The addendum to the purchase agreement regarding all of East Africa Metals‘ gold assets reflects the following:
- Tanzanian Goldfields Company (the developer) has assigned the rights to the obligations of the definitive agreement, the Gold Purchase Agreement and the addendum to the developer’s new entity Tanzanian Goldfields Company
- The developer has paid US$688 972 to settle outstanding payables owed to East Africa and provide advance payments towards the final purchase of the assets
- The developer will pay $500 000 to East Africa on the delivery of documents for Tanzanian Government approval
- The developer will deposit $750,000 in a trust account when the documents to the Tanzanian Government have been submitted and the amount will be released when Tanzanian Government approvals are received
- Under an interim management agreement, Tanzanian Goldfields Company and East Africa’s Tanzanian subsidiaries will enter into shareholders and directors agreement providing the rights and obligations to Tanzanian Goldfields Company of the day to day operations until the transaction has been approved by the Government of Tanzania
- Both East Africa Metals and the developer have the right to offer to exchange the gold stream to a net smelter return royalty
- Luck Winner Investment will not be investing in the Tanzanian operations
The transaction will provide East Africa with the right to acquire a gold stream equal to 30% of gold produced during mining operations established at any of the Assets, for a per ounce payment equal to the lesser of:
- Production cost plus 15% based on the developer’s historical and budgeted production costs
- The prevailing market price for gold. Furthermore, the developer conveys to East Africa the right to receive a 1.6% net smelter royalty, capped at $1 800 000.
Further, East Africa and the developer will establish a mining technical committee (MTC) whose mandate is to provide oversight on all technical matters related to the exploration, development and operation of the Magambazi mine including budgets, production targets and reclamation requirements.
The developer will have three seats on the MTC with East Africa having two.
The MTC will provide guidance to achieve targeted production of 40 000 oz per year for the calendar year 2020.
The developer has provided a completion guarantee under which, if the developer fails to produce 10 000 oz a quarter for two consecutive quarters commencing in 2020, the developer will pay East Africa an advanced cash payment equivalent to 85% of the fore-casted revenue to East Africa.
The remaining unpaid 15% of East Africa’s revenue will be settled once the developer reaches 10 000 oz of gold production in a quarterly period.
Such production numbers shall be cumulative and shall be reconciled annually.
East Africa will have a right of first refusal to re-acquire the properties if commercial production is not reached during 2020, if the developer notifies East Africa Metals of its intention to abandon the assets or if the developer decides to sell the assets.
If the assets are sold to a new party East Africa Metals’ rights to the gold purchase agreement remains in effect.
The transaction will not close until East Africa Metals receives the payments identified above and obtains Tanzanian Government approval.
East Africa Metals will not be required to contribute to capital or exploration expenditures with respect to the construction and development of the assets.
Feature image credit: Wikipedia