Arctic Star - Apr 2018 - Baystreet.ca...Source: Global Diamond Industry Report Ownership Arctic Star acquired a 100% interest in the project in June 2017, from an unrelated party (Dragon

Siddharth Rajeev, B.Tech, MBA, CFA

April 30, 2018

2018 Fundamental Research Corp. “15+ Years of Bringing Undiscovered Investment Opportunities to the Forefront” www.researchfrc.com

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Arctic Star Exploration (TSXV: ADD / OTC: ASDZF / FRA: 82A1) - Initiating Coverage - Diamonds in

Finland and Canada

Sector/Industry: Junior Resource www.arcticstar.ca

Market Data (as of April 30, 2018)

Current Price C$0.17

Fair Value N/A

Rating* N/A

Risk* 5 (Highly Spec)

52 Week Range C$0.11 – C$0.38

Shares O/S 102,968,863

Market Cap C$17.50 M

Current Yield N/A

P/E (forward) N/A

P/B 1.9x

YoY Return -15.0%

YoY TSXV -2.2% *see back of report for rating and risk definitions.

Investment Highlights

Arctic Star Exploration (“company”, “Arctic”) holds a diversified portfolio of diamond exploration projects in Finland and Canada, and a carbonatite project (rare earth elements / niobium) in B.C., Canada.

The company’s technical team have a strong track record in the diamond exploration and development space. Management and board members hold 17% of the total outstanding shares, strongly aligning management/board and investors’ interests.

The Timantti project in Finland is the company’s flagship asset. The project currently has four known diamond bearing kimberlites. A total of 245 diamonds were found in a 167.53 kg sample. A drill program is underway to identify the true size and shape of the four kimberlites. As kimberlites typically occur in clusters, we believe it is highly likely that the four identified kimberlites are the first of several discoveries in the region.

Arctic’s Diagras diamond property is located 22 km north-east of the Diavik diamond mine, and 36 km east of the Ekati diamond mine in the NWT, Canada. The company completed ground geophysical surveys over several known kimberlites last summer, which identified untested kimberlite-like anomalies.

A recently completed summer exploration program at the company’s Cap property resulted in a carbonatite discovery, with strong potential for niobium, rare earth elements and phosphate.

Due to the early stage nature of the company’s portfolio, we are not currently assigning a fair value estimate or rating on. However, we believe ADD is an attractive speculative play in the diamond space.

Risks

Commodity price risk. The properties are relatively early stage. None of the projects have NI

43-101 compliant resource estimates. Advancement of projects depends on availability of financings. Exposure to share dilution through future financings

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Overview

Outlook on

Diamonds

Arctic Star Exploration, incorporated in 2001, and based out of Vancouver, BC, Canada, is a diamond and mineral exploration company with projects in Finland and Canada (B.C., the Northwest Territories and Nunavut) The company is headed by Patrick Power (Executive Chairman) and Scott Eldridge (new CEO and President). Mr. Power is a venture capitalist and financier. Mr. Eldridge has a financial background, having been involved in over $0.5 billion in financing in the mining industry. The technical team is led by two individuals with a strong background in the diamond space:

Buddy Doyle led the exploration team of Kennecott Canada Exploration (Rio Tinto / ASX: RIO) that discovered the Diavik diamond deposits in NWT, Canada in 1994. Diavik is one of the largest diamond mines in Canada today.

Roy Spencer, a former De Beers’ geologist with over 40 years of experience, led the team that discovered the Grib Kimberlites in Russia. Grib is one of Russia’s largest diamond mines. He was also instrumental in advancing the Liqhobong diamond mine in Lesotho to commercial production. Mr. Spencer, who was also responsible for the discovery of kimberlites on the Timantti project, joined Arctic Star’s board in 2017, subsequent to Timantti’s acquisition.

The following chart shows the Global Rough Diamond Price Index. Rough diamond prices are up 3.3% YoY, and 10.9% over the past 10 years, as of April 2018.

Source: The Diamond Loupe

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Sales of rough diamonds by De Beers was down 3% YoY in 2017.

De Beers’ Sales

Source: De Beers

Alrosa’s (MCX: ALRS) sales in the past four cycles were down 10% YoY.

