Final Results

Final Results

Mercator Gold Plc

Mercator Gold PLC

PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2008

London: 1 April 2009 – Mercator Gold plc (“Mercator” or “the Company”) announces its preliminary results for the year ended 30 June 2008.

MANAGING DIRECTOR’S REPORT

Meekatharra Mining Operations & Refinancing of Mercator Gold Australia Pty Ltd

Mercator Gold Australia Pty Ltd’s Meekatharra mining operation commenced gold production in the last quarter of 2007, and produced 9,479 ounces of gold to 31 December 2007, 10,852 ounces to 31 March 2008 and 11,846 ounces to 30 June 2008. Some considerable exploration success was also achieved, with new resources delineated at the Chunderloo and Batavia prospects.

Unfortunately the Meekatharra mining operation experienced substantive operational difficulties relating to the requirement to deviate the Great Northern Highway and a big increase in operating costs brought about by the rising fuel price. The extreme cost inflation experienced by the mining industry as a whole combined with the requirement to deviate the Highway caused Mercator’s operations to become unprofitable.

In particular, labour and fuel costs were a severe burden on the Meekatharra operation during its vulnerable start up phase. The need to deviate the Great Northern Highway in order to continue mining the Surprise pit and the extensive delays encountered in obtaining the required approvals to carry out the deviation from the State Government of Western Australia also worked against the operation.

Faced with an untenable situation, the Board of Directors decided to suspend the Australian operation and endeavour to preserve Mercator Gold plc.

Accordingly, on 9 October 2008 Ferrier Hodgson were appointed as administrators to Mercator’s Australian operating subsidiary Mercator Gold Australia Pty Ltd (MGA) and on 4 December 2008 MGA executed a Deed of Company Arrangement (DOCA). The DOCA endures for an initial period of six months and can be extended.

As a consequence of the DOCA, MGA’s administrators will remain in control of the company, and in concert with MGA’s Directors and with Mercator, are working to refinance the Meekatharra operations with a view to recommencing mining activities as appropriate. The DOCA also provides for a moratorium on the claims of creditors.

The refinancing of MGA is being engineered in conjunction with Tulla Resources Group Pty Ltd and various other interested parties. Tulla Resources Group Pty Ltd is an Australian investment company with interests in various commodity sectors as well as mining services.

While both the outcome of the refinancing of MGA and the interest in MGA that will eventually be held by Mercator Gold plc are at this stage uncertain, a number of initiatives are in place to assist with the refinancing:

• A new business plan for the Meekatharra mining complex has been developed, and this will form the basis of the attempted refinancing. The plan contains a review of the Meekatharra resource/reserve base and sets out a programme and budget for a return to profitable production.
• Negotiations between Tulla, the Company and with various other parties are ongoing.
• A valuation of MGA’s Meekatharra assets has been carried out for the Administrators by AMC Consultants Pty Ltd. The valuation has been completed but is confidential to the liquidator.

Gold Exploration in Papua, Indonesia

Mercator has an option to acquire an exciting gold project in Papua Province, Indonesia. The project area contains a rich alluvial mining area with potential for ongoing operations to be expanded, while the scope for wider exploration, particularly with regard to the possibility of locating the hard rock source of the alluvial gold now being mined, appears exceptional.

It is anticipated that Mercator will recover its initial investment in the project within an 18 month time-frame and will have a free carried interest in the project.

Acquisition of ACS Asia (1996) Co Ltd, an Asia Pacific-Focused Metal Products Company

Mercator has acquired a 70 per cent interest in ACS Asia, a profitable Asia Pacific-focused metal products business formerly owned by the US industrial conglomerate Tyco International. ACS Asia’s product range includes the well known Unistrut brand of construction products, which are manufactured in a modern facility belonging to ACS Asia in Thailand.

Mercator is actively involved in the management of ACS Thailand and has concluded a management agreement with that company that sees a payment of management fees to Mercator Gold plc being made on a monthly basis.

Silver Swan

As a result of the sale in early 2008 of some non-core exploration tenements located near Meekatharra to Silver Swan Group Ltd, an Australian Stock Exchange listed exploration company, Mercator owns ten million Silver Swan ordinary shares and a further four million performance related shares subject to certain conditions, the most notable of which is the proving up by Silver Swan of 350,000 ounces of gold or gold equivalent in the indicated resource category on the tenements sold to it by Mercator.

