Raising of GBP1M

Mercator Gold PLC
05 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 'the
Company') proposes to raise £1 million through an underwritten entitlement offer
to Warrantholders for the early exercise of 12,500,000 Warrants (the 8 pence
warrants listed on AIM: MCRW).  The offer is conditional upon Shareholder and
Warrant holder approval being received at the Extraordinary General Meetings of
the 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 at
any time prior to or during the period commencing on date of the passing of the
Shareholders Resolution and the Warrantholders Resolution (whichever shall be
the latter) and ending at 3 pm on 13 September 2005 he/she will receive in
addition the one 10p Warrant to which he/she is entitled under the Warrant
Instrument, one further 10p Warrant for every two Warrants exercised;

(ii) the maximum number of Warrants which may be exercised in aggregate under
the terms of the Offer is 12,500,000. In the event that more than 12,500,000
Warrants are exercised in accordance with the terms of the Offer then the
applications 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 AIM
on 8 October 2004.

The Company entered into the Annean Joint Venture with St Barbara Mines Ltd, a
company listed on the Australian Stock Exchange, to explore for economic gold
resources in the Annean Joint Venture area in the Meekatharra region of Western
Australia. The Company is currently carrying out an extensive drilling programme
on a number of properties within the Annean Joint Venture area and preliminary
results have encouraged the Company to extend its current programmes.

To provide adequate finance for these extended programmes, the Directors have
considered a number of funding options available to the Company and after due
consideration have proposed, subject to the Shareholders Resolution and the
Warrantholders Resolution being passed to raise additional finance of up to £1
million through an offer to all  Warrantholders of an issue of one bonus 10p
Warrant for every two Warrants exercised at any time during the period
commencing on the date of passing the Shareholders Resolution and the
Warrantholders Resolution (whichever shall be the later) and ending at 3 pm on
13 September 2005 ('the Offer').

The Company currently has in issue 87,119,800 Ordinary Shares and 34,494,600
Warrants. Also in issue are the Unlisted Warrants. The Offer will not extend to
holders of the Unlisted Warrants. Directors hold, in aggregate, 1,950,000
Warrants and will be allowed to participate in the Offer on equal terms with
other Warrantholders

The terms of the Warrant Instrument state that each Warrant entitles the holder
to subscribe for one Ordinary Share at the price of 8p per Ordinary Share at any
time during the period commencing on Admission and expiring 13 months thereafter
and for every two Warrants exercised the holder will also be entitled to be
issued with one 10p Warrant exercisable at any time during the period commencing
on Admission and expiring 25 months thereafter.

Current Trading and Future Prospects

Mercator believes that the results received from the projects thus far justify
the continuation of drilling programmes at Surprise - including Surprise
Extended and Jess, Bluebird and Maid Marion projects.

Sufficient capital will be raised by the early exercise of a proportion of
warrants to allow drilling to continue without excessive dilution of the
company's shares.

Mercator's objective is to establish a resource base of sufficient size to
sustain a substantial  operation for a long period of time (greater than 10
years). To achieve this objective the company is targeting a minimum of 4
deposits containing at least 500,000 ounces each.


The Meekatharra area has historically produced a number of such deposits at
relatively 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 the
SpaDiSTM  System and concluded that 'SpaDiSTM  is an invaluable tool for
designing efficient exploration drilling programmes - and further that - it is a
revolutionary technology that permits quantitative analyses of ore body
diametric 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 those
operations worldwide, and it further notes that the company has a better than
80% chance of discovering more than 500,000 ounces in at least 4 separate
deposits.

Mercator's future projects are based on a strong technical team whose work is
monitored both internally and independently on an ongoing basis.

It's landholding at Meekatharra is delivering results and the SpaDiSTM System
leads the way in identifying the high grades zones that will support long term
profitability.

Newland Resources Limited

Newland has agreed to underwrite the Offer to the maximum extent and has
therefore agreed that in the event that applications under the terms of the
Offer are received for the exercise of less than 12,500,000 Warrants it will
exercise sufficient of the Warrants held by it to cover the shortfall. The
agreement 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 Warrantholders
EGM to exercise their Warrants under the terms of the Offer;

(iii) If more than 12,500,000 Warrants are exercised, any Warrant exercise
monies accepted shall be scaled back pro-rata based on the total number of
Warrants exercised so that no more than 12,500,000 Warrants are exercised and no
more than 6,250,000 additional 10p Warrants are issued; and

(iv) The Company shall pay an underwriting commission to Newland of £50,000 cash
payable upon completion of the Offer.

