Results from Airborne Magnetic and E.M. Surveys Flag Resources (1985) Limited's Mackelcan and Rathbun Township Properties, Sudbury, Ontario

    CALGARY, June 12 /CNW/ - Recent technological advances in airborne
surveys significantly improved both the spatial and depth resolution of
anomalous geophysical targets. As a consequence, W.A. (Bill) Morris, Morris
Magnetics Inc. recommended that Flag undertake airborne surveys over its
Sudbury properties.
    The results, from the completed surveys, were impressive, producing more
significant exploration targets than 28 years of previous exploration work by

    Mackelcan Township

    Magnetic Anomalies
    A. Large positive magnetic anomaly was found underlying the immediate
area and to the northwest of Wolf Lake, located within the parameters of a
system of fractures.
    B. A notable positive anomaly was found along the east side of the long
north-south Laundry Lake fault.
    Neither anomalies had previously been described. Their genesis remains
undefined. Flag proposes to complete a helicopter airborne E.M. survey over
the area of the magnetic anomalies.

    Cobalt Hill, Mackelcan Township
    The airborne E.M. survey completed over the Cobalt Hill area is still
under review. Studies for Flag, between 2001 and 2003, on mineralization at
Cobalt Hill, confirmed the presence of minute inclusions of five different
nickel-bearing sulfide, with minor gold and copper values in quartz veins, in
drill core from D.H. CH-92-1, on Cobalt Hill. With Chromium also being present
(in chromium mica), an inert element not moving far from its source, the
studies suggested that the mineral bearing sulfides migrated, in hydrothermal
saline fluids, from a nearby underlying mafic or ultramafic source. A later
down-hole magnetic survey confirmed the presence of a nearby off hole strong
magnetic anomaly, in support of the 2001-2003 studies. Anomalous cobalt values
were also found in Cobalt Hill mineralization.

    Rathbun Township
    A study by Bill Morris of the results from the airborne surveys over the
Rathbun Lake area revealed magnetic anomalies not explained by current

    Rathbun Lake, Magnetic and E.M. anomalies
    A. The study revealed a large magnetic anomaly, associated with Rathbun
Lake, recommending that it be drilled.
    B. The Rathbun Lake anomaly continues under the Nipissing sill, in the
southeast sector of Rathbun Lake. The geometry of the magnetic anomaly changes
as it passes under the sill, the study therefore calling it a prime study
    C. There is a broad discontinuous E.M. response that is coincident with
the magnetic anomaly associated with Rathbun Lake.
    D. An E.M. anomaly is located at the northern extension of the Rathbun
Lake magnetic anomaly, where it intersects with the Sudbury Olivine diabase
    E. The Study identified magnetic anomaly zones in the region around
Rathbun Lake, not previously described. The distribution of these anomalies
does not correlate with any reported geological data. Consequently, the
genesis of these magnetic anomaly zones remains undefined. A more careful
investigation of the anomalies is recommended.
    F. A number of locations, in the area around Rathbun Lake, have been
identified with spatially coincident magnetic and E.M. responses. The
geological significance of these coincident anomalies, in the absence of any
direct information, is a matter of speculation. Further investigation by a
drilling program is recommended.
    G. Later time channels suggest a broad approximately north trending E.M.
anomaly underlying the peninsula between Lake Wanapitei and Portage Bay. It
overlays an isolated magnetic anomaly.
    H. The strongest E.M. anomaly detected by the airborne survey, present in
all time channels, is coincident with the southern margin of a faulted Sudbury
olivine diabase dike.
    Flag drilled a 300 foot 75 degree angle hole, RLE 08-1, into the anomaly.
A significant percentage of sulfides was intersected throughout the drill hole
to its completion depth of 300 feet. The drill hole was in igneous rock. Prior
to logging of the drill core, a 5 foot representative section of drill core is
being assayed for mineral content.
    I. Flag drilled its second exploratory drill hole, into an E.M. anomaly
located 4900 feet southeast of RLE 08-1, having the same identical geometrical
relationship to the Sudbury olivine diabase dike.
    The vertical drill hole intersected the same mineralized horizon as RLE
08-01, from the surface to 395 feet. RLE 08-02 was drilled to a depth of 415
    With the two drill holes 4900 feet apart, intersecting 300 and 395 feet,
respectively, of the same mineralized horizon, upon Bill Morris'
recommendation, Flag has submitted a sample of the igneous rock to Vancouver
Geo Tech Labs to obtain two polished thin sections, with the objective of
establishing the relationship of the mineralized sulfides to the ground mass
of the igneous rock.
    The cost of the airborne magnetic and E.M. surveys, additional staking
and the two initial exploratory drill holes, into the two airborne anomalies,
was paid by an advance of $75,000 from Flag's president Murdo C. McLeod,
$45,000 from Flag's chairman, Sidney Miszczuk and $70,000 from shareholders.

