An anonymous director reports

NAUTILUS RECEIVES ADDITIONAL BRIDGE LOAN AND PROVIDES CORPORATE UPDATE

Nautilus Minerals Inc. continues to arrange bridge loans from Deep Sea Mining Finance Ltd. and is providing a corporate update on the company's affairs.

$1.6-million (U.S.) bridge loan

To date the company has received bridge loans from the lender totalling $11.25-million (U.S.). In conjunction with the most recent loan of $1.6-million (U.S.), the company has issued to the lender an additional 6,872,852 warrants of the company. Each warrant entitles the lender to purchase one common share of the company at a price of 23 Canadian cents for a period of five years from the date of issuance of the warrant. To date the company has issued a total of 48,324,740 share purchase warrants to the lender in connection with bridge loans.

The bridge loans will assist the company's immediate working capital requirements and facilitate payments required to continue the development of the company's seafloor production system to be first utilized at the company's Solwara 1 project. The loans bear interest at 8 per cent per annum, payable biannually in arrears with a one-year maturity date.

The company will be entitled to prepay each loan prior to maturity, by paying 108 per cent of the outstanding principal of the loan plus accrued and unpaid interest. Each loan is represented by a promissory note and will initially be secured against the assets of the company through a general security agreement. The lender may subsequently require the loan to be guaranteed by the company's material operating subsidiaries and secured against the assets of such subsidiaries.

As previously disclosed, the lender is a private company owned 50 per cent by each of: (i) USM Finance Ltd., a wholly owned subsidiary of USM Holdings Ltd., an affiliate of Metalloinvest Holding (Cyprus) Ltd.; and (ii) Mawarid Offshore Mining Ltd., a wholly owned subsidiary of MB Holding Company LLC. As the lender is indirectly controlled by two insiders of the company, the lender is a related party of the company and the loan transaction constitutes a related party transaction of the company under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions. The transactions comprising the bridge loans and the share purchase warrants are exempt from the formal valuation and minority shareholder approval requirements of MI 61-101.

The company did not file a material change report more than 21 days before the expected closing of this transaction as the details of the transaction were not finalized until immediately prior to the closing and the company wished to close the transaction as soon as practicable for sound business reasons.

$34-million (U.S.) facility and project financing efforts

As previously disclosed, the bridge loans provided by the lender are expected to form part of a larger secured structured credit facility of up to $34-million (U.S.) to be provided by the lender to the company.

The parties are in active negotiations regarding the definitive loan agreement and the additional encumbrances to be placed on the company and its subsidiaries' assets to secure the loans under the facility. Once the facility is in place, existing bridge loans provided by the lender to the company will become secured loans made under the facility.

As with the existing bridge loans, the facility is intended to provide financial support to the company to enable the continued advancement of the Solwara 1 project while the company seeks, with the assistance of its exclusive financial adviser, M. Horn & Co. Ltd., the remaining project financing of up to $350-million (U.S.) required to complete the development of the Solwara 1 project. Efforts to secure project financing are continuing and the company, through its exclusive financial adviser, is in active discussions with various third parties and financial advisers as the company considers numerous financing structures and alternatives.

Annual general meeting (AGM)

The company plans to hold its annual general meeting on June 25, 2018, at the offices of its Canadian legal counsel DuMoulin Black LLP in Vancouver, B.C. At the AGM, in addition to routine annual business, the company will be seeking disinterested shareholder approvals of: (i) the issuance of the maximum number of share purchase warrants to the lender under the bridge loans and the facility, in each case in an amount of up to $34-million (U.S.); and (ii) an exercise price of 17 Canadian cents per share in respect of such warrants (whether previously issued or to be issued), all as required by the rules of the Toronto Stock Exchange.

Further details of the AGM will be provided in the notice of meeting and information circular to be delivered or made available to shareholders on or about May 16, 2018.

Update on vessel default

The company previously announced that Fujian Mawei Shipbuilding Ltd., the owner of the shipyard where the production support vessel is being built, had notified the company that MAC Goliath Pte. Ltd., the purchaser of the vessel, had failed to pay the third instalment of the contract price (approximately $18-million (U.S.) plus interest). The vessel is to be chartered to the company by MAC and is an essential component of the company's seafloor production system.

If MAC fails to remedy the default, the shipyard may rescind the shipbuilding contract between the shipyard and MAC. In the event that the contract is rescinded, the shipyard has the right to either complete or not complete the vessel and to sell the vessel by private sale either in a complete or incomplete state. In accordance with the terms of the contract, Nautilus Minerals Niugini Ltd., a wholly owned subsidiary of the company, has the option to either remedy the default on behalf of MAC and/or replace MAC as a party to the contract by way of a novation or assignment.

The company continues discussions with the shipyard, MAC and third parties with respect to the default and potential remedies, including in regard to one or more third parties assuming responsibility for the completion of the vessel and subsequent charter to the company. While, as previously announced, the vessel has been launched by the shipyard, the vessel remains docked near the shipyard's facilities in China. Currently, work on the vessel has halted pending the resolution of the default situation. The company will provide further updates as circumstances warrant.

Solwara 1 project timing

As indicated, the company requires significant additional financing in order to complete the build and deployment of the entire seafloor production system to be utilized at the Solwara 1 project by the company and its joint venture partner (as to 15 per cent), the Independent State of 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. Failure to secure the necessary financing may result in the company undergoing various transactions including, without limitation, asset sales, joint ventures and capital restructurings.

The company had previously disclosed that the company was planning to commence initial production activities at the Solwara 1 project during the third quarter of 2019, subject to securing project financing, finalizing the ship build contract delivery date between the shipyard and MAC, and finalizing the vessel equipment integration methodology (due in Q2 2018). As a result of the delays in securing the remaining project financing and delays in resolving the MAC default situation, the timing for initial production at the Solwara 1 project is expected to be delayed past Q3 2019. The company will provide further updates as circumstances warrant.

Stronger board of directors

With the appointments earlier this year of Jonathan Whitworth and Jay Layman as independent directors of the company (along with the appointment of John McCoach in Q4 2017), the company's board has been strengthened with a majority of independent directors to assist the company as it continues to develop its business plan and work toward advancing the seafloor mining industry.

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.

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