Newland is a related party as a result of their holding 12,849,500 Warrants and
nil Ordinary Shares in the Company as at the date of this document, equating to
37.25% of the existing Warrants and equating to 14.75% of the Existing Share
Capital. The underwriting arrangements as set out above constitute a related
party transaction under the AIM rules. The Directors consider, having consulted
with the Company's Nominated Advisor, that the terms of the underwriting are
fair and reasonable insofar as the Company, the shareholders and the
Warrantholders are concerned.


The Company has called an Extraordinary General Meeting of Shareholders and an
Extraordinary General Meeting of Warrantholders for 30 August 2005 at the
Company's office. A notice of this meeting is posted to all Shareholders and
Warrantholders detailing the offer and recommending that both resolutions are
supported. The Warrantholders who do not take up their rights under this offer
will not have their original rights varied in any way.



Patrick Harford, CEO of Mercator commented:  'I am delighted at the support
Newland is showing the Company by agreeing to underwrite the early exercise of
Mercator 8p Warrants.  The Board believes that this early exercise and bonus
issues is the most cost effective method to providing the Company with
additional financing for its extended programmes, including the Nottingham
extension in Meekatharra. The Board will unanimously recommend the proposals to
Shareholders and Warrantholders at the forthcoming EGMs.'



Note: The document is available, free of charge, for a period of at least one
month from the Company's office at Peek House, 3rd floor, 20 Eastcheap, London,
EC3M 1EB.


                                     -End-


For further information please contact:

Mercator Gold plc
Patrick Harford, Managing Director                                  Tel:  [phone]
Terry Strapp, Chairman                                              Tel : [phone]
Michael de Villiers, Finance Director                               Tel:  [phone]
Email:     [e-mail]
Web:       www.mercatorgold.com


Beaumont Cornish Limited
Roland Cornish / Felicity Geidt                                     Tel:  [phone]
Ocean Equities Limited
Will Slack                                                          Tel: [phone]


King & Shaxson Capital Ltd
Nick Bealer                                                         Tel:  [phone]
Parkgreen Communications
Justine Howarth / Ana Ribeiro                                       Tel:  [phone]


Mercator operates a continuous disclosure policy with respect to exploration
results. Company news releases are based on technical information approved by
Susan 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 the
Annean Joint Venture with St. Barbara Mines to explore for economic gold
resources in the Annean Joint Venture area in the Meekatharra region of Western
Australia.

Under the terms of the Annean Joint Venture, Mercator Gold Pty Ltd (the
company's wholly owned subsidiary) has a right to earn a 45 per cent interest in
the Meekatharra Properties by spending AUD$3 million on exploration by 2 March
2006, with a minimum expenditure of AUD$1 million by 2 March 2005. If Mercator
earns the 45 per cent interest, it can elect to increase this interest to 51 per
cent by spending a further AUD$1 million by 2 March 2007. If Mercator earns the
51 per cent interest, it can elect to increase its interest to 70 per cent by
spending a further AUD$ 4 million by 2 March 2009. If Mercator earns the 70 per
cent interest, St. Barbara Mines must then contribute pro-rata on any further
expenditure or dilute its interest by a standard dilution formula.

Mercator recently announced that the Group has spent the first AUD$1 million and
has elected to proceed towards the first step of earning 45% with a minimum
expenditure requirement of AUD$2 million before 2rd March 2006.

SpaDiSTM is a software programme developed by Vearncombe Associates that uses
fractal technologies, including autocorrelation, to generate high-grade targets
from historic exploration data. Mercator Gold has a contractual arrangement for
the on-going use of SpaDiSTM.

The Directors have set the Company an exploration target of 2,000,000 ounces of
gold contained within four resources, each of at least 500,000 ounces within the
Annean Joint Venture area.

The Company has reported initial high-grade drilling results from the first two
target areas, Bluebird and Surprise Projects within the Annean Joint Venture

Yaloginda - This line of workings has been the principal source of production
for St Barbara Mines. Its 15 km x 2 km area has yielded 18 deposits in a variety
of styles of mineralization, but the open pits rarely extend below 70m depth.

Mercator will assess the geology, structure, alteration and gold distribution to
see if a super pit style of operation is realistic, and it will examine
potential for extensions of orebodies in depth. The target resource is >500,000
oz.

Nannine - Oxide deposits were mined by St Barbara with records indicated that
total gold production has exceeded 100,000 oz. The mineralization is hosted in
basalt, iron formations and granite. Again, >500,000 oz deposits are being
sought.

Kurara East - Gold mineralization is hosted in sulphidic quartz veins, mainly in
altered granite, basalt and dolerite. A 3.5 km long zone of anomalous gold
geochemistry has been identified at Bluebush and Mingah, with aircore drilling
returning 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 the
under-explored northern extension of this alteration zone. Mercator has outlined
an extension zone of mineralisation over 6500 meters long and containing two
prospects, Maid Marion and Nottingham.

                      This information is provided by RNS
            The company news service from the London Stock Exchange