AQUILA RESOURCES ANNOUNCES POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR ITS BACK FORTY PROJECT

– PEA includes the known underground Mineral Resources –

BACK FORTY PROJECT PEA HIGHLIGHTS:
(All figures in this news release are expressed in US dollars unless indicated otherwise)

  • Robust economics: After-tax NPV at a 6% discount rate of $176.3 million (approximately CA$235 million) with 26.1% IRR at long term consensus metal prices including $1,485 per ounce gold
  • Significant leverage to gold: After-tax NPV of $316.3 million at a 6% discount rate (approximately CA$422 million) with 37.8% IRR at recent spot prices including $1,998 per ounce gold with gold generating 52% of revenue
  • Includes the known underground Mineral Resources at Back Forty, increasing the life of mine to 12 full years
  • Life of mine production of over 1.5 million gold equivalent1 ounces with production in Year 1 of 206,000 gold equivalent ounces
  • The PEA mine plan consists of open pit mining from Year 1 to Year 5. Underground development will be initiated in Year 5 and underground mining will continue to Year 11. Remaining stockpiles will be processed in Year 12 and a partial Year 13
  • Pre-production capital costs of $250.4 million benefitting from significant nearby infrastructure
  • Potential value enhancement through additional exploration as the deposit remains open at depth
    ___________________________________

1 Refer to Note 4 of Table 1 for an overview of the gold equivalent calculation methodology.

TORONTO–(BUSINESS WIRE)–

Aquila Resources Inc. (TSX: AQA, OTCQB: AQARF) (“Aquila” or the “Company”) is pleased to announce results of a positive Preliminary Economic Assessment (“PEA”) for its wholly-owned Back Forty Project (“Back Forty” or the “Project”), located in the Upper Peninsula of Michigan, USA. The PEA demonstrates Back Forty’s value as a high grade, gold-rich project with compelling economics in a Tier 1 jurisdiction. The PEA builds on the Company’s 2018 open pit Feasibility Study and includes the currently known underground Mineral Resources.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20200805005353/en/

Figure 1: Production Profile - The production profile at Base Case metal prices is shown in Figure 1. (Graphic: Business Wire)Figure 1: Production Profile – The production profile at Base Case metal prices is shown in Figure 1. (Graphic: Business Wire)

Barry Hildred, President & CEO of Aquila, commented, “The completion of the PEA is a significant milestone for Aquila that showcases Back Forty’s potential as a near-term producer in the United States at a time when advanced and substantially de-risked projects are scarce. Back Forty is a well-defined project that also holds tremendous exploration potential. We are excited to commence work on an updated Feasibility Study that we anticipate will be completed next year as we advance the Project through the final stages of pre-construction activities. While doing so, we plan on conducting a drill program at Back Forty to continue to expand the Mineral Resource at-depth where the deposit remains open with numerous targets.”

Aquila will host a webcast to provide a corporate update and review the results of the PEA on Tuesday August 11, 2020 at 12 PM ET / 9 AM PT. See details below.

PEA SUMMARY

The PEA was prepared in accordance with National Instrument 43-101 (“NI 43-101”) by P&E Mining Consultants Inc. in collaboration with Golder Associates Ltd. and Lycopodium Minerals Canada Ltd. The team was led by Andrew Boushy, P.Eng. SVP Capital Projects of Aquila with support from Neil Lincoln, P.Eng. of Lincoln Metallurgical Inc. The Company plans to file the PEA Technical Report (“Technical Report”) on SEDAR at www.sedar.com within 45 days of the date of this news release. The PEA is preliminary in nature, includes Inferred Mineral Resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be classified as Mineral Reserves, and there is no certainty that the PEA will be realized. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

TABLE 1
PEA SUMMARY METRICS

Area

Item

Units

Base Case
Price Deck1

Spot
Price Deck2

Process Production

Total Process Feed

Million tonnes

15.9

Grade

g/t gold equivalent (AuEq)4

4.2 g/t

3.7 g/t

Total Recovery and Payability

% of contained AuEq

74.3%

73.4%

Payable Gold

koz gold

692

Payable Gold Equivalent

koz gold equivalent

1,543

1,323

Annual Gold Equivalent

koz gold equivalent

128

110

Life of Mine

Years

12 years

Throughput

Tonnes per day (t/d)

Nominal 2,800 t/d sulphides + 350 t/d oxides

Metal Price Deck

Gold

$/oz

$1,485

$1,998

Zinc

$/lb

$1.08

$1.04

Copper

$/lb

$3.05

$2.92

Silver

$/oz

$18.20

$25.00

Lead

$/lb

$0.91

$0.83

Revenue and OPEX

Gross Revenue

$/t process feed

$132

$149

NSR

$/t process feed

$113

$130

Total Site Opex

$/t process feed

$52

Royalties

% of NSR

2.0%

2.1%

EBITDA3

$/t process feed

$59

$75

EBITDA margin

% of EBITDA / NSR

52%

58%

C1 Cash Costs (co-product)3

$/oz gold equivalent

$733

$854

C1 Cash Costs (by-product)3

$/oz gold

$(1,392)

$(1,791)

CAPEX

Initial Capital

$ M

$250.4

Sustaining Capital

$ M

$214.1

AISC (co-product)3

$/oz gold equivalent

$926

$1,078

AISC (by-product)3

$/oz gold

$(963)

$(1,362)

Unlevered Returns

Pre-Tax NPV 6% discount rate

$ M

$248.3

$430.3

Pre-Tax IRR

%

31.6%

45.4%

Post-Tax NPV 6% discount rate

$ M

$176.3

$316.3

Post-Tax IRR

%

26.1%

37.8%

After-tax Payback

years

2.4

1.6

1.

THE BASE CASE MACRO-ECONOMIC FORECAST ASSUMES FLAT PRICING THAT HAS BEEN DRAWN FROM THE CONSENSUS LONG TERM ESTIMATES OF SELECT BANKS AS OF JULY 2020.

2.

As at August 4, 2020.

3.

