September 21, 2011


CORPORATE UPDATE

Dear Shareholder,

This letter will provide you with an update on our key exploration projects in Ecuador, Chile and Canada. Recently we have received a number of questions from our shareholders, and company President Brooke Macdonald has provided responses which are provided below.


What is your vision for Cornerstone?

What I would like to see happen at Cornerstone is the creation of significant value for our shareholders by advancing exploration at several key properties in our portfolio. Cornerstone's strategy is to be a prospect generator. We find properties of merit then add value through systematic exploration. Right now we're focused on a number of highly prospective gold and copper properties in Ecuador and Chile and on the Little Deer copper project in Newfoundland.


Tell us about some of these properties.

I'll start with our South American properties because these assets probably have the biggest potential impact on the company and its share price.

The most advanced project is Shryi, located in southern Ecuador about 16 kilometers to the west of Iamgold's multi-million ounce gold Quimsacocha deposit. The property is optioned to Intrepid Mines of Australia who are spending US $6 million over 5 years on the property to earn a 60% interest. It can choose to go to 80% on specific project areas up to 5,000 hectares each by making a $750,000 private placement in Cornerstone, completing a bankable feasibility study or spending an additional US$20 million, whichever comes first, and making a payment to Cornerstone of up to US$5 million based on the gold equivalent ounces in the mineral reserve.

Intrepid has already spent over US$2.7 million completing a Phase 1 drilling program on the Gama prospect at Shyri. We got some good results from the program in that we seem to have discovered an extensive gold-enriched copper-moly porphyry. Hole 2 intersected 45 metres at 0.71 g/t gold within a broader zone of 101 metres at 0.41 g/t gold, and hole 11 intersected 26 metres at 0.45 g/t gold.

A thorough technical review of the Phase 1 drilling program was completed in Ecuador in late August 2011 by the combined team of Intrepid and Cornerstone geologists and geophysical consultants.

Based on these results, a proposal for Phase 2 work at Gama, including soil geochemical sampling, ground geophysical surveys and drilling on the porphyry and epithermal targets will be presented to Intrepid's board for consideration in the next few weeks.


Do you think Intrepid's Board will approve the proposal?

While I can't speak for them, I can tell you that everyone on our team was very excited about the Phase 1 success and is confident that we will continue on.

In the meantime, in addition to continuing work on the Gama soil-sampling and geophysical surveying programs, community consultations have begun at another key target on Shyri, Cañaribamba. We will also shortly begin consultations at a third target, Vetas Grandes, in an effort to have environmental permitting ready to support drilling those targets around the end of Q1 2012.


What else is going on in Ecuador beyond Shyri?

We had some very good initial results at the newly acquired 100% owned Cascabel property in northern Ecuador. We took 179 rock samples and found that most were anomalous in gold, copper and zinc. We also found significant free gold when we panned in most of the streams that run through the property. This is pretty exciting for just a few weeks of work, so we plan to move to a full exploration program in the near future.


What about Chile?

Cornerstone is making great progress there too. In late August we released the first results from our La Fortuna property, where we have an option to earn a 100% interest.

Significant copper and silver assay results were obtained in the northern two-thirds of the property, with seven prospective mineralized zones identified over a large area of approximately 18 km2.

Channel sampling at trench #1 returned 19.5 m at 1.34% copper and 58.0 g/t silver. We've completed over 200 line kilometers of ground magnetic surveys and that data is currently being processed and interpreted. We also plan to carry out induced polarization surveys in prospective areas. There are already some obvious drill targets, and with further trenching and integration of magnetic and IP data, new targets will be developed.

Also in Chile, we have made application for exploration concessions covering approximately 300 square kilometers in our Miocene project area, located just north of the Maricunga belt that hosts several world-class gold deposits.


Let's come back to North America. What's going on at Little Deer?

Little Deer is the Company's most advanced asset. Along with our JV partner Thundermin Resources, we have increased the resources at Little Deer to indicated resources totalling 99 million lbs. of copper and inferred resources of 175 million lbs. of copper.

Our belief is that this is a significant resource that has a strong potential to be developed into a new mine. That belief led us to exercise the option recently to acquire 100% of the property from the original vendor.

It's also the reason that we have invested in an internal scoping study to take an early look at potential mining methods and indicative economics. The results of that internal review are expected in October.


Now that you're so far along on Little Deer do you see yourselves developing the project into a mine?

There's still considerable work to be done before Little Deer heads down the development trail including, of course, the completion of a feasibility study and environmental impact statement. Thundermin can earn up to a 75% interest in the project by completing a bankable feasibility study and arranging for the financing to put Little Deer into commercial production.

Whether Cornerstone and Thundermin ultimately develop the property is an open question. Generally speaking, Cornerstone's strategy of prospect generation precludes us from going to the development stage. If that were to be the case with Little Deer, we would have a number of options to realize value. For example, we could sell our interest to Thundermin or to a third company that was development focused. Nothing has been decided yet and we remain open to a number of approaches.


So with all the work that's going on at your various projects why has the share price not performed well lately?

From a share price perspective, we started 2011 with a real bang. When we first announced that the government of Ecuador had granted the exploration license at Gama, our shares zoomed up to the 75-cent range.

Since then we have seen a general market decline in which, unfortunately, most mining stocks have suffered. This is particularly ironic since commodity prices are holding up very well.

We are working hard to implement our strategy. We've been able to work on several properties, make a discovery at Gama and have been very active in meeting potential new investors.

When the market turns, companies like Cornerstone who do what they say they are going to do will benefit tremendously from a rising market.


On this theme, were you surprised that the Phase 1 drilling results at Gama didn't affect the share price very much?

Yes, in some ways I was. As I said before, general market softness might have been a contributing factor. But I also think that porphyry deposits are not as well understood by investors as they should be.

These deposits generally have lower grades than vein type deposits, however, they are very extensive systems that provide significant near-surface bulk tonnage mineralization. In addition, they are often poly-metallic. In Gama's case we think that we may have discovered a very large copper-moly porphyry that is gold-enriched.

Some of the world's biggest producing mines are on porphyry deposits.


What is your prediction for commodity prices, particularly gold?

I see no reason for prices to decline much in the near future. Sovereign debt issues are reinforcing gold's role as a store of value, and emerging market countries like China still seem poised to continue growing which will create demand for base metals like copper, especially in the medium to long term.

Cornerstone plans to continue regular updates to shareholders on its activities and invites investors to contact us with other inquiries at any time.

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