Mercator Minerals 2011 Annual Review

solid core

m e r c at o r m i n e r a l s a n n u a l r e v i e w 2 0 1 1

2 // mercator minerals annual review 2011 2 // mercator minerals annual review 2011

mercator minerals annual review 2011 // 1

core st rat egy

Our core strategy is to deliver on a value

accretive organic growth plan to significantly

increase our copper production growth

profile over the next five years.

This strategy is expected to propel us to a

mid-tier base metal producer and one that

provides shareholders with an exposure to

copper and molybdenum production from our

large tonnage, long-life Mineral Park Mine, as

well as development potential from both the

construction-ready El Pilar copper project, and

the El Creston molybdenum-copper deposit.

Our core operations are in safe, mining-

friendly jurisdictions in the USA and Mexico.

Our core leadership team has the experience

of exploring, developing, and building

operations that deliver value.

In a growing world that needs the metals we

produce, our growth potential positions us to

deliver and unlock shareholder value.*copper equivalent production is calculated using a molybdenum/copper ratio of 4.53.

350

300

250

200

150

100

50

0

Cu

Eq*

Pro

duct

ion

(Mill

ion

lbs)

El Creston

El Pilar

Mineral Park

2011 2014E Beyond

310

%

projected grow th

2 // mercator minerals annual review 2011


2011 : Year in review

· June: Acquired Creston Moly Corp. and with it the El Creston

property – an advanced stage molybdenum-copper deposit

in northern Mexico.

· September: Completed Phase 2 expansion at

Mineral Park Mine to 50,000 tons per day throughput.

· November: Filed the El Pilar feasibility study, which indicated a

robust, economically feasible copper deposit in northern Mexico.

· Record production: Copper equivalent production of

80.3 million pounds: 42.4 million pounds of copper,

7.0 million pounds of molybdenum, and 721,442 ounces

of silver.

· Strong cash flow generation: Over $55 million of cash

from operations.

· Appointed new CEO, Bruce McLeod, new CFO, Mark Distler,

and three new Directors: Bruce McLeod, John Bowles, and

Colin Benner.

Financial excerpts

us$ millions, unless noted 2011 2010

revenue 263.0 182.6

operating profit 42.7 27.5

net income (loss) earnings per share (basic)

91.7 $ 0.41

(139.2 ) $ (0.71 )

cash Flow from operations 55.2 21.3

cash 42.9 46.2

total assets 612.9 422.7

production

throughput

revenue

300

250

200

150

100

50

US

$ M

illio

ns

2009

2010

2011

40,000

35,000

30,000

25,000

20,000

Tons

per

day

2009

2010

2011

CopperMolybdenum

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0

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ion

lbs

2009

2010

2011

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US

$ M

illio

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2009

2010

2011

40,000

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20,000

Tons

per

day

2009

2010

2011

CopperMolybdenum

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40

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Mill

ion

lbs

2009

2010

2011

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US

$ M

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2011

40,000

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per

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2011

CopperMolybdenum

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2009

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2011

core grow th



Mercator Minerals has a talented team of experience

that has developed, built, and grown mining companies.

The senior management team leads nearly 400 employees

in its continual goals of safe production, lowering costs,

increasing productivity, and growing the company.

From left to right: mark w. distler cpa, Chief Financial Officer // michael j. Broch Bsc, Geology, MSc, Economic Geology, FAusIMM, VP Exploration & Valuations // d. Bruce mcleod p.eng., President, CEO & Director, marc leblanc Corporate Secretary // gary simmerman Bsc, Mining Engineering, FAusIMM, VP Mineral Park

Board oF directors

corporate governance

The Board is committed to maintaining a

strong corporate governance structure, which

is necessary to ensure the proactive and

effective management of opportunities and

challenges that may face the company.

The Board’s size and composition reflect

the breadth of skills and experience required

for effective governance of the company.

The Board is not constrained in its access

to information, in its ability to oversee the

business of the company, and believes there

are sufficient systems and procedures in

place to allow the Board to be independent

from management.

The Board has responsibility for the strategic

direction of the company and stewardship

of the resources with which it has been

entrusted. The Board’s objectives are to build

long-term shareholder value and ensure the

company meets its obligations in a safe and

responsible manner.

