Mr. Phillip Thomas reports

DECISION TO RELINQUISH PORT SNETTISHAM IRON ORE PROPERTY OPTION; DUE DILIGENCE ON COPPER CONCENTRATION PLANT - MANZANILLO MEXICO

Arrowstar Resources Ltd. has decided to relinquish its option over the 49 tenements at Port Snettisham in Alaska. The company still retains 21 claims covering the area where a second magnetic anomaly was identified. The claim fees are current until Aug. 28, 2015.

The key reasons why the board decided to relinquish the option granted by BullRun Prospecting Inc. were as follows:

• Unsatisfactory returns -- The return on capital employed and internal rate of return at a 10-per-cent discount rate did not meet the board's threshold of investment return. The Platts iron ore index price at 62 per cent Fe has remained at $84 per tonne, and the outlook expressed by a range of analysts does not see the average price recovering over $100 per tonne for years. With an expected freight cost of $20 per tonne, a loading cost of $5 per tonne and an $80-million capital expenditure, the cost of production and management of the waste did not provide sufficient profit at two million tonnes a year of production of final product to adequately reward shareholders.
• Increase in production in Australia -- Production from Rio Tinto, BHP Billiton Ltd., Fortescue Metals Group Ltd. (FMG) and the Roy Hill mine will add about 100 million tonnes a year to Australia's exports of iron ore where the freight cost is less than $10 per tonne to China, and CIF (cost, insurance and freight) is under $50 per tonne.
• Expensive option agreement -- Negotiations with the option grantor failed to produce a fee arrangement that didn't materially impact the economic success of the project.
• Environmentally sensitive -- The deposit is in an environmentally sensitive area with salmon farms located 15 kilometres away and a very large sea lion colony three kilometres away. Whales have been seen in Stephen's Passage, and eagles that frequent the area could obstruct helicopter operations. With 90,000- to 110,000-tonne ships visiting the area to load, the company felt it would be difficult and capital intensive to secure the environment. An archeological site has been identified close to one of the key beach landing areas. Fog can be a major issue in November.
• Waste difficulties -- The project will produce a significant amount of waste, approximately two million tonnes or one million cubic metres of silica/pyroxenite per year. Finding a suitable location close to the proposed mine site to build a waste stockpile was proving economically unviable. Trucking in the area would have been difficult without considerable road-building expenditures and permits.
• Double processing -- The geochemistry from the 109 samples taken after extensive testing showed that the grind size would have to be one millimetre to produce iron ore at 63.5 per cent Fe which would cost an additional $3 to $4 per tonne in operating costs. The samples containing representative magnetite iron ore also showed that the iron oxide value was low (reducing the price) and that a dual-processing system would have to be implemented, as 75 per cent of the iron extracted was hematite or altered magnetite (non-magnetic), and only 25 per cent was magnetic iron that could be separated by high-speed magnetic drums. High concentrations of silica and titanium were present in the high-iron samples.
• Impact of snow, moisture -- Processing would have to take place under a large, covered area to prevent the high-impact grinders and magnetic drums from getting clogged from high moisture. Melting snow on crushed preprocessed ore and wet ore from the wet magnetic drum system would have been problematic for shipping, adding additional cost. This covered area would be a very substantial construction, approximately 130 metres by 60 metres by 25 metres high.
• Bulk-loading port costs -- The cost of building bulk-loading ports is increasing, and while $30-million was budgeted, more detailed studies have shown that the capital cost may be as high as $65-million (U.S.) to $125-million (U.S.) based on the depth of the channel and the infrastructure required for shipping two million tonnes in 90,000 to 110,000 Panamax ships, being 20 shipments, or two per month.
• Difficult terrain -- The terrain where the mine would be situated if the project had proceeded was very steep and challenging to mine given the mobile track equipment being proposed. Road construction in the Tongass Forest is still limited.

Copper concentration project -- Manzanillo, Mexico

Due diligence is being conducted on a copper concentrator located close to Manzanillo with the view to start production of copper concentrate within three months of acquisition. Discussions are being held with various miners to buy their raw ore. This project may provide the company with cash flows from a modest investment and provide a platform for substantial expansion.

We seek Safe Harbor.