Letter to Shareholders

Celtic Resources Holdings PLC
12 October 2007



                         Celtic Resources Holdings Plc

                             Letter to Shareholders


The below is the text of a letter being posted today to shareholders of Celtic
Resources Holdings Plc:


"Dear Fellow Shareholder,

REJECT SEVERSTAL'S PROPOSED OFFER


Background

On 5 September 2007, Severstal approached your Board with an unsolicited and
highly conditional potential offer of 220 pence per share for the entire issued
share capital of Celtic Resources Holdings Plc ("Celtic" or the "Company"),
which your Board unanimously rejected. On 19 September 2007, Severstal acquired
shares in the Company at a price of 232 pence per share. On 27 September 2007,
the Company announced that a third party, other than Severstal, had approached
Celtic with a view to making an offer for the Company. On 28 September 2007,
Severstal announced its intention to make an offer for Celtic at 270 pence per
share.

Your Board, who are being advised by Gleacher Shacklock LLP and Strand Partners
Limited, unanimously consider that Severstal's proposed offer of 270 pence
significantly undervalues Celtic.

Severstal has still to dispatch its formal offer document, but has taken the
extraordinary step of sending you a letter urging you to accept its offer,
before it has been made. Accordingly, your Board felt it was appropriate to
write to you now, rather than wait until Severstal sends you its formal offer
document. I will continue to keep you informed of all material developments
during the course of the offer.


Celtic's key attractions

Severstal's proposed offer of 270 pence per share fails to recognise the
Company's excellent strategic position, planned growth in production against a
background of a high and rising gold price and our cash rich balance sheet.

Severstal is trying to buy Celtic cheaply. It is trying to take possession of:

• A highly experienced management team with a strategy for driving shareholder
  value
• An excellent portfolio of assets, with gold production expected to
  reach 90,000 ounces in 2007 and planned to rise substantially in 2008; and
  molybdenum production anticipated to reach 1.5 million pounds in 2007
• The proven ability to use the technologically advanced biological process for
  gold recovery (BIOX(R)) for gold production in the Former Soviet Union
• A track record of generating profits from the trading of mining assets
• A strong financial position, with cash of US$34.4 million at 30 June 2007, and
  a further US$26.5 million in cash received for the sale of Miheevskoye at the
  end of July 2007
• Direct exposure to the financial benefits of a high gold price

Celtic's prospects as an independent company are excellent. Severstal is trying
to buy Celtic without paying for these prospects. You should not accept
Severstal's proposed offer.


Response to Severstal's letter of 8 October 2007

In its letter which was sent to you on 8 October 2007, Severstal made a number
of assertions which we can refute.

(a) Severstal wants you to believe that Celtic's Board did not properly
    consider its proposed offer on 28 September 2007.
    
    We did. Severstal first approached the Company more than 3 weeks beforehand, 
    on 5 September 2007. The uncomfortable truth for Severstal is that your 
    Board, and its advisers, unanimously consider that 270 pence per share 
    significantly undervalues your Company.

(b) Severstal claims that Celtic's board has a "confused strategy".

    When Severstal first became a shareholder in Celtic in August of this year, 
    it went out of its way to praise Celtic's management team.  In its  
    announcement of 14 August 2007, it said, "We think particularly highly of 
    Celtic's management".  It has changed its tune since it decided to try to 
    buy the Company.

(c) Severstal asserts that if its proposed offer fails, there is a likelihood 
    that the share price of Celtic will fall significantly.

    Severstal cannot know this.  It is also choosing to ignore the gold price -  
    between 1 January 2007 and 17 September 2007 (the day prior to our
    announcement of an approach), the gold price rose by approximately 13% and 
    Celtic's share price by approximately 24%.  Your Directors consider that the 
    combination of rising gold production levels and a high gold price will
    continue to underpin a strong Celtic share price in the absence of any
    offer.

(d) Severstal has implied that I, your Chairman, sold shares in Celtic during
    the summer.
    
    I did not, and Severstal knows this to be the case.


