Uruguay Mineral Exploration Inc Announces Results for the Quarter and Nine Months Ended February 28, 2007

    LONDON, April 12 /CNW/ - Summary of Results

    --  Gold production was 27,921 ounces for the third quarter, bringing
year to date production to 67,155 ounces - consistent with the Company's
reforecast objective of 95,000 ounces for the full year.

    --  Cash costs were $US 253 per ounce for the quarter and $US 303 for the
nine months to February 28, compared with $US 203 and $US 199 for the
corresponding quarter and nine month period of the previous financial year.
Cost performance for the third quarter was consistent with previous quarters
with the higher production volumes reducing the unit cost per ounce.

    --  Net profit after tax for the third quarter was $ 3,899,000 or $ 0.080
basic earnings per share, with net profit for the 9 months to February 28,
2007 of $ 8,217,000 or $0 .17 basic earnings per share.

    --  Cash flow from operations before non-cash working capital movements
was $ 5,641,000 for the third quarter and $ 12,821,000 for the year to date.

    --  The higher average realized gold price for the third quarter of $ 638
per ounce resulted in increased sales of $ 16,606,000 when compared with the
corresponding quarter of the previous financial year, when sales of $
12,167,000 were recorded at an average sales price of $ 510 per ounce.

    --  The interim dividend of C$ 2.0 cents per share announced with the
results for the second quarter on 11th January 2007 will be paid to
shareholders on 12 April 2007.

    Tony Shearer, Chairman commented: "The strong production results during
the quarter demonstrate that the Company is making up the shortfall from the
first half and is on track to produce 95,000 ounces for the year. Unit
operating costs have fallen in line with these higher production volumes.
Financial performance has also improved with the average sales price of gold
benefiting from no hedge deliveries. Approvals to divert the Arroyo Corrales
provide increased certainty for the company in achieving its near term
objectives and underwrites the cashflows necessary to grow the company in the
coming years. Our Board visit to Uruguay during February confirmed that the
management team changes are starting to make an impact with increased
exploration and development activity, and better focus on delivering resource

                                              3 Months to    9 Months to
                                             -------------- --------------
                                              Feb    Feb     Feb    Feb
                                               2007   2006    2007   2006
    Operating Review
    Gold produced                     Ounces 27,921 25,451  67,155 75,937
    Average cash cost                 US$/oz    253    203     303    199
    Average price received            US$/oz    638    510     593    465

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

    Financial Review
    Revenue                            US$
                                       '000s 16,606 12,167  41,216 35,214
    Net income (loss) for the period   US$
                                       '000s  3,899  2,322   8,217  6,506
    Cash flow from operations (a)      US$
                                       '000s  4,840  3,599  11,737 10,913
    Basic earnings per share           US$     0.08   0.05    0.17   0.14
    Cash at the end of the period      US$
                                       '000s  7,796  3,590   7,796  3,590
    Total debt at the end of period    US$
                                       '000s  2,425  4,008   2,425  4,008
    ---------------------------------------- -------------- --------------
    (a) before non-cash working capital movements

    Summary of Significant Events

    Diversion of the Arroyo Corrales

    The Company has been granted the environmental and regulatory approvals
necessary to divert the Arroyo Corrales. Construction work began in March and
is expected to take four months to complete. Where possible the Company will
use its own equipment fleet to assist in construction to provide greater
certainty on timing. The level of rain during construction and water flow in
the Arroyo may affect the ultimate completion date and contingencies are being
developed for such delays.

    New appointments

    The appointment of Devin Den Boer as the Exploration Manager for the Isla
Cristalina Belt during the quarter completes the senior management positions
in exploration. Devin and Alex Raab, who was appointed as the Exploration
Manager for the Dom Feliciano and Florida Belts in the previous quarter,
report to George Schroer, VP Exploration. Ernesto Lamilla, an experienced
mining engineer, was also appointed as Technical Services Manager during the

    Increasing Gold Resources

    Exploration drilling at the San Gregorio mine during the quarter was
focused on resource definition of the Veta A and Veta Sur deposits. A
relatively small section of these vein deposits has provided an inferred
resource of 28,700 ounces as of the last resource statement. Detailed
definition drilling continues to replace the ounces that have been mined from
the resource. Exploration in the coming quarter will focus on more significant
strike and down dip extensions of these deposits to build a larger resource.
Exploration drilling will also test known parallel veins.

    The Argentinita/Zapuchay district continues to be developed. Work during
the quarter focused on completing drilling for resource and reserve estimation
and on mapping and sampling further along strike. New zones of mineralization
have been identified along strike further north and east of Argentinita at
Lilo and Tito Perez respectively. Rock chip samples have returned values of up
to 29 g/t Au in oxidized quartz vein material. These deposits are potentially
all part of the same shear zone, and further mapping during the quarter will
be followed up with drilling to build resources.

    The re-evaluation of the structural setting in the western portion of the
Isla Cristalina and a ground magnetic survey over the same area is identifying
a priority corridor for exploration between San Gregorio and Argentinita.
Sampling and initial mapping at Papagayo, a prospect approximately 5 km west
of Argentinita, has identified mineralization associated with a shallow thrust
fault and quartz veins. During the coming quarter more detailed mapping of the
district will be performed by the Company's structural geologist to develop a
conceptual model for the emplacement of mineralization within the district.