None of EBITDA, C1 cash costs or all-in sustaining costs (“AISC”) have a standardized meaning under IFRS. See “Non-IFRS Measures”.

4.

Gold equivalent ounces were determined by calculating the total value of metals contained or produced and dividing that number by the gold price ($1,485/oz gold Base Case or $1,998/oz gold Spot Case). As the denominator is higher in the Spot Case, the gold equivalent is lower than at Base Case prices. Gold equivalent grade is calculated by dividing the number of gold equivalent ounces by the Mineral Resource size (tonnes).

5.

Project economics reflect the Company’s gold and silver streaming agreements with Osisko Gold Royalties (see Aquila press release dated June 18, 2020). The PEA financial model includes $30 million of initial payments under the gold stream to be received during the design and construction period. The 2018 Feasibility Study did not include the impact of the gold streaming agreement.

TABLE 2

SENSITIVITY TO GOLD PRICE1

Gold Price

($/oz)

After-tax NPV6%
($M)

After-tax IRR

Gold % of Gross Revenue

$1,200

$83

16.9%

40%

$1,400

$149

23.6%

43%

$1,600

$213

29.3%

47%

$1,800

$277

34.6%

50%

$2,000

$341

39.6%

52%

$2,200

$401

44.1%

55%

$2,400

$460

48.5%

57%

1.

ALL OTHER METALS AS BASE CASE METAL PRICES.

OPPORTUNITIES

The PEA outlined a number of initiatives that may enhance the Project including:

  • Increased gold recovery: There is value in further investigating leaching sulphide flotation tailings to economically recover additional gold. Previous scoping metallurgical test work and cost analysis investigated various options, at a high level, to extract gold from flotation tailings and was favourable at gold prices above $1,600/oz.
  • Contract mining: The current mine operations plan is based on an owner-operated mine fleet. Contract mining may be an option to offset initial mine capital costs and mitigate any risks associated with training, operational readiness and the availability of experienced mine personnel.
  • Contract process plant operations and maintenance: The current process plant operations plan is based on owner operating and maintaining the process plant. An operations and maintenance contract may be an option to mitigate any risks associated with training, operational readiness and the availability of experienced process plant operators and maintenance personnel.
  • Resource confirmation and expansion: Complete additional infill drilling with the objective of step-out drilling to potentially expand Mineral Resources.

WEBCAST DETAILS

Management will host a webcast on Tuesday August 11, 2020 at 12 PM ET / 9 AM PT to provide a corporate update and discuss the PEA. Register for the webcast here. Please send your questions to management at dcarew@aquilaresources.com. A replay of the webcast will be available on the Company’s website at www.aquilaresources.com.

BACK FORTY PROJECT BACKGROUND

The Back Forty Project is a polymetallic Volcanogenic Massive Sulphide (“VMS”) deposit located in Menominee County, Michigan, USA. The Back Forty Deposit was originally discovered in 2002 and is currently wholly owned by Aquila. The Project is located approximately 55 km south-southeast from Iron Mountain, and approximately 19 km west of Stephenson, Michigan.

A Feasibility Study on the Project was completed in August 2018 that studied open pit mining and on-site processing plants for treating oxide material to produce gold doré and sulphide material to produce zinc, copper, and lead concentrates. The subject of the PEA relates to an expansion of the open pit mining case (Phase 1) by proposing the development of an underground mine (Phase 2) associated with the Project after the open pit phase is complete. It should be noted that the Company has not yet commenced the permitting process for a potential underground expansion.

While the value proposition and operating context for the PEA are similar to the 2018 Feasibility Study, the PEA reflects certain enhancements including:

  • As a result of the addition of an underground mine expansion, the oxide and sulphide processing plants were resized to a lower nominal throughput to align them with expected underground mine throughput and to optimize the Project’s economics. The oxide process plant throughput has been reduced from 800 t/d to 350 t/d and the sulphide process plant throughput has been reduced from a nominal 4,000 t/d to 2,800 t/d. The reduction in process plant throughput contributed to a $54 million decrease in initial capital expenditures versus the 2018 Feasibility Study.
  • The oxide processing flowsheet was updated to include a SART (sulfidization, acidification, recycling and thickening) plant for optimal doré quality, silver recovery, mercury management, and cyanide management.
  • Process plant feed, stockpile management and sulphide process plant change-overs have been optimized to improve operability.
  • Additional metallurgical test work has been incorporated to assess blending options and recovery performance and penalties.
  • Updated permit conditions have been incorporated, including a double liner leak detection system under all waste rock storage areas and additional contact water storage volume.

MINERAL RESOURCE ESTIMATE

The Mineral Resource Estimate is set out in Table 3 and was prepared by P&E Mining Consultants Inc. The Deposit is well-defined with 94% of the Mineral Resource contained in the Measured and Indicated (“M&I”) classifications. On a gold equivalent basis, the Deposit contains 2.5 million gold equivalent ounces in the M&I classifications at a grade of 4.3 g/t gold equivalent.

TABLE 3
MINERAL RESOURCE ESTIMATE AS AT OCTOBER 14, 2019

Classification

Tonnes
(1,000)

Gold
(g/t)

Gold
(koz)

Silver
(g/t)

Silver
(koz)

Copper
(%)

Copper
(mlb)

Lead
(%)

Lead
(Mlb)

Zinc
(%)

Zinc
(Mlb)

Open Pit

Measured

7,062

1.94

440.1

18.95

4,302.0

0.34

53.51

0.14

22.1

3.02

470.1

Indicated

4,341

1.75

244.7

29.67

4,140.1

0.14

13.55

0.35

33.8

1.97

188.1

M&I

11,403

1.87

684.8

23.03

8,442.0

0.27

67.05

0.22

55.9

2.62

658.2

Inferred

264

3.13

26.6

42.32

359.4

0.06

0.35

0.56

3.3

0.62

3.6

Underground

Measured

1,382

2.21

98.0

25.37

1,127.7

0.30

9.1

0.32

9.7

4.43

134.9

Indicated

5,486

1.86

327.7

25.98

4,582.8

0.42

51.2

0.32

38.2

3.53

427.3

M&I

6,868

1.93

425.7

25.86

5,710.6

0.40

60.3

0.32

47.9

3.71

562.2

Inferred

930

3.88

116.0

51.21

1,531.8

0.47

9.7

0.45

9.2

1.40

28.7

Total

Measured

8,444

1.98

538.1

20.00

5,429.7

0.34

62.6

0.17

31.8

3.25

605.0

Indicated

9,827

1.81

572.4

27.61

8,722.9

0.30

64.7

0.33

72.0

2.84

615.4

M&I

18,271

1.89

1,110.4

24.09

14,152.6

0.32

127.3

0.26

103.8

3.03

1,220.5

Inferred

1,194

3.71

142.5

49.24

1,891.2

0.38

10.1

0.47

12.5

1.23

32.3

1.

