Preliminary Results

Mercator Gold PLC
31 October 2006


                                                                                  31 October 2006


                                             Mercator Gold plc
                                       ('Mercator' or the 'Company')
                                              Ticker- AIM:MCR



       PRELIMINARY ANNOUNCEMENT OF AUDITED FINANCIAL STATEMENTS
       FOR THE YEAR ENDED 30 June 2006

       Chairman's report

       The financial year ended June 2006 was a significant year for Mercator Gold plc.

       8 October 2005 marked the first anniversary of our listing on the AIM market of the London
       Stock Exchange. In that month we also announced our intention to acquire, at a cost of AUD$18
       million dollars, 100% control of the St Barbara's Meekatharra Goldfield.

       The above acquisition included ownership of four historically productive gold areas namely
       Paddy's Flat, Yaloginda, Nannine and Reedy. The gold resources contained within these leases
       now stand at 2,160,000 ounces.

       At Yaloginda, as part of the St Barbara purchase, we also acquired the Yaloginda Mill with a
       rated capacity of 3,000,000 tonnes per annum of oxide material or 1,250,000 tonnes per annum
       of primary or fresh rock.

       The Company's management views the St Barbara acquisition as an opportunity to transform the
       Company from junior explorer to mid-tier producer and to work towards recommencing production
       on a profitable and sustainable basis as soon as it is practicable.

       To assist us in reaching sustainable and profitable production the Company undertook two major
       capital raisings:

       •    the first, in December 2005 raised £10 million at 50p and allowed us to complete
            the acquisition from St Barbara Ltd on 31 January 2006;

       •    the second in May 2006 raised a further £10 million at 70p.

       Since completing the acquisition and related fundraisings the Company's activities have been
       primarily focused upon the expansion of its resource base and the lifting of the quality of
       selected resources to mineable reserve status.

       As at the date of this report:

       •    Total resources had risen from 1,960,000oz to 2,160,000oz.

       •    Indicated resources had risen from 1,099,000oz to 1,401,000oz.

       The indicated resource category is presently the subject of mining studies to assess what
       proportion may be suitable for profitable mining.

       During its long history the Meekatharra district has been at various times a prolific
       generator of substantial profits from many individual mines and a quiet backwater of the
       Western Australian mining scene. Mercator intends to bring to the field what we believe has
       been lacking - namely a commitment to ongoing exploration of the highest technical standards
       to ensure the producing operation has sufficient reserves/resources to ensure a long term mine
       life.

       The Company's exploration team considers, after an extensive and exhaustive review of over
       138,000 drillholes, that the Company's leases contain the potential for sufficient reserves/
       resources to contribute to a long term mine life provided existing and ongoing exploration
       expenditure/success is maintained.

       We are pleased to have been able to attract and retain a quality team of personnel, with the
       exploration team headed by Dr Julian Vearncombe and operations headed by Mr Denis Geldard. We
       also have a group of dedicated professional staff which brings a mixture of youth and
       experience, enthusiasm and care to the task I believe is necessary in order to ensure the
       Company meets its defined objectives.

       Your Company is also actively involved in the community with proactive policies in regard to
       employment and participation in community affairs. The introduction of a heritage trail,
       substantially within the Company's tenements, is an example, together with our concern for the
       environment and other associated responsibilities.

       I look forward to the next exciting year of Mercator's growth and development.

       Terrence Strapp

       Chairman




       Managing Director's report

       The past year represents a period of significant transition for Mercator Gold plc. We began
       the year as an exploration company whose key asset was a joint venture over certain areas in
       the Meekatharra district. By year's end we had gained 100% control of most of the significant
       assets of the Meekatharra Goldfield. To add value to these assets we have focused on four
       areas of activity.