    Exploration programmes in the Florida and Dom Feliciano Belts were
launched during the quarter. Mapping and sampling at Presidente Terra has
confirmed the existence of a 7 km mineralized contact shear between meta
sediments and granite rock. New areas of gold mineralization and veining have
also been discovered. Mapping and sampling at the Crucera project are
confirming extensions to mineralized structures and are identifying new veins.
Drilling on this target is planned for the coming quarter.


    The Company has entered into a farm-in and data acquisition agreement
with DelcoSur S.A. for exploration properties within the Florida Greenstone
Belt. This transaction provides the Company with a number of advanced
exploration targets, additional information on existing UME prospects such as
Casupa, and historical regional sampling and interpretation work performed on
the Florida Greenstone belt. This package allows the Company to accelerate
exploration work within the Florida Greenstone Belt and to invest its future
exploration expenditure more effectively.

    Initial work on the properties acquired will be focused on the Nueva
Helvecia property, which is located in the central portion of the Florida
Belt. Historic drilling conducted in 1997 by REA Gold Corp at the Campo
Rovaina prospect intercepted 10 metres grading 3.2 g/t Au (including 4.85 g/t
Au over 5 metres) at a vertical depth of 40 metres. A test trench was
excavated by DelcoSur across the surface projection of the drill intercept.
Channel samples from the trench averaged 3.28 g/t Au using a one-gram cut off
over a width of 12.8 metres. This mineralization coincides with a gold soil
anomaly approximately 500 metres long and between 50 to 200 metres wide. The
central portion of this gold soil anomaly coincides with a 300-metre long
arsenic soil anomaly.

    Non-gold exploration

    At Lascano, a drill programme is underway to test the magnetic
susceptibility and density of the rock units at various points in the most
prominent circular feature of the anomaly. Two drill holes, one on the rim and
a second in the centre have been completed. A third drill hole on the rim is
in progress and is currently at approximately 700 metres. Drilling is
relatively slow given the depth of the holes (up to 1,000 metres), the
alluvial coverage over the basement rock (50-100 metres), the fact that the
drilling is in low-lying, wet areas and that far more rain has fallen recently
than is usual.

    Dominant rock types encountered to date are diorite to gabbro, quartz
feldspar porphyry, and basalt lava flows. In the first hole the more
interesting rocks encountered were gabbros to diorites with lenses of
granophyre. The rocks in this hole were not altered except for near surface
oxidation. The second hole showed evidence of iron oxide metasomatism and
locally weak (trace) pyrite and chalcopyrite mineralization. This is both
interesting and encouraging. Minor clay alteration is associated with this
mineralization. Sampling of selective intervals has been carried out for trace
element chemistry and petrographic work as well as geophysical
characteristics. This work will allow the Company to continue to develop its
conceptual model of the geological setting for the anomaly. At present, the
Company is working on two possible geologic models as being the cause of the
anomalies. One is that large intrusive bodies have entered the surrounding
country rock causing the circular pattern. The second is a volcanic caldera.
Significant mineral deposits can be associated with these two model types.

    The third drill hole will be completed at the end of April with the
remaining three holes expected to be completed over the next three months.
Drilling progress will, however, be dependent on the weather. Assaying,
petrographic work and geophysical property analysis will then follow and take
another month to complete. While analysis is ongoing, the Company expects to
define a model, select targets to test for mineralized bodies and decide how
to progress this significant and unique project in the second half of the
calendar year.

    During the quarter, work continued on the diamond project. Kimberlite
indicator minerals, including pyrope garnets and crome spinels have been
obtained from follow-up stream sampling for diamonds in the Rivera area during
the quarter. This sampling programme, the interpretation of aeromagnetic and
gravity surveys, prospecting and air-photo studies have identified a number of
priority areas for further work. A detailed ground magnetic survey was
performed at one of the priority areas during the quarter and has confirmed
magnetic geophysical anomalies consistent with geomorphic features and
positive soil and stream sediment indicator minerals. Other priority areas
will be followed up and an initial drilling phase is planned for the coming

    During the quarter the company acquired Southern Era Diamonds Inc's
historical Uruguayan geological database including geochemical sampling,
drilling results and airborne magnetic surveys. This data will allow UME to
accelerate progress on the diamond exploration in Uruguay, supporting its plan
to continue to build value in the project, prior to a farm out or initial
public offering.

    Chairman's Statement

    Financial Performance

    Our quarterly results to 28 February 2007 show increased profitability
resulting from improved production volumes and higher average sales prices.
Our quarterly production of 27,921 ounces has put us on track to achieve the
full year reforecast of 95,000 ounces. All sales in the current quarter were
delivered at spot following the completion of hedge obligations in the
previous quarter.

    Operating cash costs have fallen from $US 345 per ounce for the second
quarter to $US 253 for the third quarter, taking the year to date average to
$US 303. This reduction has been a function of higher production levels with
similar costs. Operating costs per tonne of material for the quarter are
consistent with the first half of the financial year.

    Reconciliation of cash costs between comparable periods in the 2007
     and 2006 financial years
                                                       9 Months  6 Months
                                                          to 28     to 31
                                                        February  November
    ------------------------------------------------------------ ---------
    Cash cost per ounce 2006 financial year                $199      $197
    Change in strip ratio                                    20        20
    Other cost increases                                     49        47
    ------------------------------------------------------------ ---------
    Cash cost before impact of lower production             268       264
    Reduced production from lower grade                      35        76
    ------------------------------------------------------------ ---------
    Cash cost per ounce 2007 financial year                $303      $340
    ------------------------------------------------------------ ---------

    During the quarter we generated cash from operations and financing of $
5,205,000 and re-invested $3,211,000 of this back into our operations giving a
net cash generation for the quarter of $ 1,994,000. Comparatives for the nine
month period are shown in the table below. During the current financial year $
1,495,000 has been paid in dividends.

