AMN - ETHIOPIA: Agreement will advance gold assets

East Africa Metals has executed a binding letter of intent (LOI) With Tibet Huayu Mining for the exploration, development and operation of the company’s Ethiopian gold assets. The agreement for the Terakimti, Mato Bula and Da Tambuk deposits also covers financing.

The boards of directors of East Africa and Tibet Huayu have approved the transaction. The deposits are located in the Tigray National Regional State.

Tibet Huayu is a Chinese mining company with its headquarters in Lhasa, China, and is publicly listed on the Shanghai Stock Exchange.

The LOI contemplates East Africa transferring its equity interest in its Ethiopian subsidiary companies to Tibet Huayu and the parties entering into joint venture contracts for the purpose of development and operation of the assets.

East Africa owns 70% of Harvest Mining PLC and 100% of Tigray Resources Incorporated PLC. Harvest holds the Terakimti oxide gold mining licence while Tigray holds the Mato Bula and Da Tambuk deposits, which are in the final process of mine permitting.

The transaction defined in the binding LOI includes terms that in exchange for 55% interest of Harvest and 70% interest in TRI, Tibet Huayu will:

- Provide a cash payment of US$1.7 million to East Africa;

- Finance, develop and operate the Terakimti, Da Tambuk and Mato Bula projects.

On completion of the proposed transaction:

- Tibet Huayu will hold the rights to 55% post-tax profits/government distributions of Harvest and hold the rights to 70% of the post-tax profits/government distributions of Tigray.

- East Africa will hold the rights to 15% post-tax profits/government distributions of Harvest and hold the rights to 30% of the pos- tax profits/government distributions of Tigray.

East Africa will retain the mineral rights and all exploration obligations for the prospective targets not incorporated in the three mining licences.

East Africa’s CEO Andrew Lee Smith said, “The signing of the binding LOI with Tibet Huayu marks a significant milestone for EAM and the emerging Ethiopian Mining sector.

"EAM’s board and management look forward to a partnership that will see mine development and exploration agendas advancing parallel with the objective to establish mining operations and grow the current resource base through diamond drilling.”

The LOI follows the Ministry of Mines and Petroleum last month approving the mining agreements for East Africa’s Mato Bula and Da Tambuk projects.

With the completion of the two agreements, East Africa now has three advanced development gold projects in close proximity to each other and existing transportation and power infrastructure.

www.eastafricametals.com