An anonymous director reports

NAUTILUS SIGNS FUNDING MANDATE WITH MAJOR SHAREHOLDERS

Nautilus Minerals Inc. has entered into a financing mandate agreement with Deep Sea Mining Finance Ltd. (DSMF), pursuant to which DSMF will seek to leverage the international expertise and financial relationships of Nautilus's two major shareholders to assist in advancing the development of the company's Solwara 1 project.

As previously disclosed, Mark P.M. Horn will lead DSMF, which is a newly incorporated private company in the British Virgin Islands and intended to be 50 per cent owned by each of: (i) USM Finance Ltd., a wholly owned subsidiary of USM Holdings Ltd., an affiliate of Metalloinvest Holding (Cyprus) Ltd. (Metallo); and (ii) Mawarid Offshore Mining Ltd., a wholly owned subsidiary of MB Holding Company LLC.

DSMF has been appointed as the company's exclusive financial adviser in respect of the remaining project financing of up to $350-million (U.S.) to complete the development of the Solwara 1 project.

The company may terminate DSMF's exclusivity rights under the agreement if DSMF fails to arrange binding commitments in respect of financings of at least $50-million (U.S.) by Dec. 4, 2017.

The company will pay the following to DSMF:

• An initial retainer fee of $75,000 (U.S.) upon DSMF securing the interim financing and an additional fee of $30,000 (U.S.) to be made following the initial six-month period in advance of each three-month period during the term of the agreement;
• Subject to DSMF securing the interim financing, the company will make a lump sum payment of $350,000 (U.S.) as reimbursement for costs and expenses of DSMF incurred in connection with the interim financing, and the company will reimburse DSMF for all of its reasonable costs and expenses which may be incurred in connection with subsequent financings;
• A cash fee on the aggregate consideration received by the company in a financing transaction equal to 6 per cent in respect of equity financings, or 5 per cent in respect of any debt financing, trade financing or other form of financing transaction during the term of the agreement, and for a period of 12 months following its cancellation in respect of investors introduced to the company by DSMF. No fees will be payable in respect of any funds provided by DSMF or its affiliates (including Metallo and Mawarid);
• A cash fee equal to 1.0 per cent of the amount raised by the company in a financing transaction arising from an unsolicited investment proposal received from a third party pursuant to the terms of the agreement.

DSMF will have a right of first refusal in respect of matching any unsolicited investment proposals.

The agreement will remain in effect until the earlier of Jan. 1, 2019, or until terminated by: (a) mutual agreement; (b) the termination of DSMF's exclusivity rights pursuant to the agreement; (c) automatically upon the closing of financing transactions of $350-million (U.S.); or (d) upon a sale of the company.

As DSMF will be controlled by two insiders of the company, DSMF is a related party of the company and the transactions contemplated by the agreement constitute a related party transaction of the company under MI 61-101.

The independent committee of directors of the company, consisting of Russell Debney, determined that entering into the agreement was exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 in reliance on the exemptions set forth in sections 5.5(a) and 5.7(1)(a) of MI 61-101, on the basis that, at the time the transaction was agreed to, neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the agreement including the retainer fees and the expense reimbursement (but excluding the financing fees), exceed 25 per cent of the company's market capitalization.

Payment of financing fees by the company to DSMF will remain subject to receipt of all necessary shareholder approvals in compliance with the requirements of MI 61-101 and/or Toronto Stock Exchange rules in the context of a specific future financing transaction which may trigger the requirement to pay financing fees pursuant to the agreement.

A copy of the agreement will be available under the company's profile on SEDAR.

The agreement remains subject to receipt of all necessary approvals from the TSX.

The company requires significant additional financing in order to complete the build and deployment of the seafloor production system to be utilized at the Solwara 1 project by the company and its joint venture partner (as to 15 per cent), Papua New Guinea's nominee.

There can be no assurances that the company will be successful in securing the necessary additional financing transactions within the required time or at all, including in connection with the agreement. Failure to secure the necessary financing may result in the company undergoing various transactions, including, without limitation, asset sales, joint ventures and capital restructurings.

Termination of the 2016 bridge financing agreement

In conjunction with entering into the agreement, the company, Metallo and Mawarid entered into an agreement to terminate the subscription agreement among the company, Metallo and Mawarid dated Aug. 21, 2016, as amended. As a result, no further amounts may be drawn by the company under the bridge financing agreement. The company issued a total of 78,247,462 common shares for gross proceeds of $12-million (U.S.) under the bridge financing agreement.

About Nautilus Minerals Inc.

Nautilus is the first company to explore the ocean floor for polymetallic seafloor massive sulphide deposits. Nautilus was granted the first mining lease for such deposits at the prospect known as Solwara 1, in the territorial waters of Papua New Guinea, where it is aiming to produce copper, gold and silver. The company has also been granted its environmental permit for this site.

We seek Safe Harbor.