Tembo Gold Corp. Announces Up To $8.657M Strategic Private Placement

October 08, 2013

TORONTO, ONTARIO -- Tembo Gold Corp. (TSX VENTURE:TEM)(FRANKFURT:T23) ("Tembo" or the "Company") is pleased to announce a proposed strategic financing for the Company. The Company proposes to complete a non-brokered private placement (the "Financing") consisting of up to 13,333,334 units (the "Units") at a price per Unit of C$0.15 and up to 44,380,000 subscription receipts (the "Subscription Receipts") at a price per Subscription Receipt of C$0.15 for total gross proceeds of up to C$8.657 million with a minimum financing condition of C$7 million.

Each Unit will consist of one common share (each a "Share") and one common share purchase warrant of the Company (each a "Warrant"). Each Warrant will be exercisable to acquire one Share at a price of $0.16 per Share for a period of three years from the issuance of the Units on the initial closing of the Financing.

The main investors subscribing for Subscription Receipts under the Financing will be NAMF II (Mauritius) Limited ("NAMF Mauritius") as to C$1,941,750, NAMF II South African Partnership ("NAMF South Africa") as to C$558,250, Stratex Gold A.G. ("Stratex") as for up to C$1,657,000 and Concept Capital Management Limited ("CCM") as for up to C$2,500,000 (collectively, the "Investor Group"). Certain management members, other insiders, and existing shareholders of the Company will also participate in the Financing for up to C$2,000,000 of Units. None of the members of the Investor Group are currently insiders of the Company.

David Scott, President and CEO of Tembo, states, "We are very pleased with the prospect of having the Investor Group as strategic partners in Tembo. We look forward to their financial support through their investment, and importantly, their input into the technical planning and corporate management of the Company. he synergy of Tembo's goals and that of the Investor Group could point toward a fruitful and successful future as the prospectivity of the Tembo Project is further explored."

Commenting on the proposed investment Stratex Chairman Christopher Hall said "Stratex is very pleased to announce this exciting strategic investment in conjunction with the New Africa Mining Fund II and Concept Capital Management. The Tembo property is located in the highly prospective Lake Victoria Gold Belt of Tanzania to the northwest of, and next to, the Bulyanhulu Mine. Tembo has built on extensive historic work and artisanal activity with encouraging results from over 35,000m of drilling on half a dozen targets, however, it has yet to report a resource. Stratex and its partners believe they can guide, support and provide the finance for management to focus on priority targets, with infill and step-out drilling, before moving to resource estimation. In line with our restated strategy, we see Tembo as a "tipping point" opportunity, where tightly focussed exploration can accelerate the exploration process. Negotiating and structuring this transaction has been a protracted process and there are still some hurdles to be overcome. However, there has been an immense amount of goodwill on all sides as the financing is clearly in the interests of Tembo and all its stakeholders."

About New Africa Mining Fund II

The New Africa Mining Fund II ("NAMF") is a junior mining venture capital fund which provides capital for early to later stage exploration and mining development projects in all minerals except diamonds and uranium, throughout Africa. NAMF adheres to the common standards and investment practices which have been developed and successfully followed by Private Equity investment firms in other markets. Such practices include due diligence, strict attention to corporate governance and sustainable development policies and a disciplined approach to timely investment realization.

About Stratex International Plc. (AIM:STI)

Stratex is an AIM-listed company focused on the exploration and development of gold and high-value base metals in Turkey, East Africa and West Africa. Listing in January 2006, the company has been positioned to take advantage of the current paucity of exploration activities and the resultant projected shortage in supply of precious and base metals. Since inception Stratex has rapidly amassed a portfolio of high-potential exploration licences in central and western Turkey, Ethiopia and Djibouti, and Senegal and Mauritania, as a result of the company's informed and aggressive approach to terrain analysis and prospect identification.

About Concept Capital Management

CCM, is a private German based Asset Management Company focused on evaluating and investing in Canadian resource companies through equity investments, convertible bonds and gold, silver, and copper off-take agreements.

