Citadel Gold Mines Inc. Enters Into Share Exchange Agreement

TORONTO, ONTARIO--(Marketwire - Jan. 26, 2011) -

NOT FOR RELEASE OR DISSEMINATION INTO THE UNITED STATES

Citadel Gold Mines Inc. (the "Company") (TSX VENTURE:CGM.H) is pleased to announce that it has entered into a share exchange agreement (the "Agreement"), dated effective as of January 26, 2011, with 2215107 Ontario Inc. ("221") and the shareholders of 221, pursuant to which the Company has agreed to acquire all of the issued and outstanding common shares in the capital of 221 (the "Proposed Transaction") from the shareholders of 221 in exchange for the issuance, by the Company to the shareholders of 221, of 61,380,000 common shares in the capital of the Company (the "Common Shares"), on a pro rata basis, subject to the satisfaction or waiver of certain conditions set out in the Agreement. 221 is a private company incorporated under the laws of the Province of Ontario. It is in the business of mining exploration and development and has an interest in a mineral property in Nunavut.

As a result of the Proposed Transaction, approximately 64% of the issued and outstanding Common Shares will be issued to the shareholders of 221 post-closing, and 221 will become a wholly owned subsidiary of the Company.

Approval of the Agreement and the terms of the Proposed Transaction was received from the board of directors of the Company, including the unanimous approval of the independent directors.

Completion of the Proposed Transaction is subject to certain conditions, including receipt of necessary TSX Venture Exchange and regulatory approvals, approval of the shareholders of the Company and 221, the Company having minimum cash assets of $100,000 at the time of closing of the Proposed Transaction, completion of satisfactory due diligence by the Company, completion of definitive legal documentation, completion of a private placement by the Company concurrently with the closing of the Proposed Transaction and completion of a share consolidation by the Company, among others. Subject to the satisfaction of such conditions, the Proposed Transaction is scheduled to close on or about February 28, 2011. However, there can be no assurance that the Proposed Transaction will be completed as proposed or at all.

A press release with further particulars relating to the Proposed Transaction will follow in accordance with the policies of the TSX Venture Exchange.

The statements used in this press release may contain forward-looking statements, and are based on the opinions and estimates of management, or on opinions and estimates provided to, and accepted by, management. These opinions and estimates include those that relate to geological and mining factors, commodity prices, and marketing parameters used by management, and speak only as of the date of this press release. Forward-looking statements in this press release include, but are not limited to, the closing of the Proposed Transaction and the anticipated benefits from the Proposed Transaction. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions, including with respect to the closing of the Proposed Transaction, the timing and receipt of all applicable regulatory approvals and third party consents, the anticipated benefits from the Proposed Transaction and the satisfaction of other conditions to the completion of the Proposed Transaction. Forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ, possibly significantly. Although the Company believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual events or results will be consistent with these forward-looking statements. Except as required by applicable law, the Company does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking information, whether as a result of new information, future developments or otherwise. Readers are therefore cautioned not to place undue reliance on any forward-looking statements.