Terra Nostra Announces Third Quarter Financial Results

Terra Nostra Resources Corporation (OTCBB: TNRO), a majority owner of two joint venture companies in the copper and stainless steel industries in China, announced results for the three months ended February 29, 2008.

Revenues for the third fiscal quarter ended February 29, 2008 were $108.8 million, compared to $41.3 million for the three month period ended February 28, 2007. Gross profit reached $11.4 million in the quarter ended February 29, 2008 compared to a loss of $1.3 million in the third quarter ended February 28, 2007. Blended gross profit margin in the quarter was 10.4%, reflecting strong management of raw materials sourcing in both of the copper and stainless steel operations, higher copper pricing, and the addition of higher grade stainless steel.

Operating profit for the three months ended February 29, 2008 was $7.9 million as compared to operating loss of $4.6 million in the period ending February 28, 2007. Comprehensive income for the third quarter ended February 29, 2008 was $39.3 million compared to comprehensive loss for the third quarter ended February 28, 2007 of $3.3 million. Included in fiscal third quarter 2008 comprehensive income was non-cash derivative income of $37.6 million related to the company’s convertible note financings.

On a weighted average share basis, net income in the third quarter was $0.61 per share compared to a net loss of $0.08 per share in last year’s third quarter. On a fully diluted per share basis, net income in the third quarter was $0.45 per share compared to a net loss of $0.08 per share in last year’s third quarter.

“Third quarter’s performance reflects the aggressive ramp in our stainless steel business, with production increasing to 22,260 MT from 1,495 MT last year,” said Don Nicholson, president and acting CFO of Terra Nostra.

“We made good progress executing on our growth strategy to become a premier producer of specialty stainless steel and cathode copper in China,” continued Nicholson. “Refurbishment of the Jinpeng copper facility, designed to bring the plant to international environmental standards, is now complete. On the stainless steel side we produced our initial run of higher value 310-S and increased value-added downstream production of approximately 17,000 MT of hot-rolled strip.”

Nicholson continued, “In the fourth quarter we will continue to deploy the capital raised in the second half of 2007, increasing production and diversifying our product mix. Now that both the Jinpeng and Dongying copper facilities are fully operational, we will begin to ramp downstream production of rod and wire used in the power and home appliance sectors. Based on orders in hand we are planning for a continued ramp in stainless steel production, including a larger portion of higher grade 310-S and hot rolled strip.

“Domestic demand remains robust. Our local sources of supply and our modern, efficient and strategically located plants give us a distinct advantage over imports and other in-country producers. Our performance to date demonstrates that we’ve built an efficient manufacturing model to maximize profitability as we achieve greater economies of scale and optimize capacity utilization,” concluded Nicholson.

Nine Month Results

Revenues for the nine months ended February 29, 2008 were $409.1 million, compared to $153.2 million for the nine months ended February 28, 2007. Gross profit for the period was $38.1 million, compared to $4.7 million for the nine months last year. Blended gross margin was 9.3%, driven by lower raw material costs in both stainless and copper operations and an increase in higher value grades of stainless steel, as compared to 3.0% a year ago. Operating profit for the nine months ended February 29, 2008 was $19.5 million, compared to an operating loss of $3.1 million in the nine months ended February 28, 2007.

For the nine months ended February 29, 2008, comprehensive loss was $2.7 million compared to comprehensive loss for the nine months ended February 28, 2007 of $6.4 million. On a fully diluted per share basis, net loss in the nine months was $0.09 per share compared to a fully diluted net loss of $0.15 per share.

Convertible Financing Accounting Treatment

In accordance with Generally Accepted Account Principles (GAAP), non-cash derivative income relates to the company’s derivative financial instruments that are initially and subsequently carried at fair market values. The market price of the company’s common stock significantly affects the fair value of the derivative financial instruments. Lower stock prices during the period had the effect of significantly decreasing the fair value of the company’s derivative liabilities and, accordingly, the company was required to adjust the derivatives to these lower values with a gain to its income. Further detailed discussion of accounting policies for derivative financial instruments can be found in the company’s most recent 10Q.