    Cashflow Summary                                   3 Months  9 Months
    $US 000                                              to 28     to 28
                                                        February  February
    ------------------------------------------------------------ ---------

    Operating cashflows                                  $4,840   $11,737
    Funds received from equity and debt issues              365     1,447
    ------------------------------------------------------------ ---------
                                                          5,205    13,184
    Invested in property plant and equipment             (1,252)   (7,628)
    Invested in exploration                              (1,959)   (5,196)
    ------------------------------------------------------------ ---------
                                                          1,994      $360
    Cash returned to shareholders as dividends                -    (1,495)
    ------------------------------------------------------------ ---------
    Net cash generated/(used)                            $1,994   $(1,135)
    ------------------------------------------------------------ ---------

    Our Strategy

    The Company's primary objective is to create shareholder value through
growing gold production to become a mid-tier gold producer over five years.
The Company is focused on the key challenge of increasing gold reserves
through successful exploration and alternative mining and processing methods.
Accordingly, we have put in place plans to farm out or divest our base metals
and diamond prospects going forward.


    During the quarter the Company reached a key milestone with the granting
of permits to commence the diversion of the Arroyo Corrales. This milestone
provides us with increased certainty on our three year mine plans and confirms
that we will continue to generate the cashflow from operations necessary to
fund our exploration investments. We have started work on the diversion, and
expect to complete it in July 2007.

    Senior management team

    The Company has taken the initial steps in delivering on its growth
intentions by recruiting the necessary members of the exploration and
development team. Where possible we have also sought to acquire additional
information and projects that can accelerate the achievement of these
objectives. We have focused over 80 per cent of our exploration effort on
known gold projects that have anomalous gold, and we are approaching a phase,
over the next 12 months, when many of these projects will be drill tested.

    Exploration to extend resources

    We have divided our gold exploration teams into two areas, each under the
leadership of an experienced and enthusiastic geologist. They are focused on
expanding our gold resources. Devin Den Boer is responsible for the Isla
Cristalina belt, and he has sub-divided it into three areas: the near mine
area around the San Gregoria mine; the Zapucay/Argentinita area about 40
kilometres from the mine; and the eastern end of the belt. Near mine
exploration has been refocused on targeting resource expansion from the
extensive known gold system we are currently mining. The Zapucay/Argentinita
system is in its early stages of evaluation with historical production of
30,000 ounces, new resources of 95,000 ounces (effective 1 November 2006) and
an active exploration programme defining new mineralised areas along strike.
The eastern end of the belt has received very little attention until a few
months ago. There are many reasons to be encouraged with positive results from
stream and rock chip samples. No drilling has been done to date but it will
follow when the targets are better defined. We now have one team focused on
each of these areas.

    The second area is the Florida and Dom Feliciano mobile belts that lie
respectively to the south and the east of Uruguay. Alex Raab has
responsibility for these areas. He has a number of teams working on various
projects with known extensive gold mineralisation such as Presidente Terra and
Casupa. While these projects represent the immediate priority in our objective
to define a resource, new targets are generated, reviewed and prioritised at
the same time. Our decision to farm-in to projects owned by DelcoSur (as
announced on 22nd March) and to acquire additional information will accelerate
our plans and better target our exploration effort in an important part of the
Florida belt.

    The Board visited Uruguay in February, to understand better the progress
on operations, exploration and development. This visit demonstrated that we
are making the transition from a consolidation phase, in which our focus was
on putting the appropriate people, resources and systems in place, to a
development phase, characterised by more intensive and more clearly focused
field exploration activity.

    With better-qualified technical direction and processes in place, field
exploration is also now more systematic. All projects are mapped, sampled and
trenched, at reasonable densities, so as to define targets better. During the
quarter, over 75% of our exploration efforts focused on these activities and,
as a result, we have defined new areas of mineralisation at
Argentinita/Zapuchay and Presidente Terra. Management has also sought input
from external specialists for structure and geophysics and is improving the
quality of the exploration process. These initiatives are starting to result
in better definition of drill targets, enabling the Board to conclude that the
Company's chances of exploration success in future drill programmes has been
greatly enhanced.

    While the recent exploration focus has been, and will continue to be, on
adding incremental ore to reserves and resources, it is clear that we now have
the cash and people to continue with generative grassroots programmes at the
same time. We are following up historical bleg and other anomalies in the
eastern and central northern parts of the Isla Cristalina belt and in the
Casupa district in the Florida belt. Indications are that all these areas have
the potential to host significant gold deposits.

    Other sections of the Company's Management Discussion and Analysis for
the period explain our work in more detail.

    Resources and reserves

    Our intention is to publish annually in August, in conjunction with the
full year financial statements, an update of the reserves and resources, and
in between to describe our activities, only updating the announced reserves
and resources if the change is material. Accordingly, the next time we will be
updating the published reserves and resources will be August 2007 in
conjunction with the announcement of the financial results for the full year
ending 31st May 2007.