Alrosa’s Sales

Source: Alrosa

Global production of rough diamonds has stayed relatively flat at approximately 125 to 130 M carats every year since 2010. Russia, Botswana and Canda are the top three producers, accounting for approximately 71% of global production.

Global Rough Diamond Production

Source: Global Diamond Industry Report

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Timantti,

Finland

According to Bain and Company, global demand is expected to grow 2% to 5% p.a. from 2016 to 2030. However, supply is expected to peak at 150 M carats by 2019, and then drop to 110 M carats by 2030.


Overall, the long-term supply and demand balance is expected to remain tight, which we

believe is a positive indicator for prices going forward.


Ownership

Arctic Star acquired a 100% interest in the project in June 2017, from an unrelated party (Dragon Diamond Ventures Limited), by issuing 14.50 million shares at a deemed price of $0.20 per share, for a valuation of $2.9 million.

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The project consists of a 243 ha Exploration Permit, within a larger district scale 95,700 ha Exploration Reserve. At the time of the acquisition, the project had two identified kimberlites, namely the Black Wolf and the White Wolf kimberlites (“Wolf Kimberlites”), which are 50 m apart. The Exploration Permit allows for till sampling, ground geophysical surveys, trenching, and core drilling. Arctic Star has identified two additional kimberlites. The Wolf kimberlites are located on the Baltic Shield (also referred to as the

Fennoscandian Shield or Karelian Crarton), which hosts world class diamond mines,

such as the Lomonosov Mine and the Grib Mine. The Baltic Shield, which covers northwest Russia, Norway, Sweden, Finland, and northern Denmark, is well known for diamonds and gold. The Lomonosov Mine, and the Grib Mine, are approximately 450 km east of the Wolf kimberlites.

The Lomonosov mine is located in north-western Russia in the Arkhangelsk Oblast, with a reserve estimate of 220 M carats. The mine produces approximately 2 M carats per year.

The Grib mine, also located in north-western Russia, is estimated to hold reserves of 98.5 M carats. The annual production is approximately 3.6 M carats. Its previous owner, Lukoil (MISX: LKOH), sold a 100% interest in the project for US$1.45 billion in 2016.

Arctic’s management believes that they will be able to develop a new diamond district at Timantti, especially considering that it has a similar geology as the Grib and Lomonosova mines. Timantti is located in Northern Ostrobothnia (northeast Finland), 17 km from the town of Kuusamo. The property is easily accessible by road from Kuusamo, and is surrounded by infrastructure ideal for mining activity. The following map shows the location of the Timantti project:

Location Map

Source: Company

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Finland was ranked the best jurisdiction for “Investment Attractiveness” by the Fraser Institute’s Annual Survey of Mining Companies in 2017.

Source: The Fraser Institute

Finland has been ranked in the top five every year in the past four years.

Source: The Fraser Institute

Several companies have explored for diamonds in Finland, including De Beers, North Star Diamonds, Dia Met Minerals Ltd., America Mineral Fields, and RTZ Mining & Exploration Ltd. to name a few. However, none of them have disclosed any significant details or results of

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their exploration programs. Arctic Star reports that these previous explorers were focused mainly in areas hundreds of kilometers to the south.

Geology

The property is on the Karelian Craton (part of the Baltic Shield) - which hosts several diamond-bearing kimberlite clusters.

Kimberlite Fields in the Karelian Craton

Source: Technical Report

Diamond Formation

Diamonds are formed at great depths in the earth’s mantle most often below continental cratons where the appropriate temperature and pressure conditions are met. The association between kimberlite pipes and diamonds results from kimberlite pipes acting as conduits by which diamonds travel from depth to, or near the crustal surface where they can be mined. Kimberlites and Diamonds Kimberlite deposits form through the rapid eruption of highly volatile magma of largely mantle composition. The violent eruption tends to result in a roughly carrot-shaped “pipe”, which has brought with it xenoliths from depth. Occasionally, these xenoliths are diamondiferous. Xenoliths are essentially preformed rock fragments that become enveloped

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in a larger rock (originally as magma); in the case of diamonds, they are xenoliths which have been trapped in the kimberlite magma as it migrates upwards to the earth’s surface. Kimberlites occur in clusters, and depths of typical kimberlite pipes are approximately 2 – 3 km.