       1. Exploration and Resource Development

       The statutory status of our tenements allowed us to allocate expenditures on the most
       efficient basis possible. We focused our exploration, at various scales, to ensure tenements
       were effectively maintained and targets were effectively explored. We sought to develop
       targets that gave us a reasonable chance of substantially expanding our total resource base.
       Success in this regard was achieved at both Bluebird and Surprise. In addition to growing our
       resource base we directed effort to the improvement of its quality. Our stated aim of
       profitable and sustainable production requires the conversion of resources to reserves. It is
       therefore pleasing to note a considerable increase in the indicated resource category (30%),
       which is potentially convertible to probable reserves. Further exploration success at Paddy's
       Flat, in particular within the Prohibition zone, augurs well for the future. Exploration
       expenditure in all categories was AUD$7.2 million for the year reflecting the Company's strong
       commitment to growth by discovery and our confidence in the Meekatharra district.

       2. Operations

       The acquisition of the Meekatharra assets included the Yaloginda Mill and associated
       infrastructure. With a rated capacity of 3,000,000 tonnes of oxide ore, or 1,250,000 tonnes of
       primary ore, the mill has a replacement value of over AUD$50 million and is unencumbered. The
       absence of such a capital requirement along the Company's path to production represents a
       substantial opportunity. To further our objective we have commenced a refurbishment programme
       costing AUD$2.7 million. The mill will be ready to commence treatment of ore early in 2007.

       The Company's assets include a number of separate deposits whose resources are considered of
       sufficient quality to justify mining studies. Our objective is to produce, prior to the
       recommencement of production, a schedule sufficient to support operations for at least four
       years. At this time our work is focused on Bluebird and Surprise at Yaloginda and the
       Prohibition-Vivian-Consols' resources at Paddy's Flat. From each of these we received
       excellent drilling results over the course of the year.

       3. Building our Team

       Mercator is a young company and as such is paying much attention to the building of its team.
       Denis Geldard joined as Operations Director at the time of the asset acquisition. Denis brings
       exceptional skills to our task of optimising the resources of the Meekatharra district. His
       experience includes a five-year period as the Operations Manager of one of Meekatharra's most
       profitable mines. His knowledge of the industry and of the field is outstanding.

       The exploration team led by Drs Julian and Susan Vearncombe is one of which we are very proud.
       The geology of the Western Australian greenstone belts is very complex and Meekatharra is no
       exception. The excellent quality of the exploration particularly at Surprise and Prohibition
       during the past year has added considerably to the value of these assets.

       4. The Year Ahead

       The Company is focused on recommencing production as soon as is practicable. The criteria for
       recommencement are that it be both profitable and sustainable. Whilst the year saw an historic
       high for the AUD$ gold price, our planning is essentially conservative. We aim to ensure that
       the Company can produce very profitably at a gold price of USD$450/oz. Our work in the next 12
       months will ensure that this is the case.

       Our Responsibilities

       Whilst clearly focused on delivering value to our shareholders, the Company recognises a broad
       range of responsibilities as intrinsic to its success.

       Firstly, the safety and health of our staff is our top priority. We aim, through training, for
       each of our employees to feel and to be secure. Constant attention is directed to this goal at
       all levels within the Company.

       Secondly, the environment in which we live and work is precious to us. We aim to minimise the
       impact of our activities on it and where possible to enhance it.

       Thirdly, we belong to a community. Meekatharra is a small town but it has a long history based
       on both the mining and pastoral industries. Where possible we draw on the skills of the
       community and support local initiatives. Our agreements with the Wadjari Yamatji (formerly
       Gnoonooru Wadjari) and the Yugunga-Nya groups, aim to ensure long-term partnerships.