    Delisting of Flag's shares on the TSX Venture Exchange and Cease Trading
    by the Alberta Securities Commission

    Flag's shares were delisted, by the Exchange, on August 25, 2005 and
cease traded by the Alberta Securities Commission May 19, 2006.

    1. Actions by the Exchange 2003 - 2008

    July 11/2003
    In giving conditional approval to a filing by Flag, the Exchange asked
Flag to clarify implications, in regard to the file, that could be raised by
the S.E.C. of the United States and also to clarify any implications raised by
the amalgamation of Flag and associated Golden Briar.
    Flag had no involvement with the S.E.C. and there was not any
amalgamation proposed between Flag and Golden Briar.

    May 12/2004
    Replying to a Flag filing, the Exchange made reference to a 50 percent
working interest in all of Flag's property holdings in Mackelcan Township held
by Golden Briar Mines, requesting a detailed geological report, estimated to
cost between $100,000 and $125,000.
    Golden Briar did not hold any interest in Flag's Mackelcan Township

    May 17/2004
    The Exchange commenced its first compliance review on Flag's corporate
affairs in 28 years.

    June 24/2004
    The Exchange announced that Flag shares were to be halted from trading,
on June 25, 2004.
    The June 24 announcement was dated June 15/04, and the first paragraph,
acknowledging receipt of June 21 correspondence from Flag, appearing to have
been inserted.

    November 23/2004
    As a result of the compliance review, on November 23/04, the Exchange, in
a Suitability Review, requested the immediate resignation of Flag's chairman,
Sidney Miszczuk and its president, Murdo McLeod, stating they were not
suitable as directors.
    Murdo McLeod had been accepted as a registered underwriter by the Ontario
Securities Commission in 1974, with his application including a 25 year
personal corporate history. He is not aware of being the subject of any formal
review or investigation, until the commencement of Flag's compliance review of
May 27/04.
    Sid Miszczuk was deemed by the Exchange to be an unsuitable director,
although his wholly owned company, Cooksville Steel Limited was owed in excess
of eight million dollars for cash advances.
    Fortunately for Flag shareholders, Mr. Miszczuk and Mr. McLeod refused to
    The Exchange's November 23/04 Suitability Review was based mainly on the
terms of a March 2002 Tax Settlement Agreement between Revenue Canada and Mr.
McLeod and Revenue Canada and Flag Resources.
    Under the Agreement, Flag agreed to pay $150,000 for failing to meet a
Requirement to Pay and Mr. McLeod agreeing to settle his taxes for $50,000.
    The Exchange alleged that by agreeing to the assessment Flag was paying
its president's taxes, although receiving a written communication from Revenue
Canada that Flag's tax liability had arisen directly under subsection 224(1)
and (4) of the Act, provisions inapplicable to Mr. McLeod, in the
    Although the Tax Settlement Agreement had been accepted by Flag and Mr.
McLeod, upon recommendation from legal counsel, Mr. McLeod was uncomfortable
with the settlement. He requested Revenue Canada to transfer $100,000 of
Flag's tax assessment to his account. However, in the November 23/04
Suitability Review, the Exchange alleged throughout the document that Flag was
paying $150,000 of its president's taxes, although being aware that Mr. McLeod
had voluntarily assumed payment of $100,000 of the $150,000 assessment.
    In retrospect, Mr. McLeod stated, that in the circumstances, he should
have set forward the fact that Flag's board of directors had not failed to
meet a requirement to pay. Revenue Canada, at the time, had also issued
Requirement to Pay, for Mr. McLeod taxes, to Flag's bank, which resulted in
the seizure of Flag's bank account of $192,000. There were no funds remaining
for Flag's board of directors to meet a Requirement to Pay in 2000.
    The seized funds were frozen by a court order obtained by Flag's legal
counsel. In August 2001, the seized funds were returned to Flag by the Court.
    A Revenue Canada employee subsequently asked Justice Canada to appeal the
Court Order, but the 30-day period for an appeal had lapsed. However, the
Revenue Canada employee becoming aware of a Settlement Agreement being
negotiated between Mr. McLeod and Revenue Canada, as a result of litigation
against Revenue Canada by Mr. McLeod, requested Justice to include a tax
assessment of $150,000 to Flag, in the Tax Settlement Agreement, for Flag
failing to meet a Requirement to Pay. Belatedly, a meeting with Revenue Canada
is to be requested shortly, to have the tax assessment nullified, even though
it had been approved, as the Revenue Canada employee was aware that Flag had
not failed to meet a Requirement to Pay, as all funds available had already
been seized by Revenue Canada.
    There were two other allegations in the Exchange's November 23/04
Suitability Review. The Exchange alleged that Mr. McLeod was late in paying
for exercised Flag stock options, although Mr. McLeod was only late on a few
occasions for making payments on some options. He incurred a substantial loss
in exercising the stock options to provide Flag with additional financing.
    In its last allegation, the Exchange alleged that Mr. McLeod had signed
three press releases, as a qualified person, although not qualified to do so.
Mr. McLeod responded that an Exchange surveillance officer had requested him
to do so. The Exchange held a private meeting with the surveillance officer,
hearing his view on what had been discussed.
    Mr. McLeod and his counsel were not given an opportunity to be present
when the inquiries were made. The Exchange accepted its surveillance officer's