    Non-gold exploration

    We are continuing to evaluate the best alternatives for realizing value
from the Company's non-gold assets in Uruguay. Interest from international
companies in the base metal and nickel properties is still being received and
will be considered. A number of international companies are presently
reviewing these projects and the Company is considering how best to take them

    Important advances have been made on diamond exploration during the
quarter and we aim to drill test a number of targets in the coming quarters
before re-assessing our divestment options. Our acquisition of the database
from Southern Era (as announced on 19th March) should reduce our need for
sampling in some areas and accelerate the programme. This should enable us to
build value in the project faster than we would otherwise have done, prior to
a farm-out or an Initial Public Offering.

    Additional work will continue to be done on the Lascano project over the
next six months and we will make an assessment of the best way to develop the
project in the latter part of Calendar 2007.


    The interim dividend of C$ 2.0 cents per share announced on 11th January
2007 will be paid on 12 April 2007 to shareholders registered on 22 March
2007. This will cost a total of C$ 962,000 and compares with the dividend of
C$ 3.5 cents per share paid on 27 October 2006. It is the Board's intention to
recommend to the Annual General Meeting that a final dividend be paid in
October 2007.


    The strong production results during the quarter demonstrate that the
Company is making up the shortfall from the first half and is on track to
produce 95,000 ounces for the year. In line with these higher production
volumes, unit operating costs have fallen. Financial performance has also
improved with the average sales price of gold benefiting from no hedge
deliveries. The granting of approvals to divert the Arroyo Corrales provides
increased certainty for the Company in achieving its near term objectives and
underwrites the cashflows necessary to grow the Company in the coming years.
Our Board visit to Uruguay during February confirmed that the management team
changes are starting to make an impact with increased exploration and
development activity and better focus on delivering resource growth.

    Tony Shearer

    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 Thursday 12th April
2007. The dial-in numbers are: +44 (0)20 7138 0825 / +1 416 915 1269 and
participants should quote Uruguay Mineral Exploration. 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:3867642#. A recording will
also be available at www.uruguayminerals.com.


    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 Interim Financial
Statements For the three and nine month periods ended February 28, 2007
(Unaudited - prepared by management)

    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 periods ended February 28

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

                                                    As at   As at    As at
                                                 February  May 31 February
                                                  28 2007    2006  28 2006
    ----------------------------------------------------- ------- --------
                                                        $       $        $

     Cash and cash equivalents                     7,796   8,931    3,590
     Accounts receivable                           2,723   1,699    2,814
     Inventories                                   9,716   8,108    7,792
     Prepaid expenses and other                      623     612      647
                                                 -------- ------- --------
                                                  20,858  19,350   14,843

    Property, plant and equipment (Note 2)        22,470  22,896   24,788
    Deferred exploration costs (Note 3)           16,379  11,184    8,308
    Future income tax                                578   1,855      959
    Deferred stripping and other non current
     assets (Note 4)                               5,892   4,723    3,065
                                                 -------- ------- --------
    Total assets                                  66,177  60,008   51,963
                                                 -------- ------- --------

    Liabilities and Shareholders' Equity

    Current liabilities
     Accounts payable and accrued liabilities      4,592   5,076    3,754
     Dividend provision                              840       -        -
     Current portion of long term debt (Note 5)    1,188   2,058    2,190
     Unrealized fair value of derivatives (Note
      10)                                              -   2,317    2,529
                                                 -------- ------- --------
                                                   6,620   9,451    8,473

    Future income tax liabilities                  2,349   1,486
    Long term debt (Note 5)                        1,237   2,167    1,818
    Asset retirement obligation                    1,665   1,665    1,624
                                                 -------- ------- --------
    Total liabilities                             11,871  14,769   11,915

    Equity instruments (Note 6)                   34,587  32,858   31,675
    Contributed surplus (Note 7)                   3,081   1,625    1,694
    Cumulative translation adjustment                (19)    (19)     (19)
    Retained Earnings                             16,657  10,775    6,698
                                                 -------- ------- --------
    Total Shareholders' Equity                    54,306  45,239   40,048

                                                 -------- ------- --------
    Total Liabilities and Shareholders Equity     66,177  60,008   51,963
                                                 -------- ------- --------

                                          Uruguay Mineral Exploration Inc.
         Consolidated Statements of Income and Retained Earnings (Deficit)
                                      (Unaudited - prepared by management)
              (Thousands of United States Dollars, except where indicated)

                              Three months ended      Nine months ended
                                   February 28           February 28
                                   2007       2006        2007       2006
    ----------------------------------------------- ----------------------
                                       $          $           $          $

    Sales                        16,606     12,167      41,216     35,214
    Net profit interest                          -           -       (635)
                             ---------------------- ----------------------
    Net Sales                    16,606     12,167      41,216     34,579

    Operating expenses            7,374      5,289      21,799     16,019

    Amortization, depletion
     and accretion                2,331      2,181       6,255      6,497

    Other expenses
     Compensation expense -
      stock based                   278        176         758        334
     Fair value adjustment
      for derivatives                 -        937      (2,317)     2,349
     General and
      administrative              1,229        705       3,218      1,952
     Interest and financing
      fees                           79        137         249        311
                             ---------------------- ----------------------
                                  1,586      1,955       1,908      4,946

                             ---------------------- ----------------------
    Income before other items
     and taxes                    5,315      2,742      11,254      7,117

    Other items
     Gain on settlement of
      net profit interest             -          -           -        888
     Interest and other
      income                        119        138         356         40
     Foreign exchange gain /
      (loss)                        (44)      (133)       (202)      (179)

