Power Metal (POW.L) Strategic Option Agreement – Pilot Mountain Nevada

Strategic Option Agreement – Pilot Mountain Project Nevada USA

Power Metal and Wholly Owned Subsidiary Golden Metal Resources Ltd Signs Option Agreement to Acquire Pilot Mountain Project in Nevada, USA

Power Metal Resources PLC (LON:POW) the London listed exploration company seeking large-scale metal discoveries across its global project portfolio, announces that the Company and its wholly owned subsidiary Golden Metal Resources Ltd (“Golden Metal”) have signed a Strategic Option Agreement (the “Agreement”) allowing Golden Metal to acquire a 100% interest in the Pilot Mountain Project (“Pilot Mountain” or the “Project”), in Nevada, United States of America (“USA”), subject to completion of detailed due diligence.

HIGHLIGHTS

Project:

· The Pilot Mountain Tungsten-Copper-Silver-Zinc Project is located approximately 200km southeast of Reno, in Nevada, USA

· Pilot Mountain hosts a JORC (2012)1 compliant Mineral Resource Estimate of 12.53Mt @ 0.27% WO3 for 34.3kt of contained tungsten metal plus significant silver, copper and zinc.

· The Project has undertaken metallurgical testwork and a 2018 Scoping Study for a conceptual open pit mining operation with an 8-year mine life.

· There is a clear pathway for upgrading and supplementing the scoping study work, addressing the permitting requirements and advancing the Project towards a mining Feasibility Study.

· Pilot Mountain has significant upside exploration potential.

The Option:

· Power Metal and its wholly owned subsidiary Golden Metal have secured an option (the “Option”) to acquire a 100% interest in the Pilot Mountain Project.

· 60 day Option Period to undertake detailed Project due diligence and during which it may exercise the Option.

Option Exercise:

· Upon Option exercise, Golden Metal will acquire a 100% interest in Pilot Mountain (the “Acquisition”), the consideration for which will be paid by Power Metal, as outlined in detail below, but principally including the issue of US$1.65million of Power Metal new ordinary shares of 0.1p each at an issue price of 2.5p ( 48,118,920 shares – equivalent to 3.88% of current Power Metal issued share capital and subject to a minimum 6 month hold period as outlined below).

Listing of Golden Metal:

· Power Metal plans to spin-out Golden Metal into a new listing on the London capital markets, and assuming Option exercise Golden Metal will hold 100% interests in Pilot Mountain together with the Garfield and Stonewall projects. Golden Metal will also hold the right to earn-in to a 100% interest in the Golconda Summit project. All projects are in Nevada USA.

· Further announcements will be made to outline listing plans and project exploration/development plans.

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

“We plan to list our wholly owned subsidiary Golden Metal as soon as possible in the London capital markets. The Pilot Mountain project, subject to due diligence, will be an important strategic interest embedded within that listing, and provide a significant increase to the value of the Golden Metal listing proposition.

In addition to the JORC (2012) compliant Mineral Resource at Pilot Mountain we are of the view that there is considerable exploration upside potential.

Historic work undertaken, including a Scoping Study completed in 2018, has demonstrated the potential viability of production from the Pilot Mountain deposit, further bolstered by strong metallurgical test results.

On a standalone basis Pilot Mountain is a significant advanced asset and complements the earlier stage exploration interests currently held by Golden Metal.

Importantly on completion of the acquisition we believe the Golden Metal portfolio will be one of the most exciting resource exploration and development opportunities in Nevada, USA.

We are now working with advisers to complete Project due diligence and undertake an accelerated listing process.”

PILOT MOUNTAIN PROJECT BACKGROUND

The Pilot Mountain Tungsten-Copper-Silver-Zinc Project is located approximately 200km southeast of Reno, in Nevada, USA, ranked first in overall Investment Attractiveness Index by Fraser Institute 2020 annual survey2, entirely on United States Bureau of Land Management (“BLM”) land.

The 5,908-acre Project is centered around four existing mineral deposits including Garnet, Good Hope, Gunmetal and Desert Scheelite all which possess significant skarn-style tungsten-copper-silver-zinc mineralisation.

The Desert Scheelite and Garnet deposits host a combined JORC (2012) compliant resource of 12.53Mt at 0.27% Tungsten Trioxide (“WO3”) with significant copper (“Cu”), silver (“Ag”) and zinc (“Zn”) credits (see Table 1).

Tabel 1: Pilot Mountain Project JORC (2012) compliant Mineral Resource Estimate , dated 13 December 2018

http://www.rns-pdf.londonstockexchange.com/rns/2315K_1-2021-8-31.pdf

PILOT MOUNTAIN CURRENT OWNERSHIP STRUCTURE

Thor Mining plc holds 100% of Black Fire Industrial Minerals Pty Ltd (Australian private company) which owns 100% of Industrial Minerals Pty (USA) Pty Ltd (Australian private company) which owns 100% of: BFM Resources Inc and Pilot Metals Inc (USA private companies) which own tenements representing the entire Pilot Mountain Project.

As at 30 June 2020 BFM Resources Inc had Gross Assets of AUD$21,449 (circa £11,317) and incurred no profit or loss (AUD$Nil) for the year ended 30 June 2020.

As at 30 June 2020 Pilot Metals Inc had Gross Assets of US$3,055,411 (circa £2,226,602) and a loss of US$106,164 (circa £77,366) for the year ended 30 June 2020.

