TORONTO, May 15 /CNW/ - CITADEL GOLD MINES INC. (CGM.H: NEX Exchange, formerly YCI: TSX Venture Exchange) announced today that the Company has entered into an agreement of purchase and sale with Dr. Bernard Sherman, a principal shareholder and related party of the Company, involving the sale to Dr. Sherman of the Company's general partnership interest in Citabar Limited Partnership and certain claims related to the Surluga Property in Wawa, Ontario and the assumption by Dr. Sherman of certain liabilities of Citadel, for aggregate cash consideration of $250,000 (the "Transaction"). Completion of the Transaction is subject to certain conditions, including the receipt of approval of minority shareholders and all required regulatory approvals. If approved by shareholders at the annual and special meeting of shareholders of the Company to be held on June 6, 2006 (the "Meeting"), the Transaction will result in Dr. Sherman becoming the sole owner of the Surluga Property. An Information Circular for the Meeting describing the Transaction is being mailed to shareholders. The Transaction will provide the Company with immediate funding in the amount of $250,000 and is expected to provide additional funding on a deferred basis in the amount of up to $270,000, in funds to be received by the Company as a reimbursement of funds previously paid by the Company and held by the Ontario Ministry of Northern Development and Mines Resources in connection with the 1989 closing of mining operations at the Surluga Property. Subject to the Company's other obligations, management intends to utilize the proceeds from the completion of the Transaction to launch the Company on a new course by seeking out mineral projects, either at the exploration or development levels, primarily in Canada, but also looking for overseas opportunities. Management of the Company believes that the Transaction, if approved, will represent a new beginning for Citadel, which has been relatively inactive for the last several years. It is expected that Transaction will put the Company in a position to build a more active and visible company by taking advantages of opportunities for exploration and development that exist today in the minerals sector. Provided the requisite shareholder approval is obtained, it is expected that the Transaction will be completed on or about June 30, 2006. At the meeting, minority shareholders will also be asked to approve a proposed restructuring of the Company's current preferred share and debt structure, as described in the Information Circular.