Silver Swan has made a significant base metal discovery on the tenements acquired from Mercator, and based on the current mid market price Mercator’s shares in Silver Swan are worth approximately AUD$2.5 million. Mercator continues to actively monitor the performance of Silver Swan.

Outlook

The Directors of Mercator Gold plc continue to work wholeheartedly towards a viable future for the Company. As well as attempting to complete the refinancing of MGA, Mercator has acquired one promising new asset and is close to acquiring another. In addition, steps have been taken to significantly reduce overheads and conserve the Company’s cash resources.

Mercator Gold shares were suspended on AIM immediately following the entry of MGA into administration on 9 October 2008, and will remain suspended pending clarification of the Company’s financial position, which is expected during the second quarter of 2009. The Company’s shares could conceivably return to trading if the refinancing of MGA is completed successfully, or if the Company reorients itself around one or more new assets.

Patrick Harford
Managing Director

For further information please contact:

Mercator Gold plc
Patrick Harford, Managing DirectorPatrick Harford, Managing Director
Tel: [phone]Tel: [phone]
[e-mail]
www.mercatorgold.com

Bankside Consultants Ltd
Tel: [phone]Tel: [phone]
Simon RothschildSimon Rothschild
Oliver WintersOliver Winters

Income statement	Â		Â				Â
For the year ended 30 June 2008	Â				Â
				2008				2007
				£				£
Impairment of investment in and loans to subsidiarysubsidiary				(30,044,000)				-
Administrative expenses		Â		(1,656,015)				(887,535)
Operating loss				(31,700,015)				(887,535)
Finance expense				(220,224)				(199,747)
Finance income		Â		22,504				1,977,248
				(31,897,735)				889,966
Loss of associate company attributable to the Company for the year the Company for the year		Â		(45,860)				-
(Loss) / profit for the year, before taxation				(31,943,595)				889,966
Corporation tax		Â		60,116				(60,116)
(Loss) / profit for the year after taxation, attributable to equity shareholders of the Company attributable to equity shareholders of the Company		Â		(31,883,479)				829,850
(Loss) / earnings per share (basic and diluted)diluted)		Â		(50.9)p				1.5p

All amounts relate to continuing activities.

Balance sheet	Â	Â	Â	Â		Â
At 30 June 2008					2008		2007
					£		£
Assets
Non-current assets
Property, plant and equipment					3,686		9,116
Investments in subsidiaries					3,201,760		31,558,950
Investment in associate	Â	Â	Â	Â	1,093,339		-
Â	Â	Â	Â	Â	4,298,785		31,568,066
Current assets
Trade and other receivables					79,996		98,419
Cash and cash equivalents	Â	Â	Â	Â	24,902		1,261,269
Â	Â	Â	Â	Â	104,898		1,359,688
Total assets	Â	Â	Â	Â	4,403,683		32,927,754
								Â
Liabilities and equity
Equity attributable to shareholders
Share Capital					6,267,491		6,224,491
Share premium					27,182,233		26,963,483
Other reserves					722,423		-
Accumulated losses	Â	Â	Â	Â	(32,313,752)		(430,273)
Â	Â	Â	Â	Â	1,858,395		32,757,701
								Â
Non-current liabilities
Interest bearing borrowings	Â	Â	Â	Â	2,206,214		-
Current liabilities
Trade and other payables	Â	Â	Â	Â	339,074		170,053
Total liabilities	Â	Â	Â	Â	2,545,288		170,053
Total equity and liabilities	Â	Â	Â	Â	4,403,683		32,927,754

The financial statements were approved and authorised for issue by the Board of Directors on 31 March 2009.

Statement of changes in equity							Â	Â	Â	Â			Â	Â			Â
	Â	Â	Â	Share capital £	Â	Share premium £					Â	Accumulated losses £			Â	Other reserves £			Â	Total £
Balance at 01 July 2006				5,355,215		22,528,660						(1,260,123)				128,774				26,752,526
Profit for the year ended 30 June 2007		Â		-		-						829,850				-				829,850
Total recognised income and expense for the year		Â		-		-						829,850				-				829,850
Conversion of 9.25% convertible loan notes				-		128,774						-				(128,774)				-)
Issue of shares				869,276		4,638,582						-				-				5,507,858
Share issue costs		Â		-		(332,533)						-				-				(332,533)
Balance at 30 June 2007				6,224,491		26,963,483						(430,273)				-				32,757,701
Loss for the year ended 30 June 2008		Â		-		-						(31,883,479)				-				(31,883,479)
Total recognised income and expense for the year attributable to equityfor the year attributable to equity shareholders of the Companyshareholders of the Company				-		-						(31,883,479)				-				(31,883,479)
Share options expense				-		-						-				476,620				476,620
Attributable share of changes in equity of associated company for the year equity of associated company for the year				-		-										20,423				20,423
Issue of 8.5% convertible loan notes				-		-						-				225,380				225,380
Issue of shares		Â		43,000		218,750						-				-				261,750
Balance at 30 June 2008		Â		6,267,491		27,182,233						(32,313,752)				722,423				1,858,395

