Sunshine Oilsands Ltd. — Capital/Financing Update 2018

Feb 28, 2018

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Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

This announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of Sunshine Oilsands Ltd.

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SUNSHINE OILSANDS LTD. 陽光油砂有限公司 *

(a corporation incorporated under the Business Corporations Act of the Province of Alberta, Canada with limited liability)

(HKEX: 2012)

ISSUE OF SHARES UNDER GENERAL MANDATE FOR SETTLEMENT OF INDEBTEDNESS

By Order of the Board of Sunshine Oilsands Ltd. Kwok Ping Sun Executive Chairman

Hong Kong, February 28, 2018 Calgary, February 28, 2018

As at the date of this announcement, the Board consists of Mr. Kwok Ping Sun, Mr. Hong Luo, Mr. Qiping Men and Ms. Gloria Pui Yun Ho as executive directors; Mr. Michael John Hibberd, Ms. Linna Liu and Ms. Xijuan Jiang as non-executive directors; and Mr. Raymond Shengti Fong, Mr. Jeff Jingfeng Liu, Ms. Joanne Yan and Mr. Yi He as independent non-executive directors.

*For identification purposes only

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Hong Kong (February 28, 2018) and Calgary, Alberta (February 28, 2018) - The Board of Directors (the “ Board ”) of Sunshine Oilsands Ltd. (the “ Corporation ” or “ Sunshine ”) (HKEX: 2012) wishes to announce the following:

ISSUE OF SHARES UNDER GENERAL MANDATE FOR SETTLEMENT OF INDEBTEDNESS

On February 28, 2018 in Hong Kong (February 28, 2018 in Calgary) (after trading hours), the Corporation entered into Debt Settlement Agreement with the Creditors, being the Independent Third Parties and creditors to the Corporation, pursuant to which the Corporation will allot and issue the Relevant Shares to the Creditors as full and final settlement of the Partial Debts.

The Issue Price is HK$0.245, which represents

• (i) a discount of approximately 3.92% as to the average closing price of HK$0.255 per Share as quoted on the Hong Kong Stock Exchange for the last five consecutive trading days immediately prior to February 28, 2018 (being the last trading day immediately preceding the signing of the Debt Settlement Agreement); and

• (ii) a discount of approximately 2.00% to the closing price of HK$0.250 per Share as quoted on the Hong Kong Stock Exchange on February 28, 2018.

There will be a lock-up period of 4 months from the date of Issuance under which the Creditors undertake not to transfer and/or dispose of the Relevant Shares.

The Relevant Shares, which shall rank pari passu in all respect with the existing Shares, will be allotted and issued under the General Mandate. The Corporation will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in the Relevant Shares. Up to the date of this announcement, the Board has allotted and issued 267,227,255 Shares under the General Mandate and no shareholders’ approval is required for the allotment and issue of the Relevant Shares.

Shareholders and potential investors should note that completion of the Issuance is subject to fulfilment of the conditions under the Debt Settlement Agreement. As the Issuance may or may not proceed, Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

THE ISSUE OF THE RELEVANT SHARES

Pursuant to the Debt Settlement Agreement entered into between the Corporation and the Creditors on February 28, 2018 in Hong Kong (February 28, 2018 in Calgary), the Corporation will allot and issue the Relevant Shares at the Issue Price to the Creditors as full and final settlement of the Partial Debts.

THE RELEVANT SHARES

Assuming no further issue of new Shares or repurchase of Shares (other than those failing to be issued upon full exercise of the share options), the Relevant Shares represent (i) approximately 1.76% of the existing issued share capital of the Corporation as at the date of this announcement; and (ii) approximately 1.73% of the total enlarged issued share capital of the Corporation immediately following completion of the Issuance.

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ISSUE PRICE

The Issue Price is HK$0.245, which represents

• i. a discount of approximately 3.92% as to the average closing price of HK$0.255 per Share as quoted on the Stock Exchange for the last five consecutive trading days immediately prior to February 28, 2018 (being the last trading day immediately preceding the signing of the Debt Settlement Agreement); and

• ii. a discount of approximately 2.00% to the closing price of HK$0.250 per Share as quoted on the Stock Exchange on February 28, 2018.

