Chesstown Capital Inc.

March 08, 2010 14:33 ET

Chesstown Capital Inc. (TSX VENTURE:CHC.P) Announces the Signing of an Agreement in Principle

BURLINGTON, ONTARIO--(Marketwire - March 8, 2010) -

Letter of Intent

On February 5th, 2010, Chesstown Capital Inc. ("Chesstown") (TSX VENTURE:CHC.P) announced that it entered into an arm's length and non-binding letter of intent ("LOI") with Canadian Star Minerals Limited ("CSML") pursuant to which Chesstown would, subject to a number of conditions, acquire certain assets of CSML, namely an undivided one hundred percent legal and beneficial interest in and to certain mining claims located near High Lake in northwestern Ontario (the "Transaction"). The LOI was subject to various conditions.

Chesstown is now pleased to announce that, after satisfying certain conditions in the LOI, Chesstown and CSML have reached an Agreement in Principle, dated the 5th day of March, 2010.

Chesstown is a Capital Pool Company under the policies of the TSX Venture Exchange ("TSXV") and it is intended that the Transaction, if completed, will constitute Chesstown's Qualifying Transaction under TSXV policies. It is anticipated that the Resulting Issuer will meet the Tier 2 listing requirements of the TSXV for a Mining Issuer upon completion of the Transaction.

The Proposed Transaction:

Significant Assets

Chesstown proposes to purchase from CSML a 100% interest, subject to a 2% Net Smelter Return royalty (NSR), in the High Lake Gold Property ("High Lake") and an option agreement to acquire a 51% interest in the adjacent Electrum Lake property ("Electrum Lake"). In addition, Chesstown proposes to purchase from CSML a 100% interest in a 1-unit claim which was acquired by staking ("Canadian Star Claim") located between the other two properties. The combined High Lake, Electrum Lake and Canadian Star Claim (the "Property") is host to seven known gold prospects, as well as numerous gold-copper-molybdenum occurrences and covers a large area of favourable host rocks and has exploration potential for other mineral deposits. The Property is located in Ewart Township, Indian Bay Map area, near Kenora, Ontario.

There is an underlying 2% NSR payable to the original owner for any metals produced from the High Lake Property and a 2% NSR payable to the original optionee for metal produced from the Electrum Lake Property. The High Lake Property includes 20 mining claims held under a 21- year renewable mining lease granted by the Mining Lands Section of the Ontario Ministry of Northern Development and Mines (MNDM). The Electrum Lake Property contains 10 unpatented mining claims (63 claim units).

The Property is at the initial exploration stage. None of the known mineralized zones on the Property have been completely explored and delineated by drilling.

A multi-phased exploration program on the Property has been recommended (the "Work Program") as follows:

The first phase (Phase I) is designed to confirm the gold mineralization reported in the most explored zone, the Purdex Zone. This involves surface mapping (including relocation of the historic drill collars, trenches, etc.) and a small diamond drilling program to "twin" several historic holes as well as to extend the currently known mineralization. An estimate of the cost of such a program is $222,915.

Assuming that the results from this work are encouraging, a second phase (Phase II) designed to locate and sample all of the reported mineralized zones on the "Property" is recommended. This phase should also include surface geological mapping and some test geophysical surveys (Magnetometer and IP) for use in identifying and evaluating other similar zones. The identified mineralized zones should be stripped, mapped and sampled and a modest drill program carried out to confirm the approximate dimensions and Au content.

If Phases 1 and 2 of the Work Program are successful in verifying the existence and potential of the seven currently known targets on the High Lake/Electrum Lake Property, a third phase program consisting primarily of definition diamond drilling will be required. The Work Program should be sufficient to verify the mineralization outlined by previous explorers on the High Lake/Electrum Lake Property and provide the information needed to make a decision regarding an advanced exploration and development program.

