Aquila Resources Announces Third Quarter 2021 Financial Results

TORONTO--(BUSINESS WIRE)--November 12, 2021-- 

Aquila Resources Inc. (TSX: AQA, OTCQB: AQARF) ("Aquila" or the "Company") announces the filing of its financial results for the third quarter ended September 30, 2021. All amounts, unless indicated, are reported in US dollars.

Guy Le Bel, President & CEO of Aquila, commented, "This past quarter has been transformational for Aquila. Since announcing the proposed acquisition of the Company by Gold Resource Corporation in September, our team has been working closely with our counterparts to ensure a smooth closing of the Transaction following the upcoming Aquila Shareholder Meeting. We are excited to start a new chapter as part of a multi-jurisdictional, diversified precious and base metal producer with an attractive growth profile underpinned by the Back Forty Project. We thank our shareholders for their strong support of Company over the years. During the quarter, Aquila also continued to progress the optimized Feasibility Study for the Project, which remains on track for completion in the coming months."

THIRD QUARTER HIGHLIGHTS

   -- On September 7, 2021, Aquila announced the entering into of a binding 
      letter agreement (the "Letter Agreement") with Gold Resource Corporation 
      ("GORO") (NYSE American: GORO) setting out certain key terms of a 
      proposed acquisition by GORO of all the issued and outstanding common 
      shares of Aquila by way of a plan of arrangement under the Business 
      Corporations Act (Ontario) (the "Transaction"). Pursuant to the 
      Transaction, GORO will acquire all the issued and outstanding Aquila 
      shares for 0.0399 of a GORO share per Aquila share (the "Exchange 
      Ratio"). Based upon the 20-day volume-weighted average price ("VWAP") of 
      GORO's shares on the NYSE American stock exchange on September 3, 2021, 
      being the last trading day prior to the date of the Letter Agreement, the 
      Exchange Ratio represents a 29% premium to the 20-day VWAP of Aquila's 
      shares on the Toronto Stock Exchange as of such date. The Exchange Ratio 
      represents consideration of C$0.09 per Aquila share (the "Per Share 
      Price"), reflecting a premium of 12.5%, based upon the closing prices of 
      the Aquila shares and the GORO shares on September 3, 2021. 
   -- On August 16, 2021, Aquila announced that a subsidiary of Osisko Gold 
      Royalties Ltd ("OGR") agreed to immediately release $2.4 million (the 
      "Fourth Deposit") to the Company under the Amended and Restated Gold 
      Purchase Agreement dated as of March 10, 2021. The Fourth Deposit will be 
      used for the continued advancement of the Back Forty Project Optimized 
      Feasibility Study and demonstrates OGR's strong support for the Back 
      Forty Project. 
   -- On August 16, 2021, Aquila also announced that Guy Le Bel, President and 
      CEO of the Company, was appointed to the Board of Directors. 
   -- As at September 30, 2021, Aquila had cash of $2.3 million and negative 
      working capital of $0.6 million. This compared to cash of $1.8 million 
      and negative working capital of $0.8 million at December 31, 2020. The 
      decrease in working capital is primarily due to permitting and legal 
      activities at its Back Forty Project. The Company is actively evaluating 
      financing and strategic alternatives and continues to take measures to 
      preserve liquidity including cutting discretionary spending, and working 
      with service providers to manage and defer spend wherever possible. 

