Mr. Barry Hildred reports

AQUILA RESOURCES ANNOUNCES RESULTS FROM NEW PRELIMINARY ECONOMIC ASSESSMENT FOR BACK FORTY PROJECT

Aquila Resources Inc. has received positive results from its new preliminary economic assessment on the Back Forty project in Michigan's Upper Peninsula. The PEA, which incorporates a revised mine plan based on results from Aquila's 2013 resource update, was completed by Tetra Tech Inc. after considering various trade-off studies which looked at different mine configurations to determine the optimal scenario for the project. The PEA will be filed on SEDAR within 45 days and will also be available on Aquila's website. All figures quoted are in U.S. dollars unless otherwise specified.

PEA highlights

The PEA contemplates mining 16.1 million tonnes of mineralized material over the 16-year life of mine, of which 12.5 million tonnes is open pit and 3.6 million is underground. The PEA demonstrates the potential for a diverse earnings stream with a payable metal value mix of 41.2 per cent gold, 40.5 per cent zinc, 12.0 per cent copper, 5.7 per cent silver and 0.6 per cent lead.

        KEY ECONOMIC HIGHLIGHTS
 
                    Pretax     Aftertax

NPV at 6%          $247.2M      $184.7M 
IRR                  34.9%        28.9%  
Payback period   1.6 years    2.1 years

The PEA includes inferred resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA results will be realized.

Highlights from the PEA include:

• Operating at an initial throughput rate of 5,350 tonnes per day, the total payable production of the mine is expected to be 532,000 ounces of gold, 704 million pounds of zinc, 63 million pounds of copper, 4,645,000 ounces of silver and 11 million pounds of lead;
• A total estimated initial capital cost of $261-million comprising $177-million of direct preproduction capital expenditure, a $44-million contingency, and $40-million of indirect and owner's costs;
• The average on-site operating costs are $29.25 per tonne processed for open-pit mining and $66.20 per tonne processed for the underground mine;
• The near-surface characteristics of the orebody provide the opportunity to develop a low capex, high-grade initial phase operation. The economics of this are still being evaluated as part of the PEA and will be reported when complete.

"The results from our PEA validate our decision to acquire 100 per cent of Back Forty and focus on strategic assets in this promising region," stated Barry Hildred, chief executive officer of Aquila. "The PEA and new mine plan show marked improvements across key metrics. Ultimately, we believe this PEA demonstrates the potential of Back Forty while carefully considering the interests of all our key stakeholders."

Mark Burridge, chairman of Aquila, stated: "Our focus is now on recommencing project development at Back Forty. The PEA provides a path forward for the next set of project milestones, including the ramp-up of permitting activities, and the commencement of a feasibility study and an exploration program initially focused on near-mine satellite targets."

Sensitivity analysis

A sensitivity analysis was performed to test the economic viability of Back Forty against possible fluctuations in commodity prices.

                  SENSITIVITY ANALYSIS 

               Base case -15%  Base case  Base case +15%

Gold                $1,099/oz  $1,293/oz       $1,487/oz   
Silver              $17.39/oz  $20.46/oz       $23.53/oz   
Zinc                 $0.82/lb   $0.96/lb        $1.10/lb   
Copper               $2.70/lb   $3.18/lb        $3.66/lb   
Lead                 $0.82/lb   $0.96/lb        $1.10/lb   
Pretax                                           
NPV at 6%              $94.2M    $247.2M         $399.2M    
IRR                     20.2%      34.9%           47.7%     
Payback period      3.3 years  1.6 years        1.0 year   
Aftertax                                         
NPV at 6%              $74.6M    $184.7M         $294.5M    
IRR                     17.5%      28.9%           38.7%     
Payback period      3.5 years  2.1 years       1.4 years   

Mineral resources

In February, 2013, Aquila updated its mineral resource estimate. The 2014 PEA incorporates the results from this updated resource, of which 90 per cent was classified as measured and indicated, and only 10 per cent inferred. Please refer to Aquila's annual information form dated March 31, 2014, for further information regarding the updated mineral resource estimate.

                         GLOBAL RESOURCE AT BACK FORTY 

Category      Tonnes     Au      Ag     Cu    Pb    Zn  Au content       Zn content
                       (g/t)   (g/t)    (%)   (%)   (%)        (oz)             (lb)

Measured   6,700,000   2.16   27.30   0.47  0.18  3.95     465,000      583,000,000   
Indicated  8,430,000   1.92   22.24   0.22  0.26  2.36     520,000      439,000,000   
M&I       15,130,000   2.03   24.48   0.33  0.22  3.06     985,000    1,022,000,000  
Inferred   2,340,000   2.07   26.53   0.36  0.33  2.20     156,000      113,000,000

Notes

1. Mineral resources are not mineral reserves and do not have demonstrated economic viability.
2. Net-smelter-returns cut-off values for the 2013 resource estimate were based on metal price assumptions of 96 U.S. cents per pound zinc, $3.65 (U.S.) per pound copper, $1.01 (U.S.) per pound lead, $1,456.36 (U.S.) per troy ounce gold and $27.78 (U.S.) per troy ounce silver. Metallurgical recoveries were determined and applied for each of the metallurgical domains determined for the deposit. Average cut-off value for the open-pit resource contained within an optimized pit shell was $27.75 (U.S.). Average cut-off value for the underground resources outside of the optimized pit shell was $66.45 (U.S.).

Project potential

The optimized mine plan provides some flexibility in the development of the project including a low capex, high-grade initial phase operation. This option would focus on mining near-surface, high-grade zones by way of three small open pits in order to maximize capital return in the early years of production. This approach has the potential to provide attractive economic returns, mitigate certain start-up risks and allow for significant optionality in the long-term development of the project. This opportunity would be fully evaluated during the feasibility stage of project development and could be pursued depending on future macroeconomic conditions.

Other opportunities for consideration include optimization of the underground mining approach, which was not completed as part of the PEA, improving processing performance and defining the upside potential, including further exploration and expansion of the underground resource, in-pit targets and near-mine drill targets, which have the potential to extend mine life and improve project economics.

Qualified persons

The PEA was prepared under the supervision of Tetra Tech, specifically Rex Bryan, SME; Wenchang Ni, PEng; Daniel Sweeney, PEng; Dr. Arun Vathavooran, PhD, CEng, MIMMM, SME; Dharshan Kesavanathan, PEng; Mike McLaughlin, PEng; Sabry Abdel Hafez, PEng; and Andrew Carter, EurIng, CEng, MIMMM, MSAIMM, SME. All of the aforementioned individuals are qualified persons as defined in National Instrument 43-101.

The scientific and technical information in this news release was reviewed and approved by Thomas O. Quigley, vice-president of exploration and senior technical adviser for the Back Forty project. By virtue of his education, experience and professional association, Mr. Quigley is considered a qualified person as defined under National Instrument 43-101. Information regarding data verification is provided in Aquila's annual information form dated March 31, 2014.

We seek Safe Harbor.