Tembo Gold reinvents itself – Tanzanian tycoon joins as new major shareholder with 27.1% stake
It’s almost like a second founding: Tembo Gold Corp. (TSXV: TEM; FRA: T23A) today announces a groundbreaking transformation that brings the company fresh capital and a powerful new major shareholder and ally in Tanzania, Tanzanian tycoon Rostam Aziz. Through the simultaneous strategic acquisition of a production-ready gold project in Tanzania,
Tembo is undergoing an express transformation from explorer to budding producer. Upon completion of the acquisition and concurrent financings, Taifa Mining, Tanzania’s largest private mining company, is expected to own approximately 27.1% of Tembo’s shares. The seller of the production-ready open pit mine, Lake Victoria Gold (“LVG”), or its shareholders will own approximately 13.3% of Tembo. With its new set-up, Tembo aims to promote itself as the go-to party for advanced gold projects in Tanzania in the future – with access to money and the best political connections.
As a first step, Tembo has entered into a License Purchase Agreement with privately held Australian Lake Victoria Gold Ltd (“LVG”), pursuant to which the Company will acquire, directly or indirectly, LVG’s Imwelo Gold Project in Tanzania. Concurrently, Tembo has signed a binding letter of intent for C$11,520,000 in financing with Taifa Mining and Civils Limited (“Taifa”). Tembo reserves the right to complete additional financing either prior to or upon completion of the Acquisition or the Concurrent Financings.
Tembo acquires fully permitted and production-ready open pit project
The Imwelo Project is a gold project located in northern Tanzania, immediately west of Anglogold Ashanti’s Geita Gold Mine. The project is owned by LVG’s Tanzanian subsidiary, Tanzoz Mineral Limited. An updated Pre-Feasibility Study (“PFS”) was completed in 2021 by Australia-based Measured Group Pty Ltd. which includes mine design, mine planning, scheduling, reserve estimation and costing. The project has a Tanzanian mining license (ML538/2015, “ML”) and also contains another primary mining license PML2637 to which LVG has an interest through a purchase agreement. The ML538 mining license is 3.85 km² in size and the PML is 8.5021 ha in size. The project is subject to a 2% royalty to a previous owner. The ML is fully permitted for commencement of mine construction and production. The project resource comprises seven mineralized sites that have been drilled and includes 42,000 oz Au at a measured grade of 3.15 g/t, 95,700 oz Au at an indicated grade of 1.95 g/t and 153,900 oz at an inferred grade of 1.53 g/t for a total of 291,600 oz Au. The gold occurs in typical quartz vein shear deposits suitable for open pit mining. The Imwelo ML offers significant ‘bluesky’ potential, according to Tembo. Drilling to date has only extended to 80m below surface, some areas have not been drilled as they were inaccessible at the time, and extensions to the known mineralization remain untested both along strike and down dip. Significant increases in the resource and ultimately the reserve are anticipated, which will allow for expansion of production and extension of the mine life.
Seth Dickinson Managing Director of Lake Victoria Gold commented on the deal from a vendor perspective, “Lake Victoria Gold is excited about the opportunity to become part of the Tembo family. Bringing together the technical and land knowledge and experience of our respective teams will provide a strong foundation for the development and advancement of the Tanzanian gold projects.”
David Scott, President and CEO of Tembo commented, “The acquisition of Lake Victoria Gold and the partnership with Taifa Mining strategically positions Tembo Gold as a vehicle for growth and consolidation in Tanzania. We look forward to seeing Tembo evolve from a company with a single exploration property to one with multiple opportunities to create value for shareholders. We look forward to working with LVG’s Seth Dickinson and the Taifa team to identify and evaluate additional value-creating opportunities in the country.”
The acquisition will be paid for predominantly through the issuance of Tembo shares at $0.22 CAD
Under the agreement, Tembo will acquire the project for an amount of C$5,500,000, consisting of approximately 23.6 million common shares of Tembo at a deemed value of C$0.22 per share and approximately $221,000 in cash. The Tembo shares, which will go as consideration to LVG, LVG’s management, insiders and shareholders who owned more than 3% of LVG’s shares prior to the acquisition, have a graded holding period. 1/3 of the shares will vest after six months, another third after 12 months and the remaining third will be released from escrow once commercial production is achieved on the project.