Conclusion

Your Board, which has been so advised by Gleacher Shacklock LLP and Strand
Partners Limited, believes that Severstal's proposed offer significantly
undervalues Celtic and unanimously recommends that you should take no action in
relation to the proposed offer. In providing advice to the Board, Gleacher
Shacklock LLP and Strand Partners Limited have placed reliance upon the Board's
commercial assessments.

Your Directors' intention is not to accept Severstal's proposed offer in respect
of their own beneficial shareholdings, amounting in aggregate to 5,844,462
shares, equivalent to 10.47% of the Company's issued share capital.

When Severstal does send you its offer document and accompanying form of
acceptance, do not complete it.

In short, DO NOTHING.

I will continue to keep you informed of all material developments during the
course of the offer and will be writing to each of you again once the Severstal
offer document is published.

Yours sincerely,


Peter Hannen
Chairman



An information line has been set up for shareholders' enquiries. Please
telephone [phone]. This is a free phone line for shareholders located
in the UK and Ireland."



Enquiries

Celtic Resources Holdings Plc
Kevin Foo
Jonathan Scott-Barrett
Tel: + 44 (0)20 7921 8800

Gleacher Shacklock LLP
Kieran Murphy
Tel: [phone]

Strand Partners Limited
Simon Raggett
Stuart Faulkner
Tel: [phone]

Cardew Group
Anthony Cardew
Shan Shan Willenbrock
Tel: [phone]
[e-mail]

Conduit PR
Leesa Peters
Jane Stacey
Tel: [phone]
[e-mail]


Other information

Any person who is the holder of 1 per cent. or more of any class of shares in
Celtic may be required to make disclosures pursuant to Rule 8.3 of the Irish
Takeover Panel Act, 1997, Takeover Rules 2001 to 2006.

The Directors of Celtic accept responsibility for the information contained in
this announcement, save that the only responsibility accepted by the directors
of Celtic for information relating to Severstal and Centroferve Limited, which
has been compiled from published sources, has been to ensure that such
information has been correctly and fairly reproduced or presented (and no steps
have been taken by the directors of Celtic to verify this information). To the
best of the knowledge and belief of the Directors of Celtic (having taken all
reasonable care to ensure that such is the case), the information contained in
this announcement for which they accept responsibility is in accordance with the
facts and, where appropriate, does not omit anything likely to affect the import
of such information.

Gleacher Shacklock LLP is acting exclusively for Celtic and no one else in
connection with the offer and Gleacher Shacklock LLP will not regard any other
person as a client in relation to the offer and will not be responsible to
anyone other than Celtic for providing the protections afforded exclusively to
its clients or for providing advice in relation to the offer, the contents of
this letter or any transaction or arrangement referred to herein.

Strand Partners Limited is acting exclusively for Celtic and no one else in
connection with the offer and Strand Partners Limited will not regard any other
person as a client in relation to the offer and will not be responsible to
anyone other than Celtic for providing the protections afforded exclusively to
its clients or for providing advice in relation to the offer, the contents of
this letter or any transaction or arrangement referred to herein.


Sources and bases for information:

(i)   The information contained in the first paragraph of this announcement
      is sourced from stock exchange announcements on the relevant dates

(ii)  Celtic's 2007 gold and molybdenum production targets have been sourced
      from Celtic's 2006 annual report and accounts and its 2007 interim report

(iii) Celtic's cash position is stated as at 30 June 2007 as per its 1st half
      2007 interim report. The amount of proceeds and date of completion for the
      sale of the Company's shareholding in the Miheevskoye project are sourced
      from a stock exchange announcement made by the Company on 31 July 2007

(iv)  The data underlying the movements in the gold price and Celtic's share
      price between 1 January 2007 and 17 September 2007 have been sourced from
      Bloomberg. The gold price is the closing gold spot price on the London
      Metal Exchange on 1 January 2007 (US$636.8/oz) and 17 September 2007
      (US$717.9/oz). The Celtic share price is its closing price on 2 January
      2007 (164p) (as it was not traded on 1 January 2007) and 17 September 2007
      (203p)

(v)   The number of shares beneficially held by Celtic's Directors has been
      sourced from the Company. The percentage of the Company's issued share
      capital has been calculated based on 55,827,026 shares outstanding






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