Channel Directors Reaffirm Rejection of Etruscan Offer and Reject Solomon's Comments (Part 2 of 3).

KELOWNA, BRITISH COLUMBIA--(BUSINESS WIRE)--July 17,1998-- Channel Res.(TSE:CHU.)

QUALITY OF RESOURCE AT CHANNEL'S BOMBORE FIRST TARGET The quality of the 1,200,000 ounce gold oxide Indicated Resource on the Bombore First Target was independently reviewed by Arthur Andersen, an internationally recognized firm providing audit and management consulting services.

The review was performed by Mr. Normand Champigny, Director of Arthur Andersen's Centre of Excellence in Mining, who is a reputed geological engineer with considerable relevant international experience. Mr. Normand Champigny was a member of the Advisory Committee on Reserve Definition of the Canadian Institute of Mining Metallurgy and Petroleum ("CIM") and the liaison person for the Mineral Economics and Geology Societies of CIM. Mr. Champigny is a reserve, resource and mineral property valuation specialist and has independently assessed more than 50 reserve and resource estimates.

In its letter, Etruscan refers to an "estimated indicated resource" and states that this is "not a category of resource that is recognized within the industry". Arthur Andersen's report does not refer to the "Estimated Indicated Resource" category but rather to an Indicated Resource category. An Indicated Resource is formally defined under CIM definitions in Canada. Other important mining jurisdictions have also adopted this resource category, for example, Australia and South Africa. By their nature, all statements of resources and reserves are estimates and Etruscan's argument deals with semantics only. Etruscan's resource calculations are also stated to be "estimates". (See page 22 of the Etruscan Offering Circular.) Channel released an estimated "Indicated Resource" using criteria established by CIM, as stated on page 5 of the valuation opinion of Arthur Andersen. CIM defines "Indicated Resource" as the "estimated quantity and grade of part of a deposit for which the continuity of grade, together with the extent and shape, are so well established that a reliable grade and tonnage estimate can be made. Fundamental to the Indicated Resource class is well established geological information on the continuity of the mineralized zones." The Indicated Resource category is a more rigorous classification than the "in situ geological mineral inventory" which Etruscan reports on its Samira Hill property.

Channel has, through systematic and progressive exploration programs, demonstrated the geological continuity of the mineralized zones defined on the Bombore First Target. Systematic detailed geological mapping, systematic rock sampling, extensive trenching, reverse circulation ("RC") and diamond drill ("DD") holes in addition to systematic rotary air blast ("RAB") drilling fences, have been able to well establish the continuity of grade, the extent and the shape of 7 mineralized zones over a total strike length of 8500 metres, down to an average vertical depth of 50 metres. RAB results at the Bombore First Target show a high degree of correlation with the results from RC and diamond drilling.

Mineralization was encountered in:

- 100 percent of the 10 diamond drill holes (totaling 1080 metres of drilling)

- 85 percent of the 183 reverse circulation holes (totaling 14,947 metres of drilling) and

- 28 percent of the 1000 RAB holes (totaling 34,249 metres of drilling)

A total of 65 mineralized sections, adequately distributed, contributes to the definition of the Indicated Resource. Although approximately 50 percent of the resource is based on RAB drill holes, the grade estimates, width and geometric continuity of the RAB intersections has been clearly demonstrated by other geologic data, including RC and diamond drilling on adjacent sections. Etruscan's speculation that the "vast majority of the resource is defined by RAB drilling results" is incorrect.

In conclusion, Channel is satisfied with the approach it has taken in estimating its resource on the Bombore First Target, which approach was confirmed by the Arthur Andersen valuation and is consistent with the CIM definition of Indicated Resource.

