Flag Resources (1985) Limited's President, Murdo C. McLeod, Contends That The Alberta Securities Commission's Extended Cease-Trading Order On Flag's Shares Into 2009 Is By False Allegations.



    CALGARY, Oct. 9 /CNW/ - In May 2006, the Alberta Securities Commission
issued a cease-trading order on Flag's shares, for late filing of the 2005
annual financial statements, rejecting Flag's auditor's request for a one
month extension to file the financial statement. The Commission had no
comments on Flag's financial statements.
    In December 2006, Flag applied to have the cease-trading order rescinded,
as its financial statements were up to date. Instead of processing the
application, the Commission proceeded to change the conditions under which the
cease-trading order was issued by commencing a series of spurious allegations
up to the present on Flag's financial reports for 2003, 2004 and 2005 with
which Flag would have to deal before the cease-trading order would be revoked.
    The main allegation that Flag's auditor had not prepared the financial
statements in accordance with Generally Accepted Accounting Principles is
simply not true.

    
    Flag's Auditor's Report (as in every Lo Porter Hetu audited financial
    statement):
    -------------------------------------------------------------------------

    To the shareholders of
    FLAG RE

SOURCES (1985) LIMITED We have audited the balance sheets of Flag Resources (1985) Limited as at December 31, 2003 and 2002 and the statements of operations and deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards required that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respect, the financial position of the Company as at December 31, 2003 and 2002 and the results of its operations and cash flows for the years then ended in accordance with Canadian generally accepted accounting principles. (signed) Lo Porter Hetu Certified General Accountants Lo Porter Hetu is associated with Porter Hetu, an International Professional Service Group. The 2003 to 2005 annual financials were accepted by Flag's share holders and the investment community. These financial statements were filed with the Commission, with no critical comments from the Commission at the time of filing. The cease-trading order continues and is a very serious detriment to Flag shareholders. As reported in press releases, with new technology enabling airborne surveys to penetrate to depths of 2600 feet, Flag accepted recommendations to complete airborne surveys over its holdings in Rathbun and Mackelcan Townships. Initial funding of $115,000 was provided by Flag's chairman Sid Misczcuk age 80 and president Murdo McLeod age 81. In Rathbun Township: The airborne surveys outlined more mineral prospects than had been found in 28 years of exploration by Flag including: in Rathbun Township, the discovery of mineralized quartz diorite over a large area, with quartz diorite associated with major ore deposits in the adjoining Sudbury igneous complex; a large magnetic anomaly in Rathbun Township recommended for drilling; coinciding Magnetic and Electro Magnetic anomalies recommended for drilling; prime study recommended for the study of changes in the Rathbun Lake Magnetic Anomaly as it passes under a gabbro-sediment contact and intersects a mined out surface of rich massive sulfides (selected sample, 10% copper, 34 ounces palladium); discovery of EM anomalies at the north end of Rathbun Lake and in the peninsula at the South end of Rathbun Lake. In Mackelcan Township: Five varieties of nickel-bearing sulfides, confirmed by 2001-2003 study to be in mineralization in quartz veins at Cobolt Hill, suggested to have originated in a nearby mineralized mafic or ultramafic intrusion. A downhole magnetic survey outlined such a very strong magnetic mafic or ultramafic intrusion nearby, from 450 to 2200 feet in depth; - Airborne EM surveys are recommended for two large magnetic anomalies, one underlying and to the northwest of Wolf Lake and the other on the east side of the Laundry Lake fault located east of Wolf Lake. After 28 years of waiting, the exploration and development of these newly discovered mineral prospects could bring substantial financial benefits to Flag shareholders. However, the continuing cease-trade order on Flag's shares has seriously impeded the commencement of any large exploration program on the mineral prospects. For the past three years, the Alberta Securities Commission and TSX Venture Exchange have endeavored to force the resignations of Flag's chairman and Flag's president. In contrast, their re-election as directors of Flag was approved by 94.93 percent of the proxy votes by shareholders at Flag's annual shareholders meeting, on October 7, 2008. Flag's chairman and president are bewildered by the actions of the Exchange and Commission as they are unaware of any corporate malfeasance. Flag's directors believe the investing public and its shareholders deserve better from the Alberta Securities Commission.

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

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Flag Resources (1985) Limited

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