Canadian Shield Enters into Letter of Intent to Acquire 44.7% Interest in Poderosa Gold Mining Company, Peru.

TORONTO -- Canadian Shield Resources Inc. (CSP:TSX V) (the "Company" or "Canadian Shield"), a mineral exploration company, is pleased to announce that it has entered into a letter of intent ("LOI"), dated September 6, 2004, to acquire from a group of private shareholders ("Selling Group"), a 44.7% interest in Compania Minera Poderosa S.A. ("Compania Minera"), a private Peruvian mining company. Compania Minera owns and operates the Poderosa Mine located in Northern Peru. The mine has produced 1.25 million ounces of gold since 1982.

Pursuant to the LOI, Canadian Shield and the Selling Group intend to enter into a definitive agreement for the purchase and sale of all the Selling Group shares representing 44.7% of the issued and outstanding shares of Compania Minera. The purchase price will be determined by the parties and will be satisfied by the issuance of Canadian Shield common shares representing at least 60% of the issued and outstanding shares of Canadian Shield, on a fully diluted basis at the time of closing. The transaction is subject to a number of conditions, including the negotiation and execution of a definitive agreement between Canadian Shield and the Selling Group, satisfactory due diligence, and all necessary corporate and regulatory approvals. The closing of the transaction is also conditional on Canadian Shield completing a financing of not less than US$20 million by no later than November 15, 2004, on terms acceptable to the Selling Group. The proceeds of the financing will be used to: acquire the Selling Group's advances to Compania Minera in the sum of US$5.9 million; acquire additional shares of Compania Minera and to acquire other debts of Compania Minera to third parties (if available on terms satisfactory to Canadian Shield); and for general working capital purposes.

The transaction is expected to close no later than November 15, 2004. A break-up fee of US$7,500,000 is payable by the Selling Group to Canadian Shield if the transaction contemplated by the LOI is not closed because the Selling Group sells their interest in Compania Minera to a third party. In addition, a break-up fee of US$7,500,000 is payable by Canadian Shield to the Selling Group if the transaction is not closed due to a breach by Canadian Shield of the terms of the LOI or the definitive agreement contemplated by the LOI.

The Selling Group are at arm's length with Canadian Shield. The completion of the transaction will not result in a change of management or business of Canadian Shield but will result in a change of control.

Canadian producer, Cambior Inc., announced on September 3, 2004 that it has entered into an agreement with another group of private shareholders to acquire their 55.3% interest in Compania Minera and their shareholder advances to Compania Minera in the sum of US$8 million for a cash consideration of US$25 million and approximately 2.2 million common shares of Cambior.

The Selling Group is comprised of certain members of the Arias family who entered into the proposed transaction with Canadian Shield to protect their interest in the Poderosa Mine and their continued participation in the business and operation of the mine with its partners.

"Canadian Shield recognizes Peru as an excellent country to conduct mining activities and we have spent considerable time searching for opportunities in my native land. We are delighted at the prospects of acquiring a significant position of an established operation in Peru in an area with tremendous potential for future development," states Ed Baer, CEO of Canadian Shield. "This acquisition will enable Canadian Shield to establish a base of mining operations with a proven track record, immediate production and extensive growth potential."

Compania Minera owns and operates the Poderosa Mine which consists of approximately 80,000 hectares and is located within the Pataz Province of La Libertad Department, Northern Peru, approximately 900 km from Lima and 340 km from Trujillo. The mine is accessible by both road and by air. The mining property is located mostly in the Pataz Batholith, a highly prospective geologic region that hosts a number of producing long-life mines. Over 400,000 ounces of gold are produced annually from the Pataz Batholith by private Peruvian companies.

Compania Minera has produced 1.25 million ounces of gold since 1982, 10% of which is outsourced ore. Targeted gold production for 2004 is estimated at 110,000 ounces at a total cash cost of US$233 per ounce (these costs do not include costs of processing outsourced ore). Total cash costs include the cost of production at US$161 per ounce; administration, cost of sales, and insurance at US$22 per ounce; and financing, hedging and royalties at US$50 per ounce. As at August 31, 2004, production levels exceeded 74,000 ounces of gold.

The total cash costs can be reduced to approximately US$193 per ounce if a new power line is activated and if debt service costs are reduced. As of July 31, 2004, Compania Minera had outstanding bank and creditors' debts of US$16.3 million and US$18.2 million in shareholders' advances (including the US$5.9 million advances from the Selling Group).

In 2003, Compania Minera produced 99,800 ounces of gold at a cash cost of US$224 per ounce. Total cash costs include cost of production at US$153 per ounce; administration, cost of sales, and insurance at US$23 per ounce; and financing, hedging, and royalties at US$48 per ounce. The cash costs do not include the costs of processing outsourced ore.

Compania Minera's principal gold production is from a series of high grade veins mined by both mechanized and conventional mining methods. The average head grade in 2003 was 19.74 g/t gold. Current treatment plant capacity is 800 tonnes per day from two facilities which utilize cyanide leaching and Merrill Crowe processing.

Canadian Shield's Recent Acquisition in Peru

On September 1, 2004, Canadian Shield announced that it entered into a definitive agreement to purchase up to 90% of the issued and outstanding shares of Gallant Minerals Peru Ltd., S.A. ("Gallant Peru").

The initial focus will be on the Humajala epithermal gold discovery in southern Peru. The Humajala property covers 5,600 hectares in the Department of Arequipa and significant work has been done by Gallant Peru following initial work conducted by Normandy Mining in 2001-2002. One of twelve holes drilled on the property intersected 0.76 g/t gold over a core length of 46 meters at the top of the hole. The mineralized intersection is within an advanced argillic alteration zone that can be traced on surface for more than two kilometres. Existing magnetic and IP surveys provide additional data to aid in the selection of drill hole targets.

The other three Gallant Peru projects (Ccello, Cerro Cori and Apune-Pucarana) consist of concessions covering 7,600 hectares in southern Peru. There is encouraging alteration and geology at each project to warrant geophysical surveys that will define future drill-hole targets. Canadian Shield recognizes the Gallant Peru portfolio of assets as having significant gold and copper exploration potential and plans to commence an exploration campaign in the fourth quarter 2004.

Cautionary Statement

Completion of the transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance and disinterested Shareholder approval. The transaction cannot close until the required Shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular and/or Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the Reverse Take-Over may not be accurate or complete and should not be relied upon. Trading in the securities of Canadian Shield should be considered highly speculative.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Canadian Shield Resources Inc. is a mineral exploration company focused on the acquisition and development of exploration and advanced stage mining properties. Canadian Shield shares are listed on the TSX Venture Exchange (Trading Symbol CSP:TSX V).

THE TSX VENTURE EXCHANGE HAS NOT REVIEWED AND DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

CANADIAN SHIELD RESOURCES INC. (TSX VENTURE:CSP)