arenal deposit, currently the largest known gold resource in Uruguay. Uruguay Mineral Exploration Inc. is quoted in Canada (TSXV) and London (AIM) and Collins Stewart Europe Limited is the Nominated Adviser and broker. Uruguay Mineral Exploration Inc. Consolidated Balance Sheets Thousands of United States Dollars, except where indicated As at May 31 2007 2006 ------------------------------------------------------ --------------- Assets Current assets Cash and cash equivalents $13,978 $8,931 Accounts receivable (Note 3) 2,275 1,699 Inventories (Note 4) 8,484 8,108 Prepaid expenses 647 612 ------- ------- 25,384 19,350 Property, plant and equipment and development costs (Note 5) 25,885 22,896 Deferred exploration and evaluation (Note 6) 16,316 11,184 Future income tax assets (Note 13) 2,387 1,855 Other assets and deferred costs (Note 7) 4,969 4,723 ------- ------- Total assets $74,941 $60,008 ------------------------------------------------------ --------------- Liabilities and Shareholder's Equity Current liabilities Accounts payable and accrued liabilities $6,238 $5,076 Current portion of long term debt (Note 8) 1,231 2,058 Unrealized fair value of derivatives (Note 15) - 2,317 ------- ------- 7,469 9,451 Long term tax payable (Note 13(d)) 2,414 1,486 Long term debt (Note 8) 2,154 2,167 Asset retirement obligation (Note 9) 2,036 1,665 ------- ------- Total liabilities 14,073 14,769 Equity instruments (Note 10) 34,592 32,670 Warrants (Note 10) 12 188 Contributed surplus (Note 11) 3,297 1,625 Cumulative translation adjustment (19) (19) Retained earnings 22,986 10,775 --------------- Total shareholders' equity 60,868 45,239 ------- ------- Total liabilities and shareholders' equity $74,941 $60,008 Commitments and contingencies (Note 12) Approved on behalf of the Board: David Fowler, Director Tony Shearer, Director These Consolidated Balance Sheets should be read in conjunction with the Full Notes to the Financial Statements which are available at www.sedar.com and www.uruguayminerals.com. Uruguay Mineral Exploration Inc. Consolidated Statements of Income and Retained Earnings Thousands of United States Dollars, except for earnings per share amounts and weighted average number of shares outstanding For the years ended May 31 2007 2006 ---------------------------------------------------------------------- Sales $63,056 $51,206 Net profit interest - (635) ---------- ---------- Net sales 63,056 50,571 Operating expenses 31,537 22,014 Amortization, depletion and accretion 8,752 8,742 ---------- ---------- Operating expenses 40,289 30,756 Sub-total 22,767 19,815 Other expenses (gains) Stock based compensation 975 1,453 Fair value adjustment for derivatives (2,317) 2,138 Exploration written off 2,129 - General and administrative 4,347 3,483 Interest and financing fees 314 339 Gain on settlement of net profit interest - (888) Interest and other income (510) (64) Foreign exchange loss 225 128 ---------- ---------- 5,163 6,589 Income before taxes 17,604 13,226 Current income taxes (Note 13) 3,582 2,711 Future income taxes (Note 13) (532) (68) ---------- ---------- Net income for the year 14,554 10,583 Retained earnings beginning of year 10,775 192 Dividend distribution (2,343) ---------- ---------- Retained earnings end of year $22,986 $10,775 ---------------------------------------------------------------------- Basic earnings per share (Note 10.g) $0.30 $0.23 Diluted earnings per share (Note 10.g) $0.30 $0.22 Basic weighted average number of shares 48,258,892 46,661,234 Diluted weighted average number of shares 48,668,269 48,548,859 These Consolidated Statements of Income and Retained Earnings should be read in conjunction with the Full Notes to the Financial Statements which are available at www.sedar.com and www.uruguayminerals.com. Uruguay Mineral Exploration Inc. Consolidated Statements of Cash Flows Thousands of United States Dollars, except where indicated For the years ended May 31 2007 2006 ------------------------------------------------------------ --------- Operating activities Net income for the year $14,554 $10,583 Adjustments for non cash items: Amortization, depletion and accretion 8,752 8,742 Exploration written off 2,129 - Accretion of net profit interest acquisition liability 159 - Future income taxes (531) (68) Deferred stripping (391) (3,870) Tax deferred payment (Note 13.d) 928 1,486 Fair value adjustment of derivatives (2,317) 2,137 Stock based compensation 975 1,453 Others (81) 52 -------- -------- 24,177 20,515 Net change in non-cash working capital balances (Note 16) 1,181 (2,129) -------- -------- 25,358 18,386 -------- -------- Financing activities Proceeds from the issue of share capital 1,515 1,473 Proceeds from borrowings, net of costs 106 457 Lease/Loan payments (163) - Dividends payments (2,343) - -------- -------- (885) 1,930 -------- -------- Investing activities Purchase of property, plant and equipment and development costs (12,401) (12,058) Sales of capital assets 51 650 Payments for exploration (7,076) (5,478) -------- -------- (19,426) (16,886) -------- -------- Increase in cash and cash equivalents 5,047 3,430 Cash and cash equivalents, beginning of year 8,931 5,501 -------- -------- Cash and cash equivalents, end of year 13,978 8,931 These Consolidated Statements of Cash Flows should be read in conjunction with the Full Notes to the Financial Statements which are available at www.sedar.com and www.uruguayminerals.com.

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 Shared Value Ltd Emily Bruning, +44 20 7321
5027 ebruning@sharedvalue.net or Collins Stewart Europe Ltd Chris Rollason,
+44 20 7523 8308 crollason@collins-stewart.com

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URUGUAY MINERAL EXPLORATION INC.

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