Mr. Mike Johnston reports

NAUTILUS OBTAINS BRIDGE FINANCING AND RESTRUCTURES SOLWARA 1 PROJECT DELIVERY

Nautilus Minerals Inc. has signed a subscription agreement with Mawarid Offshore Mining Ltd. and Metalloinvest Holding (Cyprus) Ltd., under which the purchasers have agreed to purchase such number of common shares of the company that will raise gross proceeds of up to $20-million (U.S.).

Mike Johnston, Nautilus's chief executive officer, commented: "The company appreciates the ongoing support of its two major shareholders through this bridge financing arrangement, especially given current market conditions. We are also heartened by the continued support of all of our key stakeholders, in particular, our joint venture partner in the Solwara 1 project, the Independent State of Papua New Guinea's nominee and our vessel contractors, Marine Assets Corp., and Fujian Mawei shipyard. The global interest in seafloor mining continues to grow, and Nautilus remains the industry leader in this expanding field."

As previously disclosed, the company requires significant additional financing in order to complete the build and deployment of the seafloor production system to be utilized at the Solwara 1 project by the company and its joint venture partner (as to 15 per cent), the Independent State of Papua New Guinea's nominee.

The gross proceeds available under the subscription agreement will provide the bridge financing necessary to enable the company to operate and to carry on the project as described in detail below, while it continues to explore additional financing, joint ventures or other transactions that provide the financing required in order to complete the development of the Solwara 1 project. There can be no assurances that the company will be successful in securing any such transactions.

Pursuant to the subscription agreement, the shares will be purchased on a private-placement basis and will close in tranches, on a monthly basis, during the period from Dec. 1, 2016, through to Nov. 30, 2017, at the election of the company.

The company will determine the amount of funds to be raised under each tranche during each month of the financing period, subject to the limitations of receiving maximum subscription proceeds of $2-million (U.S.) per month and an aggregate maximum total amount of $20-million (U.S.) during the entire financing period.

Shares will be issued under each tranche at a price that is equal to the volume-weighted average trading price of the company's common shares on the Toronto Stock Exchange for the 10-day period immediately prior to the date the company issues the purchasers a notice that the tranche will proceed. Closing of the bridge financing remains subject to the approval of the Toronto Stock Exchange.

As the purchasers are related parties to the company, Multilateral Instrument 61-101 and the rules of the TSX require that shareholder approval be obtained in order for the issuance of shares in the bridge financing to exceed 25 per cent of the company's market capitalization or 10 per cent of the company's current number of outstanding shares.

The company plans to hold an extraordinary general meeting of its shareholders on Oct. 26, 2016, in order to seek approval of the bridge financing. Further information regarding the terms of the bridge financing and the relationship between the company and the purchasers will be included in the information circular to be mailed to the company's shareholders and filed on SEDAR in connection with the meeting of shareholders.

For the purposes of the additional financing required and in order to continue operating during the financing period, the company will implement a restructuring plan that involves the following:

• Completing the company's three key equipment contracts and storing that equipment when delivered, which includes:
  • The seafloor production tools and associated equipment being supplied by Soil Machine Dynamics;
  • The riser pipe being supplied by General Marine Contractors;
  • The subsea slurry lift pump being supplied by GE Hydril;
• Marine Assets Corp. continuing the construction of the production support vessel at the Fujian Mawei shipyard up to the completion of the hull, with further construction dependent upon the company securing additional financing;
• Undertaking, with its joint venture partner, the activities necessary to maintain the good standing of the mining lease and environmental permit for the Solwara 1 project, including the completion of environmental management and monitoring plans, as well as the completion of local community projects in the regions of Papua New Guinea closest to the Solwara 1 project area;
• Terminating other contracts for the construction of any seafloor production equipment that are in the early stages of development and not entering into any new construction contracts until additional financing is secured;
• Reviewing the joint venture's remaining development, testing and operations plans to take account of current market conditions;
• Reducing company staff numbers by approximately 60 per cent to maintain the key resources required to implement the above activities, whilst ensuring project and corporate knowledge is retained. In this regard, the remaining members of the company's executive management team, who will be responsible for implementing the restructuring plan, are:
  • Mr. Johnston;
  • Adam Wright, vice-president, PNG operations;
• Staff reductions will include the departure of the following members of the company's executive management team by Sept. 2, 2016:
  • Shontel Norgate, chief financial officer;
  • Kevin Cain, vice-president, projects;
  • Jonathan Lowe, vice-president, strategic development and exploration;
  • Karen Hauff, general counsel/company secretary.

The company previously disclosed that in the event that the required financing is secured and the company is able to continue development of the Solwara 1 project, the schedule would be delayed. The company has now secured the necessary bridge financing to facilitate the time required to secure that additional required financing. If the additional required financing is secured by June, 2017, and subject to continuing detailed planning, the company could be in a position to commence the initial deployment and testing operations at the Solwara 1 project by the end of first quarter 2019.

There can be no assurances that the company will be able to obtain the necessary project financing on acceptable terms or at all. Failure to secure project financing may result in the company taking various steps aimed at maximizing shareholder value, including suspending or terminating the development of the Solwara 1 project and engaging in various transactions, including, without limitation, asset sales, joint ventures and capital restructurings. The company will provide updates as circumstances warrant. Any transaction(s) will be subject to all necessary stock exchange and, if applicable, shareholder approvals, as well as compliance with all other regulatory requirements.

We seek Safe Harbor.