Mr. Andrew Smith reports

UPDATE: 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 provided additional information to the original announcement dated Feb. 8, 2019, regarding the project financing with Tibet Huayu Mining Company. The company can confirm the boards of directors for both East Africa Metals and Tibet Huayu Mining have approved the transaction.

Original release

The company has executed a binding letter of intent (LOI) with Tibet Huayu Mining Co. Ltd. for the exploration, development and operation of the company'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 LOI contemplates the company 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's Ethiopian mining assets. East Africa owns 70 per cent of Harvest Mining PLC and 100 per cent of Tigray Resources Inc. PLC (TRI). Harvest holds the Terakimti oxide gold mining licence. EAM's subsidiary, East Africa, hosts 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-per-cent interest of Harvest and 70-per-cent interest in TRI, Tibet Huayu will:

• Provide a cash payment of $1.7-million (U.S.) to the company;
• 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 posttax profits/government distributions of Harvest and hold the rights (interest) to 70 per cent of the posttax profits/government distributions of TRI.
• East Africa will hold the rights (interest) to 15-per-cent posttax profits/government distributions of Harvest and hold the rights (interest) to 30 per cent of the posttax 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;
• The company has received the cash payment of $1.7-million (U.S.).

The company will retain the mineral rights, and all exploration obligations for the prospective targets not incorporated in the three mining licences. EAM shall give Tibet Huayu a right of first refusal of reasonable duration to acquire the company's mineral resources. For consideration of the future Ethiopian mineral resources negotiations will be based on i) cash payment and ii) allocated percentage of posttax profits of the new mineral resources. Tibet Huayu and the company will use best efforts to finalize all conditions precedent and finalize the definitive agreement.

Andrew Lee Smith, East Africa's chief executive officer, 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 posttax metrics for each project are presented in the attached table (see news release April 30, 2018).

Parameter                                                 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 (000)      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$ (000)     $54,200     $34,030           $17,180
Sustaining capital            US$ (000)      $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            $17.00
Pretax
Cash flow                     US$ (000)    $139,710     $31,160           $29,360
NPV at 8%                     US$ (000)     $83,820     $20,670           $19,470
IRR                                   %        34.1        37.8              37.4
Posttax
Cash flow               LOM   US$ (000)     $97,700     $20,615           $20,890
NPV at 8%                     US$ (000)     $56,660     $13,020           $13,180
IRR                                   %        28.4        28.6              30.1
Other metrics
Payback                           years         3.0         1.9               2.4
C1 op cost                    US$/oz Au        $412        $420              $465
AISC                          US$/oz Au        $620        $642              $649

We seek Safe Harbor.