                             ---------------------- ----------------------
    Income before taxes           5,390      2,747      11,408      7,866

                             ---------------------- ----------------------
    Income taxes                  1,491        425       3,191      1,360

    Net income for the period     3,899      2,322       8,217      6,506

                             ---------------------- ----------------------
    Retained earnings,
     beginning of period         13.598      4,376      10,775        192
     for dividends                 (840)         -      (2,335)         -
    Retained earnings, end of
     period                      16,657      6,698      16,657      6,698
    ----------------------------------------------- ----------------------

    Basic earnings per share       0.08       0.05        0.17       0.14
    Diluted earnings per
     share                         0.08       0.05        0.17       0.13

    Basic weighted average
     no. of shares           48,451,768 46,708,080  48,168,433 46,387,746

                                          Uruguay Mineral Exploration Inc.
                                      Consolidated Statements of Cashflows
                                      (Unaudited - prepared by management)
              (Thousands of United States Dollars, except where indicated)

                                           Three months     Nine months
                                                ended          ended
                                            February 28     February 28
                                             2007   2006     2007    2006
                                           -------------- ----------------
                                                 $      $        $       $
    Operating activities
       Net income for the period            3,899  2,322    8,217   6,506
       Adjustments for:
        Amortization, depletion and
         accretion                          2,331  2,181    6,255   6,497
        Future income taxes                  (537)  (319)   1,277      86
        Deferred stripping                   (341)  (803)  (1,354) (2,244)
        Fair value adjustment of
         derivatives                            -    937   (2,317)  2,349
        Compensation expense - stock based    278    176      758     334
        Other                                  11      1      (15)    174
                                           -------------- ----------------
                                            5,641  4,495   12,821  13,702
      Net change in non-cash working
       capital balances (Note 9)             (801)  (896)  (1,084) (2,789)
                                           -------------- ----------------
                                            4,840  3,599   11,737  10,913
                                           -------------- ----------------

    Financing activities
     Proceeds from the issue of share
      capital, net of costs                   344    224    1,512     428
     Finance lease drawdown                   105      -      105       -
     Payments of finance lease                (84)     -     (170)      -
     Dividend payment                           -      -   (1,495)      -
                                           -------------- ----------------
                                              365    224      (48)    428
                                           -------------- ----------------

    Investing activities
     Refundable deposits                        -      3        -       -
     Purchase of property, plant and
      equipment                            (1,252)(5,176)  (7,673)(11,428)
     Payments for exploration              (1,959)(1,347)  (5,196) (2,474)
     Proceeds on sale of assets                 -      -       45     650
                                           -------------- ----------------
                                           (3,211)(6,520) (12,824)(13,252)
                                           -------------- ----------------

    Increase (decrease) in cash             1,994 (2,697)  (1,135) (1,911)

    Cash and cash equivalents, beginning of
     period                                 5,802  6,287    8,931   5,501
                                           -------------- ----------------

    Cash and cash equivalents, end of
     period                                 7,796  3,590    7,796   3,590

    Uruguay Mineral Exploration Inc. Notes to Consolidated Interim Financial
Statements (Unaudited - prepared by management) (Thousands of United States
Dollars, except where indicated)

    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 reporting currency used is the United States
dollars which is also the Company's functional currency. 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 adjusted to reflect all adjustments required to reflect a fair
presentation of these statements in accordance with the accounting policies of
the company. These interim consolidated financial statements should be read in
conjunction with the most recent annual consolidated financial statements for
the year ended May 31, 2006 for detailed note disclosures. The significant
accounting policies follow that of the most recently reported annual
consolidated financial statements.

    2. Property, Plant and Equipment

                                                   February 28 2007
                                              Cost   Accumulated  Net Book
                                                     Amortization  Value
                                            -------- ------------ --------
    Land and lease rights                    $1,895           $-   $1,895
    Plant and equipment                      23,506       10,986   12,520
    Mineral properties                       15,570        7,515    8,055
                                            -------- ------------ --------
                                            $40,971      $18,501  $22,470
                                            -------- ------------ --------

                                                     May 31 2006
                                              Cost   Accumulated  Net Book
                                                     Amortization  Value
                                            -------- ------------ --------
    Land and lease rights                    $1,895             $  $1,895
    Plant and equipment                      20,362        7,474   12,888
    Mineral properties                       13,218        5,105    8,113
                                            -------- ------------ --------
                                            $35,475      $12,579  $22,896
                                            -------- ------------ --------

                                                   February 28 2006
                                              Cost   Accumulated  Net Book
                                                     Amortization  Value
                                            -------- ------------ --------
    Land and lease rights                      $671           $-     $671
    Plant and equipment                      20,605        6,368   14,237
    Mineral properties                       14,066        4,186    9,880
                                            -------- ------------ --------
                                            $35,342      $10,554  $24,788
                                            -------- ------------ --------

    a) On November 30, 2005 a subsidiary of the Company acquired the 10% net
profits interest over key tenements within the Minas de Corrales Project
including the tenements on which the Arenal deposit is located. The total cost
of the acquisition was $ 4,246 with $ 3,500 allocated to mineral properties
and $ 746 allocated to deferred exploration and development costs. The
consideration for the acquisition was 290,000 common shares and $ 3,150
payable in 3 equal annual installments of $ 1,050. Terms of the notes are
detailed at Note 5(d). An additional $ 1,050 is payable to the vendor if the
average daily gold price for the 36 months to 30 June 2008 exceeds $400 per

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

    c) Mineral properties includes development costs incurred to bring a
mining property into production, develop new ore bodies or develop mining
areas in advance of production, and are capitalized and charge to operations
using the units of production method based on the estimated life of mine. As
of 1st of November 2006, the Company reassessed its reserves and resources in
a fully compliance with NI 43-101 requirements and CIM definitions,
determining a lowered reserve. The change in estimation affected the quarter
determining an increase in amortization of mineral properties, and will be
accounted for prospectively resulting in a higher amortization per ounce of
production over the life of the mine.

