Canadian Royalties Inc.

Canadian Royalties Inc.

May 12, 2005 08:00 ET

Canadian Royalties Inc.: Mesamax Nickel-Copper Grades Increase Over 10%, Mequillon Deposit Size Triples

MONTREAL, QUEBEC--(CCNMatthews - May 12, 2005) - Canadian Royalties (TSX:CZZ) will conduct a web cast and teleconference in conjunction with today's release, beginning at 1:30 pm EST today, Thursday, May 12, 2005. Members of the news media, investors and the general public are invited to access the live web cast of the conference call via Canadian Royalties' website at or through The phone number for the conference call is (877) 407-8035 (toll free) or (201) 689-8035 (international). The conference ID is 152677. The event will be archived and available for replay via our website at

Canadian Royalties Inc. (TSX:CZZ) reports revised, increased indicated resources at the Mesamax deposit of 1,848,000 tonnes grading 2.1% nickel (Ni), 2.6% copper (Cu), 0.08% cobalt (Co), 0.2 g/t gold (Au), 1.0 g/t platinum (Pt) and 3.8 g/t palladium (Pd) (5 g/t Pt + Pd + Au (PGE)). Compared to the last undiluted resource for the Mesamax Deposit reported in June, 2004, the nickel grade has increased by 10.5%, the copper grade has increased by 13%, and the size has increased by 80,000 tonnes. An additional 220,000 tonnes of net-textured sulphides remain to be added to the Mesamax resource pending metallurgical testing of this material. In addition, indicated resources at the Mequillon deposit have been updated to 4,185,000 tonnes grading 0.6% Ni, 0.9% Cu, 0.03% Co, 0.2 g/t Au, 0.7 g/t Pt and 2.4 g/t Pd (3.3 g/t PGE), effectively tripling the size of the initial resource based on drilling completed in 2003 and reported September 22, 2004.

Henrik Thalenhorst, P.Geo., of Strathcona Mineral Services Inc. ("Strathcona") is the author of these latest reports on the estimates of mineral resources at the Mesamax and Mequillon deposits. Both reports are based on results from drilling, bulk density and metallurgical studies conducted in 2004.


- Mesamax Deposit - nickel grade increased by 10.5%, copper grade
increased by 13%, total NI 43-101 indicated undiluted resources are
now 1,848,000 tonnes grading 2.1% Ni, 2.6% Cu, 0.08% Co, 0.2 g/t
Au, 1.0 g/t Pt and 3.8 g/t Pd (5 g/t PGE). The grade increases are
mainly the result of a higher proportion of massive sulphides in
the overall deposit;

- Mequillon Deposit - resource estimate tripled to 4,185,000 tonnes
grading 0.6% Ni, 0.9% Cu, 0.03% Co, 0.2 g/t Au, 0.7 g/t Pt and 2.4
g/t Pd (3.3 g/t PGE). The bulk of resources are now classified as
indicated resources;

- The total indicated resources on Canadian Royalties' Raglan South
Trend Nickel project has reached 6,123,000 tonnes grading 1.1% Ni,
1.4% Cu, 0.05% Co, 0.2 g/t Au, 0.8 g/t Pt and 2.8 g/t Pd (3.8 g/t
PGE). This figure does not include an upcoming resource estimate on
the Expo deposit. Refer to the following table for additional

Table 1 - Canadian Royalties NI 43-101 Resources

Deposit and Category Thousands Ni Cu Co Au Pt Pd PGE
of Mineralization of tonnes (%) (%) (%) (g/t)(g/t)(g/t)(g/t)
Mesamax Deposit
Indicated 1,848 2.1 2.6 0.08 0.2 1.0 3.8 5.0
Inferred 30 1.6 1.8 0.08 0.1 0.6 5.5 6.2
TK Deposit
Indicated 90 1.6 1.2 0.10 0.1 0.4 2.0 2.5
Inferred 7 1.6 1.0 0.11 0.0 0.4 1.6 2.0
Mequillon Deposit
Indicated 4,185 0.6 0.9 0.03 0.2 0.7 2.4 3.3
Inferred 167 0.8 1.0 0.04 0.2 0.7 2.4 3.3
Weighted Average Total Canadian Royalties NI 43-101 Resources
(May 12, 2005)
Indicated 6,123 1.1 1.4 0.05 0.2 0.8 2.8 3.8
Inferred 204 0.9 1.1 0.05 0.2 0.7 2.8 3.7

Notes: Expo deposit resource estimate is pending. The Mequillon
resources are partially diluted (see below).