The strategic intention of the Investor Group is to prioritize continued advancement of the exploration of the Tembo project with an aim to develop a significant resource base. The Board of Directors considers that the introduction of the Investor Group will favorably expand the potential capital base of the Company going forward. As such the Board of Directors of Tembo unanimously recommends that Tembo shareholders consent to the change of control in connection with the Financing. The Investor Group has advised Tembo that it intends for Tembo to remain a public company after completion of the Financing.

Set out below are some additional key terms of the Financing:

  • The members of Investor Group are making their investment jointly;
  • The investors in the Investor Group will each be granted a right to maintain their pro rata interest in the Company going forward, subject to maintaining a minimum 5% equity interest in Tembo;
  • The Investor Group will act jointly and in concert in making its investment and propose to enter into a private voting arrangement in connection with their investment. It is anticipated that the voting arrangement will provide for, among other things, the pooling of the Shares (assuming conversion of the Subscription Receipts) owned by the Investor Group, the termination of the pooling arrangement, the exercise of the collective voting rights, certain restrictions on encumbrances, the establishment of a pooling agent and certain rights with respect to the disposition of Shares (assuming conversion of the Subscription Receipts);
  • The board of directors of Tembo will be reconstituted with a majority of directors comprised of nominees of the Investor Group. It is proposed that David Scott, Dave Anthony and John Seaman will resign as needed from the Tembo board and Neil Gardyne, Bob Foster, Frank Hoegel of NAMF Mauritius and NAMF South Africa, Stratex and CCM, respectively, will be appointed to fill such vacancies. Each nominee will be appointed immediately following the conversion of the Subscription Receipts of the applicable Investor Group member. The appointment of all the nominees of the Investor Group will constitute a "Change of Management" under the rules of the TSXV. The biographies of the proposed directors are as follows:

Neil Gardyne - Mr. Gardyne is a geologist with over 35 years' experience in exploration and mining ventures in Southern Africa, and has been involved in managing Private Equity/ Venture Capital funds focusing on early stage exploration and mine development in South Africa for the past 12 years. He has a BSc (Hons) degree in Geology from the University of Kwa-Zulu Natal, and is currently a Director on the Board of NAMF II (Mauritius) Ltd, Decorum Capital Partners (Pty) Ltd, and NAMF Corporate Advisory Services (Pty) Ltd.

Bob Foster (BSc, PhD, FIMM, CEng, FGS, CGeol) - Dr. Foster has 39 years of experience as a professional economic geologist and has particular expertise in the genesis of and exploration for gold deposits, having worked in Europe, Central Asia, North and South America, and throughout Africa. Following ten years in the mining industry in Rhodesia (now Zimbabwe) he joined Southampton University in 1984 where he subsequently devoted more than 15 years to lecturing and managing a large applied research group investigating ore-forming processes and mineral exploration strategies before spending six years with UK-based Exploration Consultants Ltd as Minerals Manager. He has published numerous scientific and technical papers and has been an invited keynote speaker at very many international scientific and technical conferences around the world. He is Chief Executive of Stratex International Plc, an AIM-quoted company operating in Turkey and East and West Africa.

Frank Hoegel - Mr. Hoegel currently serves as Chief Executive Officer of Peter Beck Performance Fonds GbR, and sits on the advisory board of Concept Capital Management, an Asset Management Company focused on evaluating and investing in Canadian resource companies through equity investments, convertible bonds and gold, silver, and copper off-take agreements. Mr. Hoegel completed his degree in Master of Business Administration (FH) with a focus on Financial Management, Banking and International Business & Management from the University of Nürtingen, Germany.

The net proceeds of the Financing will be used by the Company to fund ongoing exploration costs on its properties in Tanzania and for working capital purposes. The following table sets forth the capitalization of the Company as at June 30, 2013, the date of the most recent consolidated financial statements filed by the Company, before and after giving effect to the maximum Financing. The table should be read in conjunction with the consolidated financial statements of the Company, including notes thereto, and the associated management's discussion and analysis.