Generalized Diagram of a Kimberlite Pipe

Source: http://www.kgs.ku.edu

As mentioned earlier, the project currently has four known diamond bearing kimberlites. Black Wolf and White Wolf were discovered in 2005 by European Diamonds PLC’s team led by Roy Spencer. Grey Wolf was discovered in 2018. European Diamonds drilled eight diamond drill holes on a low-magnitude magnetic high anomaly at the head of a kimberlitic indicator mineral train traced over 30km. Approximately 41.2 kg (4 samples) of kimberlite

from White Wolf were collected, which showed 42 small diamonds between 0.15 and

0.88 mm in size. A 9.8 kg sample from the Black Wolf kimberlite returned 23 microdiamonds. Subsequently, in 2006, a 8.8 tonne kimberlite sample was extracted, which showed 1.25

carats of stones greater than 1 mm, with the largest stone being of 0.09 carats. Arctic’s

management believes the sample did not represent the entire kimberlite, as it was taken

from a near surface trench. Large diameter drill core is being used to take a more

representative sample.

Between 2004 and 2007, a total of 14 short core drill holes were drilled towards the south-west area of the property by European Diamonds. Details are shown below:

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Drill Hole Locations

Source: Company

Upon taking over the project, Arctic was able to access the core of previous drilling stored by the Finnish Geological survey (GTK). The company collected 48.65 kg of a kimberlite core

sample, and sent it to the Saskatchewan Research Council laboratory. The results were highly encouraging, as 111 microdiamonds greater than 0.106 mm were recovered from the sample. 18 were greater than 0.30 mm, six were greater than 0.60 mm, and the largest was 1.18 mm.

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Data Source: Company

Another study on a 18.9 kg sample (from surface sampling) showed 58 stones over 0.106 mm, with 6 stones over 0.30 mm.


In total, 169 stones were recovered from a total sample of 67.55 kg.


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In February 2018, the company announced the discovery of Grey Wolf kimberlite, which is near surface under very thin glacial overburden, and close to the other Wolf kimberlites. In March 2018, the company announced results of a 5 hole drill program on the new discovery. All 5 holes intersected kimberlite, with the longest intersection being 45 m. The following table summarizes the results:

Source: Company

Additionally, on Grey Wolf, the company found a visible pyrope (a type of garnet) in a drill core.

Pyrope in Drill Core

Source: Company

On April 16, 2018, the company announced results of caustic fusion analyses. A summary of all the results received to date is shown in the table below (including the results from White Wolf mentioned above):

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CAP Project,

B.C.

Caustic Fusion Results Timantti Project

Source: Company

The following table shows how Arctic’s results compare very favorably to other kimberlites located in Finland, and recent discoveries in Canada.

Comparison

Source: Company

The immediate focus is a drill program to identify the true size and shape of the known

kimberlites, and identify further kimberlites on the property. A drill program will be preceded by ground geophysical surveys to identify drill targets. We believe another major upside of the project is that, as kimberlites typically occur in clusters, it is highly likely that the Wolf kimberlites are the first of several discoveries in the region. The company’s proposed budget is approximately $1.5 million, including $0.80 million on drilling, $0.2 million on till sampling, and the remaining for ground geophysical surveys, trenching, and sampling. The Cap property, consisting of six claims covering 2,825 ha, is located approximately 85 km northeast of Prince George, B.C. The land package is approximately in the center of the Rocky Mountain Rare Metal Belt, and is 50 km southwest of the Wicheeda REE Carbonatite. The property is road accessible. Arctic had acquired this project in 2010, but had not

conducted any work on it from 2012, up until the recent summer exploration program.

