Mr. Brian Kerzner reports

PRISM RESOURCES ENTERS INTO ROYALTY PURCHASE AGREEMENT WITH AGNICO EAGLE

Prism Resources Inc. has entered into a royalty purchase agreement with Agnico Eagle Mines Ltd. pursuant to which the company will sell its 7.5-per-cent net profit interest royalty over certain properties in the Porcupine mining district of Ontario, including Agnico's Aurora and Sunday Lake properties to Agnico for cash consideration of $5-million.

Recommendation of the board and special committee

The board of directors of the company established a special committee to review, assess and advise the board on the transaction, which is currently composed of Patrick Evans as the sole member, with Mr. Evans being free from any conflict of interest with respect to the transaction. The special committee engaged Evans & Evans Inc. as financial adviser, and Evans & Evans prepared a written valuation report in connection with the transaction. The special committee, composed solely of Mr. Evans, upon reviewing the valuation report and after consideration of the advice of legal and financial advisers to the special committee and the company, determined that the transaction is fair and reasonable and in the best interests of the company and recommended that the board approve the transaction and recommend to the shareholders of the company that they vote in favour of the transaction.

Robert Parsons, Brian Kerzner, Scott Ross and Timothy Charles Moody, each a director of the company, have a conflict of interest with respect to the transaction by virtue of the fact that each of them is entitled to receive certain payments in connection with the transaction, and each recused himself from voting on the transaction. The board (represented by Mr. Evans as the sole deliberating and voting member, following the recusal of the interested directors) has determined that the transaction is in the best interests of the company and has recommended that the shareholders vote in favour of the transaction. The determination and recommendation of the board were made upon the recommendation of the special committee and after consideration of the advice of legal and financial advisers to the special committee and the company.

Closing conditions and use of proceeds

The transaction is subject to customary closing conditions, including shareholder approval and approval of the TSX Venture Exchange.

Certain promissory notes were issued by the company between 2019 and 2026 in connection with loans made to the company by certain related parties that include an additional payment feature pursuant to which the holders of the promissory notes are entitled to receive payments computed with reference to a percentage of any proceeds received by the company in connection with the civil claims relating to the royalty, or, if the company sells or otherwise disposes of the royalty, payments computed with reference to 35 per cent of the proceeds of such sale or disposition. Based on the $5-million purchase price payable by Agnico under the royalty purchase agreement, the aggregate additional payments payable to the holders of the promissory notes on closing of the transaction will be $1.75-million, allocated among the noteholders in proportion to their respective noteholdings. The noteholders entitled to receive the additional payments include certain of the interested directors or their associates or affiliates. All material interests of the interested directors in the transaction, including the aggregate amounts to be received by each of them on closing of the transaction, will be described in detail in the information circular (as defined below).

Following completion of the transaction, the company intends to use the proceeds from the sale of the royalty to finance the general working capital requirements of the company and to finance the cash portion of certain payments payable by the company. In particular, following the completion of the transaction, the company intends to pay an aggregate of approximately $3,025,878 in cash and to issue an aggregate of approximately 35,833,333 shares of the company in connection with the following: (a) the repayment of outstanding indebtedness, including to certain related parties, in the aggregate amount of approximately $756,953; (b) the payment of the additional payments in the aggregate amount of $1.75-million, as described in the paragraph above; (c) the payment of accrued management and director fees of approximately $443,925 in cash and 33,333,333 shares in the aggregate; and (d) the payment of a transaction bonus of $75,000 in cash and 2.5 million shares.

Related-party transaction disclosure

The transaction is a related-party transaction for the purposes of Multilateral Instrument 61-101 (Protection of Minority Security Holders in Special Transactions) by virtue of the fact that Agnico holds 5.75 million shares of the company, representing more than 10 per cent of the issued and outstanding shares of the company, making Agnico a related party of the company under MI 61-101. The transaction also constitutes a disposition of all or substantially all of the assets of the company, which will be more fully described in the information circular. In addition, each of the interested directors, being directors of the company and related parties under MI 61-101, is entitled to receive a benefit as a consequence of the transaction (as described further under the heading Closing conditions and use of proceeds), and each therefore constitutes an interested party under MI 61-101 whose votes must be excluded from the majority of minority vote on the transaction required under MI 61-101.

The company has an exemption from the formal valuation requirement under Subsection 5.5(b) of MI 61-101 as no securities of the company are listed on a specified major exchange. Notwithstanding this exemption, the special committee has obtained the valuation report from Evans & Evans in connection with the transaction, as required pursuant to the applicable policies of the TSX-V. The shares held by the interested directors and by Agnico, representing in the aggregate approximately 23 per cent of the issued and outstanding shares of the company, will be excluded from the majority of minority vote.

Coming annual general and special shareholder meeting and approvals

In connection with the transaction, the company is preparing a management information circular, which will be mailed to shareholders as of the record date. The company intends to hold an annual general and special meeting of shareholders to, among other things, seek to obtain the requisite approvals from shareholders and, from disinterested shareholders as required by MI 61-101, for the transaction, and to transact such other business as is customarily considered at an annual general meeting.

The information circular and related meeting materials, including the notice of meeting, form of proxy, the valuation report and other meeting materials will be mailed to shareholders by the requisite times prior to the meeting date. Additional details regarding the terms and conditions of the royalty purchase agreement, as well as the rationale for the approvals and recommendations made by the special committee and the board will be set out in the information circular. Shareholders are urged to carefully review all meeting materials when received as they will contain important information concerning the transaction and the rights and entitlements of the shareholders.

About Prism Resources Inc.

Prism Resources is a Canadian precious metal explorer and developer headquartered in Vancouver, B.C. Prism Resources is composed of a strong group of directors with significant experience and a well-established record in the resource sector globally. The company holds a 7.5-per-cent net profit interest on Agnico's Aurora and Sunday Lake properties.

We seek Safe Harbor.