Robert J. Quinn, Non-Executive Chairman

Ron Vankoughnett, Lead Director

D. Bruce McLeod, P.Eng., President, CEO

Colin K. Benner, P.Eng., ICD.D

John Bowles, FCA, FCIM

Joseph M. Keane, P.E.

Stephen P. Quin, P.Geo.

Daniel Tellechea

se

nio

r

ma

na

ge

me

nt

core l e ad ers h i p


mercator minerals annual review 2011 // 7mercator minerals annual review 2011 // 7

c hai rm an ’s l e t t er to s ha re h o l d ers

2011 was a transformational year for our Company as we positioned

Mercator for a strong growth profile. In June, we acquired Creston

Moly Corp., and by extension, the El Creston property – an advanced

stage molybdenum-copper deposit, which added significantly to the

company’s long-term growth profile. At the end of September, we

completed the construction of the Phase 2 expansion at Mineral Park,

our wholly-owned copper-molybdenum-silver mine, and continued

throughput ramp-up efforts. In November, we filed a NI 43-101

compliant Feasibility Study on our El Pilar property. The Feasibility

Study indicates the El Pilar project has the potential to be a robust,

economically attractive project that can propel our company to the

next tier of production in the base metal sector.

Despite the recent uncertainty and volatility of the capital markets,

we believe there remains a strong appetite for the metals that we

produce from nations, such as China, looking to improve the lives of

their citizens. With our near-term growth profile we believe Mercator

is well positioned to help meet these global needs.

Aside from putting in place high quality assets, during the year we

enhanced our management team with additional depth and breadth

of skills to better drive the value from these assets. In June, we were

fortunate to attract Bruce McLeod as our CEO. Over his career, Bruce

has demonstrated an ability to create shareholder value. His goals,

in a safe and efficient manner, are to foster a culture of constant

improvement that will lower costs, improve productivity, grow the

Company, and improve our financial position.

As the Company grew during the year, your Board also realized

it needed to attract the right skills and experience to ensure your

company continued its path of growth and long-term value creation.

I’d like to take this opportunity to thank Mike Surratt, Raymond Lee,

Michael Lindemann, and Gavin Thomas for their years of service and

their instrumental roles in building your company. I’ll also welcome

Bruce McLeod, Colin Benner, John Bowles, and Daniel Tellechea to

our Board. Their diverse and proven experience in building companies

makes them a welcome addition.

In summary, despite recent operating challenges that we believe have

now been addressed, we mustn’t lose sight that 2011 was a year of

great progress for the company in several key areas. We achieved

record production, record profits, and generated record cash flow, all

of which will continue to grow as we optimize Mineral Park. With the

acquisition of El Creston and with El Pilar, we have established the

foundation to move the Company to a mid-tier base metal producer.

We are building a company with the leadership, assets, and strategy

in place that we believe will unlock Mercator’s value.

We are building a company with the leadership, assets, and strategy in place

that we believe will unlock Mercator’s value.

robert Quinn

Non-Executive Chairman

”“



“

c eo ’s l e t t er to s ha re h o l d ers

Our strategy is simple: deliver on an organic growth plan of significantly

increasing our copper production profile over the next five years. In a

growing world needing the metals we produce, our strategy positions

us to deliver long-term value. The first phase of our strategy provides

investors with exposure to copper and molybdenum markets from the

large-scale, long-life Mineral Park Mine, which we completed building at

the end of the third quarter of 2011. The second phase of our strategy

is to develop the El Pilar project and provide investors with mid-term

copper exposure. El Pilar – with its low capital intensity – has the

potential to produce over 73 million pounds of copper per year for

12 years. The third phase of our growth is to provide investors with

longer term exposure to molybdenum and copper markets through the

potential development of the El Creston deposit, which could further

increase Mercator’s copper equivalent production.

As with the execution of any strategy, it starts with goals that are clear,

achievable, and upon delivery will create additional value. For 2012, the

goals at our operating Mineral Park Mine are to increase efficiencies

and maximize cash flows by: maintaining throughput at 50,000 tons

per day, reducing cash costs of copper produced to $2.20 to $2.30

per pound and $10.00 to $10.50 per pound of molybdenum produced,

and sustaining recoveries for copper and molybdenum at 80% and

75%, respectively. At our El Pilar project, the goals are to continue to

de-risk the project by releasing an optimized feasibility study to further

highlight the improved project economics from the November 2011

feasibility study filed – continuing to ensure the project is construction-

ready, to which we have all the permits in place to start building – and

when market conditions improve, obtaining a value-accretive financing

package to build El Pilar. At El Creston, our goal this year is to release

a feasibility study which will update the project’s valuation and then

allow us to make a decision on this attractive project’s next steps.