Mesamax Deposit Resource Update

Canadian Royalties discovered the Mesamax deposit in 2002, and the first mineral resource estimate was completed by Strathcona in April, 2003. The deposit is located approximately 12 kilometres to the south of the Falconbridge Limited Raglan Mine.

A total of 136 diamond drill holes (almost 12,000 metres) has defined the distribution of massive and disseminated nickel-copper-PGE values for 250 metres in length and over widths of up to 100 metres, with the bulk of the mineralization occurring between the surface and depths of approximately 80 metres. The mineralization reaches its maximum width near the center of the deposit giving the general geometry of a half football lying just below surface. This geometry is considered ideal for open pit exploitation.

Average indicated resource grades provide very high contained dollar values which, even once discounted to allow for mining and milling losses, and transportation and processing costs, are anticipated to provide for robust operating margins and rapid payback of capital in any eventual open pit mining operation. The non-nickel payable metals provide for approximately 45% of the contained dollar value of the mineralization or the net smelter returns based upon initial floatation test work and expected medium-term metal prices (US$5 per pound of nickel, US$1.10 per pound of copper, US$15 per pound of cobalt, US$375 per ounce of gold, US$750 per ounce of platinum and US$175 per ounce of palladium). The high-grade massive sulphide mineralization is accompanied by more extensive, generally flanking, disseminated to net-textured sulphide mineralization of generally lower metal grades but similar palladium concentrations.

The updated undiluted resource estimate completed by Strathcona, based on exploration conducted to December 31, 2004 is summarized in Table 2 below. The diluted resource estimate is summarized in Table 3 below:

Table 2 - Mesamax Undiluted Mineral Resource Estimates as of December 31, 2003 and 2004

thousands Ni Cu Co Pt Pd Au
Type of Mineralization of tonnes (%) (%) (%) (g/t) (g/t) (g/t)
Indicated Mineral
Massive (fresh) 2004 661 3.5 4.1 0.14 1.4 3.9 0.3
2003 760 3.4 4.1 0.14 1.5 5.2 0.4
(oxidized) 2004 194 3.3 4.9 0.13 1.8 3.7 0.4
2003 None
(fresh) 2004 993 0.8 1.1 0.04 0.6 3.8 0.1
2003 1,080 0.8 1.1 0.04 0.6 3.7 0.1
Total 2004 1,848 2.1 2.6 0.08 1.0 3.8 0.2
2003 1,840 1.9 2.3 0.08 0.9 4.3 0.3
Inferred Mineral
Massive (fresh) 2004 9 3.6 3.2 0.16 1.0 7.8 0.3
2003 28 2.8 4.0 0.13 1.0 11.6 0.3
(oxidized) 2004 None
2003 None
(fresh) 2004 22 0.8 1.3 0.05 0.5 4.6 0.1
2003 39 0.8 1.0 0.04 0.5 3.1 0.1
Total 2004 30 1.6 1.8 0.08 0.6 5.5 0.1
2003 67 1.6 2.2 0.08 0.7 6.6 0.2

Strathcona Notes on the Mesamax Resource Estimate (Henrik
Thalenhorst, P.Geo.):

- Based on initial results of metallurgical test work, it now appears
that the partly oxidized massive sulphides will produce saleable
concentrates at reasonable metal recoveries. All of the oxidized
massive sulphide mineralization was therefore included in the
resource estimate for the first time.

- No flotation test work has yet been completed on the partly
oxidized net-textured sulphide mineralization (approximately
220,000 tonnes at grades identical to the unoxidized material),
which are therefore excluded from this mineral resource update
(Tables 1, 2 and 3). Canadian Royalties plans to collect sample
material as part of the 2005 bulk sample collection program in
order to evaluate recoveries of this 220,000 tonnes of material not
included in this latest resource estimate.

- As was the case a year ago, the mineral resources are quoted at
zero cut-off grade, as the metal grades of all types of
mineralization are uniformly distributed within their respective
domains making the application of a cut-off grade unnecessary.

- There was a loss of 100,000 tonnes in the fresh massive sulphides
compared to the 2003 estimate, due to: i) the depth of oxidation to
be deeper than anticipated near the centre of the deposit, leading
to a partial transfer to the oxidized domain; ii) the re-
classification of some peripheral massive sulphide intersections as
veins; and iii) a tighter constraint on the geometry of the massive
sulphides as a result of revised interpretations of data from the
additional drilling completed in 2004.

- As a result of the inclusion of the oxidized massive sulphides in
the estimate, the total massive sulphides have increased by nearly
100,000 tonnes. It now appears that the oxidized massive sulphides
carry some supergene copper mineralization as indicated by the
increased average copper grade of the resources compared to the
fresh massive sulphides, and as implied by the 32% to 34% grades
achieved for the copper concentrate from this material.