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Source: Technical Report

The property is relatively under explored and is considered to have potential for

carbonatite hosted mineral deposits, given the recent positive results from drilling and

surface sampling. Carbonatite is a very rare rock type, but is a good source of rare earth elements (REEs), tantalum, niobium and a number of industrial minerals. A few well-known carbonatite deposits in the world are listed below:

Araxa, Brazil – Nb

Palabora, South Africa - Cu, Ni, Au, and PGE

Bayon Obo, China- REE’s, Fe, Nb, and fluorspar

Niobec, Canada - Nb

Mountain Pass, U.S. - REEs

A summer exploration program this year focused on a 3km x 1km area, and resulted in a carbonatite discovery, with strong potential for niobium, REE and phosphate. The program,

which included prospecting, geologic mapping and sampling, and four drill holes,

showed carbonatite and related rocks exposed over a 90 m strike, at a thickness of over

50 m.

The following key results were obtained through prospecting (grab samples):

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Diagras, NWT

Five samples contained >0.20% Nb2O3, with a peak value of 0.96% Nb2O3;

Three samples contained >0.20% TREO (Total Rare Earth Element Oxides), with a peak value of 0.39% TREO; and

Three samples contained >5.00% P2O5, with a peak value of 12.62% P2O5.

Highlights from the discovery hole (CAP17-004) are shown below:

24 to 95.66 m: 0.35% Nb2O5 across 10.42 m, and including 2.26 m of 0.63% Nb2O5;

87 to 118.50 m: 19.63 m of 9.94% P2O5, including 2.55 m of 20.97% P2O5; and

1 to 138.5 m: 2.4 m of 0.81% TREO.

Encouraged by the results, the company staked an additional 15 claims covering 7,657 ha to the north of the property.

Although the property requires further work (mapping, trenching and drilling) to define the size and extent of the mineralization, management’s immediate focus is on its diamond projects.

The Diagras property, consisting of 23 contiguous claims covering 18,699 ha, is located 22 km north-east of the Diavik diamond mine (held by Rio Tinto / LSE: RIO and Dominion Diamond Corporation) and 36 km east of the Ekati diamond mine (held by Dominion Diamond) in the NWT, Canada. The property is a 60 : 40 Joint Venture between Margaret Lake Diamonds Inc. (TSX: DIA) and the company. Margaret Lake is the operator. The property contains 13 kimberlites (green diamonds in the image below) discovered in the 1990s by DeBeers.

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Source: Company

The blue diamonds in the above image show areas that have 1+ carats of diamonds per ton. The closest identified economic diamond deposit to the Diagras property is the Jay Kimberlite, located 8.9 km to the south-west. According to management, clusters of mineable kimberlites are known to be located every 7 to 8 km along a NNE structural trend or corridor.

In August 2017, the company announced geophysical results, which were successful in identifying seven new kimberlite exploration drill targets.

Kimberlite or Target Magnetics (Line Km) Gravity (Line Km)

Jack Pine 39.02 11.26

Black Spruce 20.02 11.57

Suzanne 18.55

HL-02 8.66

HL-55 8.13

Naomi 16.34

Kong (East / West) 18.72

Total Line Km 129.44 22.83

Source: Company

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Other Projects

Management /

Directors

Target locations are shown below:

Source: Company

The company is currently permitting for a drill program to test prominent gravity and EM targets that are close, but significantly separated from, the known kimberlites. The company will also test the other kimberlites and targets, with ground geophysics, concurrently with the drilling. The 100% Stein property is located 85 km north-west of Taloyoak, Nunavut, Canada. The project, consisting of four contiguous permits covering 105,637 ha, has six drill ready targets with only 3m of overburden. The targets are magnetic anomalies at the head of a diamond indicator mineral train. Management and board members hold 16.59 million shares, or 17% of the total outstanding shares. We consider the strong holding strongly aligning the management/board’s and

investors’ interests.

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Source: Company and Management Information Circular

Brief biographies of the management team and board members, as provided by the company, follow: Scott Eldridge – CEO / President / Director

Scott Eldridge is experienced in the financial industry focused on the resource sector. He is a co-founder, President & CEO of Euroscandic International Group Inc., a private company offering accounting and investment banking services to natural resource companies. During his time in the industry Scott has been responsible for raising in excess of $500 million in combined equity and debt financing for mining projects varying from exploration to construction financing around the globe. Mr. Eldridge has a B.B.A. from Capilano University, and an M.B.A. from Central European University.

