VANCOUVER, BC--(Marketwired - October 02, 2017) - East Africa Metals Inc. (TSX VENTURE: EAM) ("East Africa" or the "Company") is pleased to announce the signing of a binding memorandum of understanding ("MOU") with Luck Winner Investment Limited ("LW") providing for project development financing of up to US$250 million and a private placement of 52,100,000 units at a price of $0.26 per unit for aggregate gross proceeds of approximately C$13,550,000. LW has also agreed to provide an unsecured loan to the Company in the amount of C$2,000,000.
Project Development / Joint Venture
The MOU with LW contemplates that a joint venture company ("JVCo") will be formed, with 70% owned by LW and 30% owned by East Africa. LW will invest up to US$250 million into development of East Africa's projects in Ethiopia. East Africa will contribute a proportionate amount of gold valued with a cost price of US$70/oz, of up to 1.5 million ouncesAuEquiv for an aggregate value of US$110 million (See EAM News Release dated July 13, 2016 and resource information below). The parties intend to expeditiously negotiate, finalize and execute a comprehensive joint venture agreement respecting JVCo and the development of East Africa's Ethiopian projects.
Private Placement
Under the MOU, LW has committed to purchase, on a private placement basis, 52,100,000 units at a price of $0.26 per unit for aggregate gross proceeds of approximately C$13,550,000. Each unit will consist of one common share and one-half of one share purchase warrant, with each whole warrant exercisable for $0.45 and expiring 24 months from closing.
The securities issued under the private placement will be subject to a hold period of four months. The proceeds will be used to continue exploration programs on the Company's projects in Ethiopia and general working capital.
Upon completion of the private placement and conversion of the C$2,000,000 loan described below, LW will own approximately 28.8% of the Company's outstanding shares (37.8% on a diluted basis). Also upon completion of the private placement, the Company will cause three of its directors to resign and appoint three LW nominees to fill those vacancies, and the Company may make certain changes to management positions.
$2 Million Loan
LW and East Africa also entered into a loan agreement pursuant to which LW has agreed to lend C$2,000,000 to East Africa. The loan will be repayable in six months and will accrue interest of 2% per annum. Under the loan agreement, East Africa is required to restructure its existing cooperation agreement with respect to the Magambazi project within 30 days. Upon completion of the restructure, LW has the right to require the establishment of a joint venture for the development of the Magambazi project, which joint venture will be 70% owned by LW and 30% owned by East Africa. The C$2,000,000 loan proceeds will be deemed to be LW's cash consideration payable to East Africa for the joint venture, and any accrued interest would be forgiven.
If the loan is not allocated and the interest forgiven in connection with the formation of a joint venture for the Magambazi project, at any time following 30 days after the execution of the loan agreement, LW shall have the right to convert the C$2,000,000 loan principal and accrued interest into units of East Africa at a deemed price of $0.26 per unit. Each unit will consist of one common share and one-half of one share purchase warrant, with each whole warrant exercisable for $0.45 and expiring six months from issuance. The securities issued under the loan will be subject to a hold period of four months.
Until the loan is allocated for the Magambazi joint venture or is converted into units, East Africa is restricted to use the proceeds of the loan for East Africa's Harvest project's mining license application, the negotiation of an agreement respecting the Harvest project development stage, the restructure of the existing cooperation agreement respecting the Magambazi project, and the renewals of the Magambazi mining licenses if required.
Subject Conditions
The project development funding and private placement are subject to certain conditions, including but not limited to, the establishment of JVCo, receipt of mining license for the Harvest project, Harvest agreement to develop the project, completion of satisfactory due diligence reviews by both parties, execution of definitive agreements, East Africa's shareholder approval of the creation of a new control person and any transactions as required by the TSX Venture Exchange, and receipt of approval of the TSX Venture Exchange. The Company intends to call a shareholders meeting upon completion of East Africa's and LW's satisfactory due diligence review.
More information on the Company can be viewed at the Company's website: www.eastafricametals.com.
About Luck Winner
Luck Winner, incorporated in Hong Kong Special Administrative region in 2017, is an international mining development and investment company currently seeking to expand its investments throughout Africa.
Andrew Smith, P. Geol. and Jeff Heidema, P.Geol., Qualified Persons under the definitions of National Instrument 43-101, have reviewed and approved the contents of this news release.
East Africa's Mineral Resources at Harvest and Adyabo.
| Project | Ownership | Resource Summary | |||
| Adyabo 3(Indicated) | 100% | 446K Ounces AuEquiv | |||
| Adyabo 3(Inferred) | 100% | 434K Ounces AuEquiv | |||
| Terakimti Oxide Update 1 (Indicated) | 70% (Permit Pending) | 132K Ounces AuEquiv | |||
| Terakimti Sulphide 2 (Indicated) | 70% | 348K Ounces AuEquiv | |||
| Terakimti Sulphide 2 (Inferred) | 70% | 426K Ounces AuEquiv | |||
The resources stated above have been previously disclosed in News Releases.
1Terakimti Oxide Resource update disclosed October 27, 2015; effective date October 18, 2015. Full mineral resource estimate disclosure can be found in the company's press release dated October 27, 2015, available at www.eastafricametals.com or at www.sedar.com. Subsequent to the release of the Oxide Resource update, a review by the resource QP identified an error in the tabulation of mineral resources. The corrected resource information was disclosed via press release on January 11, 2016. Metal prices for gold and silver are $1,300/oz and $17.50/oz, respectively.
2Terakimti Initial Resource Estimate as disclosed in the 43-101 Technical Report dated February 14, 2014; effective date January 17, 2014. Full mineral resource estimate disclosure can be found on the company's website or at www.sedar.com. Metal prices for gold, silver, copper, and zinc are $1,400/oz, $25.00/oz, $3.50/lb, and $0.90/lb, respectively.
3Adyabo project updated mineral resource estimate disclosed via press release dated June 14, 2016; effective date May 31, 2016. Metal prices for gold, silver, and copper are $1,400/oz, $20.00/oz, and $3.20/lb, respectively. Metallurgical recoveries of 97% for gold, 72% for copper, and 50% for silver were applied at Da Tambuk.