It was arrived after arm’s length negotiation between the Corporation and the Creditors with reference to the market condition and the prevailing market price of the Shares.

LOCK-UP

There shall be a lock-up period of 4 months from the date of Issuance to the Creditors under which the Creditors undertake not to transfer and/or dispose of the Relevant Shares.

GENERAL MANDATE TO ISSUE THE RELEVANT SHARES

The Relevant Shares will be allotted and issued pursuant to the General Mandate and the issue of the Relevant Shares is not subject to Shareholders’ approval. The maximum number of Shares that can be issued under the General Mandate is 1,111,667,271 Shares. As at the date of this announcement, the Board has issued and allotted 267,227,255 Shares under the General Mandate. The General Mandate is sufficient for the allotment and issue of the Relevant Shares. No separate approval of Shareholders is required for the Issuance. The total amount of Relevant Shares to be issued and allotted constitute approximately 9.21% of the General Mandate as at the date of this Announcement.

RANKING AND APPLICATION FOR LISTING

The Relevant Shares will be issued under the General Mandate and will rank pari passu in all respects among themselves and with the existing Shares in issue on the Completion Date. Application will be made to the Stock Exchange for the grant of the listing of, and permission to deal in the Relevant Shares.

CONDITIONS

Completion of the Debt Settlement Agreement shall be subject to and conditional upon the following:

• (i) the Listing Committee of the Stock Exchange granting the listing of, and permission to deal in the Relevant Shares; and

• (ii) all relevant approvals and consents from governmental or other competent authority or in accordance with applicable laws having been obtained, if necessary.

None of the above conditions are capable of being waived. In the event that the conditions of the Issuance are not fulfilled on or before March 14, 2018 (or such other time and date as may be agreed between the parties to the Debt Settlement Agreement), the Debt Settlement Agreement shall cease and determine and neither the Corporation nor the Creditors shall have any obligations and liabilities under the Debt Settlement Agreement.

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EFFECTS ON SHAREHOLDING STRUCTURE OF THE CORPORATION

As at the date of this announcement, the Corporation has 5,825,563,613 Shares in issue. The shareholding structure of the Corporation as at the date of this announcement and immediately after completion of the Issuance (assuming that there are no other changes to the shareholding structure of the Corporation from the date of this announcement to the date of completion of the Issuance) are as follows:

Name of Shareholders Kwok Ping Sun Hok Ming Tseung Creditors Other public shareholders (excluding the Creditors) Total	As at the date of	this announcement Immediately after Completion of the Placing (assuming that there are no other changes to the shareholding structure of the Corporation from the date of this announcement to the date of completion of the Issuance)	this announcement Immediately after Completion of the Placing (assuming that there are no other changes to the shareholding structure of the Corporation from the date of this announcement to the date of completion of the Issuance)
	Number of Shares 1,658,897,000 295,893,656 - 3,870,772,957	Approx. % of Shares Number of Shares 28.48% 1,658,897,000 5.08% 295,893,656 102,436,500 66.44% 3,870,772,957 100.00% 5,928,000,113	Approx. % of Shares 27.98% 4.99% 1.73% 65.3%
	5,825,563,613		100.00%

REASONS FOR AND BENEIFTS OF ENTERING INTO THE DEBT SETTLEMENT AGREEMENT

As at the date of the Debt Settlement Agreement, the Corporation was indebted to Creditor A and Creditor B for CDN$2,746,806.5 and CDN$1,792,614.7 respectively.

For Creditor A, CDN$275,323.8 will be settled by cash and the remaining balance (CDN$ 2,471,482.7), being the Partial Debt A, will be settled by the issuance of 61,984,388 Shares.

For Creditor B, CDN$179,681.2 will be settled by cash and the remaining balance (CDN$ 1,612,933.5), being the Partial Debt B, will be settled by the issuance of 40,452,112 Shares.

