Stikine Energy Corp. : Angus: Inferred Resource Estimate and Positive Preliminary Economic Assessment Results

Vancouver, British Columbia: Stikine Energy Corp. (TSX.V: SKY) ("Stikine" or the "Company") announces it has received the results of a Technical Report and Preliminary Economic Assessment ("PEA") for the Angus Frac Sand Project dated December 12, 2011. The report is compliant with the requirements of National Instrument (NI) 43-101 and was prepared by Wardrop, a Tetra Tech Company (Tetra Tech). Tetra Tech is an international engineering consulting firm that is independent of Stikine. The PEA will be filed on SEDAR within 45 days. The Angus Frac Sand Project (100% Stikine) is located in close proximity to the Montney Basin and 80 km north of Prince George, British Columbia.

The PEA highlights a conventional open pit mine development plan for the Angus Project and presents robust preliminary economics. Frac sand is a naturally occurring, fine-grained, quartz-pure material used in the shale gas industry as a "proppant" in hydraulic fracturing. Hydraulic fracturing or "fracking" is a technique used in the development of shale-hosted oil and gas deposits such as those found at the Montney Basin and other sites in northeastern BC. There are no developed sources of frac sand in northeastern BC and the industry currently transports frac sand from distant out-of-province locations such as Alberta, Saskatchewan and the United States.

PRELIMINARY ECONOMIC ASSESSMENT HIGHLIGHTS

The PEA is preliminary in nature. It includes inferred mineral resources which are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves and there is no certainty that the preliminary economic assessment will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

All amounts in Canadian Dollars ($Cdn)

Input Parameters and Economic Returns	Base Case	Alternate Case
Frac sand sale price	$200/tonne	$250/tonne
Life of Mine from production start	25 years	25 years
Net Cash Flow	2.96 billion	$4.21 billion
IRR (%) Pre tax	34.1%	45.2%
NPV Pre-tax (8% discount rate)	$977 million	$1.47 billion
Payback period from start of production	2.6 years	1.9 years

NI43-101 Inferred Mineral Resource Estimate
The Angus deposit contains a unique, and continuous occurrence of fine grained, slightly metamorphosed sandstone (quartz arenite) with sand grain sizes that appear well-sized for frac sand products used in the Montney Basin. The area identified for the inferred resource estimate (and PEA) is about 2.5 km long by 0.4 km wide and is located in the middle of the Angus sandstone outcrop which extends over a total length of approximately 5.0 km. An inferred maximum mineral resource of 726 million tonnes is based on bedrock mapping, core drilling, 3D wire-frame modeling and volume estimates.

Mining Methods
The PEA has advanced the Company's concepts for an open pit/quarry mining operation and on-site processing of frac sands. A base case scenario was developed and evaluated for the project to produce 1 million tonnes per year of frac sand in various commercial sizes for 25 years. Using an estimated yield of 60% will require a mill throughput of 1.67 million tonnes per year, or about 4,570 tonnes per day. Producing 1 million tonnes of product per year for 25 years will require approximately 42 million tonnes of raw material, or only 6% of the inferred resource estimate and therefore provides opportunities to expand beyond the base case.

The Angus deposit is exposed at surface with little or no surficial soils or overburden and the site is topographically well suited to conventional open pit mining methods. The mine development concept considers a series of adjacent open pits that would be sequenced to allow for progressive backfilling of tailings during operations. This approach is beneficial in eliminating the need for an external tailings storage facility, allows for progressive reclamation and reduces the overall footprint of the operation during the mine life.

A starter pit will be excavated during the pre-production phase and rock will be stockpiled for processing at the end of the mine life. Production will commence with excavation of Pit 2 and tailings (fine or broken quartz grains and water) from the process will be backfilled into the starter pit. Once the starter pits are filled with tailings, mining will commence on Pit 3 and the operation will continue with increasingly larger pit dimensions and ongoing backfill/reclamation throughout the mine life. The backfilled pits will be reclaimed by placing coarse sandstone over the surface to return the site at closure to conditions similar to pre-mining.

Processing Methods
The process flowsheet is a simple and innovative arrangement of off-the-shelf equipment available from a variety of manufacturers. The process includes dry primary, secondary and tertiary crushing using jaw and cone crushers. This equipment is commonly available in the required production size in a variety of stationary and mobile configurations. Crushed raw material is then fed to an autogenic attrition crushing device known as vertical shaft impactor ("VSI") crusher which provides grain liberation and particle size reduction by impacting particles against one another.

Water is added to the crushed (and partially liberated) material to make a density-controlled slurry which is fed to wet attrition scrubbers that provide particle-on-particle attrition and liberation of individual quartz grains. Retention times and densities in the scrubbers ensure optimal liberation prior to size classification using density separators. Once sorted the sand grains are dried prior to storage and transport.

