Forsys Metals Corp
TSX : FSY
FRANKFURT : F2T

Forsys Metals Corp

September 29, 2009 13:43 ET

Forsys Notice of Annual Meeting and Chairman's Letter to Shareholders

TORONTO, ONTARIO--(Marketwire - Sept. 29, 2009) - Forsys Metals Corp ("Forsys" or the "Company") (TSX:FSY)(FRANKFURT:F2T)(NSX:FSY) advises that the Annual Meeting of Shareholders for the fiscal year ended December 31, 2008 will be held in the Ridout Room at the Toronto Board of Trade, 1 First Canadian Place, Toronto, Ontario on October 28, 2009 at 2:00 pm. This Annual Meeting is scheduled as a result of the termination of the GFI Arrangement. The record date has been set at September 23, 2009.

The following Chairman's message is being delivered as a letter to the shareholders and is included in the annual report, which is being mailed to shareholders in advance of the Annual Meeting.

LETTER TO SHAREHOLDERS

Dear fellow shareholder,

The past 12 months have been uniquely challenging for the mining industry, the financial and equity markets and practically every economy across the globe. What became known as the global financial crisis was triggered by the bursting of the United States housing bubble in July 2007 resulting in a financial crisis which has been called the most serious economic crisis since the Great Depression. A commodity price bubble was created following the collapse in the housing bubble, before plunging as the financial crisis began to worsen in late 2008. The crisis hit its peak in September and October 2008 following the collapse of Lehman Brothers on 15 September 2008 with several other major, household name institutions such as Merrill Lynch, Fannie Mae, Freddie Mac and AIG either failing, being acquired under severe duress, or being subject to government takeover. The US economic crisis rapidly developed and spread into a global economic shock resulting in a number of European bank failures, unprecedented declines in various stock indexes and large declines in the market value of equities and commodities.

It was in this environment of de-leveraging, frozen credit markets, decreasing international trade and a radical shift of investments to perceived safe haven assets including currencies, that George Forrest International ( GFI ) approached the Company to enter into exclusive discussions in respect of a potential sale of the Company.

The GFI Proposal

As the GFI transaction dominated so much of management and Board s time since October 2008, I thought it worthwhile setting out in detail the events surrounding this proposal so shareholders have a clear and precise understanding of the circumstances and outcomes over the entire history of the deal.

On October 14, 2008 the Company announced that it was in exclusive negotiations with respect to the potential sale of the Company. On October 21, 2008 a Special Committee of the Board of Directors of the Company was established to review and consider the proposed terms of this transaction and CIBC World Markets Inc. were appointed to advise the Company on the merits of the proposal.

In light of the extremely uncertain economic environment at the time, with alternative means of raising development funding virtually non-existent, on November 14, 2008 the Special Committee unanimously extended its recommendation to the full Company Board. The Board, in turn recommended to securityholders of the Company that they vote in favour of the unconditional cash offer from GFI to purchase all of the outstanding shares, in-the-money options and warrants for a consideration of CAD$7.00 per common share, equivalent to a total consideration of approximately CAD$579 million. The Special Committee and Board considered a number of factors and relied in part on an opinion from CIBC that the consideration to be received by the shareholders was fair, from a financial point of view.

The Arrangement Agreement dated November 14, 2008 entered into between the Company and GFI ("Agreement") provided for the transaction to be undertaken as a shareholder and court approved plan of arrangement with closing to be no later than March 15, 2009, subsequently amended on January 27, 2009 to March 18, 2009.

The Agreement also provided for a Reverse Break Fee ("Break Fee") of C$11,412,000 to be payable by GFI to the Company if the Agreement was terminated for reasons attributable to GFI. In the Agreement GFI covenanted to take all necessary action to ensure it had sufficient funds to carry out its obligations under the Agreement. In addition, GFI represented and warranted to the Company that it would finance the acquisition with cash on hand and existing credit facilities. At the time the Agreement was entered into, GFI advised the Company that it had made adequate arrangements to ensure that the required funds would be available to effect payment in full in accordance with the Agreement.

On February 27, 2009 the Company announced that at the special shareholders meeting, the shareholders approved the plan of arrangement. The final certified results of the vote at the meeting showed that 99.96% voted in favour of the arrangement. This total exceeded the required two-thirds of the votes. It is worth noting that not one registered shareholder exercised dissent rights with respect to the proposed arrangement.

The Company was ready, willing and able to close the transaction on March 18, 2009, as contracted, however GFI revealed that it did not have sufficient funds available to close the transaction and required an extension of closing. Due to the highly unusual and difficult economic conditions that continued to prevail in March 2009, the Special Committee and Board had some sympathy to GFI s extension request and agreed to extend the closing to a date not later than July 31, 2009 subject to the agreement of GFI and Mr. George A. Forrest to certain conditions including an increase in the Break Fee to CAD$20 million and receipt of a personal guarantee from Mr. Forrest, the sole shareholder of GFI.

GFI failed to complete the transaction by July 31, 2009.

