Mr. Barry Hildred reports

AQUILA RESOURCES ANNOUNCES THIRD QUARTER 2019 FINANCIAL RESULTS

Aquila Resources Inc. has filed its financial results for the third quarter ended Sept. 30, 2019. All amounts, unless indicated, are reported in U.S. dollars.

Barry Hildred, president and chief executive officer of Aquila, commented: "During the quarter, we continued to focus on advancing certain permit amendments for Back Forty while completing site-specific work to satisfy conditions in compliance with existing permits. As we move into 2020, our focus is to clear remaining legal hurdles and to get Back Forty shovel-ready. In order to fund these activities, we continue to evaluate interim and long-term funding options, including certain strategic opportunities with a variety of partners."

Third quarter highlights:

• The company is progressing certain Back Forty project preconstruction activities including environmental fieldwork and site data collection. The company also completed a geotechnical site investigation program including 1,200 metres of geotechnical drilling and hydrogeological testing in preparation for additional engineering activities.
• The company is continuing with its evaluation of underground mining following an open-pit operation at Back Forty as outlined in the August, 2018, feasibility study. The company is also assessing various alternatives for downsizing the processing plant that better aligns open-pit plant and potential future underground throughputs. This analysis will form the basis of an updated preliminary economic assessment, the results of which Aquila expects to announce in the coming months.
• The company advanced the legal process related to the contested case challenge to its mining permit for its Back Forty project in Michigan. In the second quarter, the Michigan Office of Administrative Hearings and Rules issued a final decision and order upholding the Michigan non-ferrous metallic mineral mining permit for its Back Forty project in Michigan. Following 30 days of cumulative testimony, the administrative law judge issued a final decision finding "that the proposed mining operation will not pollute, impair or destroy the air, water and other natural resources, or the public trust in those resources," in compliance with Michigan's nonferrous metallic mining statute. On May 28, 2019, the petitioners filed a request for review by the Michigan Department of Environment, Great Lakes and Energy (EGLE) internal review board. Hearings and briefings were held during the months of August, September and October. The company does not expect the review board to reach a different conclusion than the judge.
• The company continued to work with EGLE regarding the company's application to amend its mining permit and air permit. Aquila expects the amended permits to be issued in the coming months.
• The company advanced the legal process related to the contested case challenge to its wetlands permit. Rebuttal testimony was completed on Oct. 25, 2019. The company expects briefings and a final decision to follow mid-2020.
• The company is in active discussions with existing partners, advisers and outside investors to secure both long-term project financing and to secure interim financing to complete preconstruction activities. As part of its financing solution, the company is reviewing certain strategic transactions. There can be no assurance that the company will be able to execute and close on any financing solution.
• As at Sept. 30, 2019, Aquila had cash of $6.3-million and working capital of $3.9-million. This compared with cash of $14.4-million and working capital of $12.1-million at Dec. 31, 2018. The decrease in working capital is primarily due to the financing of the company's preconstruction activities.

Postquarter highlights:

• On Oct. 21, 2019, the United States District Court for the Eastern District of Wisconsin dismissed the lawsuit filed by coalition to Save the Menominee River Inc. In November of 2018, the coalition filed a lawsuit in the U.S. District Court for the Eastern District of Wisconsin challenging the Environmental Protection Agency and the U.S. Army Corps of Engineers' failure to exercise jurisdiction over Aquila's wetlands permit for its Back Forty project. The court dismissed the lawsuit, holding that the coalition could not challenge the federal government's refusal to exercise jurisdiction over the wetlands permit under the Administrative Procedures Act or the Clean Water Act.
• The company continues to work with EGLE to secure issue of amendments to its mining permit and its air permit that reflect project optimizations, as well as a new dam safety permit. The company anticipates EGLE will approve the mine and air permit amendments in the coming months. EGLE has informed the company of EGLE's intention to defer review and processing of the dam safety permit until 2020 in order to incorporate hydrogeological information currently being gathered under the wetlands permit into the dam safety permit review. EGLE has encouraged the company to withdraw its dam safety permit application and resubmit the application in order to facilitate EGLE's preferred approach. At this point, the company does not see this development as impacting preconstruction activities or the start date of construction.

Outlook

Preconstruction activities including engineering and construction readiness will continue to advance at Back Forty.

Operational readiness activities including advancing plans with respect to roads, power and concentrate logistics are under way.

In addition to recently filled positions, the company will continue to add resources to its owners team to prepare for the construction and operational readiness phases at Back Forty.

The company will continue discussions with prospective financial partners to secure the required capital to construct the Back Forty project. Aquila, with the assistance from its advisers, will consider all strategic and financial options available to the company and the project.

The company is also evaluating its strategy and financing alternatives with respect to its exploration projects in Wisconsin in light of the recent repeal of the decades-old moratorium on non-ferrous mining in the state.

Selected financial information

The included table provides selected financial information that should be read in conjunction with the financial statements of the company for the three months and nine months ended Sept. 30, 2019.

                                                                 Three months ended        Nine months ended    
                                                                          Sept. 30,                Sept. 30,         
                                                                  2019         2018        2019         2018
       
Mineral property exploration expenses                       $2,168,491   $1,935,172  $5,376,659   $5,377,127 
Administrative expenses                                      1,025,997    1,289,473   3,446,757    3,699,132  
Net finance charges                                            646,124      516,045   1,951,458    1,551,572  
Loss from operations                                         3,840,612    3,740,690  10,774,874   10,627,831 
(Gain) loss on foreign exchange                                (3,023)       52,813    (15,860)    (275,623)  
Loss (gain) on change in value of contingent consideration   (476,224)     (50,102)   (313,736)      412,403    
(Gain) loss on change in fair value of warrant liability     (444,123)  (1,298,287)   (793,745)  (1,405,491)
Net and comprehensive loss for the period                    2,917,242    2,445,114   9,651,533    9,359,120  
Net loss per share -- basic and diluted                           0.01         0.01        0.03         0.03        

About Aquila Resources Inc.

Aquila is a development-stage company with strategic assets in the Great Lakes region. The company's experienced management team is focused on advancing preconstruction activities for its 100-per-cent-owned zinc- and gold-rich Back Forty project in Michigan. Aquila's flagship Back Forty project is an open-pit volcanogenic massive sulphide deposit with underground potential located along the mineral-rich Penokean volcanic belt in Michigan's Upper Peninsula.

We seek Safe Harbor.