East Africa Metals Enters Binding MOU for Project Financing

VANCOUVER, BC--(Marketwired - October 02, 2017) - East Africa Metals Inc. (TSX VENTURE: EAM) ("East Africa" or the "Company") is pleased to announce the signing of a binding memorandum of understanding ("MOU") with Luck Winner Investment Limited ("LW") providing for project development financing of up to US$250 million and 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. LW has also agreed to provide an unsecured loan to the Company in the amount of C$2,000,000.

Project Development / Joint Venture

The MOU with LW contemplates that a joint venture company ("JVCo") will be formed, with 70% owned by LW and 30% owned by East Africa. LW will invest up to US$250 million into development of East Africa's projects in Ethiopia. East Africa will contribute a proportionate amount of gold valued with a cost price of US$70/oz, of up to 1.5 million ounces^AuEquiv for an aggregate value of US$110 million (See EAM News Release dated July 13, 2016 and resource information below). The parties intend to expeditiously negotiate, finalize and execute a comprehensive joint venture agreement respecting JVCo and the development of East Africa's Ethiopian projects.

Private Placement

Under the MOU, LW 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 the Company'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, LW will own approximately 28.8% of the Company's outstanding shares (37.8% on a diluted basis). Also upon completion of the private placement, the Company will cause three of its directors to resign and appoint three LW nominees to fill those vacancies, and the Company may make certain changes to management positions.

$2 Million Loan

LW and East Africa also entered into a loan agreement pursuant to which LW has agreed to lend C$2,000,000 to East Africa. The loan will be repayable in six months and will accrue interest of 2% per annum. Under the loan agreement, East Africa is required to restructure its existing cooperation agreement with respect to the Magambazi project within 30 days. Upon completion of the restructure, LW 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 LW and 30% owned by East Africa. The C$2,000,000 loan proceeds will be deemed to be LW's cash consideration payable to East Africa for the joint venture, and any accrued interest would be forgiven.