Throughout it all, we aim to maximize efficiencies in the entire

organization through an entrepreneurial culture of continuous

improvement. We will ensure we have the right people and the right

systems in the right places to maximize our utilization rates, improve

our planning, and increase productivity. We’ll do this by ensuring

we invest in our people, and continue to execute a non-capital

productivity efficiency program. At Mineral Park, we have a better

understanding of the mine’s complex ore body which will allow us to

optimize the mill’s Phase 2 expansion, thereby ensuring we realize

Mineral Park’s full potential.

We will optimize the value of our assets through safe and efficient

operations. It has been proven that a safe mine is a productive mine. As

such, we are committed to providing a safe and healthy culture for our

employees on all our properties through our recently initiated program

“Safe Production”, which ensures every pound of metal produced is a

safe pound. This also includes managing our business to the best of our

abilities, with environmental responsibility to create a positive impact

on our surroundings.

I would like to thank the Board members for their guidance and

diligence. I’d also like to thank our employees, contractors, and

suppliers for the dedicated efforts, and to our shareholders for their

continued support.

While we have made many operating improvements during 2011, expect

more to come in 2012. We are committed to working safely, increasing

productivity, reducing costs, and improving our financial position. We

look forward to reaping the benefits of our hard work in 2012 as we

unlock the value within Mercator.

We are committed to working safely, increasing productivity, reducing costs,

and improving our financial position.”

d. bruce mcleod

President & CEO



core op erat i o n s

5 Y e a r c o p p e r p r i c e s 5 Y e a r m o lY B d e n u m p r i c e s

Mercator Minerals’ Operations

Mercator Minerals has three core properties: Mineral

Park Mine in Arizona, USA, which currently produces

copper, molybdenum and silver, the El Pilar copper

development project in Sonora, Mexico, and the

El Creston molybdenum-copper development project

in Sonora, Mexico.

EL PILAR

//

//

EL CRESTON//

PHOENIX REGIONAL OFFICE

H E R M I S I L LOR EG I O N A L O F F I C E

MEXICO

MINERAL PARK MINE

ARIZONA

200 km

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JAN ‘07 JAN ‘08 JAN ‘09 JAN ‘10 JAN ‘11


5 year copper

5 year moly

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mineral park mine

min

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al

pa

rk

min

e

Mercator’s wholly-owned Mineral Park Mine in northern Arizona,

USA, is a hypogene porphyry deposit with copper, molybdenum,

and silver values and a supergene enriched copper zone. The

deposit is located in the world’s second largest copper trend,

the Sonora-Arizona Porphyry Copper Province.

The primary operation is an open-pit mining operation that feeds

a 50,000 ton per day (tpd) concentrator mill. There is also a low-

grade dump leach operation that processes leach solution through

a conventional solvent extraction-electrowinning (SX-EW) plant.

The mine is located 100 miles from Las Vegas, Nevada, or 16 miles

from Kingman, Arizona, along highway 93.

KIN G MAN

PHO E NIX

ARIZONA

500 m

// MINERAL PARK MINE

m i n e r a l pa r k s n a p s h o t

ownership 100 %

projected mine liFe (1) 23+ years

throughput 50,000 tons per day

2011 production:

copper in concentrate 38.8

cathode copper 3.6

total copper (million lbs) 42.4

molybdenum (million lbs) 7.0

silver (oz) 721,400

2011 co-product cash costs* ($/lB)

copper $2.32

molybdenum $11.63

2012 production guidance

copper in concentrate 39.0

cathode copper 3.6

total copper (million lbs) 42.6

molybdenum (million lbs) 10.4

silver (oz) 546,000

2012 co-product cash costs* ($/lB)

copper $2.20 to $2.30

molybdenum $10.00 to $10.50

(1) Based on 2006 pre-feasibility study using metal prices of $1.40/lb cu, $7.50/lb mo, and $7.50/oz ag. *cash costs is a non-iFrs performance measure, refer to page 17.