On August 4, 2009, GFI represented to the Company and separately confirmed in a press release that it had signed definitive and binding investment documentation upon terms which would permit GFI to complete the purchase of the Company by no later than August 17, 2009. When GFI failed to deposit funds to close or provide evidence of availability of such funds despite its public representations on August 4, 2009, the Board voted unanimously to terminate the Agreement. Notice of termination was delivered on August 25, 2009. On August 27, 2009 GFI responded by accepting the Arrangement was terminated, however they disputed the Company s right to claim the Break Fee and alleged certain breaches of the Agreement by Forsys for which they have filed a claim for damages. The Company considers GFI s claims as vexatious and will vigorously pursue payment of the Break Fee and any other legal remedies that it may have.

The original Plan of Arrangement dated November 14, 2008, as subsequently amended, is available on SEDAR (www.sedar.com) for those interested in reading the entire Agreement.

Throughout the course of the GFI transaction, the Board has based its decisions upon what it believed to be the best interests of all of the securityholders. The final decision to terminate the Agreement with GFI was made in an economic climate vastly different from when the original cash offer by GFI was first recommended. Capital markets are once again operating effectively and efficiently so the choices to maximize shareholder value, that simply weren't available in November 2008, are once again real and viable options.

Looking Ahead

During the course of the GFI offer, the Company has continued with initiatives aimed at adding further value to its principal asset, the Valencia Uranium Project ("Valencia") in Namibia, Africa. We have also continued to make significant progress in ensuring that the cost structures, both capital and operating, are optimized. Our people remain focused on implementing the best strategy to meet the needs, challenges, and opportunities offered by the growing global demand for uranium. Our commitment to our shareholders to maximize the value of its Namibian uranium assets and to as much as possible have that enhanced value reflected in our share price is the primary focus of management.

We are currently reviewing all of the strategic alternatives available in order to be able to respond swiftly and concisely to all opportunities that present themselves in ways that will strengthen our business going forward.

Project Update

What differentiates Forsys from others in Namibia who are attempting to develop new uranium assets, is a fully approved mining licence. The Company s wholly-owned subsidiary Valencia Uranium (Pty) Ltd. was granted a 25 year mining licence (ML 149) on June 23, 2008 allowing full scale development and production to proceed.

Updated Mineral Resource

On May 1, 2009 the Company reported an updated Ore Reserve estimate for Valencia, prepared by Snowden Mining Industry Consultants ("Snowden") in accordance with National Instrument 43-101 ("NI 43-101"). The reserve was reported as 51.4 Mlbs of probable (measured and indicated) material at an average grade of 159 ppm using a cut-off grade of 72 ppm. Included within the reserve was 39.1 Mlbs at an average grade of 211 ppm. This reserve was estimated from a global mineral resource (measured, indicated and inferred) of 254.6 Mt at an average grade of 151 ppm using a cut-off grade of 60 ppm.

Since the release of this update an additional 48,000 m of infill drilling has been completed at Valencia, with a focus on pit expansion to the east and west. We are anticipating another NI 43-101 reserve and resource update from Snowden in Q4 2009.

Significant potential exists for further expansion of the Valencia pit based on the following:

- Additional infill drilling within areas currently classed as Inferred;

- Definition drilling to investigate where the ore body remains open to the north, west and east;

- Mineralization which is known to continue at depth.

Development of Valencia

Approvals were received in May 2009 to build the access road through state and private land to the mine site. Construction of this industrial grade access road linking Valencia to the B2 highway is progressing well. In fact, we have been using this road already since June 2009 which has significantly improved access to the site for ongoing construction activities.

Subject to a formal Board decision to commence development and dependent on provision of the necessary water and power infrastructure, Valencia is expected to commence production in 2011. However, progress has been made on securing the supply of power and water as follows:

Power

Valencia is in the final stages of negotiating with Namibia s national power utility ("NamPower") on an agreement to source two main mine transformers, which are critical long-lead items for delivery of power. In addition, under the proposed agreement, NamPower would include the construction of the Valencia transmission line in a larger contract addressing the entire Erongo Region needs, thus ensuring that the best price and completion time can be achieved. Based on the proposal NamPower has provided and subject to Board approval, Valencia could be connected to the national power grid as early as the third quarter of 2010. Early connection of Valencia to the national power grid will ensure that the Valencia construction program is not constrained by grid power supply and the majority of the mine construction could be completed on grid power rather than alternative higher cost power generation using localized diesel generators.

Water

Namibia s national bulk water utility ("NamWater") will be the provider of process water for Valencia production. NamWater is evaluating options for construction of a seawater desalination plant and upgrading of the bulk water infrastructure. A new 31 km water pipeline will be constructed from the Rossing reservoir to Valencia.

Engineering

A pre-qualification inquiry for management of the engineering, procurement and construction phase of the project development has been tendered. The submissions are currently under review and after completing the adjudication process and subject to final Board approval, the engineering contract will be awarded. Until a final decision is taken however, the Company continues to conduct trade-off studies and optimization test work as part of ongoing activities associated with the feasibility study.