Cash flow statement			Â	Â											Â	Â					Â
For the year ended 30 June 2008	Â	Â											Â	Â					Â
		Â															Â	2008					Â	2007
																		£						£
Operating activities
(Loss) / profit for the year before tax																		(31,943,595)						889,966
Adjustments:
Impairment of investment in and loans to subsidiary									Â									30,044,000						-
Depreciation expense property, plant and equipment							Â											4,145						3,550
Loss on disposal of property, plant and equipment																		-						1,958
Loss of associate company for the year																		45,860						-
Interest income																		(22,504)						(1,977,248)
Issue costs amortised – Convertible loan																		29,992						38,835
Interest cost imputed on unwinding loan discount																		35,502						52,834
Interest paid																		154,730						108,078
Share based payments																		476,620						-
Corporation tax																		60,116						(60,116)
Decrease in accounts receivable																		18,423						25,993
Increase/(decrease) in accounts payable								Â										169,021						(2,232)
Net cash flow used in operations		Â																(927,690)						(918,383)
Investing activities
Purchase of property plant and equipment																		-						(8,666)
Proceeds from sale of equipment																		1,285						1,015
Advances to subsidiary undertaking																		(3,030,586)						(3,999,999)
Loans repaid by subsidiary undertaking																		225,000						-
Interest received		Â																22,504						86,544
Net cash used in investing activities		Â																(2,781,797)						(3,921,106)
Financing activities
Proceeds from issue of share capital																		261,750						4,162,217
Proceeds from issue of convertible loan notes					Â													2,366,100						-
Interest paid on convertible loan notes		Â																(154,730)						(41,222)
Net cash from financing activities		Â																2,473,120						4,120,795
Net change in cash and cash equivalents																		(1,236,367)						(718,694)
Cash and cash equivalents at beginning of the year								Â										1,261,269						1,979,963
Cash and cash equivalents at end of the year											Â	Â						24,902						1,261,269

Notes:

1. The financial information set out above does not constitute statutory accounts as defined in section 240 of the Companies Act 185. The profit and loss account, balance sheet and cash flow statement have been extracted from company’s accounts which have been audited. The audit report contains a qualification regarding non compliance with IFRS as regards preparation of consolidated accounts and also contains an emphasis of matter paragraph in relation to the significant uncertainties attached to the recoverability of the investment in the subsidiary undertaking and the use of the going concern assumption.

2. The loss per share is calculated by reference to the loss for the year of £31,883,479 and the weighted average number of shares in issue during the course of the year of 62,517,432.

3. No dividend is proposed in respect of this year.

4. Selected accounting policies

Statement of compliance

The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and their interpretations as adopted by the International Accounting Standards Board (IASB) as adopted by the European Union except that the operating subsidiary has not been consolidated. They have also been prepared with those parts of the Companies Act 1985 applicable to companies reporting under IFRS.

Application of going concern basis of accounting

These financial statements are prepared on a going concern basis notwithstanding the loss for the year of £31,883,479 (2007: £829,850 profit) which the Directors believe to be appropriate on the following basis:

Based on a review of the Company’s budgets and cash flow plans, the Directors are satisfied that the Company has sufficient resources to continue its operations and to meet its commitments for the immediate future. Should the outcome of the administration of the Company’s Australian subsidiary prove less favourable than currently expected, the going concern status of the Company may need to be re-evaluated.

The Directors are taking a number of steps to reduce and contain the cash operating costs of the Company while alternative business opportunities are investigated, including the sale of certain assets to maintain liquidity. There is however a significant risk that the Company may be unable to continue as a going concern.

Copies of the Annual Report and Accounts for the year ended 30 June 2008 will be posted to shareholders by 9 April 2009 and will be available, free of charge, from the Company's registered office at Peek House, 3rd Floor, 20 Eastcheap, London, EC3M 1EB, for a period of 14 days from the date of their posting.