Conference Call

Management will conduct a conference call at 9:00 a.m. Eastern today. During the call, management will discuss the company’s quarterly performance and financial results. To participate in the live call by telephone, please dial 877.447.4724 or, for international callers, please dial (1)706.634.5119, and reference ID number 44231630. Those interested in listening to the conference call live via the Internet may do so by visiting the company’s web site at www.tnr-corp.com/ and entering the Investor Center for the link. Please go to the web site 15 minutes prior to the scheduled start to register, download and install any necessary audio software.

About Terra Nostra Resources

Terra Nostra is a leading copper and stainless steel producer in China through its 51% majority interests in two joint venture companies in China. Shandong Terra Nostra-Jinpeng Metallurgical Co., Ltd. has an existing and under construction total production capacity of 170,000 MT of electrolytic copper and 20,000 MT of low-oxygen copper, together with value-added copper rod and wire capabilities. Shandong Quanxin Stainless Steel Co., Ltd. operates a modern stainless steel production facility with a 230,000 MT capacity casting mill, and a 150,000 MT rolling mill. The two joint venture companies, with total assets in excess of US$250 million and over 1,000 employees, are located in the highly industrialized coastal province of Shandong, midway between Beijing and Shanghai. Terra Nostra has entered into an agreement to increase its majority ownership in both joint ventures from 51% to 90%. More information on Terra Nostra can be found at http://www.tnr-corp.com.

Forward Looking Statements

Except for the historical information contained herein, the matters set forth in this press release, including statements with respect to expectations concerning (i) projects underway or under consideration, including production capacity and completion schedules; (ii) business and future potential of Terra Nostra Resources Corporation (“TNRO”); (iii) estimates or implications of future earnings, profits, EBITDA, and the sensitivity of earnings to metals prices; (iv) estimates of future metals production, sales and profitability; (v) estimates of future cash flows, and the sensitivity of cash flows to the other metals and ore costs as well as, but not limited to, fluctuations in fuel prices, scrap prices, and the availability of both, and statements related to these matters or which use words such as “may,”"might,”"should,”"expect,”"plan,”"anticipate,”"believe,”"estimate,”"predict,”"potential” or “continue,” and the negative of these terms and other comparable terminology are all forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Further risks, uncertainties and other factors, which affect the forward- looking statements included herein, and could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements include, but are not limited to, raising additional funds for working capital, obtaining final approval for tax holidays, metals price volatility, competition for projects, reserve acquisition costs, currency fluctuations, international economic uncertainty, sovereign risk, force majeure, changes in tax law or concession law, project scheduling delays, labor disputes, increased production costs and variances in ore grade, scrap grade or recovery rates from those assumed in production plans, political and operational risks in the countries in which TNRO may operate and governmental regulation and judicial outcomes, and other risks detailed from time to time in TNRO’s filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-QSB for the period ended February 29, 2007. Copies of each filing may be obtained from TNRO or the SEC. Furthermore, metals operation, by their very nature, entail inherent cyclical, sectoral, and commodity risk and could expose an investor to the entire loss of all capital invested. TNRO does not undertake any obligation to publicly release any revisions to any forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

TERRA NOSTRA RESOURCES

Consolidated Statements of Operations

(US$)

3 Months Ended

9 Months Ended

February 29, 2008

February 28, 2007

February 29, 2008

February 28, 2007

Revenues

108,788,889

41,254,575

409,101,358

153,216,590

Cost of Sales

97,437,956

42,517,572

370,954,583

148,550,056

Gross Profit/ (Loss)

11,350,933

(1,262,997)

38,146,775

4,666,534

Expenses:

Selling

40,436

69,850

216,013

177,142

General and Administrative – North America

740,310

419,801

10,706,566

2,380,691

General and Administrative – PRC

27,759

1,916,095

2,803,323

2,881,757

General and Administrative Hong Kong

83,153

–

83,153

–

Amortization of deferred financing costs

1,546,053

–

2,058,696

–

Depreciation and Amortization

1,024,223

888,142

2,807,063

2,337,713

Total Expenses

3,461,934

3,293,888

18,674,814

7,777,303

Operating Profit / (Loss)

7,888,999

(4,556,885)

19,471,961

(3,110,769)

Investment Income (Expense)

–

–

–

8,606

Interest (Expense)

