Chairman's Message March 1, 2013

Chairman's Message March 1, 2013


To Our Shareholders,

We would like to address concerns that have been expressed to us over the results of the drilling program that was recently completed at the Mary March Project in Newfoundland.

First of all, while it is obvious that the initial results were disappointing, Canstar would like to emphasize that in NO WAY is this the end of the project. The high grade intersection originally found in Discovery Hole MM-294-7 and the preliminary results from Canstar’s program on the Mary March and Nancy April Zones are very similar to several satellite zones encountered at Buchans, which were indicative of a strong VMS alteration system and proximal to main ore lenses. We are in the very early stages of an exploration program on this highly prospective property and the drill program was a very small one, consisting of only 8 drill holes. To shed some perspective on this, it takes time to find economic deposits - the Hemlo gold deposit was not found until approximately 80 holes were drilled.

Four of the drill hole locations in the past program were selected by Xstrata Zinc, our 50% joint venture partner. They participated in the cost of only these 4 holes, which were drilled at wider spacing, and at considerable distances from the original high grade discovery by Phelps Dodge. Canstar favoured closer spaced holes immediately adjacent to the Phelps Dodge discovery in this initial phase of drilling.

Sulphide mineralization containing significant values in copper, lead ,zinc, gold, and silver was encountered in 4 of the 8 holes completed, although values were generally lower and over lesser core lengths than in the original drill program conducted over ten years ago. In our attempt to twin the original discovery hole, it was collared about one meter from the drill casing of MM-294-7 and was drilled at the same azimuth and inclination. When the Mary March horizon was encountered, downhole surveys indicated the hole had wandered approximately 40m northeast of the MM-294-7 high grade intersection. This does not mean the previously discovered values are not valid or that our target was inaccurate - this is a highly complex geological structure and any number of factors could have caused the drill to wander, including an unexpected fault line. We continue to believe that the Mary March has great potential for economic deposits, and further closer spaced drilling is required to expand on the original discovery both along strike and down dip.

Planning of the next phase of exploration is already underway and we will be proposing the next phase of drilling to Xstrata as soon as possible. As soon as the program is finalized, we will announce it to our shareholders.

Sincerely,
Harry J. Hodge, P.Eng
Chairman

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