East Africa Metals Inc. ("East Africa" or the "Company") wishes to announce that further to news release dated October 27, 2015, the Company has received cash payment of US$100,000, a non-refundable deposit in partial payment of the Handeni property and extended the deadline for the effective date on the agreement with an arm's length private exploration and development company (the "Developer") to develop East Africa's Magambazi project in Tanzania, from November 30, 2015 to February 29, 2016.
As outlined in its June 15th, 2015 news release:
Under the terms of the letter agreement, the Developer will:
- pay East Africa US$1 million (US$100,000 paid) in cash for a 100% interest in the Handeni property, which includes the Magambazi project, and all properties owned by East Africa in Tanzania (the "Assets");
- pay East Africa approximately US$1 million in cash for the book value of the camp, equipment and other assets;
- convey to East Africa the right to receive a 1.6% Net Smelter Royalty on production, capped at US$1.8M;
- convey to East Africa the right to acquire a gold stream equal to 30% of the life of mine gold production from all of the Assets;
- issue treasury shares of the Developer that is expected to represent 9.9% of the Developer's outstanding shares. The Developer intends to list on the London Stock Exchange's AIM and expects to issue such shares to East Africa before the listing; and
- offer East Africa a seat on the Board of Directors of the Developer and a seat on the Management
Committee of the Magambazi project.
East Africa will not be required to contribute to capital or exploration expenditures with respect to the construction and development of any of the Assets.
The transaction will provide East Africa with the right to purchase 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.
Further, the Developer will provide a completion guarantee under which, if within 48 months of the effective date the project fails to produce a minimum of 8,000 ounces of gold in any quarterly period, the Developer will pay East Africa an advanced cash payment of US$592,000 for every quarter after 48 months from the effective date that 8,000 ounces of gold is not produced.
East Africa will have a right of first offer and a right to re-acquire the properties if commercial production is not reached in four years from the effective date or if the project is abandoned.
Andrew Lee Smith, President & CEO of East Africa, commented: "This is a significant step in the process of East Africa diversifying its asset base. This transaction is expected to allow East Africa to focus on its Adyabo and Harvest projects in Ethiopia, and will provide the Company with cash flows from operations in Tanzania going forward, once development of the project is complete."
Technical information included in this news release was approved by Jeff Heidema, P.Geo., the Company's Vice President Exploration. Mr. Heidema is a Qualified Person as defined by National Instrument 43-101.
About East Africa Metals
The Company's principal assets and interests include both the 70%-owned Harvest polymetallic VMS exploration Project, which covers approximately 116 square kilometres in the Tigray region of Ethiopia, 600 kilometres north]northwest of the capital city of Addis Ababa, and the Adyabo Project, covering 264 square kilometres immediately west of the Harvest Project. The Company owns 80% of the Adyabo Project. East Africa now has mineral resources defined at both projects in Ethiopia and continues to test priority targets.
More information on the Company can be viewed at the Company's website: www.eastafricametals.com.
On behalf of the Board of Directors:
Andrew Lee Smith, P.Geo., CEO