QUALITY OF RESOURCES AT ETRUSCAN'S SAMIRA HILL PROPERTY

In the Notice of Extension, Etruscan recites several pieces of information to defend the value of its Samira Hill property, but the fact of the matter is, Etruscan has never disclosed the key information required to enable investors to form a proper opinion as to the quality of the Samira Hill property. Channel continues to be concerned with Etruscan's failure to disclose important information concerning the Samira Hill property. Considering Etruscan claims that "the quality of the resource at Samira Hill is considerably advanced", basic questions are still pending. For example:

- what is the ratio of oxide material to sulfide material of the resource?

- what is the cut off grade applied to the sulfide material?

- what is the vertical depth of the resource estimate? Down to -200 m or more?

- what is the anticipated stripping ratio?

- which part of the resource is mineable by open pit mining methods?

- are there metallurgical test results, other than the historical work reported in 1991-1992?

- what is the gold recovery for the graphilic sulfide material?

ALL OF THIS INFORMATION IS CRITICAL TO THE ECONOMICS OF THE PROJECT.

Channel believes that it would be highly unusual that no additional metallurgical work would have been conducted, especially considering the fact that Placer Dome has performed extensive due diligence on the property, and Channel believes that up-to-date information regarding the metallurgy and other detailed technical aspects of the deposit are essential to Channel's shareholders in evaluating Etruscan. Although $61.3 million has been spent on the property, including acquisition costs, it appears that the economics of the project still need to be defined. In addition, Etruscan has not disclosed the ratio of oxide to sulfide material that makes up the deposit.

Etruscan also relies on the fact that its data has been subject to technical due diligence by a number of parties in establishing the quality of the deposit, however, Channel is only aware of due diligence performed by Placer Dome who subsequently terminated its option to acquire an interest in the property. In addition, a subsidiary of Anglo American Corporation of South Africa Limited recently asked for a 90 day extension of their due diligence period before committing to making an investment in the property. Anglo has not committed to any funding of the company or the property during this period.

It also appears that Etruscan, which claims to be well funded, does not wish to spend its own funds in further developing the project and retaining 100 percent of the project. Channel believes that this also puts into question the quality of the Samira Hill property.

Etruscan makes many comparisons between the Bombore First Target and the Samira Hill property. However, based in part on the information indicated above and by the following key data, Channel is of the opinion that the Bombore First Target represents a far better opportunity for Channel shareholders than the Samira Hill property:

BOMBORE:

- Indicated Resources(1) of 1.2 million ounces (35 million tonnes at 1.1 grams per tonne gold)

- 100 percent oxide resource

- surface down to -50 meters depth

- all zones open at depth, most zones open along strike, some zones open along section

- favourable preliminary metallurgical tests (1997)

- located in politically stable Burkina Faso 

SAMIRA HILL:

- "In situ geological mineral inventory"(1) of 1.8 million ounces (27.8 million tonnes at 2.02 grams per tonne gold) estimated by Etruscan (compared to a "preliminary kriged estimate of gold bearing material" of only 665,505 ounces estimated by Placer Dome (9.2 million tonnes at 2.25 grams per tonne gold))

- ratio of oxide to sulfide material has never been disclosed

- total depth of resource estimate is in question. Drilling reported to -250m and deeper.

- considerable effort to locate mineralization along strike; 1000 meter length is reported

- no metallurgical test results provided since 1991-1992

- located in politically unstable Niger

(1). The indicated Resource category is a more rigorous classification than "in situ geological mineral inventory".

RELATIVE CONTRIBUTION OF GOLD ASSETS

In Etruscan's Notice of Extension, it makes certain calculations based on excluding certain resources of Channel on the basis of a statement in the Arthur Andersen valuation that states that the resources in question are "of insufficient size and quality to be economically attractive", but neglects to state that this is only due to the fact that those particular resources are at a relatively early stage of development and further neglects to state that Arthur Andersen concludes that "further exploration is warranted" on these properties. The 600,000 of the 1.27 million ounces that are stated to be of "insufficient size and quality to be economically attractive" remain a resource. The 600,000 ounces do not meet economic criteria to be classified as a reserve but their classification as a resource is not challenged. Etruscan tries to compare this to Channel's decision to exclude resources on Etruscan's Koma Bangou property, which Etruscan has admitted is uneconomic and has written off and therefore the two are not comparable. There is a fundamental difference between a property that is in its early stages of development and one that has been written off recognizing a permanent impairment of the value of the asset. In that respect, Channel stands behind its calculation of relative contribution of gold assets as stated in its Directors' Circular. In essence, Channel Shareholders will contribute up to 41 percent of the gold resources of the combined company while receiving only 12.3 percent of the equity.

