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 $1.7-million (U.S.).
East Africa Metals will retain the mineral rights and all exploration obligations for the prospective targets not incorporated in the three mining licences. East Africa Metals shall give Tibet Huayu a right of first refusal of reasonable duration to acquire East Africa Metals' mineral resources. For consideration of the future Ethiopian mineral resources negotiations will be based on: (i) cash payment; and (ii) allocated percentage of after-tax profits of the new mineral resources. Tibet Huayu and East Africa Metals will use best efforts to finalize all conditions precedent and finalize the definitive agreement.
Andrew Lee Smith, chief executive officer of East Africa Metals, stated: "The signing of the binding LOI with Tibet Huayu marks a significant milestone for EAM and the emerging Ethiopian mining sector. EAM's board and management look forward to a partnership that will see mine development and exploration agendas advancing parallel with the objective to establish mining operations and grow the current resource base through diamond drilling."
The key technical and base-case pretax and after-tax metrics for each project are presented in the attached table (see news release dated April 30, 2018).
Units Mato Bula Da Tambuk Terakimti
Mine plan tonnes 3,335,000 650,000 1,086,000
Grade Gold g/t 3.0 4.9 3.1
Copper % 0.26% N/A N/A
Silver g/t 0.70 2.3 22.9
Metal recoveries Gold % 86.4% 93.0% 65.0%
Copper % 87.4% N/A N/A
Silver % 50.0% 50.0% 30.0%
Recovered metals Gold oz 278,000 95,000 71,000
Copper lb (000s) 13,353 N/A N/A
Silver oz 38,300 24,000 229,000
AuEq oz 305,000 95,000 74,000
Capital cost US$(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 $34.10
Gold price US$/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 $17.00
Cash flow US$(000s) $139,710 $31,160 $29,360
NPV at 8% US$(000s) $83,820 $20,670 $19,470
IRR % 34.1% 37.8% 37.4%
Cash flow LOM US$ (000s) $97,700 $20,615 $20,890
NPV at 8% US$ (000s) $56,660 $13,020 $13,180
IRR% 28.4% 28.6% 30.1%
Payback years 3.0 1.9 2.4
cost US$/oz Au $412 $420 $465
AISC US$/oz Au $620 $642 $649
We seek Safe Harbor.
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