       Patrick Harford

       Managing Director








       Consolidated Profit and Loss Account

       For the year ended 30 June 2006
                                                                                2006                 2005
                                                                                   £                    £
       Administrative expenses                                           (2,127,615)            (926,654)
       Other income                                                          233,469                    -
       Operating loss                                                    (1,894,146)            (926,654)
       Interest payable and similar items                                   (94,682)              (2,162)
       Interest receivable and similar items                                 152,203               61,497
       Loss on ordinary activities before taxation                       (1,836,625)            (867,319)
       Taxation                                                                    -                    -
       Loss on ordinary activities after taxation                        (1,836,625)            (867,319)
       Loss per share                                                         (7.5)p              (20.3)p
       All amounts relate to continuing activities

       Consolidated Statement of Total Recognised Gains and Losses

       For the year ended 30 June 2006
                                                                                2006                 2005
                                                                                   £                    £
       Loss for the financial year                                       (1,836,625)            (867,319)
       Exchange adjustments on foreign currency net investments            (929,394)                    -
       Total recognised gains and losses for the financial year          (2,766,019)            (867,319)

       Consolidated Balance Sheet

       At 30 June 2006
                                                                                2006                 2005
                                                                                   £                    £
       Fixed assets
       Intangible                                                         10,529,014            1,453,885
       Tangible                                                            2,859,412               65,934
       Total fixed assets                                                 13,388,426            1,519,819
       Current assets
       Stocks                                                                 91,687                    -
       Debtors                                                               403,524              194,972
       Cash at bank and in hand                                           13,297,216              954,467
       Total current assets                                               13,792,427            1,149,439
       Creditors - amounts falling due within one year                   (1,140,995)            (572,611)
       Net current assets                                                 12,651,432              576,828
       Total assets less current liabilities                              26,039,858            2,096,647
       Creditors - amounts falling due after more than one year            (854,784)                    -
       Provisions for liabilities                                        (1,205,594)                    -
       Net assets                                                         23,979,480            2,096,647

       Capital and reserves
       Called -up share capital                                            5,355,215              871,198
       Share premium account                                              22,528,660            2,492,599
       Merger reserve                                                      (399,831)            (399,831)
       Other reserves                                                        128,774                    -
       Profit and loss account                                           (3,633,338)            (867,319)
       Equity shareholders' funds                                         23,979,480            2,096,647

        Shareholders' Funds

        For the year ended 30 June 2006

                                                                              2006                   2005
                                                                                 £                      £
        Loss for the financial year                                    (1,836,625)              (867,319)
        Exchange adjustments on foreign currency net investments         (929,394)                      -
        Merger reserve arising on consolidation                                  -              (399,831)
        Equity reserve arising on issue of convertible loan notes          128,774                      -
        New share capital issued                                        24,520,078              3,363,797
        Net addition to shareholders' funds                             21,882,833              2,096,647
        Opening shareholders' funds                                      2,096,647                      -
        Closing shareholders' funds                                     23,979,480              2,096,647

        Consolidated Cash Flow statement

        For the year ended 30 June 2006
                                                                              2006                   2005
                                                                                 £                      £
        Net cash outflow from operating activities                       (376,588)              (527,002)
        Returns on investments and servicing of finance                    138,752                 29,718
        Capital expenditure and financial investment                  (11,988,877)            (1,541,832)
        Net cash outflow before management of liquid resources and    (12,226,713)            (2,039,116)
        financing:
        Management of liquid resources                                (12,939,994)              (647,000)
        Financing                                                       25,426,774              2,963,966
        Increase in cash in the period                                     260,067                277,850

        Reconciliation of net cash flow to movement in net funds
        Increase in cash in the period                                     260,067                277,850
        Movement in short term deposits                                 12,939,994                647,000
        Exchange differences                                             (857,312)                 29,617
        Increase in cash and short term deposits                        12,342,749                954,467
        Increase in debt due after more than one year                    (854,784)                      -
        Movement in net funds in the period                             11,487,965                954,467
        Net funds at 30 June 2005                                          954,467                      -
        Net funds at 30 June 2006                                       12,442,432                954,467

        Reconciliation of Operating Loss to Operating Cash Flows
        Operating loss                                                 (1,894,146)              (926,654)
        Depreciation and amortisation charges                               48,187                 22,013
        Increase in debtors                                              (208,552)              (194,972)
        Increase in inventories                                           (91,687)                      -
        Increase in creditors                                            1,769,610                572,611
        Net cash outflow from operating activities                       (376,588)              (527,002)

          Notes:

    1     The financial information set out above does not constitute statutory accounts as
          defined in section 240 of the Companies Act 1985.  The consolidated profit and loss
          account, consolidated statement of total recognised gains and losses, consolidated
          balance sheet, reconciliation of shareholders' funds and consolidated cash flow
          statement have been extracted from the Group's 2006 statutory financial statements upon
          which the auditors' opinion is unqualified and contained no statements under s237 of the
          Companies Act 1985.

