Huldra Silver Inc. obtains CCAA protection and announces entry into term sheet for up to $4,800,000 of DIP Financing

VANCOUVER, B.C., July 26, 2013 – Huldra Silver Inc. (“Huldra” or the “Company“) announces that, after careful consideration of all available alternatives, the Board of Directors of Huldra determined that it was in the best interests of all of its stakeholders to seek creditor protection under the Companies’ Creditors Arrangement Act (Canada) (“CCAA“), and has obtained such protection pursuant to an Order from the Supreme Court of British Columbia (the “Court“). The Order and related Court documents are filed on SEDAR (www.sedar.com) under the Company’s profile. While under CCAA protection, Huldra will continue attempting to restructure its financial affairs and recommence operations at its mine and mill.

Recently, Huldra has been hampered by equity market, commodity price and operational challenges which lead to the decision to proceed with CCAA protection. Details of the CCAA proceeding will soon be available on the website of the Court-appointed Monitor, Grant Thornton LLP (the “Monitor“). CCAA protection stays creditors and others from enforcing rights against Huldra and affords Huldra the opportunity to continue attempting to restructure its financial affairs. The Court has granted CCAA protection for an initial period of 30 days, expiring August 26, 2013, to be extended thereafter as the Court deems appropriate. Huldra will issue a further press release on or before August 26, 2013 which will provide an update.

While under CCAA protection, Huldra will continue attempting to restructure its financial affairs and recommence operations at its mine and mill under the supervision of the Monitor. The Monitor will also be responsible for reviewing Huldra’s ongoing operations, liaising with creditors and other stakeholders and reporting to the Court.

The Court has authorized the Monitor to arrange for Waterton Global Value, L.P. (“Waterton“), the primary secured creditor of the Company, to loan up to CAD $4,800,000 (the “DIP Loan“) to the Company pursuant to a term sheet dated July 23, 2013 (the “Term Sheet“).

The DIP Loan is to be drawn by the Company in two tranches as follows: CAD $2,300,000 (the “First Tranche“) upon the request of the Company following execution of the Term Sheet; and CAD $2,500,000 (the “Second Tranche“, and together with the First Tranche, the “Tranches“) upon receipt by Waterton of a comprehensive plan of operations from the Company for the Treasure Mountain Property that is satisfactory to Waterton and its advisors (the “Plan“). Huldra has agreed to repay the DIP Loan in full as follows: if the First Tranche (but not the Second Tranche) is advanced, then on the date which is four months after the date the First Tranche is advanced by Waterton to the Company under the Term Sheet; and if both Tranches are advanced, then in accordance with an amortized repayment schedule to be determined by Waterton which reasonably corresponds to the Plan.

The DIP Loan is being advanced subject to the terms of an existing credit agreement between Waterton and the Company dated June 16, 2011 (the “Original Credit Agreement“), subject to certain changes provided for in the Term Sheet. The Original Credit Agreement is disclosed in the Company’s news release dated June 17, 2011. The Company also agreed under the Term Sheet: to allow the Monitor appointed in the CCAA proceeding in connection with the Company (“CCAA Proceeding“) to communicate with and disclose information to Waterton as required; that any court orders obtained in the CCAA Proceeding shall be on terms satisfactory to Waterton, including an initial order in the CCAA Proceeding which shall confirm the validity, enforceability and first priority ranking of the DIP Loan and related security, subject only to an administrative charge in favour of the Monitor and its counsel; to allow Waterton, notwithstanding the CCAA Proceeding, to immediately enforce its security upon the occurrence of any event of default or event which, with the passage of time, would constitute an event of default; and to discuss with Waterton all contemplated motions in the CCAA Proceeding before instituting the same.

In addition, the Company agreed to pay certain expenses of Waterton in connection with Waterton’s review and due diligence of the Company up to a maximum of approximately CAD$100,000 on demand by Waterton, to pay Waterton for certain on-going expenses of Waterton’s counsel in connection with the CCAA proceeding on a bi-weekly basis from the cash flows filed in the CCAA Proceeding, and to pay the fees for any employees, consultants, representatives or agents of Waterton that work for, in connection with or on behalf of the Company.

As consideration for the DIP Loan, the Company has agreed to grant Waterton a 2% net smelter return royalty on the Treasure Mountain Property (the “Royalty“). The Royalty will be terminated if: no amounts (other than the PNote Amount) are drawn by the Company under the DIP Loan within thirty days of the execution of the Term Sheet; and the Company repays Waterton in full all amounts owing under the Original Credit Agreement, the Term Sheet, the DIP Loan, and all documents related thereto within thirty days of the execution of the Term Sheet, so that all of the Company’s obligations to Waterton are fulfilled to Waterton’s full satisfaction.

