VANCOUVER, British Columbia, Jan. 24, 2018 (GLOBE NEWSWIRE) -- East Africa Metals Inc. (TSX-V: EAM) (“East Africa” or the “Company”) wishes to announce that, further to news releases dated October 2, 2017 and October 5, 2016, the Company has completed the updated terms (“Addendum”) for the Definitive Agreement with an arm’s length private exploration and development company, Tanzanian Goldfields Company Limited (“TzGF) a Hong Kong company (the “Developer”), to purchase and develop East Africa’s Handeni Properties, which includes the Magambazi Project, and all properties owned by East Africa (together the “Assets”) in Tanzania.
The Addendum reflects the following:
- The Developer has assigned the rights to the obligations of the Definitive Agreement, the Gold Purchase Agreement and the Addendum to the Developer’s new entity Tanzanian Goldfields Company Limited;
- The Developer has paid US$688,972 to settle outstanding payables owed to East Africa and provide advance payments towards the final purchase of the Assets;
- The Developer will pay US$500,000 to East Africa on the delivery of documents for Tanzanian Government approval;
- The Developer will deposit US$750,000 in a trust account when the documents to the Tanzanian Government have been submitted and the amount will be released when Tanzanian Government approvals are received;
- Under an interim Management Agreement, TzGF and East Africa’s Tanzanian subsidiaries will enter into Shareholders and Directors agreement providing the rights and obligations to TzGF of the day to day operations until the transaction has been approved by the Government of Tanzania;
- Both the Company and the Developer have the right to offer to exchange the gold stream to a net smelter return royalty;
- Luck Winner Investment Limited will not be investing in the Tanzanian operations.
The transaction will provide East Africa with the right to acquire a gold stream equal to 30% of gold produced during mining operations established at any of the Assets, for a per ounce payment equal to the lesser of: (i) production cost plus 15% based on the Developer’s historical and budgeted production costs, and (ii) the prevailing market price for gold. Furthermore, the Developer conveys to East Africa the right to receive a 1.6% Net Smelter Royalty, capped at US$1,800,000.
Further, East Africa and the Developer will establish a Mining Technical Committee (“MTC”) whose mandate is to provide oversight on all technical matters related to the exploration, development and operation of the Magambazi Mine including budgets, production targets and reclamation requirements. The Developer will have three seats on the MTC with East Africa having two. The MTC will provide guidance to achieve targeted production of 40,000 ounces per year for the calendar year 2020.
The Developer has provided a completion guarantee under which, if the Developer fails to produce 10,000 ounces a quarter for two consecutive quarters commencing in 2020, the Developer will pay East Africa an advanced cash payment equivalent to 85% of the forecasted revenue to East Africa. The remaining unpaid 15% of East Africa’s revenue will be settled once the Developer reaches 10,000 ounces of gold production in a quarterly period. Such production numbers shall be cumulative and shall be reconciled annually.
East Africa will have a right of first refusal to re-acquire the properties if commercial production is not reached during 2020, if the Developer notifies the Company of its intention to abandon the Assets or if the Developer decides to sell the Assets. If the Assets are sold to a new party East Africa rights to the Gold Purchase Agreement remains in effect.
The transaction will not close until the Company receives the payments identified above and obtains Tanzanian Government approval. East Africa will not be required to contribute to capital or exploration expenditures with respect to the construction and development of the Assets.