    3. Deferred Exploration and Development Costs

                                                February          February
                                                   28,   May 31,     28,
                                                  2007     2006     2006
                                                -------- -------- --------
    Acquisition costs and option payments          $775     $775   $1,521
    Exploration, development and other property
     costs                                       13,712    8,853    5,311
    Capitalized indirect overheads, net of
     exchange gains                               1,892    1,556    1,476
                                                -------- -------- --------
                                                $16,379  $11,184   $8,308
                                                -------- -------- --------

    a) Prior to October 2006, the Uruguay Mining legislation requested all
mining titles to be supported by guarantees for any environmental
rehabilitation requirements resulting from exploration or mining activities.
These guarantees were required to be posted by non-title holders. As a result,
certain of the Company's employees, officers and directors had provided
personal assets as guarantees. The Company intends to compensate these
individuals in the event that the guarantee is called. The Company has also
agreed to pay a guarantee fee to the individuals at rates advantageous to the
Company. This fee is based on the amount of the guarantee and is negotiated on
a case-by-case basis.

    As of October 2006, regulations for guarantees were changed. This change
requires future guarantees to be provided by a recognized financial
institution or be supported by Uruguayan public bonds or cash deposits in a
Uruguayan State Bank.

    The total guarantees provided at February 28, 2007 were approximately $
1,890 (May 31, 2006 $ 1,390).These relate to potential site restoration
responsibilities associated with exploration activities. The Company has also
provided the Uruguayan state with a rehabilitation performance bond for the
San Gregorio mine and operations. This obligation is in the amount of $1,500
(May 31, 2006, $ 1,500).

    4. Deferred Stripping and Other Non Current Assets

                                                 February         February
                                                    28,   May 31,    28,
                                                   2007    2006     2006
                                                 -------- ------- --------
    Refundable deposits                             $140    $140     $140
    Capitalized debt issue costs                       -     145      113
    Deferred Stripping                             5,752   4,438    2,812
                                                 -------- ------- --------
                                                  $5,892  $4,723   $3,065
                                                 -------- ------- --------

    (a) Deferred Stripping costs

    Using the deferred stripping accounting method, mining costs associated
with waste rock removed in excess of the life of the mine average are deferred
and charged to operations on the basis of the average strip ratio for the life
of the mine. When the cumulative strip ratio is less than the life of mine
average, a provision for future stripping is made.

    The average strip ratio for the mine life was estimated to May 31, 2006
to be 4.34:1. Reevaluation of the strip ratio was then made determining a new
ratio of 5.59:1. At November 30, 2006 strip ratio applied was 5.75:1 as a
result of a marginal increase in ore. As of February 07 same strip ratio
estimation was assumed.

    The amount charged to operations is therefore subject to management's
ability to estimate the stripping ratio over the life of the mine. Any changes
to this estimate could have a material affect on the financial statements.

    5. Long Term Debt

                                                 February         February
                                                    28,   May 31,    28,
                                                   2007    2006     2006
                                                 -------- ------- --------
    Drawn debt facilities
    Deferred payment on acquisition of Net profit
     interest (a)                                 $1,980  $2,905   $2,847
    Finance lease (b)                                445     457        -
    Deferred payment on equipment (c)                  -    $863    1,161
                                                 -------- ------- --------
                                                   2,425   4,225    4,008
    Less current portion                          (1,188) (2,058)   2,190
                                                 -------- ------- --------
                                                  $1,237  $2,167   $1,818
                                                 -------- ------- --------

                                                 February         February
                                                    28,   May 31,    28,
                                                   2007    2006     2006
                                                 -------- ----------------
    Available debt facilities
    Finance lease (b)                                 $-     $43       $-
    Deferred payment on equipment (c)                  -            1,161
    Working capital facility (d)                       -   2,000    2,000
                                                 -------- ------- --------
                                                      $-  $2,043   $3,161
                                                 -------- ------- --------

    (a) 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 of February 28, 2007, $ 445 of the facility has been drawn.

    (b) 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 detailed at note 2(a). 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. First convertible note expired in July 2006, was paid in
cash and was not converted into shares. The two remaining convertible notes
are shown recorded at their net present value using an 8.5% discount rate.

    (c) On August 5, 2004, a subsidiary of the Company signed a sale and
purchase agreement for the purchase of $6,349 in mine equipment amended on
June 15, 2005 to purchase an additional $ 1,352. The equipment was purchased
on deferred payment terms with an initial payment of 25%, twelve monthly
installments equal to 15% and a final balloon payment of 60% 12 months from
the date that equipment is assembled and ready to work. Interest on all
balances outstanding accrues at the 90 day Libor rates plus 4%. As of this
date, payments obligations have been duly fulfilled and no balances remain

    (d) On August 8, 2004, the Company entered into a secured $2,000 interim
working capital facility with Macquarie Bank Limited. On October 26, 2004 this
interim facility was increased to $3,000. On December 8, 2004 the Company
signed documentation for a secured financing facility of $6,500 replacing an
interim working capital facility with Macquarie Bank Limited for $ 2,000, at a
rate of Libor plus 2%, and secured by a general floating charge over all of
the Company's assets. As of February 28, 2007, the facility has expired.

