CALGARY, Aug. 12 /CNW/ - Quartz diorite was discovered in two drill
holes, RLE 08-1 and RLE 08-2, drilled into two coinciding airborne magnetic
and EM anomalies, 4900 feet apart and in a large surface exposure, 800 feet
southeast of RLE 08-02. All three had anomalous nickel and cobalt values.
IN RLE 08-01, the anomalous nickel-cobalt values commenced increasing in
the interval between 258 and 263 feet. Anomalous nickel-cobalt values
increased 100% in the remaining 37 feet in the drill hole, 263 to 300 feet,
with the last 10 feet, from 290 to 300 feet having the highest nickel-cobalt
anomalous values in the drill hole.
With the sharp increase in nickel-cobalt values, in the altered quartz
diorite, at a shallow depth, Flag is unaware of any reason why the
nickel-cobalt values should not continue to rise as the hole is deepened.
The discovery of the quartz-diorite over a wide area, by Flag, is a
significant discovery, as major ore deposits, in the immediate adjoining
Sudbury Igneous Complex are associated with quartz-diorite.
With the recent technological advances in airborne surveys, increasing
depth penetration from 300 feet to below 2000 feet, WA (Bill) Morris
recommended that Flag undertake both airborne magnetic and E.M. surveys on its
Between January and April, an airborne magnetic survey was completed over
the Wolf Lake area in Mackelcan Township and over the Rathbun Lake area in
Rathbun Township. An airborne EM survey was completed over the Rathbun Lake
area, but an airborne EM survey completed over the Cobalt Hill area, south of
Wolf Lake, in Mackelcan Township is being revised.
The airborne surveys were initially funded by $75,000 from Flag's
president, Murdo McLeod and $45,000 from Flag's chairman, Sid Miszczuk.
With the discoveries resulting from the airborne surveys, as interpreted
by Bill Morris, Flag became somewhat of an overnight success after 28 years of
1. The quartz-diorite discovery as set forth above.
2. The discovery of a magnetic anomaly associated with Rathbun Lake.
A drill hole has been recommended to investigate its underlying
cause, including a possible mineralized intrusive as its source, as
mineralization has been found in different areas of Rathbun Lake.
Early geological maps suggested the presence of an intrusive in the
lake similar to known Sudbury Offset dikes.
3. The surveys revealed that the Rathbun Lake magnetic anomaly passes
under the contact of the Nipissing gabbro with Huronian sediments on
the southeast boundary of Rathbun Lake. It has been recommended as a
prime study area, because of the changes in the magnetic anomaly as
it passes under the Nipissing gabbro sill. A mined out surface lens
of massive sulfides is located at the Nipissing gabbro contact. With
a selected grab sample by the Ontario Geological Survey assaying 10%
copper and 34 oz of palladium per ton, and Dr. Burkhard Dressler of
the O.G.S. suggesting it may have faulted off from a larger sulfide
body, the recommended prime study would reveal any relationship
between the massive sulfide lens and the changes in the geometry of
the magnetic anomaly.
4. The coinciding airborne magnetic and EM anomalies discovered, in the
vicinity of Rathbun Lake, have been recommended for drilling.
5. In the peninsula adjoining Rathbun Lake to the south, a broad north
trending EM anomaly has been discovered, by the airborne surveys,
overlayering an isolated magnetic anomaly.
6. An airborne EM anomaly has been discovered at the northern extension
of the Rathbun Lake magnetic anomaly, where it intersects with the
Sudbury Olivine diabase dike.
7. Studies of mineralization at Cobalt Hill, located just south of
Wolf Lake, between 2001 and 2003, confirmed the presence of minute
inclusions of 5 different nickel-bearing sulfides in pyrite in quartz
veins cutting the Huronian sediments. Three of the nickel-bearing
sulfides are high grade nickel-bearing sulfides. The presence of
chromium, the studies suggested, which does not move far from its
source, indicated that the mineralization had migrated from a nearby
mafic or ultramafic intrusion.
In 2005, upon recommendation from W.A. (Bill) Morris, a down hole
magnetic survey on CH 92-1, on Cobalt Hill, detected the presence of
a strongly magnetic anomaly. Bill Morris suggested that its amplitude
could only be explained by the presence of a nearby mafic or
There was now both mineralogical and magnetic evidence for a nickel-
bearing igneous intrusive in the vicinity of Cobalt Hill. An airborne
EM survey of Cobalt Hill this year, now being revised, Flag believes
should pinpoint the location of any nearby mineralized igneous
8. An airborne magnetic survey, by Flag, of the Wolf Lake area,
discovered a previously unmapped large magnetic anomaly underlying
and to the northwest of Wolf Lake, within a fracture system, and a
magnetic anomaly along the east side of the Laundry Lake fault,
northeast of Wolf Lake, which intersects Laundry Lake.
WL 83-28, on the southwest boundary of Wolf Lake, intersecting
48 feet of 3.6 % copper and .043 oz of gold per ton and 30 feet away
WL 90-3 intersecting 73.5 feet of 0.519 oz of gold, are within the
Wolf Lake magnetic anomaly.
LL 93-1, on the northwest side of Laundry Lake, 4400 feet deep,
intersecting intermittent Sudbury breccia and chalcopyrite sections
throughout, with magnetite from 500 feet to completed depth, is
associated with the Laundry Lake magnetic anomaly.
