ECR Minerals Regulatory News (ECR)

5 Aug 2005 11:18

Mercator Gold PLC05 August 2005 MERCATOR TO RAISE £1 MILLION THROUGH PROPOSED UNDERWRITTEN OFFER FOR EARLY EXERCISE OF WARRANTS and ISSUE OF ADDITIONAL WARRANTS LONDON 5th August, 2005 - Mercator Gold plc (AIM: MCR) ("Mercator" or "theCompany") proposes to raise £1 million through an underwritten entitlement offerto Warrantholders for the early exercise of 12,500,000 Warrants (the 8 pencewarrants listed on AIM: MCRW). The offer is conditional upon Shareholder andWarrant holder approval being received at the Extraordinary General Meetings ofthe 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: (i) in the event that a Warrant holder chooses to exercise his/her Warrants atany time prior to or during the period commencing on date of the passing of theShareholders Resolution and the Warrantholders Resolution (whichever shall bethe latter) and ending at 3 pm on 13 September 2005 he/she will receive inaddition the one 10p Warrant to which he/she is entitled under the WarrantInstrument, one further 10p Warrant for every two Warrants exercised; (ii) the maximum number of Warrants which may be exercised in aggregate underthe terms of the Offer is 12,500,000. In the event that more than 12,500,000Warrants are exercised in accordance with the terms of the Offer then theapplications shall be scaled down on a pro rata basis. The Offer is conditional upon: (i) The Shareholders Resolution being passed at the EGM; and (ii) 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 AIMon 8 October 2004. The Company entered into the Annean Joint Venture with St Barbara Mines Ltd, acompany listed on the Australian Stock Exchange, to explore for economic goldresources in the Annean Joint Venture area in the Meekatharra region of WesternAustralia. The Company is currently carrying out an extensive drilling programmeon a number of properties within the Annean Joint Venture area and preliminaryresults have encouraged the Company to extend its current programmes. To provide adequate finance for these extended programmes, the Directors haveconsidered a number of funding options available to the Company and after dueconsideration have proposed, subject to the Shareholders Resolution and theWarrantholders Resolution being passed to raise additional finance of up to £1million through an offer to all Warrantholders of an issue of one bonus 10pWarrant for every two Warrants exercised at any time during the periodcommencing on the date of passing the Shareholders Resolution and theWarrantholders Resolution (whichever shall be the later) and ending at 3 pm on13 September 2005 ("the Offer"). The Company currently has in issue 87,119,800 Ordinary Shares and 34,494,600Warrants. Also in issue are the Unlisted Warrants. The Offer will not extend toholders of the Unlisted Warrants. Directors hold, in aggregate, 1,950,000Warrants and will be allowed to participate in the Offer on equal terms withother Warrantholders The terms of the Warrant Instrument state that each Warrant entitles the holderto subscribe for one Ordinary Share at the price of 8p per Ordinary Share at anytime during the period commencing on Admission and expiring 13 months thereafterand for every two Warrants exercised the holder will also be entitled to beissued with one 10p Warrant exercisable at any time during the period commencingon Admission and expiring 25 months thereafter. Current Trading and Future Prospects Mercator believes that the results received from the projects thus far justifythe continuation of drilling programmes at Surprise - including SurpriseExtended and Jess, Bluebird and Maid Marion projects. Sufficient capital will be raised by the early exercise of a proportion ofwarrants to allow drilling to continue without excessive dilution of thecompany's shares. Mercator's objective is to establish a resource base of sufficient size tosustain a substantial operation for a long period of time (greater than 10years). To achieve this objective the company is targeting a minimum of 4deposits containing at least 500,000 ounces each. The Meekatharra area has historically produced a number of such deposits atrelatively 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 peer group review of the company's activities - The Kerrich Report - available on the company's website; 3. 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 theSpaDiSTM System and concluded that "SpaDiSTM is an invaluable tool fordesigning efficient exploration drilling programmes - and further that - it is arevolutionary technology that permits quantitative analyses of ore bodydiametric 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 thoseoperations worldwide, and it further notes that the company has a better than80% chance of discovering more than 500,000 ounces in at least 4 separatedeposits. Mercator's future projects are based on a strong technical team whose work ismonitored both internally and independently on an ongoing basis. It's landholding at Meekatharra is delivering results and the SpaDiSTM Systemleads the way in identifying the high grades zones that will support long termprofitability. Newland Resources Limited Newland has agreed to underwrite the Offer to the maximum extent and hastherefore agreed that in the event that applications under the terms of theOffer are received for the exercise of less than 12,500,000 Warrants it willexercise sufficient of the Warrants held by it to cover the shortfall. Theagreement with Newland is on the following terms. (i) The Warrantholders Resolution will be passed by 30 August 2005; (ii) the Warrantholders shall have 14 days from the date of the WarrantholdersEGM to exercise their Warrants under the terms of the Offer; (iii) If more than 12,500,000 