ECR Minerals Regulatory News (ECR)

3 Nov 2005 11:07

Mercator Gold PLC03 November 2005 FOR IMMEDIATE RELEASE 3 November 2005 Proposed Meekatharra Asset Acquisition from St Barbara Mines Limited ("Mercator" or "the Company") LONDON - Mercator Gold plc (AIM: MCR/MCRW) is pleased to confirm, further to theannouncement on 28 October 2005, the terms of the agreement to acquire StBarbara Mines Limited's ("SBM") entire gold exploration and mining assets in thehighly prospective Meekatharra Belt of Western Australia, subject to shareholderapproval. The total purchase consideration will comprise of AU$18 million (£7.56million) in cash and new ordinary shares plus the adoption of environmentalbonding requirements of approximately AU$3 million (£1.26 million). The acquisition will consolidate Mercator's position as the dominant player inthe Murchison Gold Province and has the potential to transform the Company fromexplorer to producer by providing 100% ownership of the mining tenements andinfrastructure required to commence any significant gold production. The acquisition will comprise: •The current 55% balance of SBM's interest in the Annean Joint Venture with Mercator; •The 3 million tonne per annum Bluebird (Yaloginda) mill and gold processing facility, together with associated plant, equipment, 250-person camp and tailings dams located 10km south of the Meekatharra township within the Annean Joint Venture area. The mill is currently on care and maintenance and Mercator considers that it has a replacement value in excess of £20 million; •Approximately 123 granted exploration tenements and 92 tenement applications in the Meekatharra region ("the Meekatharra Tenements"), bringing Mercator's total holding to 439 granted and pending tenements totaling 1,970 sq km; •The SBM joint venture interest and benefits (currently 100% but reducing to potentially 35%) in the Pollelle joint venture with Elara Mining Pty Ltd (subject to Elara Mining's first right of refusal); •Land and property assets in and around Meekatharra and an option on pastoral leases covering a portion of the tenement area. Managing Director, Patrick Harford, said: "This acquisition provides 100%ownership of the emerging and highly prospective Annean Joint Venture ground,significant additional gold resources, and a large mill and gold processingplant. Outright purchase of these assets means Mercator will have acquiredwithout debt all the assets required to commence significant gold production atMeekatharra. This acquisition marks an important milestone in Mercator's shortlife." Meekatharra assets strategically located near the Bluebird gold processingfacility The acquisition will consolidate and enlarge Mercator's holding over the highlyprospective Meekatharra Belt in the Murchison Gold Province, more than doublethe Company's gold resource base and add significant additional explorationground to the Yaloginda project area currently yielding significant explorationsuccess for the Company. Ownership of the Bluebird mill and gold processing plant along with the enlargedresource base are integral to giving the Company the capacity to commencesignificant gold production during 2007 should it reach its resource basecriteria. Exploration of the Meekatharra Tenements by St Barbara has outlined significantgold resources (greater than 1.5 million ounces in indicated and inferredcategories) which require significant geological input and drilling to convertto mineable ounces. This represents an excellent exploration opportunity for theCompany's geology team to apply the same process of validation and drillingwhich has seen resources of 120,000 ounces at Bluebird and Surprise rise to470,000 ounces of indicated and inferred resources over comparable areas. The enlarged tenement package gives Mercator the largest land holding in theMurchison Gold Province. In addition to the above tenements, the company isacquiring the rights to a number of Miscellaneous and General Purposes Licensesproviding access, water, waste dump and tailings dam rights. The Bluebird gold processing plant has a capacity of 3 million tonnes per annumof oxide ore, dependent on ore hardness and leach residence time required. TheBluebird plant has a standard layout with single stage crushing, open stockpile,SAG and ball milling, emergency feed, pebble/scats reject conveyors, leach andadsorption, elution, gold recovery, reagents, tailings and services areas. Theplant is in excellent condition and has the potential to produce in excess of170,000 ounces of gold per annum at a 2g/t Au feed rate and 90% recovery. The Bluebird mill and associated infrastructure located 12 Km from Meekatharracould be re commissioned at a relatively low cost as and when Mercator commencesmining operations.The plant has a flexible configuration which allows for the treatment ofdifferent ore types and throughput rates. A large production facility with no attached debt significantly lowers the totaloperating costs associated with the treatment of gold bearing ores and asconsequence enhances any exploration success achieved by the Company. Mercator considers that the replacement cost of the plant and associatedinfrastructure, including a 250 person camp, would be in excess of AU$48 million(£20 million).In addition to the tenements, resources and plant, the company is acquiring: • data and intellectual property related to exploration, mining and ore processing on the tenements; • a residential camp capable of housing up