    2. The Alberta Securities Commission
    Mr. McLeod and his counsel were not given an opportunity to be present
when the inquiries were made. The Exchange accepted its surveillance officer's

    Flag's appeal against the Exchange's November 23/04 Suitability Review
Decision was heard by the Alberta Securities Commission between March 22 and
March 31/05.
    In the hearing, Flag's chairman, Sidney Miszczuk and president Murdo
McLeod were cross-examined in considerable detail by the Exchange. The
Commission did not allow Flag's legal counsel to cross examine any Exchange
official, nor did it allow Flag to call any witnesses. To underline its
fairness, the Commission consented to the Exchange's request that Mr. McLeod's
notes be removed while he was being cross-examined. Under these circumstances,
Flag was not surprised by the dismissal of its appeal by the Commission on
July 14/05.

    July 25/05
    Although Flag was still proceeding with its appeal, the Exchange, on July
25/05, announced that Flag's shares would be delisted from trading on August
25/05, stating that as Flag's chairman and president had resigned as
directors, Flag had no officers or management, and therefore under section 41
of Exchange Policy 2.9, its shares were being delisted.
    Although the chairman and president of Flag had not resigned, the
Exchange still proceeded with the delisting on August 25/05, knowing the basis
for the delisting had not happened.

    Sept. 2/05
    On Sept. 2/05, Flag appealed the delisting of its shares, rejected by the
Exchange on the basis that it should have been made within 30 days after the
July 25 decision and not within 30 days after the actual delisting on Aug. 25.
As expected, the Commission rejected Flag's appeal, concurring with the
Exchange that Flag's appeal had been filed too late.

    May 2007
    In Flag's appeal to the Alberta Court of Appeal, the Chief Justice
suggested that the sanction by the Exchange was excessive, perhaps a 30 day
suspension and a $25,000 fine. However, the Chief Justice discussed at length
the Exchange's allegation that Flag had paid $150,000 of its president's
taxes, accepting it, although the allegation was not true, as Flag's president
had voluntarily agreed to pay $100,000 of the $150,000 assessment. Accepting
the Exchange's allegation, the Court of Appeal dismissed Flag's appeal.

    Cease Trading Order by the Alberta Securities Commission

    May 4/06
    On behalf of its auditor, Flag, at a hearing at the Commission, asked for
a short extension of time in filing its year-end financial statements, to
enable the auditor to provide up to date financial information to shareholders
on Flag's process of appeals. On May 19/06, the Commission rejected Flag's
application, cease trading the shares.

    December 28/06
    Flag applied to the Commission to have the cease trading order on its
shares rescinded as it was up to date on the filing of financial statements.

    April 25/07
    The Commission replied to Flag's application five months later on April
25/07, by requesting that Flag first respond to its 5 pages of alleged
deficiencies in Flag's continuous disclosure records during 2003 to 2005, the
same period in which Flag's corporate affairs had been reviewed by the

    Jan 15/2008
    With no response from Flag, the Commission again asked Flag to respond to
the alleged deficiencies in the 2003-2005 period, but expanded the alleged
deficiencies from 5 pages to 26 pages.
    Flag did not respond to the Commission's alleged deficiencies, as they
were complex beyond any reasonable standard for a junior mining company, and,
in Flag's view, its recent experience in hearings before the Commission,
suggested strongly that any responses from it would have been considered not
satisfactory by the Commission.
    Flag is now considering what actions, if any, it should take against the
Exchange and Commission for the substantial financial losses to shareholders,
caused by the questionable conduct of the Exchange and Commission.
    This press release was written by Flag' president, after reviewing all
the pertinent documents involved.

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

Organization Profile

Flag Resources (1985) Limited

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