Mineral Park Mine


1/mineral reserves calculated in accordance with cim guidelines. 2/metal prices used for calculation of reserves were $1.40/lb cu, $7.50/lb mo, and $7.50/oz ag. 3/metallurgical recoveries are 82% for supergene cu, 80% for hypogene cu, 75% for supergene mo, 76% for hypogene mo, and 70% for leach cu. 4/ cut-off grades used were variable, but based on breakeven cut-offs of 0.283% cuequiv for supergene & 0.237% cuequiv for hypogene mineralization. 5/as calculated by Qualified person, eric olson, mausimm of range consulting group, llc in the 2006 preliminary Feasibility study.

m i n e r a l r e s e r v e s

gross contained

mineral reserve

class

tons oF ore

(millions)

average

copper %

average

molYBdenum %

average silver

(oz per ton)

copper

(million lbs)

molYBdenum

(million lbs)

silver

(million oz)

proven – mill 323.9 0.15 0.041 0.079 949.5 263.8 25.7

probable – mill 82.1 0.10 0.036 0.085 171.4 59.1 7.0

total mill 406.0 0.13 0.040 0.080 1,120.9 322.9 32.7

proven – leach 69.6 0.07 – – 92.8 – –

total 475.6 0.13 0.040 0.080 1,213.7 322.9 32.7

Year in review

Since 2010, the Company has completed construction, commissioning,

and commenced commercial operation of the Phase 1, Phase 1.5,

and Phase 2 mill expansions at Mineral Park which were designed to

increase mill capacity from 25,000 tpd to 50,000 tpd. This included

the completion and commissioning of the Phase 2 expansion of the

mine and plant processing facilities in September of 2011, which was

the final step to increasing ore throughput to 50,000 tpd. The Phase

2 expansion included the installation of a SAG mill, two ball mills, 11

roughers, five wells and waterline, and second primary crushing line.

This has resulted in a substantial increase in copper and molybdenum

production with cash costs of production anticipated to decrease on

a going forward basis as operations are optimized. Also, in August

of 2011, the Company finished installation and placed in service the

natural gas turbine at Mineral Park, which is presently supplying the

majority of power to the mine operations – up to 37 megawatts. The

Company expects the turbine to assist in further reducing operating

costs at Mineral Park.

During the fourth quarter of 2011, the mine achieved an average mill

throughput rate of more than 45,000 tpd for a consecutive 90 day period.

This milestone satisfied the performance test required in the project loan

agreement with the lending group, and reduced the cash sweep for the

credit facilities significantly from 50% down to 25% at Mineral Park, which

will provide greater financial flexibility in the future for the Company.

Operationally, it was a record year for Mineral Park

which showed continual growth and improvement

as depicted in the following charts:

pl ans For 2012

The Company has launched a safety program

called “Safe Production” which recognizes the

importance of safety as a value, by creating

a culture in which safety prospers, realizing

a safe operation is a productive operation. At

the beginning of April 2012, a program of

non-capital initiatives to optimize operations

and reduce costs at Mineral Park was launched.

The goal is to bring best-in-class processes to

help us optimize all aspects of our operations.

Therefore, for 2012, the goals at our Mineral Park

Mine are to increase efficiencies and maximize

cash flows by: (1) maintaining throughput at

50,000 tpd per day and beyond, (2) reducing

co-product cash costs* of copper produced

to $2.20 to $2.30 per pound and $10.00 to

$10.50 per pound of molybdenum produced,

and (3) sustaining recoveries for copper and

molybdenum at 80% and 75%, respectively.

The Company continues to understand the

mine’s complex ore body with a view to better

optimize the mill’s Phase 2 expansion, thereby

realizing Mineral Park’s full potential.

record production

improving recoveries

lower unit cash costs*

* cash costs is a non-iFrs performance measure, refer to page 17.

2010 2010 20102011 2011 2011

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$2.20 per pound

CopperMolybdenum2012 goal

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$2.20 per pound


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75%


Mercator’s wholly-owned El Pilar project is located in northern

Mexico, in the state of Sonora. The project, near the town of Nogales,

is 15 kilometers (km) from the international border between Mexico

and the USA, and is about 3.5 hours north of Hermosillo, Mexico,

or 2 hours south of Tucson, Arizona, and within close proximity to

power, water, and other infrastructure.