The Directors are of the view that the settlement of the Partial Debts by way of Issuance would not result in significant cash outflow of the Corporation while reducing the indebtedness of the Corporation. Accordingly, the Directors consider that the terms of the Debt Settlement Agreement are fair and reasonable and the Issuance is in the interests of the Corporation and its Shareholders as a whole.

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FUND RAISING ACTIVITIES OF THE CORPORATION IN THE PAST 12 MONTHS

Save as disclosed below, the Corporation has not conducted any other fund raising activities during the 12 months immediately preceding the date of this announcement.

Date of	Fund raising	Fund raising	Approximate net	Intended use of the	Actual use of the net
announcement	activity		proceeds raised	net proceeds	proceeds
January 24, 2017	Private	placement	HK$ 15,602,100.0	i) for general working	HK$ 15,602,100.0
	of Common Shares		(approximately	capital of the	(approximately
	under	General	CDN$ 2,673,123.6	Corporation; and	CDN$ 2,673,123.6 (1))
	Mandate		(1))	(ii) as funds for future	approximately 95% used
				development of the	as funds for development
				existing business of	of existing business
				the Corporation,	including funding operation
				including funding the	costs and approximately
				development and	5% as general working
				operation costs of the	capital
				West Ells project
March 24, 2017	Private	placement	HK$69,475,049.6	i) for general working	HK$69,475,049.6
	of Common Shares		(approximately	capital of the	(approximately
	under	General	CDN$11,925,809.1	Corporation; and	CDN$11,925,809.1 (2))
	Mandate		(2))	(ii) as funds for future	approximately 60% used
				development of the	for repayment of yield
				existing business of	maintenance premium and
				the Corporation,	forbearance fee in relation
				including funding the	to the Forbearance
				development and	Reinstatement Agreement
				operation costs of the	(“FRA”) signed on March
				West Ells project	21, 2017; approximately
					35% used as funds for
					development of existing
					business including funding
					operation costs and
					approximately 5% as
					general working capital
					including payment of legal
					fees incurred for
					forbearance reinstatement
					of the Corporation’s Senior
					secured Notes
March 28, 2017	Private	placement	HK$11,599,985	i) for general working	HK$11,599,985
	of Common Shares		(approximately	capital of the	(approximately
	under	General	CDN$ 1,996,485(3))	Corporation; and	CDN$ 1,996,485 (3))
	Mandate			(ii) as funds for future	approximately 95% used
				development of the	as funds for development
				existing business of	of existing business
				the Corporation,	including funding operation
				including funding the	costs and approximately
				development and	5% as general working
					capital

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Date of	Fund raising	Fund raising	Approximate net	Intended use of the	Intended use of the	Actual use of the net
announcement	activity		proceeds raised	net proceeds		proceeds
				operation costs of the
				West Ells project
April 13, 2017	Private	placement	HK$33,950,634	For settlement	of	HK$33,950,634
	of Common Shares		(approximately	indebtedness		(approximately
	under	General	CDN$5,861,054.36			CDN$5,861,054.36 (4)) –
	Mandate		(4))			there is no actual cash
						inflow into the Corporation
						as the issuance of shares
						was to offset the
						indebtedness that
						Sunshine owes to its trade
						creditor
June 07, 2017	Private	placement	HK$15,880,106	(i) for general working		HK$15,880,106
	of Common Shares under General		(approximately CDN$2,742,669(5))	capital of the Corporation; and		(approximately CDN$2,742,669 (5))
	Mandate			(ii) as funds for future		approximately 95% used
				development of the		as funds for development
				existing business of		of existing business
				the Corporation,		including funding operation
				including funding the development and operation costs of the West Ells project		costs and approximately 5% as general working capital
October 18, 2017	Private	placement	HK$2,296,228	Settlement	of	HK$2,296,228
	of Common Shares under General Mandate		(approximately CDN$369,032.04(6))	indebtedness		(approximately CDN$369,032.04(6)) – there is no actual cash inflow into the Corporation
						as the issuance of shares
						was to offset the
						indebtedness that
						Sunshine owes to its trade
						creditor
December 20,	Private	placement	HK$15,880,115.1	(i) for general working		HK$15,880,115.1
2017	of Common Shares under General		(approximately CDN$2,617,042.97	capital of the Corporation; and		(approximately CDN$2,617,042.97 (7))
	Mandate		(7))	(ii) as funds for future		approximately 95% used
				development of the		as funds for development
				existing business of		of existing business
				the Corporation,		including funding operation
				including funding the		costs and approximately
				development and operation costs of the West Ells project		5% as general working capital

