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CASCADE ENERGY, INC.3405
Folsom Blvd., Suite 820 Folsom, CA 95630

June 15, 2005

James Bay Energy Inc. 301-170 The Donway West Toronto,
Ontario

Attention: Fenton Scott, President

Dear Sirs:

Re: Acquisition Proposal  Strand Fiord Coal Project,
Canadian Arctic

Further to our recent discussions, this letter agreement sets
forth the terms upon which James Bay Energy Inc. (JB), with the subsequent
ratification of First Nephi International, Inc. (FNI) as appropriate, will
agreed to grant to Cascade Energy, Inc. (Cascade) an option to acquire an
undivided 10% ownership interest in five (5) coal exploration licenses (the
Licenses) to explore and develop certain coal properties (collectively the
Property) located on Axel Hieberg Island in the Canadian Arctic.

The Licenses have been recorded in the name of First Nephi
International LLC as follows:

|NU-COAL#007 | NU-COAL#006
|----------- | -----------
|NU-COAL#010 | NU-COAL#008
|NU-COAL#009 |            

as more particularly detailed at Indian and Northern Affairs,
Canada, at: http://nwt-tno.inac-ainc.gc.ca/ism-sid/index_e.asp.

Pursuant to an agreement (the Underlying Agreement") dated
April 20, 2005 between JB and FNI, a copy of which is attached hereto as
Schedule A, JB and FNI agreed to form a Nova Scotia company (Novaco) for the
purpose of the joint-venture exploration and development of the Property. In the
Underlying Agreement it was agreed that the ownership of Novaco would be FNI
(90%) and JB (10%), reflecting the respective interests of those parties in the
Licenses. At the date of this Agreement, Novaco had not been formed.

JB hereby agrees to use its best efforts to obtain
acknowledgement and acceptance from FNI of this Agreement.

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Subject to compliance with the terms and conditions hereof, JB
will grant to Cascade the right and option (the Option) to earn 100% of JBs
interest in the Licenses (for an overall undivided 10% interest in the
Licenses). In the event that the Option is not exercised, the parties
respective ownership interests in the Licenses will remain at FNI (90%) and JB
(10%). In the event that Cascade exercises the Option and acquires JBs 10%
interest in the Licenses, and once the Work Program (as defined in paragraph 1
hereinbelow) as been completed, the intention is that FNI and Cascade will
thereupon enter into an industry standard form of joint exploration agreement
(the JEA) with a view to the future joint development of the Property.

1.     Exercise of Option

In order to exercise the Option, Cascade shall:

|a) | pay to JB the sum of $75,000 on or before July 15,
      2005;                                                                                                                                                                                                                                                                                                                                  
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                 
|b) | issue 1,000,000 shares of its common stock to JB on or
      before July 15, 2005; and                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                 
|c) | advance in trust to FNI the sum of CDN$150,000 by no
      later than July 15, 2005, which sum shall form the budget and shall be
      utilized for the 2005 exploration and development program (the Work
      Program) on the Property. The funds shall be used specifically as
      determined and agreed to by JB and Cascade (the Work Committee), each
      party having one vote.

2.     Exercise of Option

2.1     The Option shall be deemed for
all purposes to have been exercised upon the completion of all payments and
advances noted in paragraph 1 above. At such time Cascade shall become entitled
to become the recorded owner of a 10% interest (the Earned Interest) in the
Licenses. The Earned Interest shall be an undivided ten (10%) per cent ownership
interest in and to the Licenses, free and clear of any mortgages, liens,
charges, pledges, security interests, encumbrances and any other claims of any
description, but subject to the NPI noted below. Cascade shall not be entitled
to partially exercise the Option.

2.2     A 3% net profits interest
(NPI) shall be reserved by JB and paid by Cascade on net profits received by
Cascade from its 10% interest in the Licenses and Property. For the purposes of
this subparagraph, NPI shall be calculated in accordance with Schedule B
hereto.

3.     Appointment of
Operator

JB will conduct the Work Program
and shall supervise the same as directed by the Work Committee. Once the Work
Program has been completed, all future operations on the Property shall be
governed by a JEA.

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4.     Agreement with First Nephi
International, Inc.

As soon as practicable hereafter, JB will use its best efforts
to obtain the acknowledgement and agreement of FNI to the matters detailed
herein.

5.     Assignment by
Cascade

Cascade shall not assign its rights under this Agreement in
whole or in part without first obtaining the written consent of JB.

5.     Warranty of Title

JB makes no representations or warranties as to the status of
title to the Licenses and Property, and such matters must be independently
verified by Cascade.

