Tembo Gold, through its subsidiary Tembo Gold Tanzania, has agreed to acquire the Imwelo gold project in Tanzania, from the Australian mining company Lake Victoria Gold (LVG).

Imwelo project is located in northern Tanzania, to the west of Geita gold mine owned by Anglogold Ashanti, and held by LVG’s subsidiary, Tanzoz Mineral.

Under the terms of the agreement, Tembo will acquire the Imwelo project for a total consideration of C$5.5m ($4m), including Tembo common shares and cash.

The LVG shareholders would receive a consideration comprising around 23.6 million Tembo common shares at a price of C$0.22 per share, and around $221,000 cash.

The transaction is expected to be completed by December this year.

Upon closing, Taifa is expected to own around 27.1% of Tembo’s outstanding shares, and LVG shareholders will own around 13.3% stake, on a partially diluted basis.

Lake Victoria Gold managing director Seth Dickinson said: “Lake Victoria Gold is excited for the opportunity to become part of the Tembo family.

“The merging of the technical and country knowledge and experience of our respective teams will provide a strong foundation for the development and progress of the Tanzanian Gold Projects.”

The Canadian mining company has also signed a binding letter of intent with Taifa Mining and Civils, to procure a C$11.52m ($8.5m) financing in several tranches.

Taifa will initially subscribe for 16 million shares of Tembo at C$0.22 per share for gross proceeds of C$3.52m, prior to completion of the acquisition.

After closing of acquisition, Taifa is required to complete a second private placement of 16 million units within 20 days, at a price of C$0.24 per unit, to procure total proceeds of C$3.84m.

Each unit comprises one common share of Tembo and one warrant exercisable to purchase one additional common share of Tembo for two years at a price of C$0.26 per share.

After six months from breaking ground on the project, Taifa can exercise the warrants which allows Tembo to procure gross proceeds of C$4,160,000.

Tembo will sign three mining services contracts with Taifa, after each tranche, for the provision of mining services for the Tembo projects, including all future projects.

Tembo president and CEO David Scott said: “The acquisition of Lake Victoria Gold and the partnership with Taifa Mining strategically positions and transforms Tembo into a vehicle for growth and consolidation in Tanzania.

“We are excited to see Tembo evolve from a company with one exploration asset to a company with multiple paths of shareholder value creation.

“We look forward to working with Seth Dickinson from LVG and the Taifa team as we identify and evaluate other accretive opportunities in the country.”