Mr. Barry Hildred reports

AQUILA RESOURCES CLOSES PREVIOUSLY ANNOUNCED FINANCING TRANSACTION WITH ORION MINE FINANCE FOR US$20.75 MILLION

Aquila Resources Inc. has closed a previously announced financing transaction with Orion Mine Finance, including a private placement and a silver purchase agreement for total financing of $20.75-million (U.S.). Proceeds from the transaction will be used to finance the next stage of development at Back Forty, including the completion of permitting activities, a feasibility study and additional exploration. Concurrent with the transaction, the company has also completed the repurchase of two existing royalties on Back Forty.

Private placement

Aquila has issued 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 is composed of one common share and one-half of a warrant. Each full warrant entitles Orion to purchase one common share for a price of 19 U.S. cents for a period of 36 months. Orion now holds approximately 12.2 per cent of the outstanding common shares in Aquila on a basic-share-outstanding basis and 17.2 per cent on a partially diluted basis. Orion also has the right to participate in any future equity or equity-linked financings to maintain its ownership level in Aquila. In connection with the private placement, Orion received the right to nominate one individual for election to the board of directors of Aquila for 24 months and thereafter for such time as Orion owns at least 10 per cent of the outstanding common shares. Orion has not yet exercised its nomination right but has indicated that it intends to do so.

Silver purchase agreement

Under the terms of the silver purchase agreement, Orion, or a designated affiliate of Orion, has agreed to purchase up to 75 per cent of the total payable silver ounces produced from the Back Forty project. In exchange for the right to purchase silver, Orion will pay Aquila $17.25-million (U.S.), payable in five instalments. Orion has advanced $6.5-million (U.S.) of the deposit, representing the first instalment. The remaining $10.75-million (U.S.) is payable in four instalments over the next 18 months and is subject to the completion of certain milestones and the satisfaction of certain other conditions. Once the Back Forty project is in production, Orion will pay a continuing price of $4.00 (U.S.) per each ounce of silver delivered under the agreement. A copy of the silver purchase agreement will be filed under Aquila's profile on SEDAR.

Royalty terminations

Concurrent with the closing of the transaction, Aquila completed the previously announced termination of royalty interests held by HudBay Minerals Inc. and Vale Exploration USA Inc. Aquila paid $4-million (U.S.) cash to VE USA and $1-million (U.S.) in cash plus 1,730,769 units to HudBay in exchange for the termination of the royalty interests. The cash portion of these payments was financed out of the proceeds of the transaction that Aquila received at closing.

Appointment of vice-president, project development

Aquila Resources is also pleased to announce the appointment of Andrew Boushy as vice-president, project development, who will oversee the development of the Back Forty project. Mr. Boushy brings over 25 years of hands-on experience in the global mining and minerals industry with a focus on capital project management and operational improvement, including asset and organizational optimization. He has worked in a project manager capacity for such firms as Kinross Gold and Xstrata Nickel and was most recently the vice-president and general manager at a global engineering and project management firm based in Toronto. Mr. Boushy is a professional engineer holding a bachelor of applied science, mechanical engineering, from Queen's University.

Coen Louwarts has stepped down from his role as vice-president, corporate development, but will remain as a consultant to Aquila during a transitional period.

"Aquila's management and board of directors wish to thank Coen for his contributions to the company and wish him the very best," stated Barry Hildred, Aquila's president and chief executive officer. "I am also pleased to welcome Andrew in his new role. With the backing of our new financial partner, we will look to expand our team to better position the company as we move forward through our next phase of development."

We seek Safe Harbor.