Canstar enters LOI for option deal on Golden Baie

Executive Summary

• Canstar Resources Inc. has entered into a binding letter of intent with Churchill Resources Inc. (CRI) for an option agreement to acquire a 100% interest in Canstar's Golden Baie gold-antimony project in Newfoundland.
• The transaction provides Canstar with immediate and near-term value, including approximately $3.3 million in total value (comprising equity, cash, and debt relief), with at least $2.4 million expected within 30 days of TSX-V approval and definitive agreement execution.
• The deal allows Canstar to sharpen its strategic focus on high-grade volcanogenic massive sulphide (VMS) discovery in the Buchans district, leveraging a $11.5 million non-dilutive joint venture commitment from VMS Mining Corp.

Key Details

• Transaction Structure: Churchill Resources Inc. has an option to earn a 100% interest in the Golden Baie project.
• Equity Consideration: Churchill will issue up to 9.99% of its issued and outstanding common shares to Canstar, delivered in staged tranches over 24 months:
  • Initial Tranche: 15,834,097 common shares (approx. 5.0% of post-issuance shares). Based on a closing price of 14 cents on Feb 13, 2026, this tranche has an indicative market value of ~$2.2 million.
  • Subsequent Tranches: The remaining 4.99% will be issued in four tranches of ~1.25% each over the next 24 months. Each tranche is calculated as a fixed percentage of Churchill's shares at the time of issuance.
  • Share Caps: Each 1.25% tranche is subject to a maximum issuance of 7.52 million shares. The aggregate maximum shares issuable is 45,914,097.
• Cash Consideration: Churchill will pay approximately $208,167 to Canstar to reimburse existing cash bonds posted on the property.
• Debt Relief: Canstar will be relieved of approximately $600,000 in 2026 assessment expenditure obligations required to maintain the project in good standing.
• Work Commitments: To earn the 100% interest, Churchill must incur:
  • Minimum $2 million in exploration expenditures within the first 12 months.
  • Minimum $5 million in total exploration expenditures within 24 months.
• Royalty: Canstar retains a 0.5% net smelter return (NSR) royalty on future production from Golden Baie (excluding a buyback provision). Note: The project is also subject to an existing 2.0% NSR held by Altius Minerals.
• Reversion Clause: If Churchill fails to meet the minimum exploration expenditure requirements within the specified timeframes, the option terminates, and the Golden Baie project reverts to Canstar.
• Strategic Context: The transaction supports Canstar’s focus on the Buchans district (historic VMS camp) following a $11.5 million non-dilutive joint venture commitment from VMS Mining Corp. Canstar plans to accelerate exploration drilling at its Mary March project in spring 2026.
• Regulatory Status: Transaction is subject to execution of definitive agreements, completion of due diligence, and TSX-V approval.

Notable Quotes

• Juan Carlos Giron Jr., President and CEO of Canstar: "This is a strong and strategic agreement that delivers a compelling win-win for Canstar and Churchill shareholders. Canstar benefits from approximately $3.3-million in near-term value... The strategic benefits to Canstar are also compelling. Backed by the up to $11.5-million non-dilutive joint venture commitment from VMS Mining Corp., Canstar has sharpened its focus on high-grade volcanogenic massive sulphide discovery in Newfoundland's historic Buchans district... we believe Canstar is well positioned to accelerate exploration for new, high-grade polymetallic deposits in this proven, historic district."