As at June 30, 2013 As at June 30, 2013 after giving effect to Financing(1)
Cash and cash equivalents $ 80,494 $ 8,737,494
Long-term debt $ 0 $ 0
Common Shares 49,586,213 107,299,546
Stock options 3,904,000 3,904,000
Warrants 13,278,181 70,991,515
Contributed surplus $ 8,874,788 $ 14,530,695
Deficit $ (30,008,718) $ (30,008,718)
Shareholders' equity $ 14,358,382 $ 23,015,382
Share Capital $ 35,138,792 $ 38,139,885
(1) Assumes gross proceeds of the Financing before deducting the estimated expenses of the Financing and assumes that there is no exercise of outstanding common share purchase warrants or stock options of the Company. Includes conversion of the Subscription Receipts to Units prior to the six months of issuance and no Penalty Shares. Does not include the Warrant Shares or any Shares issuable upon exercise of outstanding common share purchase warrants and stock options of the Company.

If CCM does not subscribe for all its allocated Subscription Receipts each Investment Group member shall have the right to subscribe for the remaining Subscription Receipts under CCM's allocation. Each Subscription Receipt will automatically convert to a Unit upon the clearance (the "TSXV Clearance") by the TSX Venture Exchange (the "TSXV") of the Personal Information Form(s) and/or Declaration(s) of the applicable Investor Group member for a period of five years after the issuance date of the Subscription Receipt (the "Sub Receipt Term").

Under the terms of the Subscription Receipts, to the extent any Subscription Receipts remain outstanding after six months from the date of issuance:

  1. each Investor Group member whose Subscription Receipts have converted to Units (the "Converted Members") shall have a call option (the "Call Option") for a three month period to acquire any Investor Group member's Subscription Receipts that have not converted to Units (the "Defaulting Member") at 100% of the original price paid by the Defaulting Member for the Subscription Receipts; and

  2. subject to the Converted Member(s) not exercising the Call Option, all the Defaulting Member(s) outstanding Subscription Receipts will become transferable to a third party (the "Transferee"), who must agree to enter the voting pool arrangement (as described below) with the Converted Members and an agreement with Tembo Gold that allows the Transferee to assume the rights and obligations of the Defaulting Party under the subscription agreement to be entered between the Company and the Investor Group (however, prior to any transfer being finalized, the Converted Members shall have a right of first refusal to purchase the Defaulting Party's Subscription Receipts on the same terms as those negotiated with the Transferee), and following such transfer, the Subscription Receipts will automatically convert for the Transferee or Converted Member, as applicable, to 1.5 Shares and one Warrant (to the extent the Warrant has not expired) upon the TSXV Clearance within the Sub Receipt Term; and:
      1. if either (A) NAMF and NAMF South Africa; or (B) CCM is the Defaulting Member (but not all three such parties), the Converted Members shall be issued 0.11 of a Share for each Subscription Receipt subscribed for; or

      2. if all of NAMF, NAMF South Africa and CCM are the Defaulting Members, the Converted Member (Stratex) shall be issued 0.18 of a Share for each Subscription Receipt subscribed for,
(collectively, the "Penalty Shares"). Tembo Gold shall not be required to issue fractional Shares and, in any such case, the number of Shares issuable as Penalty Shares shall be rounded up to the nearest whole number.

Notwithstanding the foregoing, in the event the Defaulting Member(s) obtains TSXV Clearance prior to completion of any transfer of Subscription Receipts under the Call Option or prior to the completion of any other transfer of the Subscription Receipts within the Sub Receipt Term, such Subscription Receipts will automatically convert to Units on their original terms (one Share and one Warrant, to the extent the Warrant has not expired) and no Penalty Shares will be issuable.

