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Canadian Royalties Inc./Mequillon Preliminary Economic Assessment

Posted on: Monday, 4 February 2008, 15:00 CST

Canadian Royalties Inc. (TSX: CZZ) announces the completion of a Preliminary Economic Assessment (PEA) for its Mequillon deposit. The author of this study, P&E Mining Consultants Inc., concluded that this deposit can be developed as a viable mining project with the following highlights:

- The deposit has the potential to extend the life of the Nunavik Nickel project by an additional 9 years beyond the original plan to mine the Mesamax, Expo and Ivakkak deposits, as proposed in the Bankable Feasibility Study (BFS).

- The deposit has a 33% IRR and a $53 million NPV in its base case ($8.00 Nickel & $2.00 Copper) and a 107% IRR and a $260 million NPV in the optimistic case scenario with elevated commodity prices ($10.00 Nickel and $2.50 Copper).

Mr. Richard Faucher, President and CEO comments on these results: "The Preliminary Economic Assessment on the viability of developing Mequillon is highly positive and supports our near-term goals of doubling the project mine life and improving project economics. Coupled with high-grade resources building at Allammaq, we are confident that the company's objective of becoming the premier mid-tier Nickel producer will be met".

This PEA was based on the Mequillon deposit being developed using conventional open pit and underground mining methods at the completion of mining operations as proposed in the BFS for the Nunavik Nickel Project (Technical Report filed on SEDAR). As such, the proposed Mequillon mining operation would utilize the Expo concentrator and infrastructure as described in the BFS.

The study assumed a production rate of 1 million tonnes per year, which would be trucked for processing at the Expo concentrator and was based on the latest resource model that was disclosed on September 11th, 2007. Forecasts by banks and analysts now support a long-term Nickel price in the range of $8.00/lb, a figure that was used in the present Mequillon PEA.

For the purpose of this assessment, the near-surface portion of the deposit would be mined by open pit. It is estimated that this pit would produce 1.95 million tonnes at an average grade of 0.63% Ni and 0.90% Cu, and have an overall stripping ratio of 7.7 to 1. A ramp would be driven to access, develop and mine six (6) underground stope blocks where mining would be performed using longhole methods and backfill.

The mineral resource estimate for the Mequillon deposit as of September 7th, 2007, electronically filed on SEDAR on October 25th, 2007, includes an indicated resource of 5,374,000 tonnes grading 0.74% Ni and 1.07% Cu, and an inferred resource of 3,085,000 tonnes grading 0.82% Ni and 1.12% Cu. The payable metal prices for nickel, copper, platinum and palladium and the exchange rate used to estimate the metal's contribution to gross mine income as part of the NSR (net smelter return) in the current PEA are presented in the following table:

Table 1 - Payable Metal Prices and Currency Exchange Rate Used to Estimate Net Smelter Return --------------------------------------------------------------- Mineral Resource BFS (i) Estimate (i) PEA (ii) --------------------------------------------------------------- Nickel Price US$ 6.00/lb US$ 5.50/lb US$ 8.00/lb --------------------------------------------------------------- Copper Price US$ 1.50/lb US$ 1.50/lb US$ 2.00/lb --------------------------------------------------------------- Platinum Price US$ 1000/oz US$ 900/oz US$ 1100/oz --------------------------------------------------------------- Palladium Price US$ 300/oz US$ 300/oz US$ 300/oz --------------------------------------------------------------- $US-$CDN Exchange Exchange Rate 0.89 0.80 0.90 --------------------------------------------------------------- (i) Technical Reports filed on SEDAR (ii) Internal company document

The Mequillon open pit and underground mining operation would together produce 9.2 million tonnes over a 9.2 year production period, at an average estimated grade of 0.68% Ni, 0.96% Cu, 0.6 g/t Pt and 2.3 g/t Pd. This Preliminary Economic Assessment includes the use of inferred mineral resources. Readers are reminded that resources in the Inferred category have not been demonstrated as economic and cannot, by definition, be used in a feasibility study.

The results of the base-case PEA ($8.00/lb Nickel) for the Mequillon project indicate:

- A project payback period of 2.8 years assuming $69 million in up-front capital; $15 million in sustaining capital and that the concentrator, port and all other major infrastructure are already in place and capitalized.

- An internal rate of return (pre-tax IRR) of 33%.

- A net present value at the start of pre-production development (NPV @ 8%) of $53 million. It is assumed that commercial production will commence after a one year pre-production period concurrent with the final year of mining activities as described in the BFS.

A sensitivity analysis was conducted by varying Nickel and Copper prices in order to determine their impact on project economics. The following table presents the results of this exercise:

Table 2 - PEA Sensitivity Analyses ------------------------------------------------------------- Pre-tax Nickel Copper IRR NPV ------------------------------------------------------------- Base Case US$ 8.00 US$ 2.00 33% US$ 53M ------------------------------------------------------------- +25% Case US$ 10.00 US$ 2.50 107% US$ 260M -------------------------------------------------------------

The independent qualified person for the Preliminary Economic Assessment is David Orava, P.Eng. of P&E Mining Consultants Inc. and the corporate qualified person for Canadian Royalties Inc. is W. Grant Arnold, P.Geo., Vice President of Exploration.

About Canadian Royalties and the Nunavik Nickel Project

Canadian Royalties has initiated the development of an independent, stand-alone nickel-copper mine on its Nunavik Nickel Project, located 20 kilometres south of Xstrata Nickel's Raglan Mine in northern Quebec. Canadian Royalties is proceeding with permitting applications, as well as exploration for additional resources.

Canadian Royalties currently holds a 100% interest in the Ivakkak deposit, subject to a net smelter royalty ("NSR", refer to news release dated September 21, 2005). Additionally, Canadian Royalties has vested in a 70% interest in the Expo-Ungava property (which hosts the Mesamax, Mequillon and Expo deposits), where its interest shall be increased to 80% simultaneously with the creation of the joint venture. Further, Canadian Royalties holds an underlying 2% NSR on the Expo-Ungava Property.

Forward-looking Statement

This news release contains certain forward-looking statements. These forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability to control or predict which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. Such risks and uncertainties are disclosed under the heading "Risk Factors" in the Company's Amended and Restated Annual Information Form dated July 10, 2007 for the year ended December 31, 2006. Accordingly, readers should not place undue reliance on forward-looking statements.

Contacts: Canadian Royalties Inc. Richard R. Faucher President & CEO Toll free: 877-879-1688 richard.faucher@canadianroyalties.com Canadian Royalties Inc. W. Grant Arnold Vice-President Exploration 514-879-1688 Toll free: 877-879-1688 grant.arnold@canadianroyalties.com Canadian Royalties Inc. C. Jens Zinke Vice-President Business Development 514-879-1688 / Toll free: 877-879-1688 jens.zinke@canadianroyalties.comwww.canadianroyalties.com Renmark Financial Communication Jason Roy Account Manager 514-939-3989 jroy@renmarkfinancial.com

SOURCE: Canadian Royalties Inc.

Source: MARKET WIRE

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