to 250 people; • offices, warehouse, workshops, vehicles, spare parts and consumables; • a six month option to purchase the Annean (1686 sq km), Norie (213 sq km) and Cullculli (584 sq km) pastoral leases. Purchase consideration The purchase consideration is as follows: 1. Cash consideration of AU$5 million (£2.1 million), includinga non-refundable cash deposit of AU$250,000 (£105,000); 2. The issue to SBM of AU$13 million (£5.46 million) of fullypaid ordinary Mercator shares at completion at an issue price equal to the priceat which the Company raises new capital to fund the acquisition; 3. Mercator to assume approximately AU$3 million (£1.26million) in Environmental Bonds presently held by SBM and to assume theobligations under existing production royalties over the acquired tenements(principally the 1.5% production royalty owned by Resource Capital Fund III LPover all of the SBM tenements that are the subject of this sale). Conditions Precedent The Sale Agreement is subject to the following conditions precedent: •Mercator completing to its sole satisfaction due diligence on the Meekatharra assets on or before 28 November 2005. •Mercator obtaining all necessary regulatory and shareholder approvals, and completing the acquisition by 31 January 2006. (Mercator has an option to extend completion to 28 February 2006 by paying a further non-refundable deposit of AU$500,000 (£210,000), such deposit to be subtracted from the purchase price on successful completion.) •Mercator raising a minimum of £8 million cash through a placing of new shares prior to 31 January 2006. (The company has received expression of interest from suitable qualified broking institutions in support of this proposed capital raising and has appointed Loeb Aron & Company Ltd as investment adviser in respect of the acquisition and capital raising.) Capital Structure Management intends to raise between £8 and £12 million in the placing, which isconsidered sufficient to fund the payment of the cash portion of the acquisition(£2.1 million) and increase exploration activity targeting additional qualityresources, the conversion of resources into reserves as well as working capitalleading to commencement of gold production at Meekatharra. The proposed transaction will result in SBM becoming a 20% shareholder inMercator. This structure recognises SBM's desire to maintain an interest in theprospective tenement holdings, In consideration of the proposed new capital raising and the proposed transitionfrom explorer to producer, shareholders will also be asked to approve aconsolidation of the share capital of the Company on the basis of one share forevery ten held. Warrants and options will be consolidated on the same basis. Board Change Paul R. Loudon, a director of Loeb Aron & Co. has tendered his resignation as anon-executive director of Mercator so that he can act impartially as an adviserto the Company in relation to the acquisition and capital raising. Share Suspension. The acquisition represents a "reverse" transaction under the AIM Rules andaccordingly the existing Mercator ordinary shares and the warrants of theCompany have been suspended from trading until either: a) The Company posts to its shareholders an admission document andcircularfor shareholder approval of the acquisition (expected to be a date nolater than 31 December 2005), or b) The Company decides not to proceed with the acquisition in accordancewith the terms of the agreement with SBM. Warrants - expiring 7th November 2005Although the shares and warrants will be suspended from trading, warrant holdersare still able to exercise the warrants up until the expiry date 7th November2005 if they so desire. The Company has written to warrantholders informing themof this ability and copies of that letter, together with this announcement, areavailable, free of charge, for a period of one month from the offices of theCompany at Peek House, 3rd Floor, 20 Eastcheap, London EC3M 1EB. Anticipated timetableThe anticipated timetable for completion of the acquisition and the balance ofthe matters referred to above is set out below: Event Date--------------------------- ---------------------------Announcement of transaction 28 October 2005Completion of Due Diligence 28 November 2005Posting of admission document and circular to 30 December 2005shareholdersExtraordinary General Meeting and completion of By end of January 2006capital raising and of acquisition of Meekatharra ---------------------------assets--------------------------- For further information please contact:Mercator Gold plcPatrick Harford, Managing Director Tel: +44 (0) 7786 486645Terry Strapp, Chairman Tel : +61 (0) 8 9322 7422Michael de Villiers, Finance Director Tel: +44 (0) 20 7929 1010Dr Julian Vearncombe Tel: +61 (0) 8 9316 9400Email: info@mercatorgold.comwww.mercatorgold.comBeaumont Cornish LimitedRoland Cornish Tel: +44 (0) 20 7628 3396 King & Shaxson Capital LtdNick Bealer Tel: +44 (0) 20 7426 5986 Ocean Equities LtdWill Slack Tel: +44 (0) 20 7786 4375 Parkgreen CommunicationsJustine Howarth / Ana Ribeiro Tel: +44 (0) 20 7493 3713 Mercator operates a continuous disclosure policy with respect to explorationresults. Company news releases are based on technical information approved bythe Company's Exploration Director, Julian Vearncombe BSc (Hons), PhD, FGS,RPGeo, FAIG. Information on the acquisition resources was supplied by SBM. This information is provided by RNS The company news service from the London Stock Exchange