MINERAL RESOURCES WHICH ARE NOT MINERAL RESERVES DO NOT HAVE DEMONSTRATED ECONOMIC VIABILITY.

2.

The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.

3.

The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.

4.

The Mineral Resources in this Technical Report were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by the CIM Council.

5.

The Mineral Resource Estimate was based on metal prices of $1,375/oz gold, $22.27/oz silver, $1.10/lb zinc, $3.19/lb copper and $1.15/lb lead.

6.

Open pit Mineral Resources were defined within the constraining pit design as per the 2018 Feasibility Study.

7.

NSR cut-off values were established for each metallurgical type. Refer to the Technical Report for full details.

MINING

The Back Forty mine plan presented in the PEA is based on mining the highest value material as soon as possible and treating this material through the process plants to maximize cash flow. This strategy is achieved by mining the mineralized material and either feeding the material directly to the process plant or stockpiling the material on-site for processing later per a feed schedule based on optimal economics for the operation. This plan consists of a combined open pit and underground mining operation. Open pit mining will take place from Year 1 to Year 5. Underground development will be initiated in Year 5 and underground production mining will continue to Year 11.

A series of grade blending stockpiles, by material type, will serve to prioritize the processing of higher-grade material and also manage fluctuations in process plant feed delivery from the two mining operations.

The Back Forty Project area consists of very subdued terrain and topography. The area, topography and climate are amenable to the conventional open pit mining operations proposed for the Project. The open pit mining operation will encompass a single open pit that will be mined with conventional mining equipment in three pushback phases. The underground mine will be developed beneath the open pit with a single decline access point located partway down the open pit main access ramp.

Open Pit Mining

The open pit design is based on the 2018 Feasibility Study design. Minor modifications were made to standardize on 5-metre-high benches with a quadruple bench configuration, resulting in a 20-metre vertical distance between catch berms.

Open pit mining operations will be carried out by Company personnel except for blasting operations. A blasting contractor will be used to supply the explosives, prepare the blasts, charge the holes, fire the blast, and inspect the area post-blast. The equipment fleet will consist of hydraulic excavators and wheel loaders, both with 8 m3 buckets, and 90 t capacity haul trucks, plus track dozers, graders, and support equipment.

A summary of the open pit mining schedule is shown in Table 4.

TABLE 4
OPEN PIT MINING SCHEDULE

Type

Units

Total

Year

Y-1

Y1

Y2

Y3

Y4

Y5

Overburden

kt

3,778

1,233

1,648

896

Waste Rock

kt

47,970

1,568

9,263

12,130

13,437

10,512

1,058

Total Waste

kt

51,747

2,801

10,911

13,027

13,437

10,512

1,058

Process Plant Feed Mining

Total Sulphide

kt

8,815

73

2,236

1,647

1,406

2,678

776

Total Oxide

kt

1,317

126

353

327

157

309

45

Total Feed

kt

10,132

199

2,589

1,974

1,563

2,987

821

Total Material

kt

61,880

3,000

13,500

15,000

15,000

13,500

1,879

Strip ratio

w:o

5.1

14.1

4.2

6.6

8.6

3.5

1.3

Feed to Stockpiles

kt

6,961

199

1,995

1,609

575

1,953

629

Underground Mining

Extraction of the underground Mineral Resource will be achieved by a combination of mechanized Cut and Fill (“CF”) or Longhole (“LH”) methods. CF mining is the dominant method, producing approximately 63% of mined tonnes, with LH producing the remaining 37% of tonnes. CF mining uses one of four stope sizes, and targets flatter-dipping material (dip less than 55°). LH mining uses one of two stope size subsets and orientations (transverse or longitudinal). The weighted average direct mining cost is $33/tonne.

The underground mine begins construction and development in Year 5 with commercial production achieved in Year 6. The production rate of the underground varies depending on development requirements, with a commercial production rate of 2,300 t/d, increasing to a maximum of 3,200 t/d in Year 7.

Table 5 shows the production tonnes from the Back Forty underground deposit by year and mining method.

TABLE 5
PRODUCTION BY MINING TYPE BY YEAR (KT)

Type

Year
5

Year
6

Year
7

Year
8

Year
9

Year
10

Year
11

Total

LH

438

968

732

2,138

CF Type 1

98

503

520

268

1,389

CF Type 2

119

551

558

536

232

1,996

CF Type 3

1

18

43

47

13

122

CF Type 4

1

16

22

24

8

72

Total

122

683

1,126

1,126

959

968

732

5,717

MINERAL PROCESSING AND METALLURGY

Oxide mineralized material and sulphide mineralized material (Main, Pinwheel and Tuff material) will be treated through separate process plants.

The oxide mineralized material will be processed via a cyanidation leach circuit to produce doré. Depending on the grades of copper, zinc and lead, the sulphide mineralized material will be processed via two stages of flotation to produce concentrates, i.e. either a copper and zinc concentrate, or a lead and zinc concentrate.

Sulphide mineralized material will be processed on a campaign basis based on the main material types that have a similar metallurgical response. As such the design of the sulphide process plant is based on a flexible metallurgical flowsheet to process the main material types.

