Aurelia Metals : Acquisition of Peak Mines

NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

Aurelia Metals Limited (ASX:AMI) ("Aurelia" or the "Company") is pleased to announce that it has entered into a binding agreement with TSX-listed New Gold, Inc. ("New Gold") to acquire a 100% interest in Peak Mines ("Peak") in Cobar, New South Wales, for US$58 million1 (the "Transaction").

• Transformational transaction, significantly increasing the Company's precious and base metals production, with:

  • A dominant landholding in a world class basin;

  • Two wholly-owned operating mines and processing facilities within 90km by road;

  • Two advanced development projects, being Nymagee and Great Cobar;

  • Increased commodity diversification with production of gold, silver, copper, lead and zinc;

  • Substantial expansion of exploration acreage in the highly prospective Cobar region to approximately 1,385 square kilometers, with a number of near-mine and regional targets identified;

  • A material increase in Aurelia's Mineral Resources2 and Mineral Reserves with opportunities at both Peak and Hera to extend operating mine life through conversion of resources to reserves.

• Value accretive combination of complementary businesses with operating synergies identified

• Peak has been in operation for over 25 years with a consistent history of reserve replacement

• Group production target for FY183 (assuming six months of Peak production):

  • Gold production 75,000 - 90,000 oz (gold equivalent 125,000 - 140,000 oz4)

    o AISC5 of A$900-1,100/oz

  • Growth capital expenditure of A$12-20 million

• FY19 production outlook of 100,000 - 125,000 oz of gold (gold equivalent of 185,000 - 210,000 oz) at an AISC of A$900-A$1,100/oz

• Purchase price equivalent to A$75.5M using RBA official AUD:USD exchange rate of 0.7683 on 9 November 2017

• Refer to statements on Mineral Resources and Reserves contained in this document.

• Assumes effective date of sale of 1 January 2018. Refer to important information at the end of this release, including cautionary statements regarding forward looking statements.

• Gold equivalent is based on payable metal production converted into gold equivalent production using metal prices of US$1229/oz gold, US$16.9/oz silver, US$1800/t Pb, US$2,500/t Zn and US$5,500/t Cu. Note that smelter treatment charges, smelter refining charges and transport costs are not included in this equivalent estimate.

• AISC (All-in Sustaining Cost) is a non-AIFRS definition and includes all site operating costs, concentrate transport and smelter costs, ore and finished goods inventory movements, royalty expenses, sustaining capital expenses, corporate and administration expenses, less by-products credits, calculated on a gold sold basis. Items excluded include growth capital, working capital movements, tax payments and financing cash flows. Base metal sales are accounted for as a by-product credit. The timing of base metal shipments will create volatility in the Company's reported AISC due to timing of base metal by-product credits and concentrate inventory movements.

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• Debt facility commitment of A$45 million and a A$25 million environmental performance bond entered into with the Investec Group ("Investec") to support the financing of the Transaction

• Equity raising in the order of A$70 million to be undertaken to finance the acquisition and to provide working capital

• Aurelia's largest shareholder, Pacific Road Capital Management Pty Ltd as the trustee for the Pacific Road Fund II Managed Investment Trust ("Pacific Road"), is strongly supportive of the transaction, and is committed to subscribe for up to A$35 million under the equity raising, conditional on shareholder approval, to increase its relevant interest in Aurelia6 to 36.7%.

• Substantial shareholder, Glencore, is supportive of the acquisition and has indicated that it may participate in the raising to maintain its approximate current level of ownership (current relevant interest of 6.7%)

Aurelia's Managing Director and CEO, Jim Simpson, said "This is a transformative acquisition for Aurelia, delivering a step-change in our production, cash generation and reserves. In the process, it is a major step in realising our strategy of creating a leading gold and base metals production company in the Cobar district.

Peak is the ideal growth asset for Aurelia, seeing us transform from a single mine company, to a business with two operating mines, two complementary processing facilities, two sources of cash flow from a diversified commodity mix (which now includes copper, along with gold, silver, lead and zinc) and identified growth opportunities and exploration targets.

By applying the operating expertise gained at Hera together with my five years as General Manager at Peak, Aurelia has identified several avenues to improve operating costs and production efficiencies at the Peak operations.

The increased scale of the new Aurelia will also provide us with the opportunity to take a portfolio approach to exploration and growth investments, prioritising capital to optimise shareholders returns."

Aurelia has entered into a binding agreement with New Gold to acquire 100% of the shares in Peak Gold Asia Pacific Pty Ltd ("PGA"), which, through its wholly owned subsidiary Peak Gold Mines Pty Ltd, owns and operates Peak.

Peak is an attractive gold, copper, lead and zinc mine, which produced 107.4koz of gold and 15mlbs of copper at an AISC of US$736/oz in CY167.

The Transaction combines two complementary businesses, delivering enhanced scale and diversification. Following completion of the Transaction, Aurelia will operate two wholly-owned producing mines and two processing facilities in the Cobar district:

With the addition of Peak, Aurelia is targeting combined FY19 annual production of 100,000 -

125,000 ounces of gold (gold equivalent of 185,000 - 210,000 ounces) and an AISC of approximately A$1,000/oz, propelling the business into the ranks of ASX mid-tier gold miners.

1. Pacific Road has provided a commitment to subscribe to the amount in the Placement that would provide Pacific Road with a relevant interest of 36.7% in Aurelia upon completion of the proposed placement and Share Purchase Plan.

2. Historical data has been sourced from New Gold Inc's regulatory filings in Canada with SEDAR (System for Electronic Document Analysis and Retrieval - www.sedar.com) and from the Company's website www.newgold.com.

The Transaction will see Aurelia expand the depth of its portfolio of growth and exploration prospects, including a number of near-mine targets identified within the 10km Peak Mines corridor, with exploration and mining permits covering a combined area of approximately 1,385 square km in the Cobar district (see Figure 1.)

The Transaction will also result in a greater increase in production for Aurelia, and will deliver further base metals diversification through increased copper production over time from Peak.

Aurelia is targeting production of between 75,000 - 90,000 ounces of gold (125 - 140koz Au Eq.) in FY18, including six months of production from Peak. In FY19, which captures a full 12 months of production from Peak, the outlook is for production of between 100,000 - 125,000 ounces of gold (185 - 210koz Au Eq.). Figure 2 provides a summary of production and cost estimates for Aurelia and its assets:

1. Refer to the important information at the end of this release, including cautionary statements regarding forward looking statements.

2. AISC/oz only relates to "Gold Production (oz)". AISC (All-in Sustaining Cost) is a non-AIFRS definition and includes all site operating costs, concentrate transport and smelter costs, ore and finished goods inventory movements, royalty expenses, sustaining capital expenses, corporate and administration expenses, less by-products credits, calculated on a gold sold basis. Items excluded include growth capital, working capital movements, tax payments and financing cash flows. Base metal sales are accounted for as a by-product credit. The timing of base metal shipments will create volatility in the Company's reported AISC due to timing of base metal by-product credits and concentrate inventory movements.

3. Gold equivalent is based on payable metal production converted into gold equivalent production using US$1229/oz gold, US$16.9/oz silver, US$1800/t Pb, US$2,500/t Zn and US$5,500/t Cu. Note that smelter treatment charges, smelter refining charges and transport costs are not included in this equivalent estimate.