Mr. Andrew Smith reports

EAST AFRICA METALS EXECUTES BINDING LETTER OF INTENT WITH TIBET HUAYU MINING FOR THE FINANCING AND DEVELOPMENT OF THE TERAKIMTI, MATO BULA AND DA TAMBUK DEPOSITS, ETHIOPIA

East Africa Metals Inc. has executed a binding letter of intent with Tibet Huayu Mining Co. Ltd. for the exploration, development and operation of East Africa Metals's Ethiopian mining assets -- the Terakimti, Mato Bula and Da Tambuk gold projects located in the Tigray national regional state of the Federal Democratic Republic of Ethiopia. Tibet Huayu is a Chinese mining company with its headquarters in Lhasa, China, and is publicly listed on the Shanghai Stock Exchange.

The letter of intent contemplates East Africa Metals 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 East Africa Metals' Ethiopian mining assets. East Africa Metals owns 70 per cent of Harvest Mining PLC and 100 per cent of the Tigray Resources Inc. PLC. Harvest holds the Terakimti oxide gold mining licence. East Africa Metals' subsidiary, TRI, hosts the Mato Bula and Da Tambuk deposits (Adyabo property), which are in the final process of mine permitting.

The transaction defined in the binding letter of intent includes terms that, in exchange for a 55-per-cent interest of Harvest and a 70-per-cent interest in TRI, Tibet Huayu will:

• Provide a cash payment of $1.7-million (U.S.) to East Africa Metals;
• Finance, develop and operate the Terakimti, Da Tambuk and Mato Bula projects.

On completion of the proposed transaction:

• Tibet Huayu will hold the rights (interest) to 55 per cent of the after-tax profits/government distributions of Harvest and hold the rights (interest) to 70 per cent of the after-tax profits/government distributions of TRI.
• East Africa Metals will hold the rights (interest) to 15 per cent of the after-tax profits/government distributions of Harvest and hold the rights (interest) to 30 per cent of the after-tax profits/government distributions of TRI.
• Closing conditions include:
  • Required approvals including, and not limited to, board, regulatory and government approvals;
  • Execution of the definitive agreement;
  • East Africa Metals has received the cash payment of $1.7-million (U.S.).

East Africa Metals will retain the mineral rights and all exploration obligations for the prospective targets not incorporated in the three mining licences. East Africa Metals shall give Tibet Huayu a right of first refusal of reasonable duration to acquire East Africa Metals' mineral resources. For consideration of the future Ethiopian mineral resources negotiations will be based on: (i) cash payment; and (ii) allocated percentage of after-tax profits of the new mineral resources. Tibet Huayu and East Africa Metals will use best efforts to finalize all conditions precedent and finalize the definitive agreement.

Andrew Lee Smith, chief executive officer of East Africa Metals, stated: "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 key technical and base-case pretax and after-tax metrics for each project are presented in the attached table (see news release dated April 30, 2018).

Parameters                                                       Project  
                            
                                          Units      Mato Bula      Da Tambuk      Terakimti 

Mine plan                                tonnes      3,335,000        650,000      1,086,000
Grade                        Gold           g/t            3.0            4.9            3.1
                           Copper             %          0.26%            N/A            N/A
                           Silver           g/t           0.70            2.3           22.9
Metal recoveries             Gold             %          86.4%          93.0%          65.0%
                           Copper             %          87.4%            N/A            N/A
                           Silver             %          50.0%          50.0%          30.0%
Recovered metals             Gold            oz        278,000         95,000         71,000
                           Copper      lb (000s)        13,353            N/A            N/A
                           Silver            oz         38,300         24,000        229,000
                             AuEq            oz        305,000         95,000         74,000
Capital cost                           US$(000s)       $54,200        $34,030        $17,180
Sustaining capital                     US$(000s)        $5,600         $8,030         $1,720
Operating cost         Site -- C1     US$/tonne         $47.53         $61.85         $34.10
Metal prices
Gold price                               US$/oz         $1,325         $1,325         $1,325
Copper price                             US$/lb          $3.00            N/A            N/A
Silver price                             US$/oz         $17.00         $17.00         $17.00
Pretax
Cash flow                              US$(000s)      $139,710        $31,160        $29,360
NPV at 8%                              US$(000s)       $83,820        $20,670        $19,470
IRR                                           %          34.1%          37.8%          37.4%
After tax
Cash flow                     LOM     US$ (000s)       $97,700        $20,615        $20,890
NPV at 8%                             US$ (000s)       $56,660        $13,020        $13,180
IRR%                                                     28.4%          28.6%          30.1%
Other metrics
Payback                                   years            3.0            1.9            2.4
C1 operating
cost                                  US$/oz Au           $412           $420           $465
AISC                                  US$/oz Au           $620           $642           $649   

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