The Vendor:

CSML was incorporated pursuant to the Ontario Business Corporations Act on October 9, 1996. Since then, CSML has carried on business as a mineral exploration and development company through the acquisition, sale and joint venturing of several advanced gold projects in Canada. The following persons own 10% or more of the issued and outstanding shares of CSML: Marco Chu, a resident of Markham, Ontario (10.80%), Lawrence Anderson, a resident of Oakville, Ontario (12.96%), and Christopher North, a resident of Scarborough, Ontario (65.35%).

Terms of the proposed Qualifying Transaction:

The purchase price for the Property will be $2,000,000, satisfied through the issuance to CSML of 10,000,000 common shares in the capital of Chesstown at an issue price of $0.20 per share.

Description of financing arrangement:

A private placement will be completed prior to or in conjunction with the closing of the Qualifying Transaction (the "Financing"). The Financing will raise approximately $300,000 at $0.20 per common share or higher. The funds from the Financing will be used to fund the Work Program.

The Resulting Issuer:

New insiders of the Resulting Issuer:

Lawrence Anderson of Oakville, Ontario, is Vice-President of CSML, a position which he has held for over 13 years. Mr. Anderson has over twenty years of extensive experience as a General Manager of a company which imports natural stone products. Prior to Mr. Anderson's involvement in the stone industry he was trained and schooled in the Nuclear Electronics field serving in the US Military Nuclear program as well as working as a Senior Field Engineer for General Instruments in New York USA.

Vernon K. Drylie, P.Eng., of Oakville, Ontario, holds a BASc. in Metallurgical Engineering from the University of Toronto. Mr. Drylie has more than thirty years experience in manufacturing and process plant operations management. He was formerly Plant Manager at NTN Bearing Corporation of Canada and a member of its Board of Directors. NTN is one of the world's largest bearing producers and a leading supplier to the industrial, natural resource and automotive markets. Prior to that, he was Technical Services Manager as well as a member of the Board of Directors of Bundy of Canada Ltd., a leading supplier and fabricator of small diameter tubing systems and assemblies for the automotive and industrial markets. He has also held the positions of Silver Refinery Supervisor and Engineering Manager for Johnson Matthey Ltd., a precious metals refiner and fabricator, Research Engineer in the mineral processing section of a research lab of Inco, and Pellet Plant Engineer for Iron Ore Company of Canada. Mr. Drylie is the holder of a US patent for cadmium-free gold solder alloys.

Christopher North, of Scarborough, Ontario, has been involved in mineral exploration and development for over 28 years. He is currently the President and CEO of CSML, a position which he has held for the past 10 years. Mr. North has an associate diploma in Geological Engineering Technology and degrees in geology as well as an MBA from Lake Superior State University. He has been part of the world class Hemlo-Williams exploration and development team and as well as several other significant mining projects in Canada, Latin America and Africa with companies such as Noranda Inc., Lac Minerals Ltd. (now Barrick Gold Corporation), Northgate Minerals Corporation and Etruscan Resources Inc.

Contemplated leadership structure of the Resulting Issuer:

It is contemplated that, following the closing of the Transaction, two of Chesstown's current directors, Jeffrey Wood and Kenneth Dube will resign from the board of directors of Chesstown (the "Board") and Lawrence Anderson, Vernon Drylie and Christopher North will be appointed to the Board. Peter Clausi and Brian Crawford will remain on the board of directors of Chesstown.

It is contemplated that Lawrence Anderson will become Chief Executive Officer of Chesstown. Jeffrey Wood will resign as Chief Financial Officer and Brian Crawford will become Chief Financial Officer. It is contemplated that Peter Clausi will remain as head of the Audit Committee.

Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange unless exempt in accordance with the Exchange's policies. Chesstown intends to apply for an exemption from sponsorship requirements based on the conduct of a non-brokered private placement in connection with the Transaction and/ or the basis of the already prepared current geological report for the property, which includes recommendations for exploration work. However, no assurance can be given that Chesstown will obtain this exemption.

TSXV Approval

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and, if applicable, pursuant to TSXV requirements, majority of the minority shareholder approval. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

For Investors

This press release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. Chesstown cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what Chesstown currently foresees. Discussion of the various factors that may affect future results is contained in Chesstown's recent filings, available on SEDAR.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy of this release.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

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