Mercator to Raise £1 Million

(“Mercator Gold”, “Mercator” or “the Company”)




LONDON: 5 AUGUST 2005 - Mercator Gold plc (AIM: MCR) (“Mercator” or “the Company”) proposes to raise £1 million through an underwritten entitlement offer to Warrantholders for the early exercise of 12,500,000 Warrants (the 8 pence warrants listed on AIM: MCRW). The offer is conditional upon Shareholder and Warrant holder approval being received at the Extraordinary General Meetings of the Company in advance of the offer being made.


Details of the Offer

The Company proposes to raise £1 million before expenses by way of the Offer.

The terms of the Offer are that:

  1. in the event that a Warrant holder chooses to exercise his/her Warrants at any time prior to or during the period commencing on date of the passing of the Shareholders Resolution and the Warrantholders Resolution (whichever shall be the latter) and ending at 3 pm on 13 September 2005 he/she will receive in addition the one 10p Warrant to which he/she is entitled under the Warrant Instrument, one further 10p Warrant for every two Warrants exercised;
  2. the maximum number of Warrants which may be exercised in aggregate under the terms of the Offer is 12,500,000. In the event that more than 12,500,000 Warrants are exercised in accordance with the terms of the Offer then the applications shall be scaled down on a pro rata basis.


The Offer is conditional upon:

  1. The Shareholders Resolution being passed at the EGM; and
  2. The Warrantholders Resolution being passed at the Warrantholders EGM;


Background to and Reasons for the Offer

Mercator Gold plc is an exploration company which was admitted to trading on AIM on 8 October 2004.

The Company entered into the Annean Joint Venture with St Barbara Mines Ltd, a company listed on the Australian Stock Exchange, to explore for economic gold resources in the Annean Joint Venture area in the Meekatharra region of Western Australia. The Company is currently carrying out an extensive drilling programme on a number of properties within the Annean Joint Venture area and preliminary results have encouraged the Company to extend its current programmes.

To provide adequate finance for these extended programmes, the Directors have considered a number of funding options available to the Company and after due consideration have proposed, subject to the Shareholders Resolution and the Warrantholders Resolution being passed to raise additional finance of up to £1 million through an offer to all Warrantholders of an issue of one bonus 10p Warrant for every two Warrants exercised at any time during the period commencing on the date of passing the Shareholders Resolution and the Warrantholders Resolution (whichever shall be the later) and ending at 3 pm on 13 September 2005 (“the Offer”).

The Company currently has in issue 87,119,800 Ordinary Shares and 34,494,600 Warrants. Also in issue are the Unlisted Warrants. The Offer will not extend to holders of the Unlisted Warrants. Directors hold, in aggregate, 1,950,000 Warrants and will be allowed to participate in the Offer on equal terms with other Warrantholders

The terms of the Warrant Instrument state that each Warrant entitles the holder to subscribe for one Ordinary Share at the price of 8p per Ordinary Share at any time during the period commencing on Admission and expiring 13 months thereafter and for every two Warrants exercised the holder will also be entitled to be issued with one 10p Warrant exercisable at any time during the period commencing on Admission and expiring 25 months thereafter.

Current Trading and Future Prospects

Mercator believes that the results received from the projects thus far justify the continuation of drilling programmes at Surprise – including Surprise Extended and Jess, Bluebird and Maid Marion projects.

Sufficient capital will be raised by the early exercise of a proportion of warrants to allow drilling to continue without excessive dilution of the company’s shares.

Mercator’s objective is to establish a resource base of sufficient size to sustain a substantial operation for a long period of time (greater than 10 years). To achieve this objective the company is targeting a minimum of 4 deposits containing at least 500,000 ounces each.

The Meekatharra area has historically produced a number of such deposits at relatively shallow depths. To monitor progress the company :

  1. has an independent technical Director – Michael Elias – capable of assessing programs and progress;
  2. has commissioned an independent Consultant to conduct resources evaluations at 2 of each advanced project – mainly Bluebird and Surprise – including Surprise Extended.


The Kerrich Report has amongst other things looked at the usefulness of the SpaDiS™ System and concluded that “SpaDiS™ is an invaluable tool for designing efficient exploration drilling programmes – and further that – it is a revolutionary technology that permits quantitative analyses of ore body diametric and grade distribution, with fractal analyses at all scales, accordingly a competitive advantage.”

The Report rates the company’s exploration team as being in the top 10% of those operations worldwide, and it further notes that the company has a better than 80% chance of discovering more than 500,000 ounces in at least 4 separate deposits.

It’s landholding at Meekatharra is delivering results and the SpaDiS™ System leads the way in identifying the high grades zones that will support long term profitability.

Newland Resources Limited

Newland has agreed to underwrite the Offer to the maximum extent and has therefore agreed that in the event that applications under the terms of the Offer are received for the exercise of less than 12,500,000 Warrants it will exercise sufficient of the Warrants held by it to cover the shortfall. The agreement with Newland is on the following terms.

  1. The Warrantholders Resolution will be passed by 30 August 2005;
  2. the Warrantholders shall have 14 days from the date of the Warrantholders EGM to exercise their Warrants under the terms of the Offer;
  3. If more than 12,500,000 Warrants are exercised, any Warrant exercise monies accepted shall be scaled back pro-rata based on the total number of Warrants exercised so that no more than 12,500,000 Warrants are exercised and no more than 6,250,000 additional 10p Warrants are issued; and
  4. The Company shall pay an underwriting commission to Newland of £50,000 cash payable upon completion of the Offer.


Newland is a related party as a result of their holding 12,849,500 Warrants and nil Ordinary Shares in the Company as at the date of this document, equating to 37.25% of the existing Warrants and equating to 14.75% of the Existing Share Capital. The underwriting arrangements as set out above constitute a related party transaction under the AIM rules. The Directors consider, having consulted with the Company’s Nominated Advisor, that the terms of the underwriting are fair and reasonable insofar as the Company, the shareholders and the Warrantholders are concerned.

The Company has called an Extraordinary General Meeting of Shareholders and an Extraordinary General Meeting of Warrantholders for 30 August 2005 at the Company’s office. A notice of this meeting is posted to all Shareholders and Warrantholders detailing the offer and recommending that both resolutions are supported. The Warrantholders who do not take up their rights under this offer will not have their original rights varied in any way.

Patrick Harford, CEO of Mercator commented:

“I am delighted at the support Newland is showing the Company by agreeing to underwrite the early exercise of Mercator 8p Warrants. The Board believes that this early exercise and bonus issues is the most cost effective method to providing the Company with additional financing for its extended programmes, including the Nottingham extension in Meekatharra. The Board will unanimously recommend the proposals to Shareholders and Warrantholders at the forthcoming EGMs.”

Note: The document is available, free of charge, for a period of at least one month from the Company’s office at Peek House, 3rd floor, 20 Eastcheap, London, EC3M 1EB.


For further information please contact:

Mercator Gold plc    
Patrick Harford, Managing Director Tel: +44 (0) 20 7929 1010
Email:This email address is being protected from spambots. You need JavaScript enabled to view it.    
Beaumont Cornish Limited    
Roland Cornish Tel: + 44 (0) 20 7628 3396
King & Shaxson Capital Ltd    
Nick Bealer Tel: +44 (0) 20 7553 8281
Parkgreen Communications    
Justine Howarth / Ana Ribeiro Tel: +44 (0) 20 7493 3713

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