Mr. Christian Easterday reports

HOT CHILI ANNOUNCES US$15 MILLION INVESTMENT AGREEMENT WITH OSISKO GOLD ROYALTIES

Hot Chili Ltd. has executed a binding $15-million (U.S.) investment agreement with Osisko Gold Royalties Ltd. for a 1-per-cent net smelter return (NSR) royalty on copper and a 3-per-cent NSR royalty on gold across the company's Costa Fuego copper-gold project located 600 kilometres north of Santiago, at low elevation (less than 1,000 metres) in the coastal range of the Atacama region, Chile.

Completion of the investment is expected within the coming weeks, subject to satisfaction of customary conditions, with Hot Chili to receive $15-million (U.S.) at closing.

Highlights:

• Significant investment by Osisko provides strong endorsement from one of North America's leading royalty-streaming groups, and will boost Hot Chili's cash position to approximately $26-million (Australian) upon closing;
• $15-million (U.S.) in funds for growth and development with the investment (royalty consideration) to be used to advance the Costa Fuego prefeasibility studies (PFS), resource growth drilling programs and for the general advancement of the project;
• Clear look-through value given the Osisko NSR is equivalent to a 1.12-per-cent copper equivalent NSR royalty across payable metals for $15-million (U.S.) and Hot Chili's current market capitalization is $80-million (U.S.);
• Buyback rights if a change of control event occurs prior to the fourth anniversary of closing. The Osisko NSR can be reduced to a 0.5-per-cent NSR royalty on copper and 2.5-per-cent NSR royalty on gold;
• Osisko to have a right of first offer (ROFO) with respect to the sale of any future royalty, stream or similar interests by Hot Chili;
• Preliminary economic assessment (PEA) for Costa Fuego confirms strong economics;
• 30,000-metre drill program set to commence, following closing.

Hot Chili's managing director, Christian Easterday, commented: "The investment agreement is yet another strong endorsement and follows extensive due diligence of the company and its Costa Fuego copper-gold project by Osisko, renowned for their technical rigour and capabilities.

"We consider that the Osisko investment will deliver a strong outcome for our shareholders by significantly strengthening our treasury without the dilution of a share issuance, while only adding a minor incremental royalty burden to Costa Fuego.

"Importantly, Osisko's involvement alongside Glencore's strategic shareholding in Hot Chili demonstrates Costa Fuego's global relevance and the projects' potential to deliver near-term, meaningful, new copper supply.

"We are pleased with the outcomes of our recently announced PEA, which has been validated by Osisko's investment. We look forward to the commencement of drilling activities across multiple growth targets and the completion of our PFS for Costa Fuego next year."

Hot Chili's financial adviser is National Bank Financial Inc., and its Canadian legal counsel is Bennett Jones LLP.

Summary of material terms of investment agreement

The investment agreement between Hot Chili, its Chilean subsidiaries holding title to the properties comprising the Costa Fuego project (each a seller) and Osisko Gold provides for the purchase by Osisko of a royalty from each seller, the material terms of which are summarized below:

• Royalty consideration: Total cash consideration to Hot Chili and the sellers in the amount of $15-million (U.S.) (royalty consideration), payable at closing of the investment (closing);
• Use of proceeds: The majority of the royalty consideration to be used for exploration, development and general advancement of the project. The balance may be used for general working capital purposes;
• Royalty interest: A net smelter return royalty with respect to a seller's share of copper and gold production from the project (royalty) comprising 1 per cent of payable copper production and 3 per cent of payable gold production;
• Royalty calculation: The royalty payable monthly with payments based on net smelter return revenues generated by the project. Deductions applicable against the royalty are those typical in a net smelter return calculation but exclude taxes and government royalties;
• Project: The Costa Fuego project properties and all associated assets and undertakings of any kind (project);
• ROFO: Osisko to have a right of first offer (ROFO) with respect to the sale of any future royalty, stream or similar interests by Hot Chili;
• Buyback: If a change of control event occurs prior to the fourth anniversary of closing, the seller shall be entitled to reduce the royalty percentage such that the resulting royalty rate applicable on payable copper becomes 0.5 per cent and the royalty rate applicable on payable gold becomes 2.5 per cent in exchange for a payment to Osisko in an amount as follows:
  • 130 per cent of the royalty consideration if exercised prior to the second anniversary of closing;
  • 140 per cent of the royalty consideration if exercised between the second and third anniversary of closing;
  • 150 per cent of the royalty consideration if exercised between the third and fourth anniversary of closing;
  • A change of control event occurs when control (meaning over 50 per cent of the voting securities) and decision-making power of either Hot Chili or the seller is acquired by another party.
• Royalty security: The royalty will be secured against all property, assets, undertaking and rights of each seller, including the project. In connection with any construction financing for the project, Osisko has agreed to principals under which it would subordinate its security interests to encumbrances granted under a senior bank loan facility, subject to customary terms and conditions;
• Conditions to closing: Closing is subject to satisfaction of conditions considered customary for royalty finance investment agreements, including execution of security documents.

The directors look forward to an exciting period ahead. Further details of the company's next steps are expected to be announced shortly.

We seek Safe Harbor.