During the term of this Agreement, no party shall do or cause
to be done any act nor make or cause to be made any omission whereby the
Licenses or Property becomes encumbered in such a way as to adversely affect the
interests of the other parties, or becomes subject to termination or
forfeiture.

6.     Access to Data

Immediately following the execution of this Agreement, JB shall
deliver to Cascade copies of all technical data for the Licences and Property in
its possession including, but without limitation, drilling, geophysics and
geological information.

Should this Agreement be terminated, for whatever reason, prior
to vesting, then Cascade shall return and forward to JB copies of data and
information received from JB.

7.     Representations and
Warranties of JB

7.1     JB represents and warrants
that:

|a) | it has all requisite power and authority to perform its
      obligations under this Agreement;                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                       
|b) | all necessary action has been taken by JB to execute and
      allow the proper performance of the terms of this Agreement, and this
      Agreement constitutes a valid and binding obligation of JB, enforceable in
      accordance with its terms;
|   |                                                                                                                                                                                                                                                       
|c) | to the best of the knowledge of JB, the location of each
      of the Licences on the ground conforms to the description appearing on
      records in the appropriate records                                                                        

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|    | office, and the Licences were properly located and will
        be in good standing for at least 180-days days after the execution of
        this Agreement;                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|d)  | they have not received notice of any violation of or
        investigation relating to any federal, provincial, territorial or local
        environmental or pollution law, regulation or ordinance with respect to
        the Property;                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|e)  | to the best of JBs knowledge there are no reclamation
        liabilities in connection with the Property and, in particular, there
        are no obligations to monitor or clean up any pre-existing mine sites
        or mine waste dumps or tailings;                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(f) | JBs interest in the Licences and Property is free
        and clear of any mortgages, liens, charges, pledges, security interests,
        encumbrances or other claims of any description and, upon exercise of
        the Option by Cascade, Cascade will acquire the Earned Interest free and
        clear of any mortgages, liens, charges, pledges, security interests, encumbrances
        or other claims of any description, except for the NPI;
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(g) | no person has any right or agreement, option, understanding,
        prior commitment or privilege capable of becoming an agreement for the
        purchase or acquisition from JB of any interest in the Licences or Property;                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(h) | all assessment work required to maintain the Licences
        or Property, as applicable, in full force and effect has been performed
        as of the execution of this Agreement; and                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(i) | there are no royalties or other latent interests in
        the Licences or Property owing to any other parties.                                                                                                                                                                                                                                                                                                                                            

7.2     JB acknowledges that Cascade
is relying on the representations and warranties noted above in entering into
this Agreement and that such representations and warranties are continuing and
survive the execution of this Agreement.

8.     Representations and
Warranties of Cascade

8.1     Cascade represents and
warrants that:

|(a) | it has been duly incorporated and is a validly subsisting
      corporation and has all corporate power and authority to perform its
      obligations under this Agreement; and                                                                                     
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                      
|(b) | all necessary corporate action has been taken by Cascade
      to authorize the execution, delivery and performance of this Agreement,
      and this Agreement constitutes a valid and binding obligation of Cascade
      enforceable in accordance with its terms.

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9.     Miscellaneous

9.1     Any notice under this
Agreement will be given in writing, by delivery in person to a named
representative or by mail or facsimile, properly addressed to each party. A
notice given will be deemed given only when received by the party to whom such
notice is directed; except that any notice given by facsimile properly addressed
to the party, to whom given, shall be deemed given to and received by the party,
to whom directed, 48 hours after such notice is successfully faxed or ten days
after it is mailed, provided there is no postal disruption at the time. Each
party's address will be as otherwise noted hereon until such party specifies
another address by written notice.

9.2     This Agreement and the
attached schedules and all properly executed amendments are hereinafter
collectively referred to as this Agreement. This Agreement constitutes the
entire agreement between the parties and supersedes all previous agreements and
undertakings relating to the subject matter. The parties acknowledge that there
are no agreements, undertakings, representations, warranties or conditions
collateral to this Agreement except as specifically stated otherwise in this
Agreement.

9.3     The division of this Agreement
into articles and sections and the insertion of headings is for convenience of
reference only and shall not affect the interpretation of this Agreement. Any
reference to a section or article shall be a reference to a section or article
of this Agreement unless specifically stated otherwise.

9.4     In this Agreement, where the
context so requires or permits, the masculine gender shall include the feminine
and neuter genders, the plural shall include the singular and vice versa, and
the words person and persons shall include corporations, partnerships, and
all other entities of whatever description.

9.5     In this Agreement all
statements of and references to dollar amounts shall mean Canadian dollars.

9.6     This Agreement shall be
interpreted in accordance with the laws of the Province of Ontario and the
federal laws of Canada applicable therein.