Patrick Power – Executive Chairman and Director

Patrick Power is a seasoned venture capitalist and financier with over 20 years of experience as a stock market professional and as director of public companies. He has been President and CEO of Arctic Star since its inception in 2002. Additionally, Mr. Power serves as a director of other mineral exploration companies. Arctic Star benefits from Mr. Power’s wealth of experience as a savvy dealmaker, an adept financier and as a tireless, results-driven leader of dynamic public companies. The company enjoys Mr. Power’s large network of contacts within the industry, his enthusiasm and his efforts as a member of the audit and remuneration panels. Buddy Doyle - VP of Exploration and Director

Buddy Doyle has 25 years’ experience in mineral exploration. He worked for Rio Tinto PLC for over 23 years, most recently he was Exploration Manager/Vice President of Kennecott Canada Exploration Inc. (owned by Rio Tinto), in charge of diamond exploration in North America. He was a key member of the Kennecott Exploration Australia team that discovered the multi-million ounce Minifie gold deposits at Lihir in 1987-1988 and led the team which

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discovered the Diavik diamond deposits in 1994-1995. Few geologists have seen 2 projects from discovery through to decision to mine. Mr. Doyle is recognized by his peers in the exploration industry as an authority on diamond exploration and kimberlite geology, and has authored/co-authored numerous papers on these subjects. He was awarded the 2007 Hugo Dummitt Award for excellence in Diamond exploration. Since leaving Rio Tinto Mr. Doyle remains active in the diamond sector through consultancy and non-executive directorships. Mr. Doyle brings to the company a disciplined scientific approach to mineral exploration and managerial skills that have a proven track record. He holds a BSc in Applied Geology from the Queensland University of Technology. Roy Spencer – Country Manger Finland / Director

Roy is a GSSA Member and a Fellow of the AusIMM. Roy joined De Beers in 1966 and has been involved with exploration and deposit evaluation for gemstones and other commodities throughout his career. Roy’s tertiary education was at the University of Natal and Rhodes University in South Africa, and is a member of the Geological Society of South Africa and a Fellow of the Aus.I.M.M. As technical director of Peregrine Diamonds, he discovered the first kimberlites on the Pilbara craton in Western Australia in 1989, and as Leader of the Owners Team for Archangel Diamond Corporation he was largely responsible for the discovery of the world class Grib kimberlite in far northern Russia (February, 1996). In 1998, Roy created and raised the seed finance for Ilmari Exploration Oy to explore for gold, base metals and diamonds on the Karelian Craton in Finland. Ilmari went public in 2000, and discovered the Lentiira kimberlite cluster in central Finland in 2003. In 2006, as CEO of London-based diamond explorer European Diamonds, Roy led the Owners Team which brought the Liqhobong kimberlite (Lesotho) into commercial production on time and under budget. In mid-2007, Roy left European, a company which had evolved into a successful mid-tier diamond producer and marketer after having raised £23 million over a 6-year period. Since that time Roy has continued in gemstone exploration and deposit evaluation in Africa, Finland and western Russia for a variety of junior and senior mining companies. Binny Jassal, CPA, CGA, FCCA - Chief Financial Officer

Binny Jassal brings over 20 years of accounting and management experience to the Company. Mr. Jassal is a member of Certified General Accountants in Canada, fellow member of Association of Chartered Certified Accountants in London, England and holds Certificate in Accounting and Finance from Ryerson University Toronto. Previously, Mr. Jassal has worked in various accounting positions (including public companies) within the manufacturing, IT and telecommunication sectors. Mr. Jassal joined the Company in May 2006 and has been an important member of the team working on the financial and corporate side of the operations. Thomas Yingling - Director

Thomas Yingling is a successful seasoned venture capitalist who benefits from over 19 years of experience running resource based public companies. He has been a Director of Arctic Star since its inception in 2002. Mr. Yingling has served for almost two decades as President of Brahma Communications Corp., an investment consulting firm that specializes in corporate finance, investor relations and strategic corporate planning for publicly traded companies. He has served as President and CEO and/or a director of other resource based public companies.