- There was also a loss of 90,000 tonnes of fresh net-textured
mineralization, due to: i) tighter constraints in some areas with
detailed drilling; ii) the lowering of the bottom of the zone of
oxidation as described above; and iii) a review of bulk density
data for this material that led to a downward adjustment from 3.3
to 3.2 tonnes per cubic metre (t/m3).

- To anticipate the effects of external mining dilution, a one-metre
thick skin of dilution has been added around the resource model for
the entire deposit. This amounts to 230,000 tonnes of which ten
percent is attributable to the overburden overlying the deposit.
The host rock dilution carries low-grade values that have been
determined by averaging more than 300 assay intervals falling into
the skin after purging three percent of these assays that
constitute high outlier values. The dilution from overburden has
been assigned zero metal values. The dilution provision for the
inferred class was added by using the factors and grades developed
for the indicated class. The diluted mineral resource is reported
in Table 3.

Table 3 - Mesamax Diluted Mineral Resource Estimate as of December
31, 2004

Thousands Ni Cu Co Pt Pd Au
of tonnes (%) (%) (%) (g/t) (g/t) (g/t)
Indicated Mineral Resources
Massive Undiluted 855 3.5 4.3 0.14 1.5 3.9 0.3
Net-Textured Undiluted 993 0.8 1.1 0.04 0.6 3.8 0.1
Total Undiluted 1 848 2.1 2.6 0.08 1.0 3.8 0.2
Dilution 230 0.1 0.3 0.01 0.1 0.5 0.0
Diluted Indicated
Mineral Resource 2 078 1.9 2.3 0.07 0.9 3.4 0.2
Inferred Mineral Resources
Undiluted 30 1.6 1.8 0.08 0.6 5.5 0.1
Dilution 4 0.1 0.3 0.01 0.1 0.5 0.0
Diluted Inferred
Mineral Resource 34 1.4 1.6 0.07 0.5 4.9 0.1

Mequillon Deposit Resource Update

The Mequillon nickel-copper PGE deposit is located approximately 25 kilometres to the west of the Mesamax deposit, and about 15 kilometres to the west of the Expo deposit.

Over 11,000 metres of additional diamond drilling completed in 2004 defined the mineralized zone for approximately 1,000 metres along the lower contact of the ultramafic host. The extensive mineralized body remains open to the east of the last diamond drill hole intersections completed in 2004.

The preliminary estimate (September, 2004) of inferred mineral resources constrained by a conceptual pit was 1.4 million tonnes at average grades of 0.7% Ni, 0.9% Cu, 0.03% Co, 0.2 g/t Au, 0.6 g/t Pt and 2.1 g/t Pd. This estimate was based on the Strathcona review of the data from the first 18 diamond drill holes drilled by Canadian Royalties in 2002 and 2003, covering the first 300 metres over the west end of the deposit.

This updated resource estimate has effectively tripled the size of the resource, by taking into account the 700 additional metres of strike length defined by drilling in the 2004 exploration season.

The Ni-Cu-PGE mineralization at Mequillon is contained within the U-shaped Mequillon ultramafic body that changes from peridotite in the centre to pyroxenite and gabbro along the outer margins. From surface mapping and magnetic data, the body is known to extend along its north-easterly to easterly trend for a distance in excess of 2.5 kilometres. Drilling to date has covered approximately one kilometre of the known length. Disseminated sulphide mineralization is found throughout the entire known vertical extent of the Mequillon ultramafic body, nearly 300 metres. The mineral resources are contained in a domain of net-textured mineralization at or near the bottom of the body in the border pyroxenite. The net-textured domain shows good continuity along the 15-degree north-easterly plunge of the host ultramafic body, with the cross-sectional area ranging from 1100 to 4800 square metres. The average length of an intersection of the net-textured mineralization is 28 metres.

Throughout nearly the entire drilled length of the Mequillon ultramafic body, a persistent, shallow easterly-dipping late fault (the Footwall Fault) truncates the deepest part and may have removed any massive mineralization that may have been part of the deposit. It is only on section 200 E, the easternmost section drilled to date, that the plunge of the ultramafic body reverses so that its bottom separates from the fault, revealing several intervals of massive, high-grade sulphides within the lowermost part of the net-textured domain.

