Update on Proposed Reverse Take-Over of Citadel Gold Mines Inc.

TORONTO, ONTARIO--(Marketwire - April 28, 2011) -

NOT FOR RELEASE OR DISSEMINATION INTO THE UNITED STATES

Citadel Gold Mines Inc. (the "Company") (TSX VENTURE:CGM.H) announces that, further to its press release dated January 26, 2011 it has entered into a share exchange agreement (the "Share Exchange Agreement"), dated effective as of January 26, 2011, as amended on February 28, 2011 and on March 16, 2011, with 2215107 Ontario Inc. ("221") and the shareholders of 221 ("221 Shareholders"), 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 221 Shareholders, subject to the satisfaction or waiver of certain conditions set out in the Share Exchange 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 (the "Property"). The Proposed Transaction among the Company, 221 and the 221 Shareholders will be subject to the approval of the shareholders of each of the Company and 221 and the approval of the TSX Venture Exchange (the "Exchange"), and will also be subject to a number of other conditions as hereinafter described. References in this press release to the "Resulting Issuer" are references to the Company following the closing of the Proposed Transaction.

The Proposed Transaction

Subject to regulatory approval, including that of the Exchange, and the approval of the shareholders of each of the Company and 221, the Company, 221 and the 221 Shareholders have agreed to effect the Proposed Transaction as described in the Share Exchange Agreement. Prior to or concurrently with the closing of the Proposed Transaction, subject to approval by the shareholders of the Company, the Company will consolidate its common shares on the basis of one (1) post-consolidation common share for every five (5) pre-consolidation common shares (the "Consolidation"). The exact number of common shares in the capital of the Resulting Issuer (the "Resulting Issuer Shares") to be issued to the 221 Shareholders will be determined in accordance with the exchange ratio as provided for in the Share Exchange Agreement along with other terms and conditions with respect to the Proposed Transaction. Following completion of the Proposed Transaction (after giving effect to the Consolidation), the current 221 Shareholders will own approximately 12,276,000 Resulting Issuer Shares, and the current shareholders of the Company will own approximately 6,779,450 Resulting Issuer Shares. Subscribers of the Financing (as defined below) will own approximately 11,666,667 Resulting Issuer Shares (assuming the Financing is fully subscribed) and MO-KAR Holdings Inc. will own 613,800 Resulting Issuer Shares for services rendered in connection with the Proposed Transaction.

The completion of the Proposed Transaction and the issuance of the Resulting Issuer Shares will be subject to Policy 5.2 of the Exchange. In connection with the Proposed Transaction, the Company will prepare a filing statement as required by Policy 5.2 of the Exchange. It is expected that upon completion of the Proposed Transaction and the Financing, the Resulting Issuer will be listed as a Tier 2 mining issuer on the Exchange. The Proposed Transaction is intended to result in a reverse takeover of the Company by 221.

The Company, 221 and the 221 Shareholders have agreed that the closing of the Proposed Transaction is conditional upon the Company raising minimum gross proceeds of $3,500,000 by way of a non-brokered private placement (the "Financing") through the sale of a minimum of 11,666,667 units (the "Units") at a price of $0.30 per Unit. Each Unit will entitle the holder thereof to receive one Resulting Issuer Share and one-half of one Resulting Issuer Share purchase warrant (each whole Resulting Issuer Share purchase warrant, a "Warrant"). Each Warrant will be exercisable to acquire one additional Resulting Issuer Share (a "Warrant Share") for a period of 18 months following the closing of the Financing at a price of $0.45 per Resulting Issuer Share. The Company anticipates that the Financing will close concurrently with the Proposed Transaction.

In connection with the Financing, the Company may pay certain finders (each, a "Finder") a cash commission (the "Commission") equal to 8% of the gross proceeds of the Financing. The Commission shall be paid to each Finder at the closing of the Financing. Upon closing of the Financing, each Finder shall also be entitled to receive warrants (the "Finders' Warrants") exercisable to acquire that number of Resulting Issuer Shares as is equal to 8% of the total number of Units issued pursuant to the Financing. Each Finders' Warrant shall be exercisable to acquire one Resulting Issuer Share for a period of 18 months following the closing of the Financing at a price of $0.45 per Resulting Issuer Share.

The completion of the Financing is dependent on the approval of third parties, including approval of the Exchange, and is therefore beyond the reasonable control of the Company and 221. The proceeds from the Financing will be used to carry out exploration work on the Property and for working capital purposes.