The oxide process plant has been designed for a throughput of 350 t/d. The overall flowsheet includes the following steps:

  1. Three stage crushing using an open circuit jaw crusher, open-circuit secondary cone crusher and closed-circuit tertiary cone crusher.
  2. Grinding and classification.
  3. Pre-leach thickening.
  4. Cyanide leach.
  5. Vacuum filtration of leaching tailings.
  6. SART.
  7. Carbon-in-Column gold adsorption.
  8. Carbon acid-washing, desorption and recovery.
  9. Smelting to produce doré.
  10. Cyanide destruction of the final wash filtrate from the vacuum filtration step.
  11. Tailings repulping and disposal to the Tailings Management Facility (“TMF”).

The sulphide process plant has been designed for a nominal throughput of 2,800 t/d. The overall flowsheet includes the following steps:

  1. Primary crushing.
  2. Coarse mineralized material stockpile and reclaim.
  3. Grinding and classification.
  4. Gravity concentration.
  5. Bulk rougher flotation to produce copper concentrate or lead concentrate depending on mineralized material campaign.
  6. Zinc rougher flotation.
  7. Bulk concentrate regrind (copper or lead concentrate).
  8. Zinc concentrate regrind.
  9. Bulk cleaner flotation, using three stages of cleaning (copper or lead concentrate).
  10. Zinc cleaner flotation, using two stages of cleaning.
  11. Bulk concentrate thickening and filtration (copper or lead concentrate).
  12. Zinc concentrate thickening and filtration.
  13. Tailings thickening and disposal in the common TMF.

Metal Production

Metal production figures are summarized in Table 6.

TABLE 6
PAYABLE METAL PRODUCTION

Metal

Life of Project

Average Annual

Gold (K oz)

692

58

Zinc (M LBS)

801

67

Copper (M lbs)

86

7

Silver (K oz)

6,260

522

Lead (M lbs)

26

2

The production profile at Base Case metal prices is shown in Figure 1.

A summary of the life of project revenue by metal, revenue by product, and recovery by metal are included in Table 7 (calculated at Base Case metal prices).

TABLE 7

Revenue by Metal

Revenue by Product

Total Recovery by Metal

Metal

% of Revenue

Product

% of Revenue

Metal

Recovery

Gold

45%

Zinc Concentrate

43%

Gold

74.3%

Zinc

38%

Copper Concentrate

38%

Zinc

91.9%

Copper

11%

Doré

13%

Copper

81.2%

Silver

5%

Lead Concentrate

6%

Silver

67.2%

Lead

1%

Total

100%

Lead

83.7%

Total

100%

Concentrate Marketing

In addition to a Doré, the Back Forty Project will produce zinc, copper and lead concentrates. The zinc concentrates will on average grade 53.9%, the copper concentrates will on average grade 18.5% (with high precious metals content), and the lead concentrate will on average grade 35%. Over its 12-year life, the Project will on average annually produce 66,200 tonnes of zinc concentrate, 18,600 tonnes of copper concentrate and 3,100 tonnes of lead concentrate. All concentrates are expected to be marketable. Studies are ongoing to evaluate the optimal blends, destinations and transport options for Back Forty concentrates. The Company believes that there are multiple attractive options for each of the concentrates.

CAPITAL AND OPERATING COSTS

The capital estimate is summarized in Table 8 by area and by discipline. All costs are based on Q3 2019 pricing. The estimate is deemed to have an accuracy of ±25%.

TABLE 8

CAPITAL ESTIMATE SUMMARY BY AREA

Item

Capital Costs ($M)

Construction Indirects

11.4

Oxide Process Plant

24.1

Sulphide Process Plant

57.5

TMF/Waste Rock Facility

42.6

Infrastructure

34.2

Mining

23.6

EPCM

15.7

Owner costs

11.4

Subtotal

220.6

Contingency (14%)

29.9

Total

250.4

Sustaining Capital

Capital expenditures incurred after Year -1 are considered sustaining capital. Open pit sustaining capital totals $45.9M in expenditures primarily incurred between Year 1 and Year 6. Initial capital costs for the underground mine are treated as sustaining capital costs for the Back Forty Project since open pit mining will be well underway by the time the underground mine is developed. Sustaining capital costs also include all costs associated with infrastructure, capital waste development (vertical and lateral), relevant equipment leasing costs (down payments, legal fees, origination costs and mobilization costs), and the paste backfill plant. Total underground sustaining capital costs are estimated at $98.9M primarily incurred in Year 5 and Year 6.

Other Project sustaining capital costs include subsequent TMF stage raises over the LOM and process plant annual capital expenditures. Other Project sustaining capital schedule over the life of mine is estimated at $69.3M incurred between Year 1 and Year 5.

Mine closure costs, salvage value and rehabilitation costs are estimated at $75M.

Operating Costs

A summary of the life of project operating costs is outlined in Table 9.

TABLE 9
OPERATING COSTS SUMMARY

Life of Project Cost
($M)

Unit Cost
($/t)

Gross Revenue

2,095

132

Realization Charges

310

19

NSR (Base Case)

1,785

113

Open pit mining

178

11

Underground mining

288

18

Process plant

310

20

G&A

46

3

Total Site Opex

821

52

Qualified Persons

This news release has been reviewed and approved by the Qualified Persons noted below. The Qualified Persons have reviewed or verified all information for which they are individually responsible.

TABLE 10
QUALIFIED PERSONS

Qualified Person

Employer

Professional
Designation

Neil Lincoln

Lincoln Metallurgical Inc.

P.Eng.

Andrew Bradfield

P&E Mining Consultants Inc.

P.Eng.

Yungang Wu

P&E Mining Consultants Inc.

P.Geo.

David Penswick

Gibsonian Inc

P.Eng.

About Aquila

Aquila Resources Inc. (TSX: AQA, OTCQB: AQARF) is a development‐stage company focused on high grade and gold-rich projects in the Upper Midwest, USA. Aquila’s experienced management team is focused on advancing pre-construction activities for its 100%‐owned gold and zinc‐rich Back Forty Project in Michigan.

