East African Mining News Unearthing Mining Opportunities in East Africa
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East Africa Metals Inc. (TSXV: EAM) has moved to restart its stalled Tanzanian gold venture, announcing a binding Memorandum of Understanding (MOU) with Ubora Minerals Company Limited to acquire and develop the Magambazi and Handeni mining project.
The deal replaces a failed agreement with PMM Mining Company Limited and aims to jumpstart a project that non-compliance issues have hampered. The Tanzanian Ministry of Minerals suspended PMM’s operations and license renewal in late, forcing EAM to seek a resolution. The government intervened again in August, instructing EAM and PMM to jointly appoint a third-party developer.
Key Terms of the Ubora Agreement
Ubora Minerals is a subsidiary of Anchises Capital Precious Metal Fund LLC, which holds an stake in EAM, making the transaction a “related party transaction” under TSX Venture Exchange policies.
The terms of the MOU are designed to settle outstanding debts and ensure development:
- Cash Settlement: A US$1.0 million cash payment to EAM upon signing a definitive agreement, which will settle a larger US$1.7 million debt owed to EAM by the former partner, PMM.
- Royalty Structure: EAM will receive a 4% Net Smelter Returns royalty, which includes annual minimum royalty payments, advanced royalties, and a cumulative 10-year guarantee.
- PMM Buyout: The agreement mandates the buyout of PMM’s residual interest in the project.
- Development Deadline: Ubora is required to achieve a minimum annual production rate of 40,000 ounces of gold within 48 months of commercial production, following the completion of all necessary approvals.
Overcoming Regulatory Hurdles
The deal is contingent on a number of factors, including approval from the Tanzanian Mining Commission and other governmental authorities, the execution of a definitive agreement, and clearance from the TSX Venture Exchange.
EAM has invested US$66.8 million in African exploration since 2005 and claims to have identified 2.8 million ounces of gold and gold-equivalent resources at an average discovery cost of US$24 per ounce. The company’s other key assets include interests in the Adyabo Property and Harvest polymetallic VMS Exploration Project in the Tigray Region of Ethiopia.
The company stated the transaction is exempt from formal valuation and minority shareholder approval requirements under Multilateral Instrument 61−101 because its securities are not listed on specified markets and the value of the deal does not exceed 25% of EAM’s market capitalization.