Flag proposes to complete a downhole survey on the Wolf Lake and
Laundry Lake drill holes and a recommended airborne E. M. survey over
the Wolf Lake area, to detect any additional accumulations of
sulfides that may exist in the area.
Although all of these discoveries have significantly changed Flag's
economic outlook, the past four years have been a very difficult time for
Flag, as the TSX Venture Exchange and Alberta Securities Commission have
repeatedly endeavored to force the resignation of Flag's president and Flag's
chairman. Flag's shares were delisted on August 25, 2005 and its shares cease
traded by the O.S.C. on May 19, 2006.
To review the four-year period, on May 27, 2004, the Exchange announced
the first and only compliance review of Flag's corporate affairs in 28 years.
Following initial discussions, the Exchange halted trading four weeks later,
on June 24.
The Exchange's summary of its compliance review, in October, 2004, dealt
mainly with a tax settlement agreement in March, 2004, with Flag being
assessed $150,000 for failure to meet a Requirement to Pay, in regards to a
tax liability of Flag's president at that time. Although being informed by
Revenue Canada that Flag's tax liability was wholly inapplicable to Mr. McLeod
in the circumstances, the Exchange alleged that Flag was paying Mr. McLeod
personal tax liability, and therefore Mr. McLeod and Flag's chairman, Sid
Miszczuk, no longer met the qualifications to be accepted as directors of the
Although directors had accepted legal counsel's recommendation that the
tax settlement be approved, Mr. McLeod subsequently had Revenue Canada
transfer $100,000 of Flag's $150,000 assessment to his personal account.
The $150,000 tax assessment should never have been made by Revenue
Canada, as there had been no refusal of a Requirement to Pay by Flag
directors. Flag is meeting with Revenue Canada to have the tax assessment,
although now academic, revoked.
The main allegation for Flag's delisting no longer exists, but its shares
remain delisted, to the detriment of shareholders.
In Flag's appeal to the Alberta Securities Commission in March, 2005, of
the Exchange ruling against Flag, the Commission stated that there were no
witnesses to be allowed and no cross examinations. However, the Exchange was
allowed to cross-examine Flag's president for a day and a half and Flag's
chairman in detail. Flag, in turn, was not allowed to cross-examine any
Exchange official, appearing to be a violation of a basic tenet of Canadian
law. To underline the fairness of the Commission's panel, when the Exchange
requested that Mr. McLeod personal notes be removed while he was being
cross-examined, the panel agreed to the request.
As expected the Commission rejected Flag's appeal and forthwith, on
July 25, 2005, the Exchange announced that it was delisting Flag's shares on
Aug. 25, 2005. In its announcement, the Exchange stated Flag's chairman and
president had resigned, and with Flag having no management, was being
delisted. There was no resignation but the Exchange still proceeded with the
On May 4, 2006, the Alberta Securities Commission rejected a request from
Flag's auditors for a one month extension to file Flag's audited year-end
financial statements, issuing a cease-trading order on May 19, 2006.
In December, Flag applied to the Commission to have the cease trading
order lifted, as it was up-to-date in its filing of financial statements.
However, instead of processing the application, the Commission proceeded to
complete a four-month review of Flag's financial affairs, which had nothing to
do with its application. Flag was never informed why the review was only
commenced after Flag's application for lifting of the cease order was
In April 2007, the Commission submitted 3 pages of alleged financial
deficiencies in financial statement, and in January, 2008, a further 25 pages,
resulting in Flag's cease trading order being further extended, to the
detriment of shareholders.
On July 16, 2008, when a press release by Flag detailed its latest
discoveries, on the same day the Commission announced publicly that it was
holding a hearing to decide whether it was in the public interest for Flag's
chairman and president to resign and be permanently prohibited from becoming
an officer or director of any issuer.
The Commission alleged that Flag had breached section of its rule "by
failing to file annual financial statements which were prepared in accordance
with Generally Accepted Accounting Principles" with the chairman and president
of Flag being responsible and therefore no longer allowed to be directors of
The chairman and president of Flag are being held for something over
which they have no control. The annual financial statements are prepared by an
independent auditor, with Flag's directors not involved, receiving the
financial statements like any shareholder.
The Commission alleges the annual financial statements for 2003 to 2005
were not prepared in accordance with GAAP. However, when the financial
statements were published, there was not a single complaint from any
shareholder or the investing public. The financial statements were prepared by
Flag's auditors, as set forth by them "in accordance with Canadian generally
accepted accounting principles". Flag suggests that if annual financial
statements were reviewed by 100 accountants, 90 would approve.
In the entire 4 year period, Flag's chairman and president were never
accused of anything dishonest.
Flag's president has been directly involved in all of Flag's exploration
and discoveries for 28 years and Sid Miszczuk, as its financial supporter and
corporate advisor, who is owed $9,000,000 by Flag for funds advanced, yet he
has been deemed unacceptable as a director.
Flag's chairman and president are 80 and 81 years old respectively, and
are determined to complete what they started 28 years ago, the discovery and
development of the first Sudbury type ore deposit in the Wanapitei anomaly.
For further information:
For further information: Murdo C. McLeod, President, Phone: (403)
262-8883, or toll free in North America: 1-888-531-7798, Fax: (403) 262-8886