East Africa Metals (EAM) has executed a binding letter of intent (LOI) with Chinese company Tibet Huayu Mining to advance its Ethiopian mining assets.

The LOI involves the exploration, development and operation of East Africa Metals’ Terakimti, Mato Bula and Da Tambuk gold projects in the Tigray National Regional State in Ethiopia.

Under the terms of the LOI, East Africa Metals will transfer its equity interest in its Ethiopian subsidiaries to Tibet Huayu.

The parties will also enter joint venture contracts to develop and operate the company’s mining assets in the country.

“The signing of the binding LOI with Tibet Huayu marks a significant milestone for EAM and the emerging Ethiopian mining sector.”

East Africa Metals owns 70% of the Harvest Mining, which holds the Terakimti oxide gold mining licence.

The company also owns 100% of Tigray Resources (TRI), which hosts the Mato Bula and Da Tambuk deposits. These are in the final process of mine permitting.

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By GlobalData

East Africa Metals CEO Andrew Lee Smith said: “The signing of the binding LOI with Tibet Huayu marks a significant milestone for EAM and the emerging Ethiopian mining sector.

“EAM’s 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.”

The transaction defined in the LOI includes terms that Tibet Huayu will make a $1.7m cash payment to East Africa Metals in exchange for a 55% interest of Harvest and a 70% interest in TRI.

Tibet Huayu will also finance, develop and operate the Terakimti, Da Tambuk and Mato Bula projects.

Upon completion, the company will respectively hold the rights to 55% and 70% of the post-tax profits/government distributions of Harvest and TRI.

The closing of the transaction is subject to securing board, regulatory and government approvals, execution of the definitive agreement, and East Africa Metals receiving $1.7m.