Table 4 - Mequillon Mineral Resource Estimates as of December 31, 2003 and 2004

Thousands Ni Cu Co Pt Pd Au
Category of tonnes (%) (%) (%) (g/t) (g/t) (g/t)
Constrained by Open-Pit
Indicated 2004 1,870 0.6 0.8 0.03 0.6 2.1 0.2
2003 None
Inferred 2004 None
2003 1,400 0.7 0.9 0.03 0.6 2.1 0.2
Constrained by Underground
Mining Solid
Indicated 2004 2,315 0.7 1.0 0.03 0.7 2.6 0.2
2003 None
Inferred 2004 167 0.8 1.0 0.04 0.7 2.4 0.2
2003 None
Indicated 2004 4,185 0.6 0.9 0.03 0.7 2.4 0.2
2003 None
Inferred 2004 167 0.8 1.0 0.04 0.7 2.4 0.2
2003 1,400 0.7 0.9 0.03 0.6 2.1 0.2

Strathcona Resource Notes on the Mequillon Resource (Henrik
Thalenhorst, P.Geo.):

- The resources potentially mineable by open pit are quoted at a cut-
off net smelter return (NSR) value of C$40 per tonne and are
constrained by a conceptual Whittle pit. There is a small near-
surface tonnage of about 75,000 tonnes on section 750 W that is
oxidized and that has been excluded from the estimate.

- The deeper resources are constrained by an underground mining solid
that was drawn with a cut-off NSR value of C$80 per tonne, and
within that solid the mineral resources are quoted at zero cut-off
grade, in anticipation of a high-productivity extraction method
with little scope for selectivity.

- In late 2004 and early 2005 a substantial amount of flotation test
work, including a number of locked-cycle tests, on mineralized
samples from all of the Canadian Royalties' Ungava projects and
from the Mequillon deposit has been conducted at SGS Lakefield.
Refer to Canadian Royalties' press release dated March 17, 2005 for
additional details.

- The internal cut-off value required for open-pit mining is
calculated as C$40/tonne, while the in situ underground cut-off
value is C$80/tonne. Note that the costs for mining the ore and the
waste in the pit are not part of the cost that the internal cut-off
value has to satisfy. The unit operating costs are based on a
conceptual 2,500 tonne-per-day operation and were arrived at by
developing costs from first principles and by comparing the results
with similarly sized, northern mining operations for which recent
unit operating costs are available.

- The estimation methodology has added a certain amount of dilution
to the resource estimate. The implied external dilution figures are
19% for the resources constrained by the Whittle shell, and 5% for
the resources constrained by the underground solid.

- The external dilution for the lower part of the deposit is larger
than implied as two drill hole intersections are incomplete, having
been abandoned above the highest-grade parts of the section. More
reliable quantification of realistic dilution expectations must
await geotechnical input in the case of the near-surface resources,
and a substantial amount of additional drilling in the case of the
resources confined by the underground mining solid that would allow
a more realistic stope layout than is currently possible.

- Relatively little additional drilling is required (three resource
delineation holes and five geotechnical holes) to support the upper
part of the Mequillon resources for a feasibility-level study. In
contrast the feasibility-level quantification of resources
potentially mineable by underground methods in the lower part will
require more than double the current data density, drilling on 25-
metre spaced sections at a drill spacing of not more than 20 metres,
with the additional holes drilled vertical rather than in fans.

Canadian Royalties' Raglan South Trend Nickel project

Canadian Royalties has focused its exploration efforts at defining zones of nickel-copper-platinum-palladium mineralization in near surface deposits near the center of the project area, while continuing to identify and evaluate new target areas across the Raglan south ultramafic trend.

Canadian Royalties has expended over $18 million on exploration in the region since 2001, covering a broad range of exploration activities including the drilling of 58,500 metres in over 500 diamond drill holes at 18 different deposit and target areas.

The cumulative impact of the discovery of several shallow nickel-copper-PGE deposits close to existing mining infrastructure is one of the key economic advantages that will continue to enhance the potential for Canadian Royalties to establish an independent, stand-alone mining operation.

Canadian Royalties holds a 70% interest in the property discussed and will hold 80% upon delivery of a bankable feasibility study.

Bruce Durham, P.Geo. and President of Canadian Royalties Inc. is the designated Qualified Person responsible for the exploration program on the property and the person responsible for the preparation of this release.

Canadian Royalties Inc. will hold its Annual Meeting of the Shareholders on Thursday, May 12, 2005 at 4:00 p.m. at the offices of Canadian Royalties, 800 Rene-Levesque Blvd. West, Suite 1525, Montreal, Quebec. The meeting will be followed by an open house at 4:30 pm. Shareholders and the public are welcome to attend. For further information, please contact the Montreal office directly at 514.879.1688.

The Statements contained in this press release may contain statements that may involve a number of risks and uncertainties. Actual events or results could defer materially from the Company's expectations and projections.

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