Monday, March 21, 2011

Gold and Silver: Cornerstone Resources: CEO Letter to Shareholders cgp.v, tnr.v, laq.v, bvg.c, bva.v, ng.to, grc.to, amm.to, ktn.v, gbn.v, rvm.to, mgn, asm.v, sgc.v, ngq.to, btt.v, alk.ax, nem, fcx, bvn, auy, abx,

  

   This company is coming back recently very fast from its napping just few months ago. We are interested in Rare Earths particularly and Chilean projects as the new value drivers for this developing story.



"4. With all that scare US Dollar remains below long term uptrend line. It was not able to rally substantially even after all this panic - it is the big question mark. Somebody is already pricing Qn+1.

5. We should expect QE3 now almost for certain. Who will buy treasuries now, but the FED? It means more US Dollar supply - it means Inflation. Place to beLithium, Rare Earths, Gold, Silver, Copper, Zinc and other Commodities."





March 17, 2011
Author: Glen H. McKay
Dear Shareholder;
Since my last letter to you on January 25th, 2011 there have been a number of developments in your company which I wish to comment on.

New President
On February 24th we announced that H. Brooke Macdonald, a Director of Cornerstone since 2009, had been appointed President, replacing yours truly in that role. Having Brooke, a respected and seasoned industry professional, as President is an important step for the Company for the next stage of its development. He brings the experience, knowledge and skills necessary to ensure that we realize the potential of our current broad portfolio of projects and take full advantage of new opportunities. As we enlarge our portfolio of projects in Ecuador and expand into other jurisdictions in Latin America, Brooke's intimate knowledge of the region and his fluency in Spanish are critically needed assets at this time. I am very pleased that Brooke is joining our senior management team at this important juncture.

Cash Position and Partner Funding of Key Projects
We continue to be focused on generating new projects that have great potential for discovery and we are committed to realize significant returns for our shareholders. Cornerstone leverages its own exploration funding through joint venture and strategic partnerships, providing shareholders with potential for success at lower risk and less dilution. We have great confidence in our projects and we look forward to advancing them to create significant value for investors who have patiently supported the Company.

Cornerstone is well funded and commitments from our JV partners constitute significant validation of the strength of Cornerstone's projects. 50% of work on the Little Deer copper project in Newfoundland is funded by partner Thundermin Resources. 100% of the funding for our other flagship property, Shyri in Ecuador (including the current drill program at the Gama target), is being provided by partner Intrepid Mines, which is committed to spending at least $1 million on the property in 2011. Great Western Minerals is funding 100% percent of the work on the Company's Chaleur rare earth elements (REE) property in New Brunswick (see news release dated March 1, 2011). 100% of work on our Macara property in southern Ecuador is being funded by Newmont Ventures Limited, a subsidiary of Newmont Mining Corporation (see news release dated March 30, 2010). 100% of work on our Letitia Lake REE property in central Labrador is being funded by Rare Earth Metals Inc. to earn a 51% interest in the property (see news release dated February 16, 2010), and 100% of work on our Red Cliff copper property on the east coast of Newfoundland is being funded by Vale Exploration Canada Inc. to earn a 60% interest (see news release dated May 4, 2010).

Cornerstone currently has approximately $2.2 million in the bank. On or before April 21st, we expect to add approximately $700,000 to our treasury from the exercise of warrants at an exercise price of $0.25. The warrants were issued in connection with a private placement announced on November 12, 2009; they were called by the Company on March 14th and will expire if not exercised by April 21st. On March 24th we expect to be able to call another 4,687,500 warrants, at an exercise price of $0.20, thereby causing them to expire if not exercised within 30 days of the date they are called. These latter warrants were issued in connection with a private placement announced on November 22, 2010, and if exercised would add another $937,500 to our treasury. Cornerstone also owns marketable securities with an approximate value of $550,000, which could be converted to cash if necessary.

In short, we believe that Cornerstone has sufficient cash on hand to meet all its commitments and to advance its strategic objectives well into 2012. Proceeds from the exercise of all outstanding warrants and liquidation of the marketable securities, with current cash on hand, gives Cornerstone potential total cash resources of approximately $4.3 million.

Little Deer Copper
On January 27th we announced that drilling had recommenced on the Little Deer copper deposit with two drill rigs. The primary purpose of the current drill program is to increase the estimated mineral resources outlined to date in the deposit to the five to six million tonne range. While we are confident that is an achievable goal, I must note that the potential increase to the Little Deer mineral resource is conceptual in nature and it is uncertain whether further exploration will result in an expansion of the resource as currently defined.

Cornerstone and our joint venture partner Thundermin Resources must decide prior to July 12, 2011 whether to exercise the option to acquire a part of the property that is subject to an underlying agreement with a third party. If we elect to exercise, we must make a payment to the third party which is based on a formula but which we currently estimate to be approximately $1.5 million, 50% or an estimated $750,000 of which must be paid by Cornerstone. At Cornerstone's election the payment may be in cash or Cornerstone shares.

Ecuador
We are confident that it will become increasingly apparent that Ecuador welcomes environmentally friendly, socially responsible, sustainable mining development and we are positioning Cornerstone to be a major player in this underexplored land of fabulous mineral potential.