Aquila’s flagship Back Forty Project is an open pit volcanogenic massive sulfide deposit with underground potential located along the mineral‐rich Penokean Volcanic Belt in Michigan’s Upper Peninsula. Back Forty contains approximately 1.1 million ounces of gold and 1.2 billion pounds of zinc in the Measured & Indicated Mineral Resource classifications, with additional upside potential.

Aquila has two other exploration projects: Reef Gold Project located in Marathon County, Wisconsin and the Bend Project located in Taylor County, Wisconsin. Reef is a gold-copper property and Bend is a volcanogenic massive sulfide occurrence containing copper and gold. Additional disclosure of Aquila’s financial statements, technical reports, material change reports, news releases and other information can be obtained at www.aquilaresources.com or on SEDAR at www.sedar.com.

Cautionary statement regarding forward-looking information

Readers are cautioned that the conclusions, projections and estimates set out in this news release are subject to important qualifications, assumptions and exclusions, all of which are detailed in the Technical Report. To fully understand the summary information set out in this news release, the Technical Report to be filed on SEDAR should be read in its entirety.

This press release may contain certain forward-looking statements. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking statements and information include, but are not limited to, statements with respect to future permitting and legal timelines and the advancement of the Company’s Back Forty Project, the additional upside potential of the Project, statements with respect to the expected project economics for the Project, such as estimates of life of mine, total production and average production, metal production and recoveries, C1 cash costs, AISC, capital and operating costs, pre- and post-tax IRR, pre- and post-tax NPV and cash flows, the potential conversion of Inferred Mineral Resources into Indicated Mineral Resources, and any projections outlined in the Preliminary Economic Assessment in respect of the Project. Forward-looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of Aquila to control or predict, that may cause their actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to: risks with respect to the COVID-19 pandemic; and other related risks and uncertainties, including, but not limited to, risks and uncertainties disclosed in Aquila’s filings on its website at www.aquilaresources.com and on SEDAR at www.sedar.com. Aquila undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents Aquila’s best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. Furthermore, mineral resources that are not mineral reserves do not have demonstrated economic viability.

Non-IFRS Measures

C1 cash costs, AISC, and EBITDA are non-IFRS financial measures calculated by the Company as set forth below, and may not be comparable to similar measures reported by other companies.

C1 cash costs, which are intended to measure direct cash costs of producing paid metal, include all direct costs that would generate payable recoveries of metals for sale to customers, including mining of mineralized materials and waste, leaching, processing, refining and transportation costs, on-site administrative costs and royalties, net of by-product credits. C1 cash costs do not include depreciation, depletion, amortization, exploration expenditures, reclamation and remediation costs, sustaining capital, financing costs, income taxes, or corporate general and administrative costs not directly or indirectly related to the Project. C1 cash costs are divided by the number of ounces of gold estimated to be produced for the period to arrive at cash costs per gold ounce produced.

AISC includes C1 cash costs, as defined above, plus exploration costs at the Project and sustaining capital expenditures (including additional tailings storage, permitting and customary improvements to the operations over the life of the project). AISC is divided by the number of ounces of gold estimated to be produced for the period to arrive at AISC per gold ounce produced.

EBITDA is earnings before interest, taxes, depreciation, and amortization.

Barry Hildred, CEO
Aquila Resources Inc.
Tel: 647.943.5672
Email: bhildred@aquilaresources.com

David Carew, Director of Corporate Development & Investor Relations
Aquila Resources Inc.
Tel: 647.943.5677
Email: dcarew@aquilaresources.com

Source: Aquila Resources Inc.


AQUILA RESOURCES ANNOUNCES AMENDMENTS TO GOLD AND SILVER STREAMS WITH OSISKO

– Agreement Provides Immediate Funding of US$2.5 Million –

TORONTO–(BUSINESS WIRE)–June 18, 2020

Aquila Resources Inc. (TSX:AQA, OTCQB:AQARF) (“Aquila” or the “Company”) is pleased to announce that the Company and a subsidiary of Osisko Gold Royalties Ltd. (“Osisko”) have entered into definitive agreements to amend certain terms of the gold purchase agreement dated November 8, 2017 (the “Gold Stream”) and the amended and restated silver purchase agreement dated September 30, 2016 (the “Silver Stream”) in order to accelerate Aquila’s access to a portion of the outstanding funding under the Gold Stream and to provide additional flexibility.

Under the terms of the amendments, Osisko will immediately advance US$2.5 million (excluding transaction costs) of the remaining deposit under the Gold Stream to Aquila. Osisko will advance an additional US$7.5 million upon Aquila achieving certain corporate and project development milestones that are expected to be completed over the next 12 to 18 months. Osisko has also agreed to adjust certain milestone dates under the Gold Stream and Silver Stream to align the streams with the current project development timeline.

In exchange for Osisko agreeing to make the payments and milestone date changes described above, the remaining deposit available to Aquila under the Gold Stream will be reduced from US$40 million to US$35 million, of which US$10 million is payable as described above, and the remaining US$25 million will be payable pro rata with drawdowns under a senior construction facility for the Company’s Back Forty Project. The designated Gold Stream percentage remains unchanged at 18.5% until the delivery of 105,000 gold ounces to Osisko, upon which the stream will be reduced to 9.25%. Osisko will continue to pay 30% of the gold spot price on delivery, subject to a maximum payment of US$600/oz. The Silver Stream will be amended to increase the designated silver stream percentage from 75% to 85% of the number of payable silver ounces produced from Back Forty with no change to the ongoing price of US$4/oz.

“This transaction provides Aquila with the certainty of funding necessary to enable us to continue to advance the Back Forty Project towards construction,” said Barry Hildred, President and Chief Executive Officer of Aquila. “In addition to providing the Company with capital to continue building on recent positive permitting developments, the stream amendments also provide us with the flexibility to advance the Back Forty Project on a schedule that reflects anticipated permitting, engineering, and financing timelines. I want to thank Osisko for their continued support of Aquila and the Back Forty Project.”

