Mr. Kevin Drover reports

AURCANA ANNOUNCES SALE OF SHAFTER SILVER PROJECT

Aurcana Silver Corp. has entered into a definitive share purchase and sale agreement to sell a 100-per-cent interest in its Shafter silver project, a previously producing high-grade silver mine located in Presidio county in southwest Texas, to Silver Hammer Mining Corp. The consideration to be paid by Silver Hammer for the Shafter project includes cash of $800,000 (U.S.) (less certain exclusivity fees and expenses prepaid by Silver Hammer), 23 million common shares in the capital of Silver Hammer, having a deemed value of $5.75-million, certain contingent payments totalling up to $3,375,000 (U.S.) (as detailed below), and the settlement of Aurcana's debt related to the Shafter project totalling $6,517,662 (U.S.) in aggregate.

Details of the transaction

The purchase agreement contemplates Aurcana U.S. Hold 1 Co. Ltd.'s, Aurcana's wholly owned subsidiary, sale of all the shares of common stock in Rio Grande Mining Corp., the direct and indirect legal owner of all the assets, property, rights and undertakings of and relating to the Shafter project, to Silver Hammer Metals, an affiliate of Silver Hammer. On closing, Aurcana will receive a cash payment of $800,000 (U.S.) (less certain exclusivity fees and prepaid expenses) and 23 million common shares in the capital of Silver Hammer having a deemed value of $5.75-million. In addition, upon the completion of the purchaser's first equity financing following the closing of the transaction, Aurcana will receive an additional cash payment of $375,000 (U.S.). Aurcana may also receive the contingent payments upon the achievement of certain milestones within 48 months of closing, in the aggregate amount of up to $3-million (U.S.), as follows: (a) up to $1-million (U.S.) will be payable in connection with the first public announcement of a new mineral resource estimate on the Shafter project; (b) $1-million (U.S.) will be payable upon the Shafter project entering commercial production; (c) $500,000 (U.S.) will be payable if the spot price of silver is equal to or greater than $30 (U.S.) per ounce for a period of 60 consecutive days; and (d) an additional $500,000 (U.S.) will be payable if both milestones (b) and (c), above, are met. Each contingent payment obligation may be satisfied by the purchaser through the payment of cash, the issuance of purchaser shares, or some combination of cash and purchaser shares to Aurcana in the purchaser's sole discretion.

The noteholders of the company have also entered into an agreement with the purchaser to settle the outstanding debt of the company in connection with the transaction. Pursuant to the debt settlement, the purchaser will acquire all of the outstanding notes of the company in the aggregate principal amount of $6,517,662 from the noteholders in exchange for: (a) the issuance of an aggregate of 4,000 debenture units of the purchaser, each consisting of one $1,000 principal amount of secured convertible debentures of the purchaser and 2,000 common share purchase warrants of the purchaser; (b) an aggregate of eight million units of the purchaser, with each unit consisting of one purchaser share and one-half of a warrant, with each whole warrant entitling the holder thereof to purchase an additional purchaser share at a price of 33 cents per purchaser share for a period of 24 months following closing; and (c) additional securities of the purchaser on the same terms as the concurrent financing (as described below) in settlement of all interest accrued on the company notes from Sept. 1, 2023, until closing.

On closing, Aurcana and the purchaser will enter into an investor rights agreement, pursuant to which Aurcana and the purchaser will agree to certain investor rights and restrictions relating to the purchaser shares to be issued to Aurcana pursuant to the transaction. Under the investor rights agreement, Aurcana will have the right to nominate one member of the board of directors of the purchaser, increasing to two directors if at any time Aurcana holds greater than 35 per cent of the outstanding purchaser shares. Aurcana will agree to certain standstill restrictions and to vote its purchaser shares in accordance with recommendations of management for a period of 24 months. In addition, the purchaser shares issued to Aurcana will be subject to voluntary resale restrictions, with 25 per cent of the purchaser shares being locked up for four months following closing, 25 per cent of the purchaser shares being locked up for eight months following closing and the remaining 50 per cent of the purchaser shares being locked up for a period of 12 months following closing.

In connection with the transaction and pursuant to the terms of the purchase agreement, Silver Hammer will arrange a concurrent equity financing for minimum gross proceeds of $3-million. The terms of the concurrent financing will be disclosed in a subsequent news release of Silver Hammer.

The transaction will constitute the sale of all or substantially all of the undertaking of Aurcana, pursuant to the Business Corporations Act (British Columbia) and, accordingly, will require approval by not less than two-thirds of the votes cast at a special meeting of the shareholders of Aurcana. Aurcana expects to mail the management information circular in connection with the meeting to shareholders and to hold the meeting as soon as practicable following the date hereof, and will provide additional details in due course.

Completion of the transaction is subject to a number of conditions, including: (i) the receipt of all required approvals of the shareholders of Aurcana and Silver Hammer; (ii) the receipt of all necessary regulatory and third party consents, approvals and authorizations, including all necessary stock exchange approvals; (iii) the completion of the concurrent financing for minimum gross proceeds of $3-million, (iv) the completion of the debt settlement; (v) conditional approval of the Canadian Securities Exchange for the listing of the purchaser shares, including the purchaser shares to be issued in connection with the transaction and the debt settlement; and (vi) other standard closing conditions for a transaction of this nature.

We seek Safe Harbor.