Warrants are exercised, any Warrant exercisemonies accepted shall be scaled back pro-rata based on the total number ofWarrants exercised so that no more than 12,500,000 Warrants are exercised and nomore than 6,250,000 additional 10p Warrants are issued; and (iv) The Company shall pay an underwriting commission to Newland of £50,000 cashpayable upon completion of the Offer. Newland is a related party as a result of their holding 12,849,500 Warrants andnil Ordinary Shares in the Company as at the date of this document, equating to37.25% of the existing Warrants and equating to 14.75% of the Existing ShareCapital. The underwriting arrangements as set out above constitute a relatedparty transaction under the AIM rules. The Directors consider, having consultedwith the Company's Nominated Advisor, that the terms of the underwriting arefair and reasonable insofar as the Company, the shareholders and theWarrantholders are concerned. The Company has called an Extraordinary General Meeting of Shareholders and anExtraordinary General Meeting of Warrantholders for 30 August 2005 at theCompany's office. A notice of this meeting is posted to all Shareholders andWarrantholders detailing the offer and recommending that both resolutions aresupported. The Warrantholders who do not take up their rights under this offerwill not have their original rights varied in any way. Patrick Harford, CEO of Mercator commented: "I am delighted at the supportNewland is showing the Company by agreeing to underwrite the early exercise ofMercator 8p Warrants. The Board believes that this early exercise and bonusissues is the most cost effective method to providing the Company withadditional financing for its extended programmes, including the Nottinghamextension in Meekatharra. The Board will unanimously recommend the proposals toShareholders and Warrantholders at the forthcoming EGMs." Note: The document is available, free of charge, for a period of at least onemonth from the Company's office at Peek House, 3rd floor, 20 Eastcheap, London,EC3M 1EB. -End- 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) 2079291010Email: info@mercatorgold.comWeb: www.mercatorgold.com Beaumont Cornish LimitedRoland Cornish / Felicity Geidt Tel: +44 (0) 20 7628 3396Ocean Equities LimitedWill Slack Tel: +44 (0) 20 7786 4375 King & Shaxson Capital LtdNick Bealer Tel: +44 (0) 20 7553 8281Parkgreen 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 bySusan Vearncombe (Company Director), BSoc.Sci, MSc(Hons), PhD, RPGeo, MAIG. Note to editors Mercator Gold plc was admitted to AIM on 8 October 2004, and entered into theAnnean Joint Venture with St. Barbara Mines to explore for economic goldresources in the Annean Joint Venture area in the Meekatharra region of WesternAustralia. Under the terms of the Annean Joint Venture, Mercator Gold Pty Ltd (thecompany's wholly owned subsidiary) has a right to earn a 45 per cent interest inthe Meekatharra Properties by spending AUD$3 million on exploration by 2 March2006, with a minimum expenditure of AUD$1 million by 2 March 2005. If Mercatorearns the 45 per cent interest, it can elect to increase this interest to 51 percent by spending a further AUD$1 million by 2 March 2007. If Mercator earns the51 per cent interest, it can elect to increase its interest to 70 per cent byspending a further AUD$ 4 million by 2 March 2009. If Mercator earns the 70 percent interest, St. Barbara Mines must then contribute pro-rata on any furtherexpenditure or dilute its interest by a standard dilution formula. Mercator recently announced that the Group has spent the first AUD$1 million andhas elected to proceed towards the first step of earning 45% with a minimumexpenditure requirement of AUD$2 million before 2rd March 2006. SpaDiSTM is a software programme developed by Vearncombe Associates that usesfractal technologies, including autocorrelation, to generate high-grade targetsfrom historic exploration data. Mercator Gold has a contractual arrangement forthe on-going use of SpaDiSTM. The Directors have set the Company an exploration target of 2,000,000 ounces ofgold contained within four resources, each of at least 500,000 ounces within theAnnean Joint Venture area. The Company has reported initial high-grade drilling results from the first twotarget areas, Bluebird and Surprise Projects within the Annean Joint Venture Yaloginda - This line of workings has been the principal source of productionfor St Barbara Mines. Its 15 km x 2 km area has yielded 18 deposits in a varietyof styles of mineralization, but the open pits rarely extend below 70m depth. Mercator will assess the geology, structure, alteration and gold distribution tosee if a super pit style of operation is realistic, and it will examinepotential for extensions of orebodies in depth. The target resource is >500,000oz. Nannine - Oxide deposits were mined by St Barbara with records indicated thattotal gold production has exceeded 100,000 oz. The mineralization is hosted inbasalt, iron formations and granite. Again, >500,000 oz deposits are beingsought. Kurara East - Gold mineralization is hosted in sulphidic quartz veins, mainly inaltered granite, basalt and dolerite. A 3.5 km long zone of anomalous goldgeochemistry has been identified at Bluebush and Mingah, with aircore drillingreturning some good intercepts. Meekatharra North - Is part of a line of workings with an endowment (production+ resources) of over 2.0 million ounces of gold. Mercator is targeting theunder-explored northern extension of this alteration zone. Mercator has outlinedan extension zone of mineralisation over 6500 meters long and containing twoprospects, Maid Marion and Nottingham. This information is provided by RNS The company news service from the London Stock Exchange