Tax Update

The Company is also pleased to announce that the Canada Revenue Agency (“CRA”) has ruled in its favor regarding two Notices of Objection that Aquila filed in connection with re-assessments of certain of its input tax credits. As a result, the Company has received approximately US$685,000 from the CRA, including interest. Together with the US$2.5 million advance under the Gold Stream, the Company has received immediate funding of approximately US$3,185,000 (excluding transaction costs).

Advisors and Counsel

With respect to the stream amendments, Scotiabank acted as exclusive financial advisor to Aquila and McCarthy Tétrault LLP acted as legal counsel to Aquila.

About Aquila

Aquila Resources Inc. (TSX: AQA, OTCQB: AQARF) is a development-stage company with strategic assets in the Great Lakes Region. Aquila’s experienced management team is focused on advancing pre-construction activities for its 100%‐owned gold and zinc-rich Back Forty Project in Michigan.

Aquila’s flagship Back Forty Project is an open pit volcanogenic massive sulfide deposit with underground potential located along the mineral-rich Penokean Volcanic Belt in Michigan’s Upper Peninsula. Back Forty contains approximately 1 million ounces of gold and 1.1 billion pounds of zinc in the Measured & Indicated Mineral Resource categories, with additional upside potential.

Aquila has two other exploration projects: Reef Gold Project located in Marathon County, Wisconsin and the Bend Project located in Taylor County, Wisconsin. Reef is a gold-copper property and Bend is a volcanogenic massive sulfide occurrence containing copper and gold. Additional disclosure of Aquila’s financial statements, technical reports, material change reports, news releases and other information can be obtained at www.aquilaresources.com or on SEDAR at www.sedar.com.

Cautionary statement regarding forward-looking information

This press release contains certain forward-looking statements. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Forward-looking statements and information include, but are not limited to, statements with respect to the transactions contemplated under the Gold Stream and the Silver Stream and their terms and timing; and the advancement of the Company’s Back Forty Project, including, but not limited to, anticipated permitting, engineering, and financing timelines. Forward-looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of Aquila to control or predict, that may cause their actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein, including but not limited to: risks and uncertainties related to the availability of further advances of the remaining deposit under the Gold Stream; the availability of senior construction financing for the Back Forty Project; risks with respect to the COVID-19 pandemic; and other related risks and uncertainties, including, but not limited to, risks and uncertainties disclosed in Aquila’s filings on its website at www.aquilaresources.com and on SEDAR at www.sedar.com. Aquila undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents Aquila’s best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. Furthermore, mineral resources that are not mineral reserves do not have demonstrated economic viability.

Barry Hildred, CEO
Aquila Resources Inc.
647.943.5672
bhildred@aquilaresources.com

David Carew, Director of Corporate Development & Investor Relations
Aquila Resources Inc.
647.943.5677
dcarew@aquilaresources.com

Source: Aquila Resources Inc.


Capacity Building Project

Capacity Building Project Announcement

At Back Forty Mine, we don't measure our success purely on exploration and production. We believe a successful project must also be an active participant in the community and share responsibility for the community's well-being. We invest in the communities within which we operate - well beyond the needs of our operations.

We started a Capacity Building project with local governments intending to prevent the boom-bust cycle of mining and ensure the community that we will operate to the highest levels of transparency. Together we will form a community agreement which boosts economic and community development, protects the environment, and increases the health and safety of employees and residents. The arrangement will also focus on providing training and emphasizing local hire.

Worldwide such agreements are considered best practice between mining companies and host communities. Further, local agreements are a part of the permitting process in Wisconsin.

“Capacity building is not just about the effectiveness of a community today — it's about the community's ability to thrive effectively in the future,” said Chantae Lessard, Aquila’s Director Social Performance and Engagement. “Capacity building is an investment in the strength and future sustainability of a community.”

For more information, email info@backfortymine.com or call (906) 451-4192.


In Observance of Independence Day

Celebrating Independence Day!

We want to provide you with an update on the geotechnical drilling program we told you about in May. As you may recall, the purpose of the program is to gain a better understanding of the subsurface — it is not an exploration program. The plan has been moving along well, and we are pleased with the progress.

As the July 4th holiday approaches, we have decided to stop drilling beginning Wednesday, July 3 at 7:00 pm, and will resume on Monday, July 8 at 7:00 am. We’ll let you know when the program is complete, which we expect will run through July.

If you have any questions or concerns, you can reach us via email at info@backfortymine.com, by telephone at (906) 451-4192, or online to backfortymine.com/contact us.

Have a safe and happy Independence Day!


Consolidated public hearing June 25, 2019

Meeting details

We have all of the permits necessary to construct and operate the Back Forty Mine. Since the issuance of our original mine permit in 2016, we have refined elements of the project design to be consistent with our feasibility study and previously issued wetland permit. The changes require us to amend both our mine and air permits and apply for a dam safety permit to ensure consistency across the permits.

The Michigan Department of Environment, Great Lakes, and Energy (EGLE) is hosting a consolidated public hearing for the two permit amendments and one new permit. The hearing will be June 25, 2019, from 5:30 P.M. to 9:00 P.M. CDT at the Stephenson High School gymnasium, W526 Division Street, Stephenson, Michigan 49887.

The EGLE has published multiple resources concerning the permits, including:

Comments

Submit written comments using the information below.

Dam Permit
EGLE, Water Resource Division, Marquette District Office
1504 West Washington Street, Marquette, MI, 49855
Due by July 5, 2019

Air Permit to Install Modification 
Ms. Annette Switzer, Permit Section Manager, EGLE, AQD
P.O. Box 30260, Lansing, Michigan, 48909-7760
Due July 23, 2019

Comments may also be submitted online. Click here, scroll to Aquila Resources Inc. - Permit to Install Application No. 205-15A, and click Submit Comment.

Mine Permit Amendment
Back Forty Project, EGLE/OGMD
1504 West Washington Street, Marquette, MI 49855
E-mail to EGLE-Mining-Comments@michigan.gov with “Back Forty Mining Permit” as the subject.
Due July 23, 2019

If you have any questions or concerns, you can reach us via email at info@backfortymine.com, call our hotline at 906-451-4192, or fill out our contact form here.