Only if, contrary to expectations, commercial production is not achieved within 3 years of contract completion will the final third of the escrow shares be released. During the escrow period, Tembo (or its nominee) retains voting rights over the shares held in escrow.
Completion of the acquisition is subject to customary conditions precedent. These include satisfactory due diligence by Tembo and LVG. Tembo and LVG must obtain all necessary shareholder and, if required, court approvals to complete the acquisition. Tembo and LVG, the counterparties, will also need to obtain all necessary regulatory approvals, including the Fair Competition Act (Tanzania) and the TSXV, to proceed with the Acquisition. Upon completion of the acquisition, a nominee representative of LVG will join Tembo’s Board of Directors.
Formal completion of the acquisition expected by the end of 2023
The Acquisition constitutes a “Fundamental Acquisition” under the policies of the TSXV and is subject to the approval of the TSXV. All Tembo Shares issued pursuant to the Acquisition will be subject to a four-month hold period from the date of issuance under applicable Canadian securities laws. The Acquisition is being made on an arm’s length basis and no finder’s fees are payable.
In connection with the Acquisition, Tembo has entered into a binding letter of intent (“LOI”) with Taifa for partial financing in the amount of C$11,520,000 (48,000,000 shares). Taifa, owned by Tanzanian tycoon Rostam Aziz, was founded in 1987 as a construction and earthmoving company in Mbeya, Tanzania. Since then, the company has grown to become the largest locally owned construction and mining company in Tanzania, with prominent companies such as Petra, De Beers, Barrick and AngloGold Ashanti as partners. The agreement with Taifa strengthens Taifa’s growing influence in the Tanzanian mining sector and provides Tembo with a local partner with extensive mining experience. Under the terms of the MOU, Taifa’s investment will be made in three phases, as follows:
Taifa (or its related persons) will initially subscribe for 16 million shares at C$0.22 per share for gross proceeds of C$3,520,000. Upon completion of this initial investment, Tembo will enter into a Mining Services Agreement with Taifa setting out the terms and conditions under which Taifa will provide mining services for pre-production and production of the Project. These services will be provided on competitive terms. TAIFA will be granted the right to nominate one member to the Tembo Board of Directors.
Upon completion of final engineering and closing of the Acquisition, Taifa will have 20 days to complete a second private placement of 16 million units (“Units”) at a price of C$0.24 per Unit (subject to TSXV pricing rules) for gross proceeds of C$3,840,000. Each unit will consist of one common share and one warrant entitling the holder to purchase one additional common share at a price of C$0.26 per share for a period of 2 years. Upon completion of this investment, Tembo will enter into an additional mining services agreement with Taifa pursuant to which Taifa will provide mining services to certain of Tembo’s projects. These services will be provided on competitive terms.
On the date that is six months after Tembo breaks ground on the project, Taifa will have 20 days to exercise the warrants, which will result in the issuance of an additional 16,000,000 shares for gross proceeds to Tembo of C$4,160,000. Upon completion of this investment, Tembo will enter into a third mining services agreement with Taifa setting out the terms and conditions under which Taifa will provide mining services to the Tembo Projects, including any future projects. These services will be provided on competitive terms.
Bottom line: if ever the word “transformative” was appropriate in a corporate news story, it is probably in this one-two punch from Tembo. Tycoon Rostam Asiz is a Tanzanian Dietrich Mateschitz – everyone in the country knows him, much like the founder of Red Bull in this country. His investment would certainly not have been possible without Tembo’s 13-year presence in the country. In principle, Tembo is collecting dividends for the trust it has built up in Tanzania over this long period. As with any good deal, all parties benefit: the Australian seller breaks the financial logjam that has so far prevented his project from going ahead. In return, he receives shares in a liquid listed company. The Tanzanian major investor becomes the new main shareholder in Tembo Gold. At the same time, he indirectly secures his own mining company, Taifa, access to the big international stage. In addition, he benefits from the know-how of the Tembo crew and will eventually earn back part of his investment through services. The biggest winner is Tembo itself. Best political connections should enable the company in the future to free a number of “stranded” projects in Tanzania from their slumber. This new direction for Tembo should also please the other major shareholder, Barrick Gold.
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