El Pilar is designed to be an open-pit, truck shovel operation, with

run-of-mine material to be mined and stacked directly on a leach

pad. Copper cathode would be produced from the oxide copper

reserve by acid leaching and SX/EW processing.

The deposit is located in the world’s second largest copper trend,

the Sonora-Arizona Porphyry Copper Province. El Pilar hosts an

unusual gravel transported copper resource that is atypical for

the area. El Pilar is an oxide copper project that occurs within

unconsolidated, alluvial wash deposits, which does not require

any on-site crushing and is ideal for acid leaching.

ACCESS ROAD:

EL P ILAR

TO

NO

GA

LE

S

28

KM

(PA

VE

D H

IGH

WA

Y)

SANTA CRUZ R IVER

RAILROAD SPUR

RA

ILR

OA

D

POWER

TRANSMISSION LINE

1 15 KV

PROPERTY BOUNDARY

WEST WASTE DUMP AREA

PIT EAST WASTE DUMP AREA

LEACH PAD

WATERWELL 1

WATERWELL 3

SX/EWPLANT

WATERWELL 2

500 m

T U C SO N

CA N A N EAN O G A L ES

MEXICO

ARIZONA

EL PILAR//

100 km

el pilar project

el

pil

ar

pr

oj

ec

t

Year in review

On November 9, 2011, the Company filed the El Pilar Project 2011

Feasibility Study Update (the “El Pilar Feasibility Study”), a Canadian

Securities Administrators National Instrument 43-101 Standards for

Disclosure of Mineral Projects (“NI 43-101”) compliant technical report for

the El Pilar project on SEDAR.The El Pilar Feasibility Study supports the

development of a robust economically feasible copper project.

El Pilar proposed site layout

El Pilar


FeasiBilit Y studY highlights ( 2)

ownership 100 %

projected mine liFe 12 years

liFe oF mine averages

copper cathode production 73 million lbs/year

cash costs* $1.37/lb

initial capital $245 million

total copper production 882 million lbs

project economics

net present value (npv)

discounted @ 8%

$335 million

internal rate of return (irr) after tax 35.7 %

payback 1.7 years

(2) Based on 2011 Feasibility study, using copper prices of $3.83/lb in year 1, $3.44/lb in year 2, $3.14/lb in year 3 and $2.60/lb for remaining life of mine. averaging $2.82/lb over the life of mine. *cash costs is a non-iFrs performance measure, refer to page 17.

1/mineral reserves calculated in accordance with cim guidelines. 2/metal prices used for calculation of reserves were $2.75/lb cu. 3/as calculated by Qualified person, mike hester, B.s. mining engineering, m.s. mining engineering, Fausimm, of independent mining consultants ((imc) in the 2011 Feasibility study.

mineral reserves and resources

mineral reserve

mineral resource class tonnes oF ore (millions) average copper (%) soluBle copper (%) contained copper (million lbs)

proven 99.6 0.332 0.153 728.8

probable 130.6 0.299 0.131 860.8

total 230.2 0.313 0.140 1,589.6

mineral resource, inclusive oF mineral reserve

mineral resource class

0.15% copper cut-off

tonnes oF ore (millions) average copper (%) soluBle copper (%) contained copper (million lbs)

measured 128.1 0.307 0.128 867.0

indicated 231.2 0.266 0.095 1,355.5

total 359.3 0.281 0.107 2,222.5

inferred 68.0 0.239 0.068 358.3

pl ans For 2012

Goals for the El Pilar project are to continue to de-risk the project

by releasing an optimized feasibility study to further highlight

the improved project economics from the November 2011

feasibility study filed – continuing to ensure the project is

construction-ready, to which we have all the permits in place to

start building – and when market conditions improve, obtaining

a value-accretive financing package to build El Pilar. Assuming

a positive production decision, once construction commences,

the Company anticipates a construction time line of 15 months,

a relatively short cycle to start recovering the Company’s initial

investment. With an initial investment of $245 million, and

the capacity to produce nearly 73 million pounds of cathode

copper annually for the life of the mine, El Pilar is a relatively

low capital project.


