Mr. Barry Hildred reports

AQUILA RESOURCES ANNOUNCES PROPOSED FINANCING TRANSACTION WITH ORION MINE FINANCE FOR US$20.75 MILLION

Aquila Resources Inc. has entered into an exclusivity agreement with Orion Mine Finance on a multilevel financing transaction that will include a private placement and a silver stream for total financing of $20.75-million (U.S.). The proposed transaction is subject to satisfactory completion of due diligence by Orion, the execution of mutually acceptable definitive agreements and receipt of Toronto Stock Exchange approvals. Proceeds from the proposed transaction will be used to finance the next stage of development at Back Forty, including the completion of permitting activities and a feasibility study, and the repurchase of existing royalties on the Back Forty project.

Transaction highlights

• Aquila will issue 26,923,077 units to Orion -- with each unit consisting of one common share and one-half of a three-year warrant to purchase one common share at a price of 19 U.S. cents per share -- at a price of 13 U.S. cents per unit for gross proceeds of $3.5-million (U.S.).
• Orion will acquire 75 per cent of Aquila's life-of-mine silver production from Back Forty for gross proceeds of $17.25-million (U.S.), subject to a drawdown schedule that will be set out in the definitive agreement.
• Orion will further pay a continuing price of $4 (U.S.) per ounce of silver delivered under the streaming agreement.
• Concurrent with the close of the proposed transaction, Aquila will repurchase the existing royalties at Back Forty from Vale Exploration USA Inc. and HudBay Minerals Inc. for consideration of $4-million (U.S.) in cash and $1-million (U.S.) in cash plus $225,000 (U.S.) in units (priced at 13 (U.S.) cents per unit), respectively.

Aquila currently anticipates that the proposed transaction will close in the first quarter of 2015.

"This transaction will be transformational for Aquila on a number of levels," stated Barry Hildred, chief executive officer of Aquila. "The capital raised, which minimizes dilution to existing shareholders, will help us get Back Forty shovel ready by the end of 2016. Over the near and midterm, proceeds from the transaction will allow us to focus our efforts on the completion of permitting, feasibility and select exploration programs designed to determine additional resource upside in the Back Forty project area."

Private placement

Aquila will issue 26,923,077 units to Orion at a price of 13 U.S. cents per unit for gross proceeds of $3.5-million (U.S.). Each unit will comprise one common share and one-half of a warrant. Each full warrant will entitle the warrant holder to purchase one common share for a price of 19 U.S. cents for a period of 36 months. Following the close of the proposed transaction, Orion will hold approximately 12.2 per cent of the outstanding common shares in Aquila on a basic shares outstanding basis and 18.3 per cent on a partially diluted basis. Orion will also have the right to participate in any future equity or equity-linked placements to maintain its interest level in Aquila. In connection with the private placement, Orion will have the right to nominate one individual for election to the board of directors of Aquila for 24 months following the close of the proposed transaction and thereafter for such time as Orion owns at least 10 per cent of the outstanding common shares. A representative of Orion is expected to be appointed to the board of directors on the closing date.

Silver Stream Orion, or a designated affiliate, will purchase 75 per cent of the total payable silver ounces produced from the Back Forty project for $17.25-million (U.S.) in accordance with a drawdown schedule that will be set out in the definitive agreement. Orion will also pay a continuing price of $4 (U.S.) per each ounce of silver delivered under the streaming agreement.

Royalty repurchase transactions

As part of the proposed transaction, Aquila will repurchase the existing net smelter return (NSR) royalty and net distributable earnings (NDE) royalty on the Back Forty property from HudBay and VE USA, respectively. Aquila will pay $1-million (U.S.) in cash and issue $225,000 (U.S.) worth of units at 13 U.S. cents per unit to HudBay. Aquila will repurchase the NDE royalty from VE USA for a one-time payment of $4-million (U.S.) in cash.

Impact on project economics

The capital secured from the proposed transaction is expected to allow Aquila to finance Back Forty through the next phase of development, including permitting, feasibility and continuing exploration programs in the immediate project area. The silver stream and the royalty repurchase transactions do not materially change the company's preliminary economic assessment on the Back Forty project, filed on SEDAR on Sept. 8, 2014.

Raymond James Ltd. and TD Securities Inc. acted as financial advisers to the company in connection with the proposed transaction.

We seek Safe Harbor.