The simple mechanical process liberates the naturally occurring quartz-pure grains into the frac sand sizes used in the Montney Basin, including -20 to +140 mesh sizes without reduction or the addition of any chemicals.

Infrastructure
The Angus deposit is well situated with respect to existing infrastructure:

• Road - Highway 97, the major highway from Prince George to northeast BC, is located approximately 20 km west of the Angus site. Access from the highway to the site would be achieved by upgraded forest service road.
• Power - a 138 kV transmission line parallels Highway 97 and the McEwan Substation is located about 25 km from the site. The PEA capital cost estimate includes a new power line and tie-in to this substation.
• Transport to Market - Frac sand will be hauled by highway rated truck from the site directly to the Montney producers or to a centrally located storage/distribution facility. For the purpose of the PEA it is assumed that facility is located at a distance of 330 km. The facility and fleet have been optimized for the base-case 1 million tonne per year of frac sand delivery.
• Railway - a rail line, also located approximately 20 km west of the site, is the major rail connection between Prince George and northeast BC. Opportunities to ship frac sand by rail will be reviewed in further studies and for potential markets outside of BC.

Capital Cost Estimate
Tetra Tech compiled and summarized capital costs for the design, fabrication and construction of all components of the project. Costs have been estimated in Canadian Dollars (Cdn$) and are considered accurate as of Q4 2011. Direct Capital costs are estimated to be $199.6 million. An additional $66.0 million was estimated for project Indirects, $6.0 million for Owner's Cost and $42.4 million for Contingency. The total estimated capital cost for the project is $314.0 million.

Capital Cost Area	Estimated Cost (Cdn$)
Site General	192,456
Mining	11,621,522
Rock Crushing and Handling	24,093,772
Processing Plant	50,434,557
Tailings / Reclaim Water	631,426
On site Infrastructure	36,670,669
Access Road	6,399,500
Power	14,508,125
Bridge	1,115,780
Gas Supply Pipeline	4,864,478
Off-site Load out Facility	49,068,826
Sub-Total Direct Costs	199,601,112
Indirect Costs	66,033,558
Owner's Cost	5,988,033
Contingency	42,359,150
TOTAL	313,981,854

Operating Cost Estimate
Tetra Tech estimated operating costs including: mining, processing, general and administrative, trucking and other costs related to the production and transport of frac sand. Operating costs are estimated at $22.73 per tonne milled, or $37.96 per tonne of frac sand produced. A breakdown of estimated operating costs by area is as follows:

Operating Cost Area	Estimated Cost/tonne milled (Cdn$)
Mining	9.16
Processing	10.36
Tailings	0.18
Site Services	1.56
G&A	1.47
Total	22.73

Tetra Tech also estimated the cost of transport and handling frac sand products to the distribution facility. A transportation cost of $27.20/tonne of frac sand has been estimated but is not included in the above table. Similarly, third party services including camp catering costs related to off-site transportation were estimated at $3.2 million/year ($1.92/tonne milled) and have been included in the financial analysis.

Market Study
A market study was completed by PricewaterhouseCoopers LLP in May 2011 and highlighted the following:

• Frac sand is not sold on an open market and a "spot" price is not available; as a result, a basic or floor price was calculated using estimated costs to supply and deliver to the Montney Basin from a variety of known supplier locations.
• Estimated minimum delivered costs to the Montney Basin (based on lowest reported cost and margins) ranged from $111/t to $285/t. Up to 70% of the cost of frac sand is simple transportation and handling. These prices relate well to historically low prices observed in 2009.
• Demand for frac sand in the Montney Basin is projected to be in the order of 1.4 million tonnes per year by 2014;
• The absence of a local source of frac sand in northeast BC presents an attractive opportunity for potential local suppliers to enter the market.

Background
Stikine is focused on becoming a dominant frac sand supplier to British Columbia's developing shale gas industry. The Horn River, Liard and Montney Basins are large-scale gas plays led by major producers who currently rely on frac sand transported over great distances. Stikine's Nonda project is located in close proximity to the Horn River and Liard Basins and the Angus project lies in close proximity to the Montney Basin. The projects were identified in 2009 through a systematic search for raw material sources possessing the different frac sand sizes used in each basin and the potential for large-scale resource development. Stikine's ongoing work for both projects includes engineering and baseline environmental work in addition to community consultation.

Tetra Tech's Hassan Ghaffari, P.Eng and Klaus Triebel, CPG are qualified persons as defined by National Instrument 43-101 responsible for the preparation of the PEA and inferred resource estimate. Scott Broughton, P.Eng. is the qualified person from the Company responsible for the preparation of this news release.

STIKINE ENERGY CORP.

"Scott Broughton"
_________________________________________
Scott Broughton, P.Eng. - President and CEO

For further information contact:
Investor Relations
Tel: (604) 684-1900
Fax: (604) 684-2902
Email: info@stikineenergy.com

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