9.7     If any provision of this
Agreement is found invalid, illegal, or incapable of enforcement by any Court of
competent jurisdiction, such provision and the remaining provisions of the
Agreement shall continue to be enforceable to the extent permitted by such Court
against any person(s) and in any circumstance(s) other than those to whom it has
been found invalid, illegal or incapable of enforcement.

9.8     Amendments to this Agreement
shall not be of any force and effect unless executed in writing by all the
parties to this Agreement.

9.9     This Agreement is not intended
to create any partnership or agency relationship between the parties or
fiduciary obligations of any description, and this Agreement shall not be
construed so as to render the parties liable as partners or as creating a
partnership,

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and no party shall be or shall be deemed to be, or shall hold
itself out to be an agent of any other party.

9.10     This Agreement shall be
binding upon and inure to the benefit of the respective successors and permitted
assigns of the parties.

9.11     This Agreement may be
executed in counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.

9.12     The parties shall at all
times do all such further acts and deliver all such further deeds and documents
as shall be reasonably required in order to fully perform and carry out the
terms of this Agreement.

9.13     This Agreement supercedes and
replaces all other agreements, documents, writings and verbal understandings
between the parties with respect to the subject matter of this Agreement.

IN WITNESS WHEREOF each of the parties hereto has caused
this Agreement to be executed as of the day and year first noted below.

|CASCADE ENERGY, INC.           | JAMES BAY ENERGY INC.
|------------------------------ | ---------------------
|                               |                      
|per: /s/ Chris Foster          | per:                 
|                               |                      
|                               |                      
|per:__________________________ | per:                 
|                               |                      
|                               |                      
|June 15, 2005                  | June 15, 2005        

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SCHEDULE A

to the Agreement between Cascade Energy, Inc. and James Bay
Energy Inc.

(dated June 15, 2005)

Copy of Underlying Agreement

-attached hereto-

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SCHEDULE B

to the Agreement between Cascade Energy, Inc. and James Bay
Energy Inc.

(dated June 15, 2005)

NET PROFITS INTEREST

1.     Definitions

Where used herein:

|(a) | Costs means all costs of mineral extraction, through to
      delivery to end purchasers of Product. Without limitation, Costs shall
      include all exploration costs, licensing costs royalties and other charges
      to native or government authorities, all costs of production (including
      engineering, staffing, machinery, carrying costs, loan service,
      depreciation, treatment, shipping, reclamation and environmental
      liabilities), and every other expense of any description whatsoever
      related to preparing Product for final sale.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(b) | "Fiscal Period" means a three month period ending on the
      last day of March, June, September and December of each calendar
    year.                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(c) | "Net Profits Interest" and "NPI" means the Revenue
      received by Cascade from the sale of Product from mining operations on the
      Property, less Costs.                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(d) | "Product" means ore mined from the Property; provided
      that if any such ore, concentrates or other materials or products are
      further treated as part of the mining operation in respect of the
      Property, such ore, concentrates or other materials or products shall not
      be considered to be "Product" until after they have been so
  treated.                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(f) | "Revenue" means gross revenues received during each
      Fiscal Period for the sale of Product by the Royalty Payer.                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(g) | Royalty Interest means 3.0% of NPI, payable to Royalty
      Holder pursuant to the Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(h) | "Royalty Holder" means the party entitled to payment of a
      royalty pursuant to the Agreement;                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(i) | "Royalty Payer" means the party obligated to pay a
      royalty pursuant to the Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Capitalized terms which are not specifically defined in this
Schedule shall have the meaning given to them in the Agreement.

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2.     Net Profits Interest

For each Fiscal Period, Royalty Payer shall pay Royalty Holder
the Royalty Interest calculated and paid in accordance with this Schedule.

3.     Calculation of Net Profits
Interest

The NPI shall be computed at the end of each Fiscal Quarter. On
or before the last day of the first month following each Fiscal Quarter, a
statement shall be furnished setting forth in reasonable detail the computation
of the NPI for the previous Fiscal Period and the Royalty Interest due to the
Royalty Holder, if any. Payment of the Royalty Interest due, if any, shall be
enclosed with such statement.

4.     Audit

The Royalty Holder, upon written notice to the Royalty Payer
shall have the right to have an independent firm of chartered accountants audit
the records that relate to the calculation of the Royalty Interest within
twenty-four (24) months after receipt of each payment described in this
Schedule.

The Royalty Holder shall be deemed to have waived any right it
may have had to object to a payment made for any Fiscal Period unless it
provides notice in writing of such an objection within twenty-four (24) months
after receipt of each payment. If the parties are unable to resolve any such
dispute within sixty (60) days after receipt of such notice, the dispute shall
be resolved by arbitration.

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