Katoro Gold Regulatory News (KAT)

Katoro Gold plc (Incorporated in England and Wales)

(Registration Number: 9306219)

Share code on AIM: KAT

ISIN: GB00BSNBL022

("Katoro" or "the Company")

08 April 2020

Katoro Gold plc ('Katoro' or the 'Company')

Disposal of Imweru Gold Project

Katoro Gold plc (AIM:KAT), the gold and nickel exploration and development company, is pleased to announce that it has agreed the disposal of its Imweru gold project ('Imweru' or 'the Project') to Lake Victoria Gold Limited ('LVG') for a total staged consideration of US$1.0 million and a 1.5% Net Smelter Royalty ('NSR') on all future gold production from Imweru ('the Disposal').

Louis Coetzee, Executive Chairman of Katoro Gold, said: "The Board believes that the Disposal is an important step for the Company, as it provides greater certainty of the ability for Imweru to be brought into production. LVG holds the Imwelo gold project, which is adjacent to Imweru, together with the relevant environmental approvals and a mining licence for Imwelo and are thus far more advanced toward gold production than Katoro.

"By combining Imwelo and Imweru, the Board believes that Imweru has a greater chance of being brought into production, potentially in the near-term, thereby providing a revenue generative opportunity for Katoro through the NSR. This will require no further funding or managerial time requirements on Katoro, which is important at this stage in our business development.

"Freeing up our financial and managerial resources will allow the Company to concentrate on the Blyvoor Joint Venture ('JV') project, which is focused on the reprocessing of an existing c.1.34 million ounces of gold JORC compliant tailings resource, and the Haneti nickel, platinum-group-elements, gold and lithium project, which the Board believes has substantial exploration upside potential.

"The Disposal enables Katoro to elect to receive up to US$1.0 million in cash payments over the next two years against the achievement of defined milestones, or to receive shares in LVG for the same value. Access to cash is important, however, the optionality to receive shares in LVG means we can elect to retain an equity interest in LVG, which will hold the combined Imwelo/Imweru project, should we so choose.

"Added to this, the 1.5% NSR could deliver a further cash stream to Katoro as the project moves into production, over a multi-year time horizon.

"Looking forward, all our energies will now be focused on the Blyvoor JV and Haneti projects, and we look forward to keeping shareholders updated on these projects."

Further information on the Disposal

Katoro has entered into a sale and purchase agreement ('SPA') with LVG for the disposal of Reef Miners Ltd ('Reef'), Katoro's wholly owned subsidiary, which holds the Imweru Gold Project in Tanzania ('Imweru').

LVG is an unlisted public company, incorporated in Australia, operating multiple exploration licences including its key project, the Imwelo Gold Project in Tanzania ('Imwelo'), located adjacent to Imweru and also holds the relevant environmental approvals and mining licence for Imwelo.

The board of Katoro ('the Board') believes that the Disposal will enable Imwelo and Imweru to be combined, thereby creating a project with a larger footprint and in-situ gold resource, enabling a faster route to gold production for Imweru.

Imweru and Imwelo are located in the Lake Victoria Goldfields region of northern Tanzania, a proven mineral district that currently hosts both AngloGold Ashanti's Geita Gold Mine and Acacia Bulyanhulu Gold Mine.

The current, JORC code compliant, mineral resource for Imweru and Imwelo consists of 11.6 Mt at a grade of 1.38 g/t for 515,110 oz Au and 4.7 Mt at 1.92 g/t for 291,600 oz Au respectively and probable reserve for Imwelo consists of 1.4 Mt at 2.2 g/t for 97,394 oz Au.

Under the terms of the SPA, Katoro will, on receiving consent for the Disposal from the Tanzanian Mining Commission in respect of section 110 of the Mining Act 2010 ('the Condition Precedent'), transfer 100% of Reef to LVG in return for a consideration of US$1.0 million, payable pursuant to a convertible loan note instrument which provides for the issue of convertible loan notes by LVG to Katoro ('the Convertible Loan Notes'), which will be due on the following dates:

· US$100,000 upon the satisfaction of the Condition Precedent;

· US$100,000 upon registration of Reef in the name of LVG;

· US$100,000 four months from the date of the SPA;

· US$200,000 nine months from the date of the SPA; and

· US$500,000 upon the earlier of the commissioning of the first producing mine of LVG in the Tanzania or the date 24 months from the date of the SPA.

Pursuant to the SPA, in the event LVG fails to make any of the payments for the first US$500,000 when due, 100% ownership of Reef will revert to the Company. In the event that LVG fails to make the final payment of US$500,000 when due, 50% ownership of Reef will revert to the Company.

The Convertible Loan Notes issued shall, within 30 days of the respective issue, be repayable in cash or converted into shares in LVG at a conversion price of A$0.10 per share, at the sole discretion of Katoro. If the Convertible Loan Note was converted in full, based on current exchange rates, this would result in the issue of c.16.2 million shares in LVG, which taken with the 700,000 shares already held by Katoro, would result in Katoro holding c.16.9 million shares in LVG, representing c.13.4% of LVG's then issued share capital assuming LVG has not issued any further shares in the meantime.

The Convertible Loan Notes are subject to standard provisions relating to a reorganisation of LVG's share capital, ensuring the value of any shares issued to Katoro on any conversion of the Convertible Loan Notes is maintained. The Convertible Loan Notes will be repayable immediately upon any insolvency event of LVG occurring.

The SPA contains standard warranties by both parties in relation to capacity and execution of the SPA, in relation to title to the shares in Reef and Imweru by the Company and in relation to authority to issue any shares to be issued on conversion of the Convertible Loan Notes by LVG.

In addition to the Convertible Loan Notes, LVG shall pay Katoro a net smelter royalty, after taking account of payments due to the Tanzanian Government in accordance with the applicable mining code, of 1.5% on all gold produced from Imweru.

As previously announced, the Disposal was originally structured to include the disposal of both the Imweru and Lubando projects (which sit within Reef), this will now though only involve the disposal of the Imweru project, with Lubando now being retained by the Company. As a result, the Disposal does not fall to be treated as a fundamental disposal requiring shareholder approval pursuant to Rule 15 of the AIM Rules for Companies ('AIM Rules') and falls to be treated as a substantial transaction pursuant to Rule 12 of the AIM Rules.

As at 31 December 2018, Reef had total assets of US$29,000 and for the year end ended 31 December 2018, had a loss of US$106,000.

Following the Disposal, the Company's assets will be its 75% interest in Haneti, 100% interest in Lubando, and its interest in the Blyvoor JV.

This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014.

**ENDS**

For further information please visit www.katorogold.com or contact: