Arbitrator Rules Overwhelmingly in Favour of Canadian Royalties.

MONTREAL -- Canadian Royalties Inc. (TSX symbol:CZZ) announces that on December 20, 2004, it received an arbitration award granting Canadian Royalties' request to dismiss Ungava Minerals' July 2004 application for a third arbitration hearing pertaining to the Expo-Ungava property.

At an interim hearing on September 23, 2004 with the Arbitrator, Maitre Max Mendelsohn of Montreal, Quebec, Canadian Royalties elected not to file a Statement of Defense, but instead, asked the Arbitrator for a ruling that this new request for an arbitration hearing be immediately abolished without trial. Canadian Royalties argued that the on-going attempts by Ungava Minerals to regain control of the Expo-Ungava property had already been adjudicated upon in a multiplicity of prior legal proceedings, and accordingly, the Statement of Claim filed by Ungava Minerals in July, 2004 was abusive, vexatious, and malicious; but more importantly, it constituted an abuse of the legal process.

The Arbitrator granted Canadian Royalties' request to dismiss Ungava's attempt to hold another arbitration hearing and held Ungava Minerals accountable for costs. He concluded that the issues raised by Ungava cannot be re-litigated on the basis of res judicata (they have already been conclusively decided). Further, the Arbitrator commented on the conduct of Ungava Minerals, and held that "While I am not prepared to conclude that the line separating the aggressive pursuit of one's rights from the abuse of the legal process has been crossed, it appears that the line cannot be very far away".

The effect of Maitre Mendelsohn's decision for Canadian Royalties is that Canadian Royalties shall retain all of its rights in respect of the Expo-Ungava property. As well, it means that a trial will not proceed. Canadian Royalties has been represented by Maitre Raynold Langlois, Q.C. of the firm Langlois Kronstrom Desjardins, Montreal, Quebec.

Currently, Canadian Royalties has earned a 70% interest in the Property, and that interest will increase to 80% upon delivery of a bankable feasibility study. Non-participation by Ungava Minerals upon the formation of a joint-venture would see their interest reduced to a 1% net smelter return ("NSR") royalty which may be purchased by Canadian Royalties for $1,500,000 at any time within 12 months of commercial production.

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Canadian Royalties Inc. (TSX:CZZ)