IS BACK FORTY A SULFIDE MINE?

No.

We are a primary zinc-gold mine with other minerals including silver, copper, and lead. However, the ore body happens to be in sulfide-bearing rock.

The term “sulfide mining” is slang, not a scientific definition or classification of mining. It is a term used by mining opponents to elicit concern and to confuse people into thinking that a mining company is producing something other than the base minerals needed by society, like zinc, nickel, cobalt, gold, and other essential raw materials. These metals occur naturally as sulfide-bearing mineral groups. When present in sufficient amounts they form a minable mineral deposit like the Back Forty. Most of the metals that we use in society today come from mineral deposits containing sulfide. There is no basis for describing zinc, copper or any other mineral mine as a sulfide mine.

back forty mine sulfide mining

SPRING 2019 DRILLING PROGRAM

Spring 2019 Drilling Program Announcement

Aquila Resources, Inc. will be conducting drilling activities at the Back Forty Project beginning around May 22nd, 2019. This program is expected to run for approximately two months, although we may extend the work.

You may see the mobilization of a core drilling rig and support equipment near the mine site during that time. We plan to access the drilling locations by using existing woodland roads and trails to reduce surface disturbance. Our drilling program will take place seven days per week but only during day-time hours while we are drilling near the Menominee River. Drilling will occur 24/7 for all other drill holes. We will not be drilling on Memorial Day or the Fourth of July holidays. As with past programs, we will use engineering controls to minimize noise as much as possible. However, when drilling nears the Menominee River, the sound will carry to nearby residents. We apologize in advance for this disturbance.

We will follow all of the conditions and requirements in our exploration permit. Any topsoil disturbed from drill site preparation will be stockpiled and used to restore sites to the natural grade. Brush and branches will be cleaned up or spread to naturalize the site, and we will reseed all disturbed areas per DNR Unit Manager’s specifications.

If you have any questions or concerns, you can reach us via email at info@backfortymine.com, call our hotline at 906-451-4192, or on our contact page.


COURT UPHOLDS ISSUANCE OF BACK FORTY MINE PERMIT

Shares Outstanding: 337,568,556

TORONTO, May 6, 2019 /CNW/ - Aquila Resources Inc. (TSX: AQA, OTCQB: AQARF) ("Aquila" or the "Company") is pleased to announce that on May 3, 2019, the Michigan Office of Administrative Hearings and Rules issued a Final Decision and Order upholding the Michigan Nonferrous Metallic Mineral Mining Permit ("Mining Permit") for its Back Forty Project in Michigan.

In February 2017, both the Menominee Indian Tribe of Wisconsin and an individual owning property near the project site filed an administrative contested case challenge to the issuance of the Mining Permit by the Michigan Department of Environmental Quality, now the Michigan Department of Environment, Great Lakes, and Energy. An Administrative Law Judge ("Judge") convened an evidentiary hearing in April of 2018, which ended in October 2018. On May 3, 2019, following 30 days of cumulative testimony, the 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 Non Ferrous Metallic Mining Statute.

Barry Hildred, President & CEO of Aquila, commented "Aquila will continue its efforts with the State of Michigan and local communities to demonstrate our commitment to environmental responsibility and sustainable resource development that benefits all stakeholders. The Back Forty Mine will be a safe, disciplined operation that promotes and supports local community socio-economic development and is protective of the environment."

ABOUT AQUILA RESOURCES

Aquila Resources Inc. (TSX: AQA, OTCQB: AQARF) is a development‐stage company with strategic assets in the Great Lakes Region. The Company's experienced management team is focused on advancing pre-construction activities for its 100%‐owned zinc‐ and gold‐rich Back Forty Project in Michigan.

Aquila's flagship Back Forty Project is an open pit volcanogenic massive sulfide deposit with underground potential located along the mineral‐rich Penokean Volcanic Belt in Michigan's Upper Peninsula. The Project contains approximately 1.1B pounds of zinc and 1M ounces of gold in the Measured & Indicated Mineral Resource categories, with additional upside potential. Aquila has received all State and Federal permissions required for the construction and commencement of operations at the Back Forty Project.

The Company has two other exploration projects: Reef Gold Project located in Marathon County, Wisconsin and the Bend Project located in Taylor County, Wisconsin. Reef is a gold-copper property and Bend is a volcanogenic massive sulfide occurrence containing copper and gold.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This press release may contain certain forward‐looking statements within the meaning of applicable Canadian securities legislation. In certain cases, forward‐looking statements can be identified by the use of words such as "plans", "expects" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar expressions suggesting future outcomes or statements regarding an outlook.

These and other forward‐looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the ability of Aquila to control or predict, that may cause their actual results, performance or achievements to be materially different from those expressed or implied thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein. These risks include those described under the heading "Risk Factors" in Aquila's most recent annual information form and its other public filings, copies of which can be under Aquila's profile at www.sedar.com. Aquila expressly disclaims any obligation to update forward‐looking information except as required by applicable law.  Such forward‐looking information represents Aquila's best judgment based on information currently available. No forward‐looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward‐looking statements or information. Furthermore, Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.

SOURCE Aquila Resources Inc.


WATER TREATMENT PROCESS

Water pollution is not an option

As a mining company, we know our environmental footprint extends beyond our fence line. The most obvious example is water, which — if managed improperly — has the potential to harm the environment. Using state of the art water treatment, process control, testing, and water management capabilities we can eliminate that potential.

Early in project development, water balance models predict the amount of water necessary versus available. Process requirements, reuse opportunities, plus historical climate and hydrological data are all taken into account. The models serve as the foundation of a water management plan, which is an integral component of mine design, operation, and closure.

In an ideal situation, you would have just the right amount of water when it is needed. In Back Forty’s case, we have more water than we can use; therefore we need to collect, treat, and discharge excess water. That means our water management plan must be tailored to reflect the needs of both the facility and the community.