(4,667,089)

(933,834)

(9,610,641)

(2,702,356)

Other Income / (Expense)

Other business income / (expenses) net

(671)

(145,158)

15,274

(258,797)

Non-operating income / (expenses) net

(124,487)

589

(109,904)

(71,655)

Derivative Income (Expenses)

37,621,722

–

(5,192,736)

–

Income / (Loss) Before Income Tax

40,718,474

(5,635,288)

4,573,954

(6,134,971)

Provision for Income Tax

1,374,482

–

3,709,895

2,355,730

Income / (Loss) Before Minority Interest

39,343,992

(5,635,288)

864,059

(8,490,701)

Minority Interest

(2,857,958)

1,895,812

(8,050,644)

926,607

Net Income (Loss)

36,486,034

(3,739,476)

(7,186,585)

(7,564,094)

Other Comprehensive Income:

Foreign Currency Translation Adjustment

4,780,545

764,109

7,694,120

2,118,004

Minority Interest’s Share

(2,009,959)

(343,369)

(3,219,484)

(945,859)

TERRA NOSTRA RESOURCES

Consolidated Statements of Operations (Continued)

(US$)

3 Months Ended

9 Months Ended

February 29, 2008

February 28, 2007

February 29, 2008

February 28, 2007

Comprehensive Income (Loss)

39,256,620

(3,318,736)

(2,711,949)

(6,391,949)

Income (Loss) Per Share – weighted average

$0.61

($0.08)

($0.13)

($0.15)

Income (Loss) Per Share – fully diluted

$0.45

($0.08)

($0.09)

($0.15)

Weighted Average Number of Shares

59,651,376

49,206,448

56,018,346

49,186,448

Fully Diluted Number of Shares

81,594,412

49,208,202

78,724,337

49,188,202

TERRA NOSTRA RESOURCES CORP.

Consolidated Balance Sheets

(US$)

February 29, 2008

May 31, 2007

(Unaudited)

(Audited)

Assets

Current Assets

Cash

7,172,802

26,828,106

Cash – Restricted

464,409

9,803,152

Accounts Receivable, Net

36,962,543

453,669

Accounts Receivable – related party

37,079

734

Other Receivables, Net

12,149,340

5,041,313

Other Receivables – Related party

15,265,319

40,509,989

Inventory

51,176,432

24,337,857

Prepaid Expenses

19,122,120

1,357,255

Prepaid Expenses – Related party

18,613,366

84,135

Total Current Assets

160,963,410

108,416,210

Long-Term Assets

Investment

4,234,098

4,133,884

PP&E

72,269,736

64,719,791

Less: Accumulated Depreciation

(11,107,535)

(8,087,684)

Construction Materials

385

1,821

Construction in Progress

3,953,124

5,630,124

Intangible Assets

11,446

13,023

Land Use Rights

5,213,333

5,061,473

Prepayment — related party

24,983,816

–

Total Long-Term Assets

99,558,403

71,472,432

Other Assets

Deferred financing costs

2,728,043

–

Other Assets

35,063

58,757

2,763,106

58,757

Total Assets

263,284,919

179,947,399

Liabilities and Shareholders’ Equity

Current Liabilities

Accounts Payable

11,631,915

2,984,356

Accounts Payable – related party

600,685

61,516

Bank Loans, Short Term

67,254,919

48,963,480

Notes Payable, Other

4,630,021

19,998,431

Land Use Rights Payable

2,105,000

2,105,000

Construction Costs Payable

8,686,578

9,655,714

Construction Costs Payable – related party

1,795,379

1,843,181

Taxes Payable

12,846,543

5,702,851

Convertible Notes

33,660,878

–

Other Liabilities

8,587,930

12,035,720

Other Liabilities – Related Party

41,378,512

33,850,660

Total Current Liabilities

193,178,360

137,200,909

TERRA NOSTRA RESOURCES CORP.

Consolidated Balance Sheets (Continued)

(US$)

February 29, 2008

May 31, 2007

(Unaudited)

(Audited)

Minority interest

40,955,711

29,679,483

Commitment and Contingencies

–

–

Shareholders’ Equity

Class A Common Stock – authorized 100,000,000 shares with a par value of $0.001; 60,800,332 issued and outstanding as at February 29, 2008; 52,762,332 issued and outstanding as at May 31, 2007.