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Date of Fund raising Approximate net Intended use of the Actual use of the net announcement activity proceeds raised net proceeds proceeds January 22, 2018 Private placement HK$21,835,040 (i) for general working HK$21,835,040 of Common Shares (approximately capital of the (approximately under General CDN$3,467,404.3[(8)] Corporation; and CDN$3,467,404.3[(8)] ) Mandate ) (ii) for repayment of approximately 92% used shareholder’s loan for repayment of shareholder’s loan and 8% as general working capital February 13, 2018 Private placement HK$28,286,303.6 (i) for general working HK$28,286,303.6 of Common Shares (approximately capital of the (approximately under General CDN$4,559,752.1[(9)] Corporation; and CDN$4,559,752.1[(9)] ) Mandate ) (ii) for repayment of approximately 48% used shareholder’s loan for repayment of shareholder’s loan and 52% as general working capital

Notes

• (1) Based on the Bank of Canada’s nominal noon exchange rate (as at January 24, 2017) of CDN$1.00 = HK$5.8367.

• (2) Based on the Bank of Canada’s nominal noon exchange rate (as at March 24, 2017) of CDN$1.00 = HK$5.8256.

• (3) Based on the Bank of Canada’s nominal noon exchange rate (as at March 28, 2017) of CDN$1.00 = HK$5.8102.

• (4) Based on the Bank of Canada's nominal noon exchange rate (as at April 13, 2017) of CDN$1.00 =HK$5.7936.

• (5) Based on the Bank of Canada's nominal noon exchange rate (as at June 7, 2017) of CDN$1.00 =HK$5.79.

• (6) Based on the Bank of Canada's nominal noon exchange rate (as at October 17, 2017) of CDN$1.00 =HK$6.2223.

• (7) Based on the Bank of Canada's nominal noon exchange rate (as at December 19, 2017) of CDN$1.00 =HK$6.0667

• (8) Based on the Bank of Canada's nominal noon exchange rate (as at January 21, 2018) of CDN$1.00 =HK$6.2972

• (9) Based on the Bank of Canada's nominal noon exchange rate (as at February 12, 2018) of CDN$1.00 =HK$6.2035

Shareholders and potential investors should note that completion of the Issuance is subject to fulfilment of the conditions under the Debt Settlement Agreement. As the Issuance may or may not proceed, Shareholders and potential investors are reminded to exercise caution when dealing in the Shares.

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DEFINITIONS

In this announcement, unless the context otherwise requires, the following words and expressions shall have the following meanings when used herein:

• “Completion” completion of the Issuance “Completion Date” the date of Completion

• “connected persons” has the meaning ascribed thereto in the Listing Rules

• “Creditor A” Tarpon Energy Services Ltd., a company incorporated in Canada with limited liability, an Independent Third Party and a creditor to the Corporation

• “Creditor B” Pyramid Corporation, a company incorporated in Canada with limited liability, an Independent Third Party and a creditor to the Corporation

• “Creditors” collectively, Creditor A and Creditor B

• “Debt Settlement Agreement” the agreement dated February 28, 2018 and entered into by the Corporation with Creditors A and B, in relation to the settlement of the partial debts that the Corporation owned by Creditors A and B