    6. Equity Instruments

    (a) Authorized

    Unlimited number of Common Shares

    (b) Issued

    Common shares                       February 28, 2007   May 31, 2006
                                         Number   Amount   (000's) Amount
                                        ----------------- ----------------
    Issued and outstanding, beginning of
     year                                 47,525 $33,595   46,107 $30,308
    Issued for stock options exercised       755     904    1,077   1,951
    Issued for acquisition of NPI (Note
     6(d))                                     -       -      290   1,096
    Issued for mine properties
     acquisition                               -       -       51     240
    Issued for exercise of warrants for
     cash                                    250   1,013        -
                                        ----------------- ----------------
    Issued and Outstanding                48,530 $35,512   47,525 $33,595
                                        ----------------- ----------------
    Less: cumulative share issue costs
     (1)                                            (925)            (925)
                                        ----------------- ----------------
    Issued and outstanding, end of year   48,530 $34,587   47,525 $32,670
                                        ----------------- ----------------

    Warrants and convertible notes      February 28, 2007   May 31, 2006
                                         Number   Amount   Number  Amount
                                        ----------------- ----------------
    Issued and outstanding, beginning of
     year                                  1,000    $188      250    $188
    Issued for acquisition of NPI (note
     6d)                                       -       -      750       -
    Expired                                 (250)      -        -       -
    Exercised                               (250)   (188)       -       -
                                        ----------------- ----------------
    Issued and outstanding, end of year      500      $-    1,000    $188
                                        ----------------- ----------------

    Total equity instruments                     $34,587          $32,858
                                        ----------------- ----------------

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

    (c) Warrants and Convertible Notes

    On November 30, 2005, the Company acquired the net profit interest in
tenements at the Minas de Corrales Gold Project as described at Note 2(a).
Pursuant to this agreement the Company issued three convertible notes that
provide the holder with the option to convert the note, with a face value of $
1,050, into 250,000 ordinary shares. The note may only 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 on   Option Price    Expiry Date
      conversion of promissory note       US $
                250,000                  4.20        July 30, 2007
                250,000                  4.20        July 30, 2008

    The first convertible note expired in July 30, 2006 and was not

    At February 28, 2007, the Company has nil (May 31, 2006 - 250,000)
warrants outstanding.

    (d) 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.

    The following table summarizes information regarding the Company's
outstanding options as at February 28, 2007:

                                          Number  Option Price    Exercise
                                            of      per Share      Price
                                           Shares   Range CDN $    CDN $
                                          ------- -------------- ---------
    Balance at beginning of the period     2,567   $0.4 - $5.50     $3.03
    Options - granted                      1,316  $3.90 - $5.29     $4.47
    Options - exercised or cancelled        (755)   $0.4 - $3.0     $1.03
    Options outstanding, February 28, 2007 3,128  $0.75 - $5.50     $4.12

    For the purposes of stock based compensation, the fair value of each
option was determined on the date of granting using the Black-Scholes option
pricing model with the following assumptions for the nine month period:
Dividend yield (range - Nil to Canadian $3.5 cents per share) (2006 - Nil),
expected volatility (range - 40% to 60%) (2006 - 60%), risk-free interest rate
(range 4% to 4.8%) (2006 - 4.3%), and weighted average life of 2 to 4 years
(2006 - 3.0 years). At February 28, 2007, the aggregate unamortized fair value
of unvested stock options granted amounted $ 1,202 (May 2006 - $ 722).

    The following table summarizes information about the stock options
outstanding to the officers, directors and staff at February 28, 2007:

                        Outstanding                       Vested options
    ---------------------------------------------------- -----------------
                          Weighted Average   Remaining            Exercise
    Options Option price   Exercise Price      Life      Options    Price
    (000,s)     CDN $          CDN $           Years     (000,s)   CDN $
    ------- ------------- ---------------- ------------- -------- --------
        15         $0.75            $0.75          1.06       15    $0.75
       344         $1.50            $1.50          1.52      344    $1.50
       103         $3.00            $3.00          2.27      103    $3.00
        60         $3.40            $3.40          2.30       60    $3.40
       570         $3.90            $3.90          4.63        -        -
       115         $3.90            $3.90          4.95        -        -
       200         $4.00            $4.00          2.16      200    $4.00
        20         $4.10            $4.10          4.42       20    $4.10
       763         $4.50            $4.50          3.55      254    $4.50
        68         $4.62            $4.62          3.77       23    $4.62
       190         $4.77            $4.77          4.27        -        -
       421         $5.29            $5.29          4.29      421    $5.29
       200         $5.40            $5.40          2.74      200    $5.40
        59         $5.50            $5.50          4.10        -        -
    -------                                              --------
     3,128                                                 1,640
    -------                                              --------

    (e) Earnings per share

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

                               Three months ended     Nine months ended
                                  February 28,           February 28,
                             ---------------------- ----------------------
                                   2007       2006        2007       2006
                             ---------------------- ----------------------
    Basic earnings per share
    Net earnings available to
     shareholders                $3,899     $2,322      $8,217     $6,506
    Weighted average number
     of shares outstanding   48,451,768 46,708,080  48,168,433 46,387,746
    Basic earnings per share
     (cents per share)             0.08       0.05        0.17       0.14

