We have a report here of your having commenced operations by levelling the American fort at Niagara. The general is most anxious to hear good and recent intelligence from your quarter. There is no considerable assembly of troops in our neighbourhood as yet; the flank companies, embodied under Colonel Young, are on their march, and the 2,000 militia will form a chain of posts from St. John's to La Prairie. The town militia of this and Quebec, to the amount of 3,000 in each city, have volunteered being embodied and drilled, and will take their proportion of garrison duty to relieve the troops. The proclamation for declaring martial law is prepared, and will be speedily issued. All aliens will be required to take the oath of allegiance, or immediately quit the province. Our cash is at its last issue, and a substitute of paper must per force be resorted to. This has been Sir George's principal object in calling the legislature together. You have a very arduous and difficult card to play, and have our sincere and confident wishes for your success. Sir George strongly recommends extreme moderation in the use of the Indians, and to keep them in control as much as possible.

[This letter contains the details of a large and armed assembly at La Chine, near Montreal, of French Canadians, who refused to serve in the embodied militia. They were dispersed by the light company of the 49th, and a detachment of artillery with two field pieces, under the command of Major Plenderleath, of the 49th, but not before one Canadian was killed and another dangerously wounded.]

Sir George Prevost to Major-General Brock.

MONTREAL, July 7, 1812.

It was only on my arrival at Montreal that I received Mr. Foster's notification of the congress of the United States having declared war against Great Britain; the fact had been previously ascertained through mercantile channels.

I am convinced you have acted wisely in abstaining from offensive operations, which in their effect might have united a people governed by public opinion, and among whom too much division exists, at this moment, to admit of its influence in promoting vigorous measures against us.

The manner of the flank companies of militia turning out must have been very satisfactory to you. I hope your supplies of ordnance and ordnance stores, on their way from Kingston, have arrived safe.

I have caused arms, accoutrements and ammunition, to be forwarded for the use of the Cornwall, Stormont, and Dundas battalions of militia. Camp equipage for 500 men shall be sent to you as soon as possible, together with muskets.

We are on the eve of substituting paper for bullion. I am aware of the Canadian prejudice against such a circulating medium, but it must give way to the imperious necessity of the times.

It is highly proper you should secure the services of the Indians; but restrain and control them as much as you can. Whatever appointments you deem indispensably necessary you are authorized to make, as well as the sacrifice of some money to gain them over. It is proper we should maintain our ascendancy over the Indians, and feed with proper food their predeliction for us.