As a result, our plan promotes continuous improvement in the form of minimizing water loss, efficient water usage, in-process recirculation systems, and most importantly — effective water treatment.

Our mine features an on-site, state-of-the-art wastewater treatment plant (WTP) to ensure the treated water is safe for the environment, and even cleaner than the strict quality standards established in our NPDES permit. For example, our standard for mercury is 1.3 parts-per-trillion, or 0.0013 ng/L which much lower than the EPA safe drinking water standards and the average statewide observed concentrations in water bodies.  The WTP is designed to treat up to 63,000 gallons of water per hour. The treated water will be reused in the mining process or discharged to the environment. The plant will begin operating during construction and continue into closure.

PROCESS DESCRIPTION

CONTACT WATER BASINS

Water that comes into contact with mining activities (e.g., mill process water, inflow to the open pit, tailings and waste rock facilities, runoff from snow and rain) will flow via gravity or pumps to lined Contact Water Basins (CWB). Design features of the CWBs include a maximum capacity of roughly 161M gallons, ability to contain a 100-year/24-hour storm event, a composite liner system, and emergency spillway to the open pit. From the CWBs, water will be pumped to the WTP to begin the treatment process.


PRECIPITATION

Treatment starts with a series of reactor tanks to remove as many dissolved solids as possible from the water. A chemical reaction within the tanks causes very fine particles to bind together to form larger particles for easier removal in the following steps.

back forty precipitation

CLARIFICATION

Here the particles, or solids, settle to the bottom of the tank. The solids are pumped to the mill to be combined with thickened tailings and sent to the tailings management facility. The water above flows to the filtration process.

back forty clarification water treament

FILTRATION

The water will travel through a sequence of filters to remove any fine particles remaining after the clarifier.

The first is a multimedia filter composed of elements such as sand, activated carbon, and gravel to remove solids from the water. Multimedia filters help remove suspended solids similar to how a coffee filter traps coffee grounds and allows water to pass.

Next, the water passes through a 0.1 micron cartridge filter. For a sense of scale, a human red blood cell is about 7.5 microns wide. The tiny holes in this filter allow water to move through and stop unwanted particles from continuing.

From here, water passes through another filter with adsorbent pellets designed to collect dissolved mercury. The water we discharge to the Menominee River is required to meet the quality standard of 1.3 parts-per-trillion — try to imagine a single drop in 10 million gallons of water.

Finally, water will pass through a 0.5 micron cartridge filter to prevent any remaining particles from leaving the system. From here the water is sent to the treated water tank.

back forty mine water treatment filters

TREATED WATER

The treated water storage tank will hold the water until it is reused in the mining process or discharged to the environment. Our permit allows for the release of up to 1.52 million gallons of treated water per day. The actual amount discharged will vary by the amount of water the plant receives. We will only discharge water that meets quality standards to the Menominee River. If water does not meet permit conditions, we will return it to the CWBs for re-treatment.

An on-site laboratory will analyze water quality data necessary for both operations and process control. A third-party accredited laboratory will confirm compliance with permit requirements.

back forty mine treated water

MONITORING

For more than a decade, we have been studying the regional groundwater and surface water conditions. Simultaneously, we have managed a regional hydrology survey to define surface water conditions in the surrounding rivers and lakes.

Existing groundwater and surface water monitoring programs extending beyond the mine site will continue throughout operations and after mine closure. Monitoring includes water quality and the aquatic ecosystem both upstream and downstream of the discharge point to the Menominee River. Michigan Department of Environment, Great Lakes, and Energy, U.S. Environmental Protection Agency, and

Wisconsin Department of Natural Resources all determined that the conditions in our water discharge permit will protect the health of the community, wildlife and the environment — including the river.

Throughout the life of the mine, we will continue to look for ways to reduce our environmental impact. If you have additional questions or concerns, you can reach us by clicking on the Contact tab at the top of the page.


2019 ESSAY COMPETITION

2019 High School Senior Essay Competition

The application deadline for 2019 has passed

Once again, we are offering area high school seniors a chance at $10,000 in educational scholarships. Our essay competition engages and challenges students from Marinette and Menominee Counties to learn and write about mining-related topics. Over the years, we’ve awarded nearly $50,000 in scholarships to area students.

2019 Theme

What role do minerals play in our national defense?

Scholarships

Mining for Tomorrow Scholarship – Eight (8) $1,000 scholarships will be awarded to students with the highest ranked essays.

Clifford D. Nelson Memorial Scholarship – One (1) $2,000 scholarship is available for a student that will be attending Michigan Technological University and majoring in a mining-related field, including Applied Geophysics, Geology, Geological Engineering, Mining, and Mining Engineering.

Rules

  • Submissions must be a minimum of 500 words and may not exceed 1,000 words
  • Only one essay per student may be submitted
  • All submissions must be typed
  • Documentation of sources is required
  • Students must attach their submission in Word or PDF format

Eligibility

To qualify for the scholarship, students must be graduating from high school in Marinette or Menominee Counties in 2019. Home-schooled students are eligible to participate. Applicants must provide proof of admission in an undergraduate college or vocational program in 2019.

Selection Criteria

Selection criteria include writing style, content, grammar, originality, clarity, conciseness, articulation, and organization.

Submission Instructions

  • Entries should be completed online at backfortymine.com/essaycontest2019
  • Mailed submissions must be received no later than 11:59 p.m. CST on April 15, 2019
  • Address essays submitted by U.S. mail to:
    • Back Forty Mine, Attn: Essay Competition, E807 Gerue St., Stephenson, MI 49887
  • Back Forty Mine is not responsible for lost or delayed mail or emails

Scholarship Awards and Announcement of Winners

Each student who submits a winning essay will receive an educational scholarship. There will be nine scholarships available — for a total of $10,000 in scholarship awards. The selected essay winners will be contacted directly by Back Forty Mine. A formal announcement of winners will take place during the senior awards assembly at their high school.

If you have any questions, please call (906) 753-9602 or email info@backfortymine.com.