The obligations of Waterton to advance the DIP Loan are subject to the fulfillment of conditions precedent to be determined by Waterton in its sole and absolute discretion. The DIP Loan is subject to TSX Venture Exchange and Court approval. The terms and conditions of the DIP Loan are subject to the agreement of Huldra, Waterton and the Monitor. The Company intends to use the proceeds of the DIP Loan to repay the principal and interest owed to Waterton pursuant to a promissory note issued to Waterton on July 8, 2013 (the “PNote Amount“) and for working capital purposes.

It is expected that the Monitor will work with the Company to develop a plan of compromise or arrangement with one or more of the Company’s classes of creditors pursuant to the CCAA and the Business Corporations Act (British Columbia).

Although CCAA protection enables the Company to continue attempting to restructure its financial affairs and recommence operations at its mine and mill until its CCAA status changes, the implications for the Company’s shareholders are less clear. At the end of the restructuring process, the value of what is left for shareholders will depend upon the terms of the restructuring plan approved by the Court.

Certain mining objectives announced by the Company on May 27, 2013 are no longer achievable because the mill and mine are on care and maintenance, the Company lacks the required financial resources and because the Company is subject to CCAA protection.

Managing the financial difficulties of the Company has absorbed considerable staff resources recently. At the current time, management and the Board of Directors are actively focusing on assisting the Monitor in obtaining Court approval of the restructuring plan, implementing the restructuring plan, and completing a transaction which restructures the affairs of the Company in such a way so as to maximize its value to all of its stakeholders. Every effort will be made to ensure that all stakeholders in the Company are kept informed of developments affecting the Company as they occur.

The Company also announces that Ryan Sharp has resigned as a director of Huldra, effective immediately upon the granting of an Initial Order under the CCAA with respect to the Company.

On behalf of the Board of Directors:

Garth Braun
CFO & Director

For additional information contact:
Garth Braun at 604-647-0142
garth@huldrasilver.com
IR@huldrasilver.com

Disclaimer for Forward-Looking Information

This press release contains projections and forward-looking information that involve various risks and uncertainties regarding future events including: (i) that Huldra will be able to restructure its financial affairs, (ii) that Huldra will be able to recommence operations at its mine and mill, (iii) that Waterton will provide one or both Tranches under the DIP Loan, (iv) that Huldra and Waterton will finalize the terms and conditions of the DIP Loan, (v) that Huldra and the Monitor will formulate a plan of compromise or arrangement under the CCAA Proceeding acceptable to Waterton and the other creditors, (vi) that Huldra will receive all regulatory and other approvals necessary for the DIP Loan, (vii) that the Court will approve of any proposed restructuring plan, (viii) that the Company and the Monitor will be able to implement any restructuring plan that has been approved, (ix) that a transaction that restructures the affairs of the Company in such a way that maximizes value to all stakeholders will be completed, and (x) the timing and duration of CCAA protection. No assurance can be given that any of the events anticipated by the forward-looking statements will occur as planned or at all, or, if they do occur, what benefits the Company will obtain from them. These forward-looking statements reflect management’s current views and are based on certain expectations, estimates and assumptions which may prove to be incorrect. A number of risks and uncertainties could cause the Company’s actual results to differ materially from those expressed or implied by the forward-looking statements, including: (1) that Huldra is unable to secure additional financing or make arrangements with its creditors, (2) that Huldra will be unable to recommence operations at its mine and mill for any reason whatsoever, (3) that Waterton does not provide one or both Tranches under the DIP Loan, (4) that one or more of the conditions precedent to finalizing the DIP Loan are not satisfied, (5) that there may be competing uses for the proceeds of the DIP Loan, (6) that Huldra and the Monitor will not be able to agree upon a plan of compromise or arrangement or that such a plan, if agreed to by Huldra and the Monitor, is not acceptable to Waterton and/or other creditors for any reason whatsoever, (7) that Huldra may not have the funds required to reimburse Waterton for certain expenditures, (8) that the DIP Loan as currently proposed is not acceptable to regulatory authorities, (9) that any such plan of compromise or arrangement may not be approved by the Court, (10) that any plan of compromise or arrangement that is approved by the creditors and the Court may not be successfully implemented for whatever reason; (11) that any plan of compromise or arrangement that is approved by the creditors and the Court may not maximize value for all stakeholders; (12) that the timing and duration of CCAA protection may be shorter than expected, (13) a downturn in general economic conditions in North America and internationally, (14) volatility and fluctuation in the prices of silver, lead and zinc, (15) volatility and fluctuation in the price of the Company’s stock and stock of resource issuers generally, (16) the uncertainty involved in Court proceedings and the implementation of a plan of restructuring under the CCAA, and (17) other factors beyond the Company’s control. Readers are cautioned that the foregoing list of factors is not exhaustive. These and all subsequent written and oral forward-looking information are based on estimates and opinions of management on the dates they are made and expressly qualified in their entirety by this notice. Except as required by law, the Company assumes no obligation to update forward-looking information should circumstances or management’s estimates or opinions change.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.