Aquila Resources announces proposed financing transaction with Orion Mine Finance for US$20.75 million

- Includes US$17.25 million silver stream and US$3.5 million private placement –
- Funds to be used to complete next phase of development at Back Forty including
permitting activities and feasibility study -  

Shares Outstanding: 192,173,528

TORONTO, Jan. 27, 2015 /CNW/ - Aquila Resources Inc. (TSX: AQA) (FKT: JM4A) (the "Company", "Aquila"), a development-stage company with assets in the Great Lakes Region including its 100%-owned gold- and zinc-rich Back Forty Project in Michigan's Upper Peninsula ("Back Forty"), announced today that it has entered into an exclusivity agreement with Orion Mine Finance ("Orion") on a multi-level financing transaction that will include a private placement and a silver stream for total funding of US$20.75 million (collectively, the "Proposed Transaction"). The Proposed Transaction is subject to satisfactory completion of due diligence by Orion, the execution of mutually acceptable definitive agreements and receipt of Toronto Stock Exchange approvals. Proceeds from the Proposed Transaction will be used to fund the next stage of development at Back Forty, including the completion of permitting activities and a feasibility study, and the re-purchase of existing royalties on the Back Forty Project.

Transaction Highlights

• Aquila will issue 26,923,077 units ("Units") to Orion – with each Unit consisting of one common share and one-half of a three year warrant to purchase one common share at a price of US$0.19 per share – at a price of US$0.13 per Unit for gross proceeds of US$3.5 million;
  
  
• Orion will acquire 75% of Aquila's life of mine silver production from Back Forty for gross proceeds of US$17.25 million, subject to a draw-down schedule that will be set out in the definitive agreement;
  
  
• Orion will further pay an ongoing price of US$4.00 per ounce of silver delivered under the streaming agreement; and,
  
  
• Concurrent with the close of the Proposed Transaction, Aquila will repurchase the existing royalties at Back Forty from Vale Exploration USA, Inc. ("VE USA") and HudBay Minerals Inc. ("Hudbay") for consideration of US$4 million in cash and US$1 million in cash plus US$225,000 in Units (priced at US$0.13 per Unit), respectively.

Aquila currently anticipates that the Proposed Transaction will close in the first quarter of 2015.

"This transaction will be transformational for Aquila on a number of levels," stated Barry Hildred, CEO of Aquila. "The capital raised, which minimizes dilution to existing shareholders, will help us get Back Forty shovel-ready by the end of 2016. Over the near and mid-term, proceeds from the transaction will allow us to focus our efforts on the completion of permitting, feasibility and select exploration programs designed to determine additional resource upside in the Back Forty project area."

Private Placement

Aquila will issue 26,923,077 Units to Orion at a price of US$0.13 per unit for gross proceeds of US$3.5 million. Each Unit will be comprised of one common share and one-half of a warrant ("Warrant"). Each full Warrant will entitle the warrant holder to purchase one common share for a price of US$0.19 for a period of 36 months. Following the close of the Proposed Transaction, Orion will hold approximately 12.2% of the outstanding common shares in Aquila on a basic shares outstanding basis and 18.3% on a partially diluted basis. Orion will also have the right to participate in any future equity or equity-linked placements to maintain its interest level in Aquila. 

In connection with the private placement, Orion will have the right to nominate one individual for election to the Board of Directors of Aquila for 24 months following the close of the Proposed Transaction and thereafter for such time as Orion owns at least 10% of the outstanding common shares. A representative of Orion is expected to be appointed to the Board of Directors on the Closing Date.

Silver Stream

Orion, or a designated affiliate, will purchase 75% of the total payable silver ounces produced from the Back Forty Project for US$17.25 million in accordance with a draw-down schedule that will be set out in the definitive agreement. Orion will also pay an ongoing price of US$4.00 per each ounce of silver delivered under the streaming agreement.

Royalty Repurchase Transactions

As part of the Proposed Transaction, Aquila will repurchase the existing net smelter return (NSR) royalty and net distributable earnings (NDE) royalty on the Back Forty property from Hudbay and VE USA, respectively. Aquila will pay US$1 million in cash and issue US$225,000 worth of Units at US$0.13 per Unit to Hudbay. Aquila will repurchase the NDE royalty from VE USA for a one-time payment of US$4 million in cash.

Impact on Project Economics

The capital secured from the Proposed Transaction is expected to allow Aquila to fund Back Forty through the next phase of development, including permitting, feasibility and ongoing exploration programs in the immediate project area. The Silver Stream and the Royalty Repurchase Transactions do not materially change the Company's preliminary economic assessment on the Back Forty Project (the "PEA"), filed on SEDAR on September 8, 2014.

Raymond James Ltd. and TD Securities Inc. acted as financial advisors to the Company in connection with the Proposed Transaction.

About Aquila Resources

Aquila Resources Inc. (TSX: AQA) (Frankfurt: JM4A) is a development-stage company with assets in the Great Lakes Region including its 100%-owned gold- and zinc-rich Back Forty Project in Michigan's Upper Peninsula.

This press release contains 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.

Forward-looking statements relate to any matters that are not historical facts and statements of our beliefs, intentions and expectations about developments, results and events which will or may occur in the future, without limitation, statements with respect tothe Proposed Transaction, including the anticipated terms and use of proceeds thereof the anticipated closing date.

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. 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.