East Africa Metals (TSX-V:EAM, StockForum), a Vancouver-based mineral exploration company engaged in exploration projects located in Africa, announced today that the company had entered into a $2.0 million loan agreement with Tigray Resources (TSX-V:TIG, StockForum) acting as borrower.
Tigray is going to use the proceeds to further exploration at Tigray's Adyabo and Harvest projects, and for general corporate purposes.
The loan is secured with shares of Tigray Resources Holdings, a wholly-owned subsidiary of Tigray that possesses controlling interest in Tigray's Ethiopian operations, and is due and payable in full on June 3, 2014, subject to a six month extension at the discretion of East Africa Metals.
According to the news release, “East Africa Metals has agreed with the TSX Venture Exchange and Tigray to not exercise such number of Warrants that would result in East Africa Metals becoming a Control Person of Tigray (as such term is defined in the policies of the TSX Venture Exchange) without prior shareholder approval.”
It went on, “As a result of the fact that a control person of East Africa Metals is also a control person of Tigray, the borrowing pursuant to the Loan is considered a "related party transaction" pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101").”
Then explained, “The Board further determined that the Company satisfies the requirements of, and ought to rely on, certain exemptions available under MI 61-101 with respect to exemptions from minority shareholder approval and valuation requirements.”
And summed up, “The Loan was considered and approved by the board of directors of the Company (the "Board"). The Board determined that the borrowing transaction is reasonable and in the best interests of the Company.”
East Africa Metals was in the news recently when the company was recognized for corporate social responsibility and environmental programs in Tanzania.
Shares dropped 13.33% on the news to $0.13 per share.
Currently there are 67,305,842 shares outstanding with a market cap of $8.75 million.