el creston project

el

cr

es

to

n p

ro

je

ct

El Creston

S T A T E O F S O N O R A

T U C SO N

H E R M I S I L LO

CA N A N EAN O G A L ES

MEXICO

ARIZONA

EL CRESTON//

100 km

1/mineral reserves calculated in accordance with cim guidelines 2/metal prices used for calculation of reserves were $15.00/lb mo and $2.60/lb cu 3/as calculated by Qualified persons, dr. gilles arseneau, p.geo. and mike johnson, p.geo. of srk consulting (canada) inc in the 2010 pea report.

mineral resources

mineral resource class

0.036% molybdenum cut-off

tonnes oF ore (millions)

average molYBdenum (%)

average copper (%)

contained molYBdenum (million lbs)

contained copper (million lbs)

measured 56.3 0.074 0.06 91.3 72.0

indicated 159.1 0.070 0.06 244.2 209.0

total 215.4 0.071 0.06 335.5 281.0

Mercator’s wholly-owned El Creston project is located in Sonora State,

in northern Mexico, approximately 145 km northeast of Hermosillo

and 5 km southwest of the village of Opodepe. The project hosts

deposits of low fluorine type porphyry molybdenum. The deposits

would be mined by open-pit method employing a conventional truck

shovel operation. The proposed mill would be analogous to that at

Mineral Park.

In December 2010, Creston filed the NI 43-101 compliant Preliminary

Economic Assessment El Creston Project (the “PEA Report”).

Based on the PEA Report, the El Creston project is expected to

be a low-cost operation generating average annual production of

approximately 23.9 million pounds of molybdenum in concentrate,

and approximately 16.0 million pounds of copper in concentrate over

a 13 year mine life. The PEA Report used price assumptions of $15.00

per pound of molybdenum and $2.60 per pound of copper and also

indicated that the project could generate an after tax NPV @ 8% of

$562 million and an IRR of 22.3%.

pl ans For 2012

At El Creston, the Company’s goal this year is to release a feasibility

study which will provide an update on the project’s valuation and then

allow a decision on this attractive project’s next steps.


cor p orat e info

head oFFice

#1050 – 625 Howe Street, Vancouver, BC, V6C 2T6, Canada

P: 604.694.0005 F: 604.558.0058

E: [email protected]

mercatorminerals.com

listing

Common shares: TSX: ML

Warrants: TSX: ML.WT.A

transFer agent

Computershare Investor Services Inc.,

3rd floor – 510 Burrard Street, Vancouver, BC, V6C 3B9, Canada

auditors

KPMG LLP,

Vancouver, BC, Canada

special and annual general meeting

The annual meeting of shareholders of Mercator Minerals Ltd.

will be held Friday June 22, 2012 at 10am (Pacific) at the

Rosewood Hotel Georgia, Vancouver, BC.

investor rel ations and media contact

David Jan, Head of Investor Relations & Communications

P: 778.330.1295 E: [email protected]


DISCLOSUREIn this Annual Review, the terms “Company” or “Mercator” refer to Mercator Minerals Ltd. and all of its subsidiaries together.

This Annual Review and the documents referred to herein include certain forward-looking information within the meaning of Canadian securities legislation and certain statements that may be deemed forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. This information and these statements, referred to herein as “forward-looking statements”, are not historical facts, and are made as of the date of this annual review. These statements relate to among other things, analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. All statements in this annual review, other than statements of historical facts, that address, among other things, future production, resource and reserve potential, exploration drilling, exploitation activities and events or developments that the Company forecasts, intends or expects are forward-looking statements. Statements concerning mineral reserves and resource estimates may also be deemed to constitute forward-looking statements to the extent that they involve estimates of the mineralization that will be encountered if a property is developed. The words “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” “target,” “budget,” “plan,” “projection” and similar expressions are intended to identify forward-looking statements.

Although Mercator believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, market prices, exploitation and exploration successes, continued availability of capital and financing and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and, that actual results or developments may differ materially from those projected in the forward-looking statements.

It is important to note that: (1) unless otherwise indicated, forward-looking statements indicate the Company’s expectations as at May 22, 2012: (2) the Company’s actual results may differ materially from the Company’s expectations if known and unknown risks or uncertainties affect the Company’s business, or if estimates or assumptions prove inaccurate; (3) the Company cannot guarantee that any forward-looking statement will materialize and, accordingly, you are cautioned not to place undue reliance on these forward-looking statements; and (4) except as required by applicable securities legislation, the Company disclaims any intention and assume no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.

