Power Metal (POW.L) Strategic, Operational and Financial Update

Power Metal Resources plc (LON:POW) the AIM listed metals exploration and development company is pleased to provide a Strategic, Operational and Financial Update (the “Update”) to shareholders, following the Company’s £1,000,000 financing announced on 06 July 2020 (the “Financing”).

The Financing unlocked the potential of Power Metal, by providing the financial capability to push on with existing interests more innovatively and aggressively.

This announcement explains in more detail important elements of strategy, operations and financial management, in light of the funding raised.

HIGHLIGHTS

· Power Metal has two key strategic objectives:

1. To make one or more major metal discoveries within its gold, base and strategic metal projects and then crystallise the value of such discoveries for shareholders’ benefit;

2. To build its working capital and ‘balance sheet’ toward financial self-sufficiency and to reduce forward reliance on funding from the market to achieve its business objectives.

· The Company currently has five main projects and two additional projects in the later stage of due diligence and commercial discussions. Each project has discrete operational targets which may lead to operational news flow, an outline of which is provided below .

· Following the Company’s Financing announced on 6 July 2020 the Company can confirm its total assets as at 10 July 2020 amounted to £3.04 million. Within total assets, cash, and tradable listed investments amounting to £1.7 million (including monies raised in the Financing).

Paul Johnson Chief Executive Officer of Power Metal Resources plc commented:

“At Power Metal I am striving to build a diversified exploration business backed by a strong ‘balance sheet’ to drive the Company towards an ability to self-finance its own activities and break the dependency most juniors have on market financings.

I am keen for us to be bold and adventurous with reward weighted risk taking, but with solid underlying principles of risk management covering geopolitical, commodity, operational and financial considerations. In other words, combining boldness with risk management means diversification, which is what we have achieved.

Many companies put their business case forward focused around a single major project and concentrate their energies around that. I understand this, but it’s not the Power Metal approach, where instead, in our view, we have numerous major projects, each of which is capable of delivering a transformational discovery and by virtue of this shareholder wealth.

It has not been easy building our diversified project portfolio during the challenging junior resource sector conditions of the last 18 months, but it may not have been possible but for those conditions that meant excellent opportunities remained available.

So now we find ourselves with a diverse and exciting portfolio of project interests, and with the support of shareholders and investors in the recent Financing, a considerable working capital position with which to drive forward those interests. If we are fortunate in making a major discovery in just one of our projects, we could create significant value for our shareholders.

Now to practicality, and how we move forward.

We have published below a step by step guide to our operational plans and our underlying financial position. As shareholders will appreciate, not everything goes to plan, but I believe if we are transparent with the approach we are taking, and utilise the financial resources available to us, we will make our business model clearer and a more attractive investment proposition.

As a final note, all shareholders and investors are invited to provide feedback on Power Metal, and recommendations or suggestions to enhance what we do are always helpful. Likewise if you have any questions please let us know through info@powermetalresources.com or my telephone number is below and at the bottom of all our market announcements. If you have a question about our business, it will likely be shared by many others, so please ask, and that will also help us to further improve our investor information and market communications.

Thanks to all our shareholders for your interest and support. As investors we are all focused on making money from our investments, however following a company’s story can also be an enjoyable part of the investing experience. I believe Power Metal has a fascinating emerging story.

Now on with the work!”

STRATEGIC OBJECTIVES

Power Metal has two key strategic objectives:

To make one or more major metal discoveries within its gold, base and strategic metal projects and then crystallise the value of such discoveries for shareholders’ benefit.

The Company considers that each of its current projects has the potential to deliver a large-scale metal discovery. The same belief also forms the basis around any selection of new projects brought into the portfolio.

Projects will only remain in the Company’s portfolio while they demonstrate the ongoing potential, through exploration findings, to deliver a discovery, and only where the work programmes needed are comfortably within the available financial resources of the Company.

In the remainder of 2020, Power Metal has a number of stand-out opportunities that through exploration, could expose shareholders to a major metal discovery. These include:

– Molopo Farms Complex project Botswana, (“Molopo Farms Project”) (Following US$500,000 earn-in – 50.96% Power Metal) – drilling is planned for the coming months targeting major nickel – copper – platinum group metal (‘PGM’) targets;

– Haneti Polymetallic project Tanzania, (“Haneti”) (up to 35% Power Metal) – exploration drilling plans are being developed to target major nickel – copper – PGM targets;

– Australia Gold JV – out of 11 licence applications in the Victoria Goldfields, proactive exploration may be undertaken in 2020 subject to license grants, local approvals and finalisation of targets following completion of the historic exploration and mining database, which includes specific drill target locations in priority licenses.

To build its working capital and ‘balance sheet’ toward financial self-sufficiency and to reduce forward reliance on funding from the market to achieve its business objectives.

Power Metal is focused on building a large underlying working capital position with which it can move toward financial self-sufficiency and an ability to fund the central and project operational costs through its own financial resources, with reduced dependency on market financings.

This is not a model pursued proactively by many junior resource companies where a more traditional model of cash burn for exploration, then restore cash balances through placings, tends to apply. Power Metal aims to do things differently.

There are three main ways in which Power Metal intends to build its ‘balance sheet’ working capital:

Adopting a dual approach of taking a position in project holding companies alongside direct project participation.

To date Power Metal have taken this approach three times with Kalahari Key Mineral Exploration Pty Ltd (“Kalahari Key”) – Molopo Farms Project, Katoro Gold Plc (“Katoro”) – Haneti and with Kavango Resources Plc (“Kavango”) – Ditau Camp Project*.

*Subject to the completion of successful due diligence

The aim is that successful project development will drive the value of the ultimate holding company in which Power Metal has a stake, driving the value of our investment in that company higher.

The recent financing has enabled this option to be utilised for further potential transactions should opportunities arise.

Monetisation of existing project interests

Following acquisition of projects Power Metal plans to move each project forward corporately and technically. From our portfolio certain interests may be vended to third parties or into new listings, in exchange for cash, equity and other forms of consideration which will build the Company’s working capital.

Investment in other junior resource sector opportunities

In the current climate there are opportunities for significant capital returns to be generated from investment in junior resource equity or related financial instruments.

Power Metal has created an internal fund for making investments in other junior resource sector opportunities, which will be referred to as the Company’s “Junior Resource Fund”, with a view to building the value of a portfolio of investments to add to working capital. As the vast majority of the Company’s working capital is deployed to operating projects and associated investments in project holding companies, only a small amount of initial capital has been deployed for the Junior Resource Fund (up to a maximum in total of £75,000 representing less than 5% of Power Metal’s current working capital.)

Full update link www.share-talk.co.uk/announcements/rns/power-metal/strategic-operational-and-financial-update/202007140700048857S


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