TSXV-listed East Africa Metals Inc. has executed a binding letter of intent with Tibet Huayu Mining Co. for the exploration, development and operation of its Ethiopian mining assets; the Terakimti, Mato Bula and Da Tambuk gold projects located in 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 its Ethiopian mining assets.
East Africa Metals owns 70% of Harvest Mining PLC and 100% of Tigray Resources Incorporated PLC. Harvest holds the Terakimti oxide gold mining license. Tigray 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 55% interest of Harvest and 70% interest in Tigray, Tibet Huayu will:
- Provide a cash payment of US$1.7 million 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% post tax profits/government distributions of Harvest and hold the rights (interest) to 70% of the post-tax profits/government distributions of Tigray.
- East Africa Metals will hold the rights (interest) to 15% post tax profits/government distributions of Harvest and hold the rights (interest) to 30% of the post-tax profits/government distributions of Tigray.
- Closing conditions include:
- Required approvals including and not limited to board, regulatory, and government approvals;
- Execution of the definitive agreement; and
- East Africa Metals has received the cash payment of $1.7 million.
East Africa Metals will retain the mineral rights, and all exploration obligations for the prospective targets not incorporated in the three mining licenses and will give Tibet Huayu a right of first refusal of reasonable duration to acquire its mineral resources.
For consideration of the future Ethiopian mineral resources negotiations will be based on i) cash payment and ii) allocated % of post-tax profits of the new mineral resources.
Tibet Huayu and East Africa Metals will use best efforts to finalise all conditions precedent and finalise the definitive agreement.
Andrew Lee Smith, East Africa’s CEO states:
“The signing of the binding letter of intent with Tibet Huayu marks a significant milestone for the company and the emerging Ethiopian mining sector. Our 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”.