• “Director(s)” the director(s) of the Corporation “General Mandate” the general mandate obtained from the shareholders of the Corporation at the annual general meeting held on 27 June 2017 (Hong Kong time) and 26 June 2017 (Calgary time) of the Corporation authorizing the Directors to allot and issue up to 20% of the issued and outstanding shares of the Corporation as at the date of the annual general meeting

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Independent Third Party(ies)” independent third party(ies) who is(are) not connected person(s) (as defined in the Listing Rules) of the Corporation and is(are) independent of and not connected with the connected persons of the Corporation

• “Issuance” the allotment and issue of the Relevant Shares to the Creditors in accordance with the terms and conditions of the Debt Settlement Agreement

• “Issue Price” HK$0.245 per Relevant Share

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Partial Debts” CDN$2,746,806.5 and CDN$1,792,614.7, being the amount of debts outstanding as at the date of the Debt Settlement Agreement due from the Corporation to Creditor A and Creditor B respectively

• “Relevant Share(s)” 102,436,500 new Shares, which represents the amount of Partial Debts divided by the Issue Price to be allotted and issued by the Corporation to the Creditors on Completion Date

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“Shares” or “Common Shares” the Class A common shares of the Corporation that is listed on the Stock Exchange “Shareholder(s)” holder(s) of the issued Shares “Stock Exchange” The Stock Exchange of Hong Kong Limited “CDN$” Canadian dollars, the lawful currency of Canada “HK$” Hong Kong dollars, the lawful currency of Hong Kong “%” per cent.

ABOUT SUNSHINE OILSANDS LTD.

The Corporation is a Calgary based public corporation listed on the Hong Kong Stock Exchange since March 1, 2012. The Corporation is focused on the development of its significant holdings of oil sands leases in the Athabasca oil sands region. The Corporation owns interests in approximately one million acres of oil sands and petroleum and natural gas leases in the Athabasca region. The Corporation is currently focused on executing milestone undertakings in the West Ells project area. West Ells has an initial production target of 5,000 barrels per day.

For further enquiries, please contact:

Mr. Qiping Men Chief Executive Officer Tel: (1) 403 984-5142

Email: investorrelations@sunshineoilsands.com Website: www.sunshineoilsands.com

FORWARD LOOKING INFORMATION

This announcement contains forward-looking information relating to, among other things, the plans and expectations of the Corporation. Such forward-looking information is subject to various risks, uncertainties and other factors. All statements other than statements and information of historical fact are forward-looking statements. The use of words such as “estimate”, “forecast”, “expect”, “project”, “plan”, “target”, “vision”, “goal”, “outlook”, “may”, “will”, “should”, “believe”, “intend”, “anticipate”, “potential”, and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on the Corporation’s experience, current beliefs, assumptions, information and perception of historical trends available to the Corporation, and are subject to a variety of risks and uncertainties including, but not limited to those associated with resource definition and expected reserves and contingent and prospective resources estimates, unanticipated costs and expenses, regulatory approval, fluctuating oil and gas prices, expected future production, the ability to access sufficient capital to finance future development and credit risks, changes

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in Alberta’s regulatory framework, including changes to regulatory approval process and landuse designations, royalty, tax, environmental, greenhouse gas, carbon and other laws or regulations and the impact thereof and the costs associated with compliance. Although the Corporation believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions and factors discussed in this announcement are not exhaustive and readers are not to place undue reliance on forward-looking statements as the Corporation’s actual results may differ materially from those expressed or implied. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, subsequent to the date of this announcement, except as required under applicable securities legislation. The forwardlooking statements speak only as of the date of this announcement and are expressly qualified by these cautionary statements. Readers are cautioned that the foregoing lists are not exhaustive and are made as at the date hereof. For a full discussion of the Corporation’s material risk factors, see the Corporation’s annual information form for the year ended December 31, 2016 and risk factors described in other documents we file from time to time with securities regulatory authorities, all of which are available on the Hong Kong Stock Exchange at www.hkexnews.hk, on the SEDAR website at www.sedar.com or on the Corporation’s website at www.sunshineoilsands.com.