In making the forward-looking statements in this annual review, the Company has applied several material assumptions, including but not limited to, the assumption that: (1) market fundamentals will result in sustained copper and molybdenum demand and prices; (2) with the commissioning and operation of the second stage of the Mineral Park concentrator mill facility in 2011, the Company commenced processing all ore grade material through the concentrator mill facility, and ceased placing new ore on the leach pads, (the Company has been placing waste grade materials on the leach dumps, so that the leaching operation at Mineral Park consists of leaching the leach dumps only, and resulting in cathode copper production continuing from the leaching of the leach dumps only), the current copper leach operations at Mineral Park remain viable operationally and economically; (3) the current milling operations at Mineral Park will continue to be viable operationally and economically; and (4) any additional financing needed will be available on reasonable terms.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking statements. Additional factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, without limitation: (1) weak commodity prices and general metal price volatility, which in the past have fluctuated widely and which could affect the profitability of the Company’s operations and financial condition; (2) the state of the global economy and economic and political events, including the deterioration of the global capital markets, affecting metal supply and demand and economic and political events affecting metal supply and demand; (3) risks related to recent market events and conditions including the Company’s access to credit and capital; (4) securing, maintaining and the nature of regulatory permits and approvals and the costs of complying with environmental, health and safety laws and regulations necessary to the Company’s current and anticipated operations; (5) the ongoing availability and cost of operational inputs including expertise, labour, reagents, water, power and equipment; (6) fluctuations in ore grade, operating costs or ore tons milled; (7) geological, technical, mining or processing problems; (8) fluctuations in foreign currency exchange rates, particularly the Canadian dollar/U.S. dollar/Mexican Peso exchange rate (9) the Company’s dependence on third parties for smelting and refining its metals; (10) the advice the Company has received from its consultants and advisors relating to matters such as mineral resource and mineral reserve estimates, metallurgy, permitting and environmental matters is reliable and correct and, in particular, that the models, dilution strategies and mining recovery estimates used to calculate mineral resources and mineral reserves are appropriate and accurate; (11) risks involved in current or future litigation or regulatory proceedings; (12) future changes that may occur in the life-of-mine plan and/or the ultimate pit design; (13) risks related to the Company’s ability to successfully produce copper, molybdenum and silver profitably; (14) uncertainty in the Company’s ability to fund and risks related to the availability of funding the development of its mineral properties or the completion of further development and exploration programs; (15) risks related to differences between US and Canadian practices for reporting resources and reserves; (16) risks related to future drilling results which may not produce reserves and resources that can be mined or processed profitably; (17 ) risks related to the Company’s mineral reserves and mineral resources figures being estimates based on interpretations and assumptions which may result in less mineral production under actual conditions than is currently estimated (18) risks related to the inherently dangerous activity of mining, including conditions or events beyond the Company’s control; (19) risks related to the Company’s development properties being located in Mexico, including political, economic and regulatory instability; (20) risks related to the Company’s land reclamation requirements which may be burdensome; (21) uncertainty regarding future requirements to fund additional reclamation work during the course of the Company’s mining activities; (22) uncertainty relating to the Company’s ability to attract and maintain qualified management to meet the needs of its anticipated growth, and risks relating to its ability to manage growth effectively; (23) risks related to the Company’s mineral properties being subject to prior unregistered agreements, transfers, or claims and other defects in title; (24) risks related to the Company’s history of losses, which may continue in the future; (25) risks related to increased competition that could adversely affect the Company’s ability to attract necessary capital funding or acquire

suitable properties for mineral exploration and development in the future; and (26) risks related to the Company’s officers and directors becoming associated with other natural resource companies which may give rise to conflicts of interests.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. These factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements. The Company believes that the expectations reflected in the forward-looking statements, including future-oriented financial information, contained in this annual review and the documents referred to in this annual review are reasonable, but no assurance can be given that these expectations will prove to be correct. In addition, although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, including future-oriented financial information, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made and the Company undertakes no obligation to disclose publicly any future revisions to forward-looking statements, including future-oriented financial information, to reflect events or circumstances after the date of this annual review or to reflect the occurrence of unanticipated events, except as expressly required by law. Additionally, the forward-looking statements, including future-oriented financial information, contained herein are presented solely for the purpose of conveying our reasonable belief of the direction of the Company and may not be appropriate for other purposes. For a more comprehensive review of these and other factors, that may affect the Company’s actual results, performance, achievements or financial position, please refer to the “Risks Factors” section in the Company’s Annual Information Form for the year ended December 31, 2011 and in the documents incorporated and deemed to be incorporated therein.