Future Focus

With satisfactory progress on the Valencia project during, what has ultimately turned out to be the distraction of the GFI Arrangement, we can now turn our focus to the next stage of building the business. Speaking from personal experience of being one of the co-founders of First Quantum Minerals Ltd, which we have built in just over 13 years to be a highly successful African focussed resource producer with a current market capitalization of in excess of CAD$5 billion, I have first-hand knowledge and experience of the challenges faced and what is required in order to be able to devise and best implement a strategy to create shareholder value from valuable resource assets located in Africa.

Recently, it has become apparent that the government stimulus aimed at enhancing market liquidity and restoring stability to the financial markets has started to yield positive results so that the strategic alternatives that now present themselves to the Company are much more flexible in nature. We continue to position ourselves as a responsive business, ready to capitalize on opportunities as they arise. To this end, I will continue to chair the Special Committee of the Forsys Board of Directors formed to evaluate the initial GFI bid; and as a committee, we will remain diligent and responsive in considering and evaluating all alternatives to create the most value for shareholders.

The Nuclear Industry

Universal concern about climate change and global warming has forced the world to reassess the use of carbon emitting fossil fuel as the dominant source of energy generation in most economies. Rapid economic growth in China and India, in particular, are further increasing the demand for global energy fuels and placing more pressure on alternative forms of long term energy generation. It is in this context that nuclear energy is emerging as the most suitable energy technology for the 21st century both from a demand and environmental viewpoint. However, the use of nuclear power remains controversial and development of the world s uranium resources is constrained by political interference and licencing requirements. This means that Forsys, with its fully approved and permitted Valencia project, is uniquely placed to take advantage of the predicted shortfall in the supply-demand balance as nuclear power inevitably becomes more accepted as an alternative and ultimately preferred form of power generation in this increasingly carbon restricted environment.

Objectives for 2010

The primary objectives for the next twelve months are:

- Lead the industry in health, safety and development of our employees and communities in which we operate;

- Appoint financial advisors to determine and analyze the various strategic alternatives now available to the Company;

- Communicate directly with the analyst and institutional investor communities to explain our strategic decisions and how they affect the Company s intrinsic value;

- Update the feasibility study for the Valencia project for current capital and operating costs;

- Finance the development of Valencia and commence construction, if this is decided as the best strategic alternative to pursue;

- Continuously enhance our leadership and technical acumen to capitalize on the opportunities we already have and those that we create or are presented to us;

- Strengthen the Board and management team with suitably qualified and motivated personnel.

The past year presented Forsys with unusual but exciting challenges. As a Company, we believe that we have met these challenges in a strong and decisive manner to ensure the integrity of our asset base and to protect the interests of all stakeholders in the Company as much as possible in the rapidly evolving circumstances.

As a result, Forsys will move forward well positioned as an emerging uranium producer with a fully approved mining licence in place, a growing asset base and with exceptional people in a very supportive country that embraces and supports mineral development.

On behalf of the Board, I would like to express my gratitude to Duane Parnham and his team for their efforts during what has been a difficult period, not just because of the circumstances of the GFI Arrangement, but also because of the economic conditions in which management have had to operate. I would also like to thank the Government of Namibia for their ongoing support of the Valencia project and their contribution to the infrastructure that the project requires in country.

We can together look forward to, I firmly believe, an exciting 2010.

Martin Rowley, Chairman

About Forsys Metals Corp

Forsys Metals Corp, having BEE sponsorship, is an emerging uranium producer with 100% ownership in the fully permitted Valencia Uranium Project. With an expanding reserve base, production is expected to commence in 2011 with a 15 year life of mine. Current NI 43-101 compliant reserves at Valencia are 51.4 Mlbs U308 and current Measured and Indicated resources are 70 Mlbs U308 with a further 11 Mlbs Inferred U308. Additional infill drilling is currently underway and is designed to bring the Inferred category resources into the Indicated category so they can be incorporated into a future reserve update. The Company also has an extensive portfolio of uranium exploration projects totaling over 252,000 ha located in Namibia, Africa, a politically stable and mining friendly jurisdiction.

On Behalf of the Board of Directors of Forsys Metals Corp

Duane Parnham, President and CEO

For further information visit our website at www.forsysmetals.com.

Sedar Profile #00008536

Forward-Looking Information

This news release contains projections and forward looking information that involve various risks and uncertainties regarding future events. Such forward looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of the Corporation. These risks and uncertainties could cause actual results and the Corporation s plans and objectives to differ materially from those expressed in the forward looking information. Actual results and future events could differ materially from anticipated in such information. These and all subsequent written and oral forward looking information are based on estimates and opinions of management on the dates they are made and expressed qualified in their entirety by this notice. The Corporation assumes no obligation to update forward looking information should circumstances or management s estimates or opinions change.

Shares Outstanding: 78,985,231

The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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