Presidents Address

Dear Fellow Shareholders;

 

Further to our news release of July 23^rd announcing the sale of the Kettle River (“Carmi “) Moly Property, I would like to personally outline and explain the resulting positive, immediate and future ramifications for St. Elias Mines Ltd. (“St. Elias” or the “Company”) and its shareholders.

 

The business model of St. Elias is the acquisition, exploration, development and sale of high potential mineral properties in the most prolific regions of the world.  St. Elias and Hi Ho Silver Resources Inc. (“Hi Ho”) have been developing the Kettle River (“Carmi”) Moly Property since September of 2005 and this agreement could not have come at a more opportune time for both companies.

 

Hi Ho is a mineral exploration company engaged in the acquisition and development of mineral properties, in particular, molybdenum, silver and copper projects.  Under a previous agreement with St. Elias, Hi Ho has effectively earned a 51% interest in the Property in consideration of making cash payments of $75,000, issuing 500,000 common shares of Hi Ho to St. Elias and spending $2,000,000 on exploration expenditures on the Property.  Hi Ho has accomplished this over the last 2 ½ years and, in doing so, has advanced the Property, benefiting St. Elias and Hi Ho respectively.

 

At present, the Company is concentrating largely on its Tesoro Property in Peru due to the high grade nature and low exploration costs.  With respect to the Carmi Property, we believe it has tremendous potential to contain significant moly reserves; however, it will take a substantial amount of money to prove up reserves in accordance with NI 43-101 and to bring the Property into production.

 

The new agreement with Hi Ho allows St. Elias to benefit from the value of the Property while mitigating its risks and avoiding dilution to the shareholders.  Consequently, St. Elias is not required to raise the capital to advance the Property towards its true potential.  In addition, under the new agreement:

·               St. Elias receives $750,000;

·               St. Elias receives an additional 3,500,000 common shares of Hi Ho;

·               in the event that Hi Ho sells the Property in the future, St. Elias will receive a portion of the proceeds which Hi Ho realizes from the sale;

·               in the event that Hi Ho sells the Property in the future, St. Elias will also receive $1,750,000 if Hi Ho exercises its option to purchase 1,750,000 of the shares; and

·               St. Elias retains a 1.5% net smelter return royalty (“NSR”) from all proceeds received from commercial production.

 

Both St. Elias and Hi Ho are extremely pleased to have negotiated this new agreement.  With Hi Ho owning 100% interest in the Property, it allows a greater flexibility.  Hi Ho is then able to pursue a variety of options with respect to advancing and/or the sale of the Property, effectively increasing value for shareholders of both companies.  St. Elias stands to benefit greatly from any development or sale of the Property.  Under this agreement, St. Elias gets paid now, gets paid again if Hi Ho sells the Property and gets paid numerous times after that from the NSR in the event the Property goes into production.  Again, the further the Property advances, the larger the benefit for St. Elias. (with no risk to St. Elias.)

 

As a result of this new agreement, St. Elias will become the second largest shareholder of Hi Ho.  In addition to Hi Ho’s interest in the Carmi Property, its other projects include the Silver Tip in Slocan, B.C., the South Rim Moly and Gold in central B.C. (which is also optioned from St. Elias), and the Tasco Copper Moly in central B.C.  As one of the largest shareholders in Hi Ho, St. Elias is positioned extremely well to capitalize on the vast potential of each unique property, without the burden of incurring the exploration expenses.

 

In addition to the increased holdings in Hi Ho, this agreement provides St. Elias a cash injection of $750,000 which will be used for general operating capital and to further develop the Company’s other projects including the Tesoro.

 

St. Elias has a keen interest in its shareholders and is dedicated to increasing shareholder value.  For the Company to develop the Carmi Property to the point of production, it would require a substantial amount of capital.  This would necessitate the raising of significant funds, possibly in the form of a private placement, increasing the number of outstanding shares thus diluting the stock.

 

I hope that this update has answered any concerns you may have with respect to this new agreement and has clearly illustrated the benefits to St. Elias and its shareholders.

 

Kindest Regards,

 

ST. ELIAS MINES LTD.

