Transaction Update

Mercator Gold plc is pleased to advise that pursuant to the terms of the heads of agreement (“Heads of Agreement”) with THEMAC Resources Group Ltd (“THEMAC”) announced on 16 March 2010, US$850,000 was last week advanced (“the Advance”) by the THEMAC to Mercator’s wholly owned subsidiary New Mexico Copper Corporation (“NMCC”) to enable NMCC to make a payment of the same amount due on 31 March in respect of the exercise of its exclusive option to acquire a 100% interest in the Copper Flat copper-gold-molybdenum-silver project (“Copper Flat”) in New Mexico, USA.



Under the Heads of Agreement, Mercator is to sell its entire interest in NMCC to THEMAC (“the Transaction”), a company listed on the TSX Venture Exchange (ticker: MAC.H). Mercator is to receive as consideration 10.5 million fully paid shares in THEMAC and 10.5 million warrants valid for five years and exercisable on a one for one basis at C$0.28 per share. Completion of the Transaction is expected in May or June of this year.

Following the completion of the Transaction it is the intention of THEMAC (subject to the outcome of all necessary feasibility, financing and permitting steps) to make all required payments to exercise NMCC’s option over Copper Flat and to progress the project to production.

THEMAC is to fund or reimburse all expenditure by Mercator and/or NMCC in relation to the Copper Flat project from the date of the Heads of Agreement until the completion of the Transaction, including any payments to exercise NMCC’s option over Copper Flat that fall due.

The subscription by Mercator and its nominees for 5.5 million units of THEMAC at C$0.15 per unit, each unit to consist of one share and one warrant valid for one year and exercisable on a one for one basis at C$0.28 (“the Initial Placing”), is in the process of being completed. Mercator has subscribed for 4 million units in the Initial Placing and has transferred funds in respect of this subscription to THEMAC.


Mercator’s Shareholding in THEMAC

As a result of the Transaction, Mercator will not be responsible for the purchase and development costs of Copper Flat but will retain, through its shareholding in THEMAC, a very substantial interest in the project.

Mercator will hold up to 29 million shares in THEMAC following completion of the Transaction, taking into account all shares expected to be acquired by the Company by means of the Initial Placing and as consideration for the Transaction and assuming the exercise of all warrants expected to be acquired by the Company.

It is anticipated that following completion of the Transaction THEMAC will have a maximum of approximately 70.1 million shares in issue. On this basis, Mercator’s shareholding in THEMAC would equal up to approximately 41.4% of THEMAC’s issued share capital.

Completion of the Transaction is conditional on the completion of a second placing (“the Second Placing”) of units of THEMAC sufficient to raise C$5 million at a minimum placing price of C$0.50 per unit, each unit to consist of one share and one warrant valid for one year and exercisable on a one for one basis at a price sufficient to raise C$10 million should all the warrants be exercised.

The closing price of shares in THEMAC on the last trading day prior to their suspension in connection with the Transaction was C$0.24 and at that point there were approximately 12.6 million shares in issue (approximately 18.1 million fully diluted).


Terms of the Advance

The Advance will bear no interest unless the Transaction is not completed, in which case the Advance must be repaid within six months of the Heads of Agreement (or the definitive agreement intended to succeed it) being consequently terminated. Should the Advance not be repaid within that period it will begin bearing interest at a rate of 8% per annum. Repayment of the Advance is guaranteed by Mercator in the event that the Transaction is not completed.


Terms of the Initial Placing

The Initial Placing is being carried out on a subscription receipts basis in order to comply with the requirements of the TSX Venture Exchange. Accordingly, the units of the Initial Placing will not be issued until the Transaction has completed. In the event that the Transaction is not completed, a possibility Mercator considers to be unlikely, Mercator and other subscribers for units of the Initial Placing would receive an interest in the repayment of the Advance equal to amount of their subscription. Alternatively, subject to the approval of the TSX Venture Exchange and the agreement of THEMAC and Mercator, the issue of the units of the Initial Placing would take place as planned.


About the Copper Flat Project

Copper Flat is a former producing mine with substantial infrastructure still in place. The Copper Flat deposit has historic reserves of 50.21 million short tons at an average grade of 0.45% Cu, 0.1244 g/t Au, 2.053 g/t Ag and 0.015% Mo, based on a cut-off grade of 0.23% Cu.

On the basis of current historic reserves and assuming metal prices of US$3/lb copper, US$10/lb molybdenum, US$900/oz gold and US$13/oz silver, the Copper Flat project is estimated to have an NPV of US$348 million and an IRR of 45%, assuming initial capital costs of US$115 million for the recommencement of production and a discount rate of 8% (figures sourced from a preliminary review of the project carried out by an independent consulting group in August 2009). The current price of copper is in excess of US$3/lb.


For further information please contact:

Mercator Gold plc
Michael Silver, Chairman Tel: +44 (0) 20 7929 1010
Patrick Harford, Managing Director +1 646 239 9087
Email:This email address is being protected from spambots. You need JavaScript enabled to view it.
Bankside Consultants Ltd Tel: +44 (0) 20 7367 8888
Simon Rothschild
Oliver Winters
Cenkos Securities plc
Beth McKiernan Tel: +44 (0) 20 7397 8900
Old Park Lane Capital PLC
Forbes Cutler Tel: +44 (0) 20 7518 2603
Director of Corporate Broking
Barry Kaplan Associates
Larry Kaplan Tel: +1 732 747 0702


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