FEL Morning Comment – Power Metal Resources (POW.L)

Silver-Peak Option Exercised.


Yesterday afternoon Power Metal Resources (POW.L) announced it had exercised its option over the Silver Peak Project in British Columbia, Canada for a 30% earn-in interest after completing a due diligence exploration programme.

The project covers part of the historic Eureka Victoria Silver Mine, which was originally discovered in the late 1800s and was last in production in 1981. More recently in 2011, underground sampling returned a grade of 8,889 g/t silver along strike of the Victoria vein.

The Eureka and Victoria vein systems have never been formally assessed or drill tested at either depth or along strike. A systematic phased exploration campaign is planned to test the resource potential of these vein systems. To earn a 30% stake, Power Metal will be required to spend C$250K on project exploration over the next 12-months, of which C$25K has already been spent during the option period.

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FEL Comment & Recommendation.

Power Metal now joins a very small band of AIM listed companies with exposure to silver focused projects, a commodity viewed as a safe-haven alternative to gold, along with having important industrial applications. To note, silver has outperformed gold by some way since the start of the year (+53% silver, +30% gold).

We believe investors have yet to price in the importance and potential upside of this new project to Power Metals portfolio of exploration and development projects. Since the option over Silver Peak was first revealed just under a month ago to the market, Power Metal shares have surprisingly only traded sideways.

We would expect much more in terms of exploration led news flow to emanate from Silver Peak in the coming months before the weather window closes in, for this part of Canada. Along with Power Metals’ two impending drill programmes in Botswana and Tanzania over large scale nickel targets, further progress anticipated on the Victoria Goldfields JV in Australia and a strong Group financial position (£1.6m cash and listed investments as at 4 Sept 2020) we continue to rate the shares as a ‘Buy’.

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*First Equity Limited acts as Joint Broker to Power Metal Resources plc.

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