Mr. Luc Lessard reports

FALCO PROVIDES A CORPORATE UPDATE AND ANNOUNCES THE APPOINTMENT OF A NEW BOARD MEMBER

Falco Resources Ltd. has provided a corporate update on the Horne 5 project and has appointed a new member to the corporation's board of directors.

Luc Lessard, president and chief executive officer, comments: "Despite 2018 having been a challenging year for the mining sector, the corporation continued to advance the development of the Horne 5 project. We have increased the number of surface properties under ownership, completed an exploration campaign, filed environmental permitting documentation, continued our discussions with the community, entered into significant financing transactions and held preliminary discussions with a major stakeholder for various authorizations required for the Horne 5 project."

Review of the project

The corporation completed a feasibility study for the Horne 5 project (see press release dated Oct. 16, 2017). The technical team has continued to review opportunities to enhance the economics of the project. These efforts are being directed by two members of the team that joined in January, 2018 -- Ronald Bougie, vice-president of engineering and construction, and Guy Belleau, mine general manager.

2018 highlights

Exploration

The corporation completed a 25,000-metre drill program at a cost of $8.5-million. The program targeted highly prospective properties contiguous to Horne 5 project. The compilation of all data produced during the program will provide information to better understand the Horne area, which remains one of the best environments to discover volcanogenic massive sulphide (VMS) mineralization and potentially increase the Horne 5 project's geological resources.

Environmental

Falco submitted its environmental impact assessment (EIA) study to the Environmental Assessment Register of the Ministry of Environment and the Fight against Climate Change of the government of Quebec. The EIA is now publicly available and currently under review. For additional information, studies, opinions, question and answers, and commentaries on the permitting process and the corporation's EIA refer to the documentation available on the MELCC website.

The corporation is committed to taking a pro-active approach to its public consultation process and has been working diligently to identify stakeholders that may be impacted in the Rouyn-Noranda and Abitibi regions. In June, the corporation held its second Horne 5 project public presentation and information session in the city of Rouyn-Noranda with more than 150 persons in attendance and dialogue is continuing.

Based on the numerous community meetings held to date, the corporation observes strong community support for the Horne 5 project. Development of the project would bring substantial economic development to the city of Rouyn-Noranda and the surrounding region over its 15-year operating life.

Pavilion Quemont school relocation

The new Pavilion's construction and relocation were completed in August at the budgeted cost of $22.5-million and Falco attended the official opening on Nov. 13, 2018. Falco delivered the Pavilion to the school board of Rouyn-Noranda in exchange for existing property and infrastructure assets that are in close proximity to the Horne 5 project. Obtaining these assets will allow the corporation to build the infrastructure required for the dewatering and operating phases of the Horne 5 project.

The Pavilion was constructed in less than 11 months, allowing the community to access these modern facilities in time for the 2018 to 2019 school year. The Pavilion will also serve as a platform for the training of the new generation of mining talent for the corporation.

Financing

On June 18, 2018, the corporation announced a financing transaction with Osisko Gold Royalties Ltd., pursuant to which Osisko agreed to commit up to $180-million through a silver stream transaction toward the financing of the development of the Horne 5 project.

The stream agreement is subject to a right of first refusal in favour of Glencore Canada Corp. Pursuant to the ROFR, Glencore shall have a period of 60 days following the receipt of a notice accompanied by a copy of the stream agreement to notify Falco that it wishes to purchase the silver stream in accordance with the terms described in the stream agreement. Falco and Osisko have submitted to Glencore documents to allow Glencore to determine its interest in exercising the ROFR. The corporation expects to receive its response in the first quarter of 2019. Concurrent with the announcement of the stream agreement, the corporation also announced the subscription by Osisko to a $7-million debenture. The debenture was convertible into 12,104,444 units of Falco upon receipt of disinterested shareholder approval. Each unit consists of one common share and one-half of one common share purchase warrant. Each whole warrant entitles the holder to purchase one common share of Falco, subject to customary anti-dilution clauses, at a price of 75 cents for a period of 36 months from the date the units are issued.

The stream agreement and the conversion of the debenture were both approved at the special meeting of shareholders of Falco held on Nov. 29, 2018, and the $7-million debenture was converted into equity. As at Dec. 31, 2018, Osisko owns 17.8 per cent of the outstanding common shares of Falco.

$10-million secured loan

In September, the corporation completed a $10-million secured senior loan agreement with Osisko. The secured loan's maturity date was extended to Feb. 28, 2019, and interest shall be payable on the principal amount of $10-million at a rate per annum that is equal to 7 per cent compounded quarterly. The secured loan will be reimbursed from the first drawdown under the stream agreement.

2019 outlook

Exploration

Falco's 2019 objectives regarding exploration will aim at completing the compilation of geological data in order to plan future exploration programs. Management endeavours to proceed with future exploration programs targeted at increasing the Horne 5 project's mineral resources and ultimately the project's life of mine.

Environmental assessment process

Falco is continuing the environmental assessment process and technical work as required to support its development plans in order to receive the EIA's acceptability from the MELCC. The corporation's objective is to start the public hearing process (Bureau d'audiences publiques sur l'environnement) on the Horne 5 project by the end of the year.

Consultation committee

The corporation will create the committee which will be composed of representatives from the community. Falco remains committed to working with various stakeholders to finalize a plan for the Horne 5 project that will maximize benefits for the entire community, the company's shareholders and other stakeholder groups. The mandate of the committee will be to review the project and prepare enhancements to provide better returns to all stakeholders.

Major stakeholder

The corporation continues discussions with a major stakeholder to obtain the authorizations required for the next steps in the development of the Horne 5 project including the negotiation of an operating licence.

Financing

The corporation continues to pursue various financing alternatives including, but not limited to, discussions with the Quebec government and other potential partners.

Appointment of a new board member

Falco is pleased to announce the appointment of Angelina Mehta to the corporation's board of directors.

Ms. Mehta has over 20 years of experience in the fields of finance and engineering. Since September, 2017, she has been acting as senior mining adviser with Paradigm Capital Inc. in investment banking, as well as vice-president of operations for North American Nickel. Over the years, Ms. Mehta also served as investment manager for Sentient Asset Management Canada and held various operational positions for multiple mining companies. She currently serves on the board of directors of Stornoway Diamond Corp., The Foundation of Greater Montreal, Azimut Exploration Inc. and Women in Mining Canada. Previously, she served on the board of directors of Meridian Mining SE and Pershimco Resources Inc. Ms. Mehta holds a bachelor's degree in mining engineering and an MBA from McGill University, as well as a master of law degree from the Osgoode Hall Law School of York University.

Sean Roosen, chair of the board of directors of Falco, stated: "We are very pleased to have Ms. Mehta join our board of directors. She brings industry knowledge, technical expertise and tremendous experience, which will allow her to contribute to Falco's success."

About Falco Resources Ltd.

Falco is one of the largest mineral claim holders in the province of Quebec, with extensive landholdings in the Abitibi greenstone belt. Falco owns about 67,000 hectares of land in the Rouyn-Noranda mining camp, which represents approximately 70 per cent of the entire camp and includes 13 former gold and base metal mine sites. Falco's principal asset is the Horne 5 project, located in the former Horne mine that was operated by Noranda from 1927 to 1976 and produced 11.6 million ounces of gold and 2.5 billion pounds of copper. Osisko is the largest shareholder of the corporation and currently owns 17.8 per cent of the issued and outstanding shares of the corporation.

We seek Safe Harbor.