Completion of the Proposed Transaction and Financing are also subject to a number of other conditions, including but not limited to, obtaining all necessary regulatory approvals, including Exchange and securities commission acceptance and appropriate shareholder and director approval. In addition, the closing of the Proposed Transaction is also subject to certain conditions precedent (unless waived by the applicable party) including: (i) no material adverse changes have occurred in the Company or 221 before the closing of the Proposed Transaction; (ii) the Company, 221 and the 221 Shareholders being satisfied in their sole discretion as to their due diligence investigations; (iii) 221's technical report prepared in accordance National Instrument 43-101 ("NI 43-101"), being complete and accurate in all material respects; (iv) there being no prohibition at law against the completion of the Proposed Transaction; (v) the completion of the Financing and the listing of the Resulting Issuer Shares on the Exchange; (vi) the Company having minimum cash assets of $50,000 at the time of closing the Proposed Transaction; and (vii) the Proposed Transaction occurring on or before June 15, 2011.

All costs and expenses of the Company, 221 and the 221 Shareholders (the "TransactionCosts") relating to the Proposed Transaction shall be borne by the Company; provided, however, that in the event that the Proposed Transaction is not completed, each party shall be responsible for its own Transaction Costs.

The Company, 221 and/or the 221 Shareholders can terminate the Share Exchange Agreement if: (i) there is written agreement to terminate by all parties; (ii) any permanent injunction or other order of a court or other competent authority preventing the closing of the Proposed Transaction shall have become final and non-appealable; or (iii) there has been a material breach by a party for which written notice is provided and such breach is not cured within 10 days of such written notice.

Business of 221

221 is a private corporation incorporated under the Business Corporations Act (Ontario) on August 18, 2009. 221 was incorporated for the purpose of acquiring the Property. 221 has 26 shareholders holding an aggregate of 9,300,000 common shares. 221 has no other securities outstanding and currently has no employees.

Pursuant to an option agreement dated October 20, 2010 (the "Option Agreement") between Marcelle Hauseux ("Hauseux") and Sandor Surmacz ("Surmacz") (together, the "Optionors") and Elen Enterprises (Ontario) Inc. ("Elen") and Nominex Ltd. ("Nominex") (together the "Optionees"), the Optionees were granted an option (the "Option") to acquire a 100% undivided interest in the Property. The Option is exercisable upon payment of $250,000 (in staged payments over four years; up to 50% of which may be satisfied by the issuance of shares of the Resulting Issuer) and prior to exercise of the Option, the Optionees are responsible for incurring all costs, payments and expenses in order to keep the Property in good standing and to file all assessment work in a timely fashion.

Pursuant to an assignment agreement dated October 22, 2010 (the "Assignment Agreement") between Elen, Nominex and 221, Elen and Nominex (together, the "Assignors") assigned all of their right, title and interest in the Option Agreement to 221 (the "Assignee"). Pursuant to the Assignment Agreement, the Assignors retained a 2% net smelter return royalty.

Principals of 221

Messrs. Norman Brewster and Neil Novak, having taken the initiative in founding and organizing the business of 221, are considered promoters of 221 under Exchange policies.

Board and Management of Resulting Issuer

The board of directors of the Company currently consists of Timothy Beesley, Dr. Colin Bowdidge, Michael Florence and John Sadowski.

It is expected that the board of directors of the Resulting Issuer following the closing of the Proposed Transaction will consist of five directors being Jason Brewster, Peter Miller, Denis Clement, Michael Florence and John Sadowski.

It is expected that Jason Brewster will be appointed President and Chief Executive Officer of the Resulting Issuer and Harvey McKenzie will be appointed Chief Financial Officer and Secretary of the Resulting Issuer.

Financial Information

The comparative audited financial statements of the Company for the financial period ended September 30, 2010 and the comparative interim unaudited financial statements for the three month period ended December 31, 2010 may be viewed through the internet on SEDAR which can be accessed at www.sedar.com.

Further financial information about 221 and the Company, including pro forma financial information, will be included in the filing statement which, once completed, will be available on SEDAR which can be accessed at www.sedar.com.

Business of the Company

The Company was incorporated under the Business Corporations Act (Ontario) on March 22, 1962. The Company's principal place of business is located at 150 Signet Drive, Toronto, Ontario M9L 1T9. Since formation, the Company has been primarily engaged in the business of holding interests in and exploring potential natural resources claims and acreages (including both mining and oil and gas exploration).

Prior to 1989, the Company was involved with the exploration and prospecting of Canadian natural resources and in doing so became involved in various joint venture and prospecting syndicates.