ARTHUR ANDERSEN VALUATION

Etruscan has chosen to attack the basis of the Arthur Andersen valuation and called it overly optimistic. Arthur Andersen has reaffirmed its confidence in its valuation and the material upon which the valuation is based, including RAB and diamond drilling results. Arthur Andersen's valuation gives the project credibility since it is a leading international audit, taxation and management consulting services firm and is involved with all sectors of economic activity including mining. The author of the valuation, Mr. Champigny, is currently director of the firm's Centre of Excellence in Mining and is an internationally recognized geological engineer and consultant with over 17 years of experience in Canada and internationally. Reference is made to the valuation in the Directors' Circular for more information with respect to the qualifications of Mr. Champigny and Arthur Andersen.

RELATIVE VALUE

Etruscan has chosen to ignore the question of the relative value of its common shares as compared to the common shares of Channel. Etruscan is trading at $67.30 per resource ounce and is clearly overvalued as compared to both Channel and its peer group which trade at $13.28 and $14.90 per resource ounce, respectively.

HSBC JAMES CAPEL CANADA INC. INADEQUACY OPINION

As stated in the Directors' Circular, HSBC James Capel Canada Inc. ("HSBC") has delivered an opinion stating that the consideration offered to the holders of Channel Shares pursuant to the Offer is inadequate. A copy of HSBC's opinion is attached to the Directors' Circular. Etruscan takes issue with the fact that HSBC has not prepared a formal valuation and one of the many items that it relied upon was the Arthur Andersen valuation. Following this statement, the Board of Directors questioned HSBC as to its confidence in its opinion and HSBC has strongly reiterated to the Board and the Special Committee that it stands firmly behind the conclusion reached in its fairness opinion and are confident that it relied upon the appropriate information and criteria to reach its conclusion. It also confirmed that the qualifications included in its opinion are standard in the industry and are included in most fairness opinions provided with respect to transactions of this nature and that it is required to inform readers that it has not performed a "formal valuation" within the meaning of Ontario Securities Commission Policy 9.1. However, that does not mean that it has not performed valuation work in forming the basis of its opinion. HSBC also reminded the Board of the substantial volume of material that it examined in order to reach its opinion, as detailed on pages 2, 3 and 4 of its opinion, which information included other reports on the Bombore Permit and certain confidential information regarding Etruscan's properties and discussions with management of Etruscan. The Arthur Andersen valuation was but one of many factors that were included in HSBC's analysis.

ETRUSCAN'S NORMAL COURSE ISSUER BID AND THE "PREMIUM" OFFERED TO CHANNEL SHAREHOLDERS

As indicated in its press release dated July 9, 1998, Channel has examined the trading records which show that Etruscan purchased 625,400 of its own common shares at an average price of $3.98 during the 65-day period ending June 5, 1998, the date on which Etruscan announced its takeover bid for Channel. This represents over 70 percent of all shares traded during the period. Etruscan has made much of the fact that at the time of the Offer, it represented a premium over the 20-day average trading price of Channel's shares, however, Channel's shareholders should seriously consider the impact of the volume of purchases by Etruscan of its own shares on the market price of those shares prior to the announcement of the Offer.

CONTACT: Channel Resources Ltd., Kelowna

D. Ross Fitzpatrick, 250/868-8019

http://www.channelr.com

e-mail: [e-mail]