60,799

52,762

Additional Paid in Capital

63,380,113

40,455,770

Accumulated Other Comprehensive Income

6,863,973

4,225,848

Retained Earnings (Deficit)

(41,154,038)

(31,667,373)

Total Shareholders’ Equity

29,150,847

13,067,007

Total Liabilities and Shareholders’ Equity

263,284,918

179,947,399

TERRA NOSTRA RESOURCES

Consolidated Statements of Cash Flows

Nine Months Ended

February 29, 2008

February 28, 2007

Cash Flows From Operating Activities

Net Income (Loss)

(7,186,585)

(7,564,094)

Adjustment to Reconcile Net Loss to Net Cash provided by (used in) Operating Activities:

Depreciation

2,807,063

2,337,713

Minority Interest

8,050,644

(926,607)

Provision for Bad Debts

894,111

–

Provision for Inventory Loss

(40,842)

–

Amortization of deferred financing costs

2,058,696

–

Issue warrant as compensation

2,337,000

–

Issue stock options

5,992,506

–

Derivative expense

5,192,736

–

Imputed interest

2,063,066

–

Shares issued for services

4,590

Interest accrued on convertible notes

3,470,640

–

Changes in Assets and Liabilities:

Accounts Receivable

(37,439,330)

7,584,474

Accounts Receivable –Related Party

–

(58,075)

Other Receivables

(7,108,027)

1,002,288

Other Receivables – Related Party

25,244,670

(13,925,085)

Notes Receivable

–

62,353

Inventory

(26,797,733)

6,970,810

Prepaid Expenses

(17,764,865)

1,655,979

Prepaid Expenses – Related Party

(18,529,231)

1,385,680

Accounts Payable

9,186,728

50,495

Accounts Payable — Related Party

–

(13,669)

Tax Payable

7,143,692

(4,556,797)

Convertible Notes

22,202,221

–

Other Liabilities

(3,878,604)

(100,842)

Other Liabilities – Related Party

7,527,852

9,369,302

Net Cash Flows provided by (used in) Operating Activities

(14,569,026)

3,273,925

Cash Flows from Investing Activities:

Acquisition of Property, Plant and Equipment

(7,489,018)

(15,868,389)

TERRA NOSTRA RESOURCES

Consolidated Statements of Cash Flows (Continued)

Nine Months Ended

February 29, 2008

February 28, 2007

Construction Materials

1,436

40,623

Construction in Progress

1,677,000

12,044,271

Construction Costs Payable

(1,016,938)

1,176,225

Construction Costs Payable — Related Party

–

1,212,403

Short Term Investment

–

24,941

Land Use Right Payable

–

(609,268)

Investment in Intangible Assets

1,577

(13,659)

Deferred Assets

23,694

72,711

Investment

(100,214)

38,836

Long Term prepayment – Related Party

(24,983,816)

–

Net Cash Flows provided by (used in) Investing Activities

(31,886,278)

(1,881,306)

Cash Flows from Financing Activities:

Proceeds from Borrowings

18,291,439

2,492,805

Cash Pledged to Bank

9,338,743

5,193,622

Notes Payable

(15,368,410)

(6,687,132)

Capital Contributions

6,844,110

100,000

Net Cash Flows provided by/(used in) Financing Activities

19,105,881

1,099,295

Net Increase (Decrease) in Cash

(27,354,686)

2,491,914

Effect of Exchange Rates on Foreign Currency Transactions

7,694,120

2,118,004

Cash – Beginning of Period

26,828,106

19,348,547

Cash – End of Period

7,172,802

23,958,465

Supplemental Cash Flow Disclosures:

Interest Paid

2,228,315

2,971,782

Income Tax Paid

3,018,354

7,459,040

Non cash transactions

Shares issued for services provided

4,590

Amortization of deferred financing costs

2,058,696

–

Issue Warrant as Compensation

2,337,000

–

Issue Stock Option

5,992,506

–

Derivative Expense

5,192,736

–

Imputed Interest

2,063,066

–

Interest Accrued for Convertible Notes

3,470,640

–

Total

21,119,234