Trading Update & Interim Results - Meekatharra Gold Project

Article Index


MEEKATHARRA GOLD PROJECT– Recovery of Significant Value Expected in 2010

In October 2008, instability in the wall of the Surprise pit at the Meekatharra gold project, then operated by Mercator, forced the cessation of mining activities at Meekatharra. This precipitated substantive losses associated with the Company’s forward sales of gold during a period of extreme volatility in the gold price.

Administrators of Mercator Gold Australia Pty Ltd (“MGA”) were appointed on 9 October 2008, pursuant to Section 436A of the Corporations Act, and were subsequently appointed Deed Administrators of a 180 day holding Deed of Company Arrangement (“DOCA”) on 4 December 2008. The DOCA was extended for a further 90 days by a meeting of creditors held on 10 June 2009. That extension ran its course. The meeting of creditors held on 7 September 2009 was adjourned by a resolution passed by creditors, and the reconvened meeting held on 7 October 2009 approved the variation to the DOCA.

During the course of the year, Mercator’s directors, staff and consultants cooperated closely with the administrators of MGA to arrive at a development plan for the Meekatharra project that would enable its refinancing. This plan was used in an extensive marketing campaign by the administrators and has largely been accepted by the successful bidder for the project, Meekatharra Gold Corporation.

Meekatharra Gold Corporation

The offer from Meekatharra Gold Corporation, which has been accepted by the administrators on behalf of all creditors, of which Mercator Gold is the largest, is subject to confidentiality at this time. However it can be stated that the creditors of MGA will have a 25% interest in Meekatharra Gold Corporation prior to the anticipated listing of Meekatharra Gold Corporation on the Toronto Stock Exchange. To assist with this transaction, Mercator has invested, by way of a loan convertible into shares, C$200,000 in Meekatharra Gold Corporation.

Furthermore, Mercator has agreed to contribute A$1.5 million in the form of a two year convertible instrument in the Company to a trust established to hold the creditors’ interest in Meekatharra Gold Corporation. In return, Mercator will be entitled to 50% of this interest, from which the Company, in due course, expects to realise material value. Mercator has waived any further distribution from the trust.

Mercator expects the acquisition of the Meekatharra gold project to be completed by Meekatharra Gold Corporation during the course of 2010. Once this has occurred, Mercator will assume full control of MGA and with it large operating and capital tax losses, which are of significant value which may be utilised for the benefit of its only shareholder, Mercator Gold plc.

Print   Email