In 1989, the Company completed a significant restructuring of its assets based upon a proposal presented by Dr. Sherman, and approved by shareholders of the Company pursuant to which Citabar Limited Partnership ("Citabar") was formed with Dr. Sherman as sole limited partner and the Company as general partner. Following this restructuring, the business of Citabar was concentrated on the exploration of certain claims related to the Surluga Property in McMurray township near Wawa, Ontario (the "Surluga Property") for potential gold and diamond deposits. In connection with the restructuring transaction, substantially all of the assets of the Company were transferred to Citabar, including all lands, mining claims, equipment, surface and underground rights, for a total purchase price of $14,000,000. Dr. Sherman made a capital contribution of $14,000,000 to Citabar to fund the acquisition. The restructuring transaction enabled the Company, through Citabar, to meet its outstanding obligations and to have sufficient funds to continue the exploration of its properties.

Effective July 1, 2006, the Company sold its general partnership interest in Citabar Limited Partnership and the Surluga Property to Dr. Bernard Sherman, and Dr. Sherman assumed certain liabilities of the Company, for aggregate cash consideration of $250,000.

On January 31, 2007, the Company signed a letter of intent with Trelawney Resources Inc. (formerly Terex Resources Inc.) ("Trelawney") to enter into a formal option agreement pursuant to which the Company could earn up to a 75% interest in a base metal (mining) property near Sudbury, Ontario (the "Massey Property"). The Company entered into a formal option agreement with Trelawney effective as of January 26, 2007, whereby the Company was granted the right to earn an initial 51% interest in the Massey Property by issuing 1,150,000 common shares, by making cash payments to Trelawney totalling $260,000, and by incurring an aggregate of $1,200,000 in exploration and development expenditures on the property over five years. The Company was also granted the right to earn a further 24% interest by completing a feasibility study. On completion of the Company's option, a joint venture was to have been formed between the Company and Trelawney on either a 51-49% or 75-25% basis, respectively, to further develop the Massey Property.

On October 1, 2008, the Company announced that it had acquired 472 line-kilometres of airborne time-domain electromagnetic and magnetic data from an AeroTEM survey on the Massey Property. The survey outlined what appears to be a large gabbro unit striking east-west as a prominent magnetic feature. The electromagnetic data was less useful, as the AeroTEM system was strongly affected by power line noise. A major power line runs sub-parallel to the area of interest. The Company contracted Balch Exploration Consulting Inc. to review the AeroTEM data, to comment on the AeroTEM response near the power lines, and to integrate the airborne data with the geological model. The Company was advised that there was no indication of any large shallow or deep conductive body based on the airborne survey results. Close to the power line, the results were inconclusive, as interference extended for a distance of approximately 300 metres from the power lines. Flight lines over known mineralization did not display significant anomalies, nor did they suggest that the known occurrences have lateral extensions. On November 19, 2008, the Company announced that its board of directors had approved sending a notice of termination to Trelawney, terminating the Company's obligations under the option agreement with respect to the Massey Property.

Since October 2008, the Company has continued to pursue and consider mineral sector exploration and development opportunities.

Sponsorship

Given the assets held by 221 and the anticipated Financing to be completed concurrently with the closing of the Proposed Transaction, the Company will apply to the Exchange for an exemption from the Exchange's sponsorship requirements. There is no guarantee that such exemption will be provided by the Exchange.

Trading Halt

The Company's common shares are currently halted at the Company's request and will remain so until the documentation required by the Exchange for the Proposed Transaction can be provided to the Exchange. Trading of the common shares of the Company will likely resume after filing with the Exchange of such documents, which is expected to take some time.

Closing of Proposed Transaction

Subject to receipt of shareholder and Exchange approval, it is expected that the Proposed Transaction will be completed on or before June 15, 2011.

The terms of the Proposed Transaction were negotiated between the Company, 221 and the shareholders of 221 and were approved by the board of directors of the Company, who determined that the timing and terms of the Proposed Transaction are in the interest of the Company and reasonable in the circumstances.

Further Information

Further information regarding the Company, 221 and the Proposed Transaction will be provided in a subsequent press release in accordance with the policies of the Exchange.

Prescribed Language

Investors are cautioned that trading in the securities of a NEX listed company should be considered to be highly speculative. The Company is a NEX listed company governed by the policies of NEX Exchange.

Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, disinterested shareholder approval. Where applicable, the Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

The Exchange has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release.

Forward-Looking Information

The Exchange has neither approved nor disapproved of the information contained herein. The statements used in this press release may contain forward-looking statements, including, with respect to the timing of completion of the Proposed Transaction, the anticipated benefits of the Proposed Transaction and the completion of the Financing, 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 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.