Canstar details initial consideration for Golden Baie

Executive Summary

• Canstar Resources Inc. has executed a definitive option agreement with Churchill Resources Inc., granting Churchill the right to earn a 100% interest in Canstar’s Golden Baie gold-antimony project in Newfoundland.
• The transaction consideration includes an initial cash payment of ~$208k and an initial issuance of ~15.8 million Churchill shares (approx. 5% ownership), with up to 45.9 million additional shares issuable in tranches over a 24-month period based on Churchill’s market capitalization.
• Churchill must incur $1M in exploration costs within 12 months and $5M total within 24 months to earn the project; Canstar retains a 0.5% NSR royalty.

Key Details

• Transaction Structure: Churchill Resources Inc. has an option to earn a 100% interest in the Golden Baie project. The agreement is effective March 20, 2026, subject to TSX Venture Exchange approval.
• Initial Consideration (Payable within 3 business days of TSX-V approval):
  • Cash: ~$208,167 (reimbursement for existing cash bonds on the project).
  • Equity: 15,834,097 common shares of Churchill, representing ~5.0% of issued/outstanding shares on a post-issuance basis.
  • Initial Value: Based on a closing price of 10 cents/share on March 20, 2026, the initial tranche has an indicative market value of ~$1.6 million. Shares are subject to statutory hold periods.
• Future Equity Tranches:
  • Canstar can receive up to an additional 4.99% ownership in Churchill, delivered in four tranches of ~1.25% each over six-month intervals during the 24-month option period.
  • Each tranche is capped at a maximum issuance of 7.52 million shares.
  • The aggregate maximum number of Churchill shares issuable to Canstar is 45,914,097 shares.
  • Value is determined by Churchill’s market capitalization at the time of each issuance, providing economic leverage to project advancement.
• Royalty Terms:
  • Canstar retains a 0.5% Net Smelter Return (NSR) royalty on future mineral production from Golden Baie upon exercise of the option.
  • The royalty has no buyback provision.
  • The project remains subject to an existing 2.0% NSR royalty.
• Work Commitments (Earn-in Requirements):
  • Minimum $1 million in exploration expenditures within the first 12 months.
  • Minimum $5 million in total exploration expenditures within 24 months.
• Reversion Clause: If Churchill fails to meet minimum exploration expenditures, the option terminates, and the project reverts to Canstar.
• Operational Impact: Canstar is relieved of ~$600,000 in assessment expenditures required by August 2026 to maintain the project in good standing.
• Strategic Context: CEO Juan Carlos Giron Jr. noted the transaction strengthens the balance sheet and allows focus on the core VMS portfolio (Mary March project). Other Q1 2026 activities include a $11.5M joint venture with VMS Mining Corp., $1M in non-dilutive capital, and a letter of intent for a Swedish VMS project.

Notable Quotes

• "With the definitive agreement executed, this transaction is effectively closed, subject to final TSX-V approval." — Juan Carlos Giron Jr., President and CEO
• "The equity structure is a key advantage. Each tranche is issued as a fixed percentage of Churchill's outstanding shares, meaning the value to Canstar scales directly with Churchill's market capitalization as the Golden Baie project advances. This preserves long-term upside while immediately strengthening our balance sheet and focus." — Juan Carlos Giron Jr.
• "This transaction allows us to retain meaningful exposure to a project we know well, while redeploying capital and attention toward our core VMS portfolio, led by our flagship Mary March volcanogenic massive sulphide (VMS) project." — Juan Carlos Giron Jr.