In addition the deal between East Africa Metals and Luck Winner Investment includes a private placement of 52 100 000 units at a price of $0.26 per unit for aggregate gross proceeds of approximately C$13 550 000.
Luck Winner Investment has also agreed to provide an unsecured loan to East Africa Metals in the amount of C$2 000 000.
Project development / joint venture
The MOU with Luck Winner Investment contemplates that a joint venture company (JVCo) will be formed, with 70% owned by Luck Winner Investment and 30% owned by East Africa Metals.
Luck Winner Investments will invest up to US$250 million into development of East Africa Metals’ projects in Ethiopia.
East Africa Metals will contribute a proportionate amount of gold valued with a cost price of US$70/oz, of up to 1.5 Moz for an aggregate value of US$110 million.
The parties intend to expeditiously negotiate, finalise and execute a comprehensive joint venture agreement respecting JVCo and the development of East Africa Metals’ Ethiopian projects.
Under the MOU, Luck Winner Investments has committed to purchase, on a private placement basis, 52 100 000 units at a price of $0.26 per unit for aggregate gross proceeds of approximately C$13 550 000.
Each unit will consist of one common share and one-half of one share purchase warrant, with each whole warrant exercisable for $0.45 and expiring 24 months from closing.
The securities issued under the private placement will be subject to a hold period of four months.
The proceeds will be used to continue exploration programs on East Africa’s projects in Ethiopia and general working capital.
Upon completion of the private placement and conversion of the C$2,000,000 loan described below, Luck Winner Investments will own approximately 28.8% of East Africa’s outstanding shares (37.8% on a diluted basis).
Also upon completion of the private placement, East Africa Metals will cause three of its directors to resign and appoint three Luck Winner Investments nominees to fill those vacancies, and East Africa may make certain changes to management positions.
Luck Winner Investments and East Africa also entered into a loan agreement pursuant to which Luck Winner Investments has agreed to lend C$2 000 000 to East Africa Metals.
The loan will be repayable in six months and will accrue interest of 2% per annum.
Under the loan agreement, East Africa Metals is required to restructure its existing cooperation agreement with respect to the Magambazi project within 30 days.
Upon completion of the restructure, Luck Winner Investments has the right to require the establishment of a joint venture for the development of the Magambazi project, which joint venture will be 70% owned by Luck Winner Investments and 30% owned by East Africa Metals.
The C$2 000 000 loan proceeds will be deemed to be Luck Winner Investments’ cash consideration payable to East Africa Metals for the joint venture, and any accrued interest would be forgiven.
Feature image credit: East Africa Metals