Lion One Metals has signed a non-binding Memorandum of Understanding (MoU) for an engineering, procurement and construction (EPC), contract and vendor financing agreement for the Tuvatu Gold Project in Fiji. The MoU with Ansteel-CapitalAsia Global Engineering covers a comprehensive EPC and financing package for development of the fully permitted project.

The scope of the EPC contract covers the design, construction, start-up testing and commissioning of the Tuvatu gold processing plant. Ansteel will also furnish all materials, equipment, machinery, tools and consumables, provide quality control and administration, and will develop the Health and Safety Plan at the project site.

In addition to the EPC contract, Ansteel will provide vendor financing for up to 80% of the anticipated value of the EPC contract in the form of a deferred payment amount of approximately US$39 million to $44 million.

Lion One will fund a minimum of US$10 million, or approximately 20% of the anticipated value of the EPC contract.

The deferred payment will be a senior secured obligation of the company guaranteed by the company's assets, to be serviced through a deferred payment plan with 7% annual interest payable in quarterly instalments.

In connection with the downpayment, Lion One will issue, subject to TSX-V approval, warrants in the amount of approximately 10% of the loan facility at a price of C$1.42 per share for a period extending to the maturity date of the earlier of the final scheduled payment under the deferred payment plan or 5 years from closing.

Lion One and Ansteel will proceed to preparing definitive binding agreements for the transactions contemplated by the MoU, and are targeting completing the transaction in the fourth quarter of 2016.

Ansteel-CapitalAsia Global Engineering is a JV company of Ansteel Group Engineering Technology Development Company and CapitalAsia Consulting (Canada) Inc. The Ansteel Group is based in Liaoning Province in northern China and is that country's largest iron ore miner and third largest steel maker.

The Tuvatu project is 17km from the Nadi International Airport on the main island of Viti Levu in Fiji.

Lion One envisages a low-cost underground gold mining operation producing 352,931 ounces of gold at head grades of 11.30 g/t over an initial 7 year mine life, including 262,000 ounces at 15.30 g/t through year three, at cash costs of US$567 per ounce with all-in sustaining costs of US$779 per ounce.

Total capex of US$48.6 million includes a contingency of US$6.1 million with an 18 month pre-production schedule and 18 month payback on capital. At a US$1200 gold price the project generates net cash flow of US$112.66 million and an IRR of 52% (after tax).