Mr. Brian Leeners reports

PHOENIX METALS ACQUIRES PEACE RIVER FRAC SAND PROJECT SURROUNDING LAPRAIRE GROUP'S CANADIAN SILICA PRODUCING MINE

Phoenix Metals Corp. has entered into a binding letter of intent (LOI) with Zimtu Capital Corp. and DG Resource Management Ltd. to acquire a 100-per-cent interest in four metallic and industrial minerals permits in northwestern Alberta, totalling approximately 24,363 hectares, collectively known as the Peace River frac sand project. The permits are known to host the Paddy Member non-marine sand of the St. John Group. Testing will be required to determine if the Paddy Member within the permits contains the quality and quantity of silica sand suitable for hydraulic fracturing and if it that product is economically extractable. The permits surround the claims of the 500,000-tonne-per-year capacity silica sand mine privately owned the Laprarie group and operated by Canadian Silica Industries.

Terms of the acquisition

• Payment of $10,000 on the signing of the LOI;
• Payment of a further $15,000 and the issuance of 2.25 million common shares on the required TSX Venture Exchange acceptance of the transaction.

The vendors will retains a 2-per-cent royalty (GORR) on production (1 per cent of which can be purchased for $1-million at the option of the company).

Peace River frac sand project

The project is located north of the community of Peace River, Alta., adjacent to the Peace River frac sand quarry, which is owned and operated by Canadian Silica Industries. It extends for approximately 40 kilometres along the Peace River, straddling both the east and west banks where the target unit is exposed. Within the region, the Lower Cretaceous Paddy Member of the Peace River formation is currently mined for frac sand. The Paddy Member is a friable sand unit representing a shoreline facies deposited in a fluvial environment, with a thickness up to 16.5 metres (7.7 m average). The sand grains are almost entirely colourless quartz and the beds are dominantly uncemented, which is ideal as a frac sand proppant in hydraulic fracturing.

The Peace River frac sand quarry of Canadian Silica Industries reportedly has a total annual capacity of 500,000 tonnes of silica sand. It is in proximity to infrastructure including rail and roads, and located near the community of Peace River. Additionally, it is located close to the Horn River, Montney and Cardium shale gas basins, and is central to the frac sand market within northwestern Alberta and northeastern British Columbia.

The technical information in this news release was approved by Stephen Wallace, PGeo, a qualified person under National Instrument 43-101 regulations

The company's focus is on developing raw materials for the frac proppants industry. The company is currently working to acquire assets to serve the developed North American market and further assets that are proximal to large underdeveloped oil and gas resources around the world that require hydraulic fracking proppants. The priority is on raw materials assets with known quantity and strong logistics and/or infrastructure.

Proppants have been critical to the major expansion of oil and gas production in North America. Sand proppants according to Accenture Research represent 90 per cent of the unit volume and 70 per cent of expenditures in the United States proppant market. Market research from Freedonia Group concluded that North American proppant demand has risen from $250-million in 2002 to nearly $5-billion in 2012 and overall North American demand is projected to reach over 100 billion pounds valued at $9.4-billion in 2017.

"As the shale boom drives North American upstream activity, demand for sand used in hydraulic fracturing is expected to spike by 24 per cent per year," according to a report published by Houston-based PacWest Consulting Partners. Demand for proppants is expected to slightly outpace supply causing moderate price increases. PacWest said, "A continued shortage of transportation infrastructure will lead to significant price increases."

Financing

Phoenix will continue the company's non-brokered private placement of up to 10 million units at a price of five cents per unit to raise proceeds of up to $500,000. Each unit will consist of one common share and one common share purchase warrant with each unit warrant entitling the holder to acquire one additional common share at a price of 10 cents per share for one year from closing. The unit warrants are subject to the right of the company to accelerate the exercise period for the unit warrants if the common shares of the company trade above 20 cents for a period of 10 consecutive trading days. The proceeds of the private placement will be allocated toward general working capital purposes.

The company may pay finders' fees on the private placement proceeds to certain parties in accordance with the policies of and subject to the approval of the TSX Venture Exchange.

The company will further pursue flow-through financing for the fast-track development of the Peace River frac sand project.

We seek Safe Harbor.