We expect that Ecuador will very shortly achieve an important milestone in implementing its new mineral exploration and development regime, with the signing of the first mineral exploitation contracts governing advanced projects. On March 5th a report at http://www.miningweekly.com/article/ecuador-expects-to-sign-first-two-contracts-by-april-minister-2011-03-05 stated that the government of Ecuador expects to have the first mineral exploitation contracts signed in the coming months with foreign firms wanting to develop identified mineral deposits in the country. The Minister for Nonrenewable Resources, Wilson Pastor, was quoted as saying: "By April we believe we will have signed at least two mineral exploitation contracts, and by June, we will have the third strategic project signed. There are two more deals for advanced exploration that will be sealed next year." The new contracts will include details of royalties to be paid to the government.

Ecuador passed a new mining law in January 2009, replacing a mandate that had ordered a suspension of all mining and exploration work in the country almost a year earlier. The provisions of the new law are now being fully implemented, thereby enabling Cornerstone and other companies to recommence exploration and development activity.

At the PDAC on March 8th the Ecuadorian delegation, headed by newly appointed Vice Minister of Mines, Federico Auqilla, mentioned Cornerstone as one of the exploration companies filling the pipeline with the second generation of projects for the country, and said they expected to have the first two mineral exploitation contracts signed by April 15th. The Vice Minister, a mining engineer from the city of Cuenca who is known as a long time supporter of foreign investment, delivered a message from President Rafael Correa that Ecuador is committed to developing a world-class mining sector and realizes it needs foreign investment to do this.

Coincidentally also on March 8th, we announced that drilling had started on our highly prospective Gama prospect on the Shyri property. As I write this letter the drilling is ongoing and we await the first results from the drilling.

During 2006/07 there was heightened anticipation about our Shyri property. Several mining analysts and letter writers who had visited it were of the opinion that all three prospects on the Shyri property - Gama, Vetas Grandes and Cañaribamba - were high priority targets. Work completed on those prospects up until the imposition of the Mining Moratorium further supported that conclusion.

Based on the geological potential of the Shyri project alone, many analysts and letter writers were recommending CGP before the moratorium. CGP traded as high as $0.89 at that time. One should keep in mind that the price of gold in 2007 was less than 50% of what it is today. Also your company has many more high potential properties than it did in 2007. In the months ahead, in addition to drilling Gama, we will be working to advance the Vetas Grandes and Cañaribamba prospects to the drill ready stage.

We recently expanded our activities in Ecuador with our February 17th announcement that we had acquired 100% of the shares of Santa Barbara Copper and Gold S.A. ("SBCG"), thereby acquiring the La Encrucijada and Cascabel properties. We will attempt to advance both properties to the drill ready stage this year. Prior to beginning work on La Encrucijada, we will need to carry out consultations with the local community, which could delay the commencement of work on that property.

Chile
On February 22nd we announced that we had signed an agreement to explore the Miocene gold-silver-copper project located in the Regions of Atacama and Antofagasta of northern Chile.

On March 15th we announced that we had signed an agreement to acquire the La Fortuna copper-silver-gold project located in the Valparaíso Region of central Chile.

These two projects were selected after two years of careful research by our experienced geological team. We plan to advance these two properties to the drill ready stage by the end of the first quarter of 2012.

Rare Earth Element Properties
On March 1st we announced that we had signed a formal option agreement granting Great Western Minerals Group Ltd (TSXV-GWG) the right to earn a 51% interest in Cornerstone's Chaleur rare earth element (REE) property in northern New Brunswick. On March 8th we announced that Rare Earth Metals Inc. (TSXV-RA) had elected to enter the second year of the option agreement respecting our Letitia Lake rare earth element (REE) properties in central Labrador.

Those two projects give your company exposure to a group of commodities that is receiving a lot of attention these days. To read a commentary on the importance of rare earth elements go to link http://financialedge.investopedia.com/financial-edge/0211/China-Dominates-Rare-Earth-Metals-Market.aspx

El Strato Gold
On February 1st we announced a decision to defer the planned winter diamond drilling program on the El Strato gold property in north-central Newfoundland until this coming summer. Unseasonably mild temperatures this winter have resulted in a lack of suitable lake ice thickness and ground freeze-up conditions, thus making access difficult. Cornerstone will commence the drilling program in early summer as soon as ground conditions are suitable.

To keep updated on news from Cornerstone please ensure that you are subscribed to our email alerts by updating your profile at http://www.cornerstoneresources.com/s/SendMessage.asp. We also encourage you to take the time to familiarize yourself with our other projects and our people by visiting our website.

The direct link to a recent CEO video interview is:
http://www.cornerstoneresources.com/i/media/SHCornerstone.asx

The link to recent CEO audio interviews is:
http://www.cornerstoneresources.com/s/Interviews.asp

The link to a recently updated Corporate presentation with narration is:
http://rblcommunications.com/webcasts/Cornerstone/CGPmarch2011/CGPmarch2011.html

For investor, corporate or media inquiries, please contact:

Investor Relations:
Email: communications@crigold.com
North America toll-free: 1 (877) 277-8377
Martti Kangas - Direct Line: 1 (647) 521-9261
Paul Benwell / Pat Kairns - Direct Line: 1 (514) 904-1333
As usual your comments, suggestions and inquiries are very welcome.

Best regards,
Glen

Glen H. McKay
Executive Vice -- Chairman & CEO
Cornerstone Capital Resources Inc.
Excellence in Mineral Exploration
"People, Process, Projects"
TSXV - "CGP" / OTC - "CTNXF"

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