Ashton Mining of Canada Inc.
TSX : ACA

Ashton Mining of Canada Inc.

December 18, 2006 08:03 ET

Ashton Mining of Canada Inc.: Board of Directors Approves Stornoway Amalgamation Proposal and Recommends Acceptance by Shareholders

Special meeting of shareholders to proceed on January 15, 2007

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 18, 2006) - Ashton Mining of Canada Inc. (the "Corporation" or "Ashton") (TSX:ACA) announces that the Corporation's Board of Directors has approved the execution of an agreement with Stornoway Diamond Corporation ("Stornoway") (TSX:SWY) and a wholly owned subsidiary of Stornoway ("Newco"), pursuant to which Ashton will amalgamate with Newco.

The amalgamation, which is subject to the approval of Ashton's shareholders, will constitute the second stage transaction proposed by Stornoway in order to acquire all of the common shares of Ashton that Stornoway did not acquire pursuant to the takeover-bid originally announced on July 24, 2006. Under the take-over bid, which expired on October 16, 2006, Stornoway acquired 75.6% of the outstanding common shares of Ashton.

As announced on November 24, 2006, a special meeting of the Corporation's shareholders will be held on January 15, 2007 to consider, and if deemed appropriate, to approve the proposed amalgamation. As outlined in the Information Circular that will be mailed to shareholders commencing on December 19, 2006, the consideration offered to shareholders pursuant to the amalgamation agreement is equal in value to, and is in the same form as, the consideration offered under the take-over bid.

Subject to the terms of the agreement, a shareholder may elect to receive consideration, for each common share of Ashton, in one of two forms, the "Share Consideration" or the "Cash Consideration". The Share Consideration, which is unlimited, consists of one common share of Stornoway plus $0.01 in cash. The Cash Consideration is equal to $1.25 in cash but is subject to pro ration of the approximately $13.6 million that will be allocated among all shareholders who elect the cash alternative. To the extent that these shareholders do not receive the Cash Consideration, they will receive a proportionate allotment of the Share Consideration.

In order to elect to receive the Cash Consideration, a shareholder must submit a valid election form not later than 5:00 p.m. (Eastern Standard Time) on Thursday, January 11, 2007. If a shareholder fails to do so, she or he will be deemed to have elected to receive the Share Consideration. An election form will be provided to all shareholders together with the Information Circular.

As announced on November 21, 2006, the Board of Directors of Ashton established an independent review committee (the "Independent Committee") to review and evaluate the amalgamation proposal, to negotiate the terms and conditions of the agreement, and to make recommendations to the Board of Directors in relation to the transaction. The Independent Committee engaged Sprott Securities Inc. as its independent financial advisor and instructed Sprott to complete a formal valuation of Ashton as well as a formal valuation of the consideration offered to the Corporation's shareholders pursuant to the amalgamation agreement.

From the time of their appointment until December 17, 2006, the members of the Independent Committee have held confidential discussions among themselves, consulted with Sprott and obtained legal advice and guidance from Davis & Company LLP, the committee's independent legal counsel. In addition, the Independent Committee has made inquiries of the Corporation's management, hasundertaken other independent investigations and has obtained additional financial and technical advice as deemed necessary to complete its review and to formulate the committee's recommendations to the Board of Directors.

On December 17, 2006, Sprott presented, in oral form, its formal valuation of Ashton and of the consideration offered to the Corporation's shareholders under the proposed transaction to the Independent Committee and the Board of Directors. While Sprott utilized several valuation methods, it placed the greatest emphasis on the "net asset value" approach. Under its "Likely Case" scenario, Sprott determined the fair market value of each common share of Ashton to be in the range of $0.91 to $1.35. Likewise under its "Likely Case" scenario, Sprott determined the value of the Cash Consideration and the Share Consideration to be in the range of $1.10 to $1.36, and $0.98 to $1.45, per Ashton common share, respectively.

In a fairness opinion also delivered orally on December 17, Sprott concluded that the consideration offered by Stornoway under the amalgamation agreement is fair, from a financial point of view, to Ashton's shareholders other than Stornoway, its associates and its affiliates. The conclusions and determinations of Sprott are subject to the limitations, qualifications, assumptions and exceptions described in the written valuation and fairness opinion that will be appended to the Information Circular (the "Valuation and Fairness Opinion"), including those that are summarized below.

Following a detailed review of the terms of the proposed transaction, Ashton's Board of Directors has unanimously concluded that the consideration offered to shareholders pursuant to the transaction is fair, from a financial point of view, to the Corporation's shareholders, other than Stornoway, and that the amalgamation is in the best interests of the Corporation. In reaching its conclusion, the Board considered all of the factors deemed relevant, including the recommendations of the Independent Committee, Sprott's two formal valuations and fairness opinion and the other considerations that will be described under the heading "Reasons for Recommendation" in the Information Circular. Accordingly, the Board of Directors has unanimously recommended that Ashton's shareholders vote in favour of the transaction.

Notwithstanding the approval of the Board of Directors, the amalgamation is subject to a number of further conditions. They include the absence of any material adverse change to either Ashton or Stornoway and the approval of not less than sixty-six and two-thirds per cent of the Corporation's shares that are voted in person or by proxy at the January 15 meeting.

The Corporation has been advised that Stornoway is entitled to vote the shares it acquired as a result of the take-over bid in favour of the amalgamation and understands that Stornoway intends to do so. Accordingly, the Corporation anticipates that the transaction will be approved and will therefore take effect on or about January 16, 2007. At that time, the Corporation will become a wholly owned subsidiary of Stornoway and the common shares of Ashton will thereafter cease to trade on the Toronto Stock Exchange.

The Information Circular and Consideration Election Form will be available under Ashton's profile on the SEDAR website at www.sedar.com.

The Valuation and Fairness Opinion must be considered and reviewed as a whole. Selecting portions of the stated analyses or factors considered therein without considering all of the stated analyses and factors together could create a misleading view of the process underlying or the scope of the Valuation and Fairness Opinion. The Valuation and Fairness Opinion may not be used by any person or relied upon by any other person other than the Independent Committee or the Board of Directors of Ashton. Accordingly, the Valuation and Fairness Opinion does not constitute a recommendation to the shareholders of Ashton in relation to voting for or against the amalgamation.

This news release is not an offer of Stornoway shares or any other securities for sale in the United States. The Stornoway shares to be issued pursuant to the amalgamation described herein have not been, and will not be, registered under the United States Securities Act of 1933 or any state securities laws, and may not be resold in the United States absent registration or an applicable exemption from registration requirements.

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