The Company currently has outstanding 49,586,213 Shares on a non-diluted basis, and 65,047,512 Shares on a fully-diluted basis. The issuance of Units to the Investor Group upon conversion of the Subscription Receipts within six months of issuance and assuming completion of the maximum Financing and no Penalty Shares, including those Shares of the Company currently held by the Investor Group, will represent up to approximately 44.2% of the issued and outstanding Shares on a non-diluted basis and up to approximately 60.5% of the issued and outstanding Shares assuming exercise of the Warrants by the Investor Group. The completion of the Financing and conversion of the Subscription Receipts will result in a change of control of Tembo and, accordingly, the Company will seek the written consent of shareholders holding over 50% of its issued and outstanding Shares in accordance with the policies of the TSXV. Following the completion of the Financing and conversion of the Subscription Receipts, assuming the issuance of the maximum number of Units under the Financing and no Penalty Shares, the Investor Group members will own:

Investor Group Member Shares and Warrants Ownership Percentage(1)
NAMF II South African Partnership 3,721,666 Shares
3,721,666 Warrants
3.47% Undiluted
6.70% Partially Diluted
NAMF II (Mauritius) Limited 12,945,000 Shares
12,945,000 Warrants
12.06% Undiluted
21.53% Partially Diluted
Stratex Gold A.G.
11,046,667 Warrants
10.30% Undiluted
18.67% Partially Diluted
Concept Capital Management Limited 19,666,667 Shares
16,666,667 Warrants
18.33% Undiluted
29.31% Partially Diluted
(1) The partially diluted percentages were calculated assuming the exercise of each individual Investor Group member's Warrants.

All the securities will be subject to a four month and one day hold period from the applicable closing date(s) of the Financing. The Company may pay a finder's fee in connection with the Financing in accordance with the policies of the TSXV, subject to the approval of the TSXV, which may include up to $50,000 in cash and up to 3,399,332 in Units in lieu of a cash payment.

The Financing remains subject to a number of conditions precedent, including without limitation, shareholder consent and acceptance and approval of the Financing by the TSXV.

The Company also announces that it has cancelled its previously announced non-brokered private placement of $1,000,000 that was announced on March 14, 2013, due to the market conditions at that time.

About Tembo Gold Corp.

Tembo Gold Corp. (TSX VENTURE:TEM) is a Canadian publicly-listed mineral exploration company with a 100% interest in the Tembo Gold Project which is located adjacent to African Barrick's Bulyanhulu Gold Mine in the prolific Lake Victoria Greenstone belt in Tanzania. Tembo's focus is the discovery and development of gold projects in Africa. The Company's exploration strategy is to discover mineral resources as well as continue to look for additional opportunities that can bring value to the Company and shareholders.

On Behalf of the Board of Directors of Tembo,

David Scott, President & CEO


Cautionary Note Regarding Forward-Looking Statements

Certain information set out in this news release constitutes forward-looking information. Forward looking statements are often, but not always, identified by the use of words such as "seek", "anticipate; "plan", "continue; "estimate; "expect", "may, "will", "intend", "could", "might", "should", "believe" and similar expressions. This news release contains forward-looking statements in respect of certain anticipated goals and expectations in connection with the Financing, including, without limitation, the use of the net proceeds from the Financing, the timing of the conversion of the Subscription Receipts, the receipt of applicable shareholder approval in connection with the change of control of the Company, the anticipated voting arrangement to be entered into by the Investor Group, the anticipated consolidated capitalization of Tembo after giving effect to Financing, the anticipated reconstitution of the board of directors of Tembo, the anticipated approval of the TSXV for the Financing and the expectation that Tembo will remain a public company following the change of control. Forward-looking statements are based upon the opinions and expectations of management of the Company as at the effective date of such statements and, in certain cases, information provided or disseminated by third parties. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, and that information obtained from third party sources is reliable, they can give no assurance that those expectations will prove to have been correct. The forward-looking statements contained herein after provided for the purpose of providing readers with the Company's expectations and goals in connection with the Financing, and may not be suitable for other purposes. Readers are cautioned not to place undue reliance on forward-looking statements.

Tembo Gold Corp.
Marc Cernovitch
Director & VP Business Development