POST QUARTER HIGHLIGHTS

   -- On October 6, 2021, Aquila announced that it entered into a definitive 
      arrangement agreement (the "Arrangement Agreement") with GORO in 
      connection with the Transaction. The Aquila management team and Board of 
      Directors believe strongly that the Transaction outlined in the 
      Arrangement Agreement provides significant benefits to Aquila 
      shareholders. GORO has a strong balance sheet, it owns a consistently 
      profitable mine in the Americas, and it has a highly accomplished 
      technical and operating team. As such, this Transaction materially 
      de-risks the financing and development of the Back Forty Project for the 
      benefit of the Company's stakeholders. The Transaction requires the 
      approval of (i) 662/3 percent of the votes cast by Aquila shareholders 
      and (ii) a simple majority of the votes cast by the minority shareholders 
      (excluding shareholders whose votes are required to be excluded pursuant 
      to Multilateral Instrument 61 -- 101) at a special meeting of 
      shareholders (the "Aquila Shareholder Meeting"). The Aquila Shareholder 
      Meeting is scheduled to be held on November 17, 2021. Each of Orion Mine 
      Finance and Hudbay Minerals Inc., which hold 28.3% and 10.4%, 
      respectively, of the issued and outstanding Aquila shares, has entered 
      into a voting support agreement with GORO pursuant to which they have 
      agreed to vote their Aquila shares in favour of the Transaction. In 
      addition, all of the directors and officers of Aquila holding 
      approximately 1.9% of the issued and outstanding Aquila shares in 
      aggregate have also executed a voting support agreement. The Aquila Board 
      of Directors unanimously recommends that Aquila Shareholders vote FOR the 
      Arrangement Resolution. 
   -- On November 8, 2021, Aquila announced that leading independent 
      international corporate governance analysis and proxy advisory firm 
      Institutional Shareholder Services recommended that Aquila shareholders 
      vote FOR the Arrangement Resolution in advance of the Aquila Shareholder 
      Meeting. 
   -- On October 5, 2021 Aquila announced that it has closed the previously 
      announced transaction (the "GL Transaction") to sell its Bend and Reef 
      properties in Wisconsin to Green Light Metals Inc. ("GL"). Total 
      consideration of C$7,000,000 payable to Aquila consists of: (i) upfront 
      cash consideration of C$2.1 million, of which C$1 million was advanced as 
      a deposit upon the execution of the letter of intent with respect to the 
      Transaction in June 2021 and the remaining C$1.1 million was paid at 
      closing and (ii) a non-interest bearing promissory note of GL in the 
      principal amount of C$4.9 million. 

OUTLOOK

   -- In connection with the GORO Transaction, the Aquila Shareholder Meeting 
      is scheduled to be held on November 17, 2021. The Transaction is also 
      subject to approval by the Ontario Superior Court of Justice (Commercial 
      List) and applicable stock exchange approvals. The Transaction does not 
      require the approval of GORO's shareholders. In addition to shareholder, 
      court and regulatory approvals, the Transaction is also subject to the 
      satisfaction of certain other closing conditions that are customary for a 
      transaction of this nature, and each of GORO and Aquila has provided 
      appropriate interim period covenants regarding the operation of its 
      business in the ordinary course. Subject to all conditions precedent to 
      completion of the Transaction being met, the Transaction is expected to 
      close in late November 2021. In connection with the closing of the 
      Transaction, Aquila will apply to have its shares delisted from the 
      Toronto Stock Exchange. 
   -- The Company is continuing to advance its Back Forty Project in Michigan, 
      where the main objectives are completing an optimized Feasibility Study 
      (the "Feasibility Study") and securing the remaining permits required for 
      construction and operations. The Feasibility Study will incorporate both 
      the open pit and underground mine plans and will reflect Aquila's 
      commitment to sustainability and responsible mining employing industry 
      best practices. 
   -- A key objective of the Feasibility Study is to incorporate feedback from 
      the Michigan Department of Environment, Great Lakes & Energy ("EGLE") and 
      the local community since the original permits were issued. By 
      incorporating the underground mine plan and modifying the Project 
      footprint, the Company expects to demonstrate substantially reduced 
      surface impact, including wetland impacts, and a longer mine life for the 
      benefit of all stakeholders. 
   -- The Company will continue to work with EGLE to finalize the Back Forty 
      groundwater model. Aquila is pleased with the significant progress made 
      in this regard and continues to collect the required site-specific data. 
   -- Following the completion of the Feasibility Study, Aquila will seek to 
      permit the optimized Project design. 

SELECTED FINANCIAL INFORMATION

The following table provides selected financial information that should be read in conjunction with the financial statements of the Company for the quarter ended September 30, 2021:

                                  Three months ended      Nine Months Ended 
                                    September 30,           September 30, 
                                      2021        2020        2021        2020 
------------------------------  ----------  ----------  ----------  ---------- 
Mineral property exploration 
 expenses                         $593,946    $537,696   1,631,276  $1,059,202 
Administrative expenses            641,512     742,633   1,886,813   2,393,686 
Net finance charges                427,070     405,214   1,284,443   3,137,227 
------------------------------  ----------  ----------  ----------  ---------- 
Loss from operations            $1,662,528  $1,685,543  $4,802,532  $6,590,115 
(Gain) loss on foreign 
 exchange                        (150,352)      51,227     (8,234)   (141,780) 
Loss (gain) on change in value 
 of contingent consideration       (9,468)       6,580    (53,519)     243,185 
Gain on change in fair value