Readers are referred to the documents filed by Mercator on SEDAR (sedar.com) and on its website.

With respect to this Annual Review, the following Qualified Persons as defined by NI 43-101, supervised the preparation, verified and approved the technical information for Mineral Park Mine by Gary Simmerman, BSc, Mining Eng. FAusIMM , Mercator’s Vice-President Mineral Park; El Pilar by Mike Broch, BSc, Geology, Msc, Economic Geology, FAusIMM , the Company’s Vice-President Exploration and Evaluation, and El Creston by Dave Visagie, P. Geo, the Company’s Exploration Manager.

*cash costs is a non-IFRS performance measure and furnished to provide additional information. This performance measure is included in the Annual Review because it is a key performance measure that management uses to monitor performance, to assess how the Company is performing, to plan and to assess the overall effectiveness and efficiency of mining operations. This performance measures may not be comparable to similar data presented by other mining companies. These performance measures should not be considered in isolation as a substitute for measures of performance included in the Company’s audited consolidated financial statements and the related notes for the years ended December 31, 2011 and December 31, 2010.

For readers to fully understand the technical information for the relevant project, they should read the related technical report (available on SE DAR and on the company’s website), which is intended to be read as a whole and should not be read or relied upon out of context and is subject to the assumptions and qualifications contained in that report.

the annual review should be read in conjunction with the company’s annual information form for the year ended december 31, 2011, the 2011 management’s discussion and analysis (md&a) and financial statements and related notes dated march 30, 2011 and the company’s first quarter 2012 md&a and financial statements and related notes. these documents are available on sedar (www.sedar.com) under the company’s profile and on the company’s website.

All figures referenced are in U.S. dollars unless otherwise noted.

notice to u.s. investors on canadian disclosure standard – This Annual Review, including any documents referred to herein, has been prepared in accordance with the requirements of securities laws in effect in Canada, which differ from the requirements of United States securities laws. In Canada, an issuer is required to provide technical information with respect to mineralization, including Mineral Reserves and Mineral Resources, if any, on its mineral exploration properties in accordance with Canadian requirements, which differ significantly from the requirements of the SEC applicable to registration statements and reports filed by United States companies pursuant to the U.S. Securities Act or the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”). As such, information contained in this annual review and the documents incorporated by reference herein concerning descriptions of mineralization under Canadian standards may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements of the SEC.

As noted above, this Annual Review and the documents referred to herein include Mineral Resource estimates that have been calculated in accordance with NI 43-101, as required by Canadian securities regulatory authorities. In particular, this annual review and the documents referred to herein use the terms “Indicated Mineral Resource” and “Inferred Mineral Resource.” While these terms are recognized and required by Canadian regulations (under NI 43-101) the SEC does not recognize them. In addition, the documents referred to in the annual review include disclosure of “contained ounces” of mineralization. Although such disclosure is permitted under Canadian regulations, the SEC only permits issuers to report mineralization as in place tonnage and grade without reference to unit measures.

The definitions of Proven and Probable Mineral Reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7. Under SEC Industry Guide 7 (under U.S. the Exchange Act), as interpreted by the staff of the SEC, mineralization may not be classified as a “reserve” for United States reporting purposes unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Among other things, all necessary permits would be required to be in hand or issuance imminent in order to classify mineralized material as reserves under the SEC standards.

United States investors are cautioned not to assume that any part or all of the mineral deposits identified as an “Indicated Mineral Resource” or “Inferred Mineral Resource” will ever be converted to Mineral Reserves as defined in NI 43-101 or SEC Industry Guide 7. Further, “Inferred Mineral Resources” have a great amount of uncertainty as to their existence and economic and legal feasibility. It cannot be assumed that all or any part of an Inferred Mineral Resource will ever be upgraded to a higher category. Under Canadian securities legislation, estimates of Inferred Mineral Resources may not form the basis of feasibility or pre-feasibility studies, or economic studies, except in rare cases. U.S. investors are cautioned not to assume that part or all of an Inferred Mineral Resource exists, or is economically or legally mineable.

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Mercator Minerals 2011 Annual Review

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