    2     The loss per share is calculated by reference to the loss for the year of £1,836,625
          (2005: £867,319) and the weighted average number of Shares in issue during the year of
          24,583,888 (2005: 4,280,724 - restated to take account of the 10:1 share consolidation
          on 18 January 2006).  There is no dilutive effect of share options or warrants.

    3     No dividend is proposed in respect of the period.

    4     Selected accounting policies

          Basis of preparation of financial statements

          The financial statements have been prepared under the historical cost convention and in
          accordance with applicable accounting standards.

          Application of going concern basis and availability of finance

          These financial statements are prepared on a going concern basis, notwithstanding the
          loss for the period to 30 June 2006 of £1,836,625 (2005: £867,319), which the Directors
          believe to be appropriate for the following reasons:

          In common with many exploration companies, the Company raises finance for its
          exploration and appraisal activities in discrete tranches to finance its activities for
          limited periods only. Further funding is raised as and when required, the most recent
          being in May 2006.

          The Company is currently undertaking an extensive work programme covering various
          tenements at Meekatharra. This work programme includes the feasibility studies on
          projects that are considered to be near term production targets.  Following the
          Company's acquisition of the Yaloginda Mill at Meekatharra, the Company has committed to
          a refurbishment programme which is scheduled for completion in January 2007.

          The Directors are of the opinion that the Company has sufficient funds to complete the
          abovementioned work programme and plant refurbishment, for at least the next twelve
          months from the date of approval of these financial statements.  On completion of the
          feasibility studies of the near term target areas, the Company will be better able to
          assess the likely timing of gold production, cash flow and further capital expenditure
          requirements for these areas.  This will also determine the future demand for working
          capital and funding for continued exploration and development work programmes and the
          requirement, if any, for further fundraising.

          Basis of consolidation

          The Group accounts consolidate the accounts of Mercator Gold plc and its subsidiary
          undertaking. The acquisition by the Company of Mercator Gold Australia Pty Ltd in August
          2004 was accounted for in accordance with the principals of Merger accounting set out in
          Financial Reporting Standards 6 on 'acquisitions and mergers'. Accordingly, the
          consolidated financial statements are presented as if Mercator Gold Australia Pty Ltd
          has been controlled by the Company throughout the period from its incorporation on 19
          January 2004.

          Exploration and development costs

          All costs associated with mineral exploration and investments are capitalised on a
          project-by-project basis, pending determination of the feasibility of the project. Costs
          incurred include appropriate technical and administrative expenses but not general
          overheads. If an exploration project is successful, the related expenditures will be
          transferred to mining assets and amortised over the estimated life of the commercial ore
          reserves on a unit of production basis. Where a licence is relinquished or a project
          abandoned, the related costs are written off. Where the Group maintains an interest in a
          project, but the value of the project is considered to be impaired, a provision against
          the relevant capitalised costs will be raised.

          The recoverability of all exploration and development costs is dependent upon the
          discovery of economically recoverable reserves, the ability of the Company to obtain
          necessary financing to complete the development of reserves and future profitable
          production or proceeds from the disposition thereof.

    5     Copies of the Annual Report and Accounts for the year ended 30 June 2006 will be posted
          to shareholders by 1 November 2006 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. The financial statements will be
          delivered to the Registrar of Companies following the conclusion of the annual general
          meeting.



For further information please contact:

Mercator Gold plc
Patrick Harford, Managing Director                   Tel: [phone]

Email: [e-mail]
Website:  www.mercatorgold.com

Parkgreen Communications
Justine Howarth / Ana Ribeiro                        Tel: [phone]




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