                               Three months ended     Nine months ended
                                  February 28,           February 28,
                             ---------------------- ----------------------
                                   2007       2006        2007       2006
                             ---------------------- ----------------------
    Diluted earnings per
    Net earnings available to
     shareholders                $3,899     $2,322      $8,217     $6,506
    Weighted average number
     of shares outstanding   48,451,768 46,708,080  48,168,433 46,387,746
    Weighted potential net
     incremental issue of
     shares for warrants              -    250,000      27,778    250,000
    Weighted potential net
     incremental issue of
     shares from stock
     options                     41,820  2,181,333     147,088  2,120,170
    Weighted potential net
     incremental issue of
     shares from convertible
     notes                            -    750,000     333,333    750,000
                             ---------------------- ----------------------
    Shares outstanding plus
     assumed conversions     48,493,588 49,889,413  48,676,632 49,507,916
    Diluted earnings per
     share (cents per share)       0.08       0.05        0.17       0.13

    7. Contributed Surplus

    The following table summarizes the movements in contributed surplus.

                                                 February         February
                                                    28,   May 31,   28,
                                                   2007    2006     2006
                                                 -------- ------- --------
    Balance, beginning of period                  $1,625  $1,577   $1,577
    Issuance of stock options (a)                    917       -        -
    Expense for the period                           758     536      334
    Transfer on exercise of options                 (219)   (488)    (217)
                                                 -------- ------- --------
                                                  $3,081  $1,625   $1,694
                                                 -------- ------- --------

    (a) On May 2006, the Company committed to the issue of 421,000 options to
the retiring CEO. A stock compensation expense for $ 917 was recorded on May
2006 against a liability for the commitment of the shares issue. As of this
date, shares have been issued and the liability has been recorded as
contributed surplus.

    8. Segmented 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 Project and the exploration segment is devoted
to the acquisition and exploration of mineral properties. The gold and
exploration segments operate solely in Uruguay. Precious metals are refined
and sold in Europe.

                                              February 28 2007
                                    Gold   Exploration Corporate   Total
                                  -------- ----------- --------- ---------
    For the 3 months ending
    Sales                         $16,606          $-        $-   $16,606
    Amortization and depreciation $(2,331)         $-          $  $(2,331)
    Net income (loss)              $4,895       $(611)    $(385)   $3,899

    For the 9 months ending
    Sales                         $41,216          $-        $-   $41,216
    Amortization and depreciation $(6,255)         $-          $ $(6,2,55)
    Net income (loss)             $10,838     $(1,583)  $(1,038)   $8,217

    As at February 28
    Property, plant and equipment $19,608      $1,627    $1,235   $22,470
    Deferred exploration               $-     $16,379        $-   $16,379

                                              February 28 2006
                                    Gold   Exploration Corporate   Total
                                  -------- ----------- --------- ---------
    For the 3 months ending
    Sales                         $12,167          $-        $-   $12,167
    Amortization and depreciation  $2,174          $7        $-    $2,181
    Net income (loss)              $2,789          $-     $(467)   $2,322

    For the 9 months ending
    Sales                         $35,214          $-        $-   $35,214
    Amortization and depreciation  $6,477         $20        $-    $6,497
    Net income (loss)              $8,020       $(474)  $(1,040)   $6,506

    As at February 28
    Property, plant and equipment $24,621        $157       $10   $24,788
    Deferred exploration               $-      $8,308        $-    $8,308

    9. Supplementary cash flow information

                                            Three months    Nine months
                                                ended      ended February
                                             February 28         28
    Net change in non-cash working capital    2007  2006     2007    2006
                                            ------------- ----------------

      Prepaid expenses and other              $109  $176    $(100)    $75
      Accounts receivable                      786   316   (1,025)   (287)
      Accounts payable and accrued
       liabilities                          (1,183) (957)   1,469  (1,191)
      Inventory                               (513) (431)  (1,428) (1,386)
                                            ------------- ----------------
                                             $(801)$(896) $(1,084)$(2,789)
                                            ------------- ----------------
    Other information
      Cash interest paid                       $89   $79     $130    $253
      Cash taxes paid (a)                        -     -        -       -

    (a) Tax were paid through the utilization of tax receivables from VAT

    10. Financial Derivatives

    The Company holds various forms of financial instruments. The nature of
these instruments and the Company's operations expose the Company to commodity
price risk, currency risk, credit risk, and fair value risk.

    The Company uses financial derivatives to mitigate the effect of certain
risks that are inherent in its business. As at February 28, 2007 the Company
has already cancelled all of its gold option contracts it has entered in the
past to reduce its exposure to fluctuations in the gold price.

    For these contracts the fair value was calculated using the spot price at
period end, expected future prices and volatilities. The nature and level of
these contracts are such that they offer a degree of downside protection while
allowing the company some participation in price appreciation. The fair value
of these contracts is noted below. The net value of these contracts has been
recorded as a liability.

                                                February          February
                                                   28,    May 31     28
                                                  2007     2006     2006
                                                -------- -------- --------
    Gold put options                                 $-       $-       $5
    Gold call options                                 -   (2,317)  (2,219)
    Gold spot deferred contract                       -        -     (315)
                                                -------- -------- --------
                                                     $-  $(2,317) $(2,529)
                                                -------- -------- --------

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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