Mr. Barry Hildred reports

MICHIGAN'S DEPARTMENT OF ENVIRONMENTAL QUALITY GRANTS DRAFT MINING PERMIT TO AQUILA RESOURCES

The Michigan Department of Environmental Quality (MDEQ) has provided public notice on its proposed decision to issue a draft non-ferrous metallic mineral mining permit to Aquila Resources Inc. for its Back Forty project. In addition to the proposed mining permit, Aquila has also received draft national pollutant discharge elimination system (NPDES) and air pollution control permits.

"The MDEQ's proposed decision to approve our mine permit application represents a significant milestone for our Back Forty project," said Barry Hildred, president and chief executive officer of Aquila Resources. "The draft mining permit is a significant step in allowing us to advance with the development of a mine that will bring economic benefit to the Upper Peninsula while adhering to high environmental standards. The MDEQ's proposed decision also underscores Michigan's commitment to responsible and sustainable resource development that benefits all stakeholders."

The MDEQ's draft mining permit as well as the NPDES permit and air pollution control permit will now be the subject of a public hearing to be administered by the MDEQ prior to issuance of final permits. The MDEQ is holding a 64-day consolidated public comment period from Sept. 1, 2016, through Nov. 3, 2016, and a consolidated public hearing on Oct. 6, 2016.

The mining permit application (MPA) review process, proposed decision and permit are being completed in conformance with Part 632 of Michigan's Natural Resources and Environmental Protection Act which regulates non-ferrous metallic mineral mining in the state of Michigan. In November, 2015, Aquila filed an MPA with the MDEQ. The MDEQ held public meetings in January, 2016, soliciting public comments on the application as part of their review of the MPA. In May, 2016, the MDEQ issued to Aquila technical review comments on the MPA and the company responded in June, 2016.

Aquila continues to work with the MDEQ on the review of its wetlands permit for the Back Forty project. The wetlands permit is the last of four permits required to build and operate the Back Forty mine. On Aug. 26, 2016, Aquila received correspondence from the MDEQ on its wetlands permit application that includes comments from the Environmental Protection Agency and the U.S. Army Corps of Engineers. The agencies' comments are in accordance with established MDEQ administrative review procedures. Aquila is currently working on its response to the MDEQ.

Economic impact of the Back Forty mine

According to a study completed by the Labovitz School of Business of the University of Minnesota Duluth, the Back Forty mine is anticipated to generate a significant economic impact to the community, including but not limited to:

• $20-million in total annual tax revenue for federal, state and local governments;
• $11.7-million in annual revenue for state and local governments to support local schools, hospitals, roads;
• Approximately $13-million in additional royalty-based revenue to the State of Michigan;
• The creation of about 250 good paying jobs directly and indirectly associated with the mine operation.

Qualified person

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 30, 2016.

About Aquila Resources

Aquila's flagship Back Forty project is a volcanogenic massive sulphide (VMS) deposit located along the mineral-rich Penokean volcanic belt in Michigan's Upper Peninsula. In its updated preliminary economic assessment filed in September, 2014, Back Forty demonstrated strong economics with a pretax net present value of $282-million ($210.8-million after tax) and a pretax internal rate of return of 38.8 per cent (32 per cent after tax) based on mining 16.1 million tonnes of measured, indicated and inferred resources over the 16-year life of mine, of which 12.5 million tonnes will be open pit and 3.6 million tonnes will be underground.

We seek Safe Harbor.