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Sean Charland - Director

Sean Charland is a seasoned communications professional with experience in raising capital and marketing resource exploration companies. He has helped raise over C$ 150 million for a variety of venture listed and private companies in mineral exploration and mining, technological and health sectors with the majority of the focus on mineral exploration and mining. His network of contacts within the financial community extends across North America and Europe. Bill Ferreira - Director

Mr. Ferreira is an exploration geologist with over 30 years’ experience in gold, base-metal and diamond exploration in Canada. Mr. Ferreira holds a Master of Science degree from the University of Manitoba and a Bachelor of Science degree from the University of Minnesota, Duluth. Mr. Ferreira’s employment experience includes work for Noranda Exploration Canada, Esso Minerals Canada, Getty Mines, Falconbridge Ltd., Granges Exploration, Canmine Resources Corp. and San Gold Corp. Mr. Ferreira is past president of the Manitoba Prospectors and Developers Association. Mr. Ferreira is currently a member of the Association of Professional Engineers and Geoscientists of the Province of Manitoba. Jared Lazerson - Director

Mr. Lazerson is CEO and Director of lithium and magnesium miner MGX Minerals (CSE:XMG). For the past 5 years, Mr. Lazerson, has seen the market capitalization grow from $2 million CAD to a current value of $100 million CAD and a 2017 high of over $200 million CAD. Mr. Lazerson has been responsible for all aspects of growth of MGX including acquisitions, financing, operations and technology development. MGX Minerals has developed some of the most advanced and low-cost technology in the world for lithium extraction from brine by eliminating the solar evaporation step, thus reducing processing time from 2 years to 1 day. Mr. Lazerson holds a B.A. in International Relations from the University of Pennsylvania

Our net rating on the company’s management team is 4.6 out of 5.0 (see below).

Source: FRC

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Financials

The company’s board has eight members, of which, four are independent. We believe that the Board of Directors of a company should include independent or unrelated directors who are free of any relationships or business that could materially interfere with the director’s ability to act in the best interest of the company. An unrelated/independent director can be a shareholder. The following table shows our analysis of the strength of the company’s board.

Source: FRC

At the end of 2017, the company had cash and working capital of $1.07 and $0.74 million, respectively. We estimate the company had a burn rate (cash spent on operating and exploration / development) of $0.19 million per month in 2017. The following table summarizes the company’s liquidity position:

Subsequent to the year-end, the company raised $1.1 million by issuing units at $0.17 per unit. Each unit consisted of a common share and a full warrant (exercise price of $0.25 per share for 2 years). According to management, the company currently has 9.34 million options outstanding (weighted average exercise price of $0.15 per share) and 43.53 million warrants (weighted average exercise price of $0.15 per share) outstanding. Currently, 35.31 million warrants

and 3.28 million options are in the money. The company can raise up to $4.28 million if

these options and warrants are exercised.

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Rating

Risks

Due to the early stage nature of the company’s portfolio, we are not currently assigning a fair value estimate or rating on Arctic’s shares. However, we believe the company is an attractive speculative play in the junior diamond space. The strong technical team, and Finland’s status as one of the best mining jurisdictions in the world, are the company’s key positives. Results to date, including the identification of 245 diamonds in a 167.53 kg sample, have been highly encouraging. We believe the upcoming drill program, if successful, will likely have a positive impact on Arctic’s share price. We believe the company is exposed to the following key risks (not exhaustive): Commodity price risk. The properties are relatively early stage. None of the projects have NI 43-101 compliant

resource estimates. Advancement of projects depends on availability of financings. Exposure to share dilution through future financings. As with most junior resource companies, we rate Arctic’s shares a risk of 5 (Highly

Speculative).

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Fundamental Research Corp. Equity Rating Scale:

Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating N/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative.

Disclaimers and Disclosure

The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. FRC and the Analyst do not own shares of the subject company. Fees were paid by Arctic to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, Arctic has agreed to a minimum coverage term including an initial report and three updates. Coverage cannot be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The distribution of FRC’s ratings are as follows: BUY (73%), HOLD (6%), SELL / SUSPEND (21%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscribe.php for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

Documents

Arctic Star - Apr 2018 - Baystreet.ca...Source: Global Diamond Industry Report Ownership Arctic Star acquired a 100% interest in the project in June 2017, from an unrelated party (Dragon