 

(signed “Lori McClenahan”)

 

Lori McClenahan,

President

Carmi (Kettle River) Molybdenum Property

Overview:

 

St. Elias Mines (“St. Elias”) owns a 100% interest in the Carmi (Kettle River) Molybdenum Property located within the prolific Beaverdell Mining Camp in British Columbia.  St. Elias has granted Hi Ho Resources Inc. (“Hi Ho”) options to earn a 70% interest in the property in consideration of $75,000, 1,500,000 Hi Ho shares, and a $5,000,000 incurrence in exploration expenditures.  To date, the property has been tested with 221 drill holes totaling over 70,000 feet.  An updated 43-101 technical report to define molybdenum reserves compliant with National Instrument 43-101 is forthcoming.

Molybdenum (“moly”) has a number of diverse uses.  It is used as a pure metal, an alloy additive, a lubricant, a catalyst, and in a number of chemical compounds.  One of the most important characteristics of moly is its extremely high melting point – 2,400^oF higher than steel alone.  Corrosion resistance and strength in stainless steel uses account for approximately 75% of moly consumption.  Molybdenum is used extensively in the millions of miles of oil, gas and water pipelines around the world (building, repairing and replacing); molybdenum based catalysts are used in the petroleum industry to remove sulphur found in crude oil, and in the liquefaction of coal; molybdenum strengthens automotive, high speed and structural steels and is used to create superalloys, nickel base alloys, lubricants, chemicals and electronics.

Quick Facts:

·         Moly has a value of approximately $33.00/lb ($66,000 per ton) as of June 2008 (Source: www.infomine.com).

·         Moly maintained a price at or near $5.00/lb ($10,000 per ton) from 1997 through 2002 and has since climbed over 550%.

·         Global demand is increasing by approximately 4.5% annually; partially due to its role in hydro processing catalysts used in the production of crude oil.

·         Rhenium is an extremely rare and valuable metal that is primarily used in high temperature alloys and catalysts.

·         Rhenium is used extensively in the US aerospace and superalloy industries as well as in electronic devices, heating elements, metallic coatings, temperature controls and thermocouples.

·         Rhenium is recovered as a by-product from molybdenite concentrates from porphyry copper – molybdenum ore and can add substantial value to the ore.

·         Total world production of rhenium is between 40 and 50 tons/year.

·         Current spot prices of rhenium is quoted between $4,800 per pound according to the BASF/Engelhard website who’s internet link is http://www.catalysts.basf.com/apps/eibprices/mp/DPCharts.aspx?MetalName=Rhenium and $5,000 per pound by www.taxfreegold.co.uk/rheniumpricesusdollars.html.

 

What’s next?

·         Initial technical report (August 2005, revised June 2006) compliant with National Instrument 43-101 states that there is a high probability that the two open pit deposits (the E-Zone and the Lake Zone) could be doubled from 22,800,000 tons grading 0.106% MoS₂ to the 40,000,000 ton size and that a third high-grade, bulk-mineable underground zone (below the Lake Zone) is estimated to contain 5,000,000 tons grading 0.33% MoS₂.  Estimates of molybdenum resources herein are historical in nature, predate and are non-compliant with National Instrument 43-101.  Although the resource estimations are believed to be reliable and accurate, they were calculated prior to the implementation of National Instrument 43-101.

·         Updated 43-101 technical report to define reserves compliant with National Instrument 43-101 is pending.

 

Summary:

 

St. Elias’s strategy is the acquisition, development and sale of high potential mineral properties in the most prolific regions of the world.  The Carmi property potentially ranks among the biggest molybdenum discoveries in British Columbia and it is the Company’s intention to turn this potential into revenue, and increase the Company’s market capitalization to the benefit of the shareholders.

 

St. Elias is well positioned to immediately capitalize on the vast potential of the Carmi (Kettle River) Molybdenum Property.  The Company is making all the necessary arrangements to realize the maximum value on this property and effectively increase shareholder value.  Further updates to follow.

 

For more information, contact Terry Nixon by phone at 778.238.6160 or by email at TNixon@StEliasMines.com