As at 30 June 2020 Black Fire Industrial Minerals Pty Ltd on a consolidated basis had Gross Assets of AUD$5,181,951 (circa £2,738,397) and a loss of AUD$154,690 (circa £81,746) for the year ended 30 June 2020.

PROJECT STRATEGIC DEVELOPMENT POTENTIAL

There is currently no domestic United States primary tungsten production, and Tungsten is classified as a strategic mineral by the United States Department of the Interior. Set against this backdrop, the Pilot Mountain project is potentially a key strategic metal deposit in the United States.

Production Potential

Potential production viability was reinforced with a scoping study completed in 2018 on the Project indicated the potential for an inital 8-year mine life from an open pit at Desert Scheelite supplemented by production from Garnet.

Furthermore 694kg of Pilot Mountain mineralised rock tested by Guanzhou Research Institute highlighted strong metallurgical results including the successful production of two saleable concentrates (scheelite, and copper/silver) from a coarse grind treated by floatation or by flotation and wet high-intensity magnetic separators (“WHIMS”).

Shallow JORC (2012) compliant deposits at the Desert Scheelite and Garnet deposits may be amenable to shallow open-cut mining methods (as modelled in the 2018 scoping study) which would allow for rapid low-cost start-up costs.

Exploration Potential

The Company is of the view that there is the significant potential to build on the current the Pilort Mountain Mineral Resource through exploration. The Project hosts significant resource upside through the upgrading of existing but under drilled targets, as well as the potential for discovery of new zones of skarn-style mineralisation located under post-mineral alluvial and basaltic cover.

Additionally, widely-spaced drillholes recently completed indicate that significant copper-rich zones at the Desert Scheelite and Good Hope deposits remain largely untested, and will be a focus of the of exploration going forward.

The exploration upside potential under post-mineral alluvial cover includes:

· The Desert Scheelite deposit remains open to the east, west and at depth along its entire strike length. The furthest east hole drilled into the Desert Scheelite intersected a copper-rich zone which assayed 17.5m averaging 1.80% Cu. A 2013 geophysical survey completed east of Desert Scheelite highlighted a strong induced polarisation (“IP”) conductor which is much larger than known mineralisation on the Project.

· Surface outcrops and historic small scale mine workings indicate that Good Hope mineralisation may comprise multiple copper-rich sub-vertical lodes which have been subject to minimal drilling which include results of 26.6m averaging 0.21% WO3, 1.0% Cu and 1.2% Zn starting at surface.

· Kaiser Engineering in 1981 estimated that the Gunmetal South deposit comprised a historical non-compliant estimate 2-3 Mt at an average grade of 0.3 – 0.5% WO3. This area has not been subject to minimal modern exploration.

· The most recent exploration efforts conducted across the whole project area occurred in the 1970s, and minimal modern geophysical coverage and drilling has been completed in areas with alluvial cover which exists over much of the eastern part of the Project.

TRANSACTION INFORMATION

Under the terms of the Agreement Golden Metal may acquire a 100% interest in Pilot Mountain, from Thor Mining plc (“Thor Mining” or the “Vendor”)

Option Period

Under this Agreement Golden Metal will have a 60 calendar day Option Period (ending 5pm GMT on Friday 29 October 2021, the “Option Expiry Date”) during which it may conduct due diligence with regard to Pilot Mountain.

Power Metal will pay US$25,000 in cash to Thor Mining and issue to Thor Mining 500,000 new Power Metal Ordinary shares of 0.1p (“Ordinary Shares”) at an issue price of 2.5p (£12,500 of Ordinary Shares). The cash compenent is a contribution toward Bureau of Land Management fees due in respect of the PMP due 1 September 2021, which will be paid in full by Thor Mining to keep the project in good standing.

Option Exercise

Subject to written confirmation of Option Exercise by the Option Expiry Date Golden may acquire Pilot Mountain on the following terms:

Power Metal will pay US$115,000 in cash to Thor Mining and US$1,650,000 payable through issue to the THR of 48,118,920 Ordinary Shares at an issue price of 2.5 pence per share (“Initial Consideration Shares”).

Thor Mining will hold the Initial Consideration Shares in full for a minimum of 6 months after the Option Exercise date and thereafter the Initial Consideration Shares will become freely tradable in 25% instalments (25% tradable 6 months after Option Exercise date, 50% – 9 months after Option Exercise date, 75% – 12 months after Option Exercise date and 100% – 15 months after Option Exercise date.) This trading restriction period may be varied with the written agreement of both parties.

In addition, Power Metal will issue to Thor Mining 12.5 million warrants to subscribe for Ordinary Shares with an exercise price of 4p per Ordinary Share and life to expiry of 3 years from the Option Exercise date (“Initial Consideration Warrants”). Should the volume weighted average price (“VWAP”) of Power Metal shares meet or exceed 10 (ten) pence for 5 consecutive trading days Power Metal may serve notice on Thor Mining providing 14 calendar days to exercise and pay for the Initial Consideration Warrants or the Initial Consideration Warrants will be cancelled.

Should Thor Mining exercise the Initial Consideration Warrants above within 12 months from the Option Exercise date, Thor Mining will receive one for one replacement warrants to subscribe for Ordinary Shares at a fixed price of 8p per Ordinary Share, and life to expiry ending 3 years from the date of Option Exercise (“Super Warrants”). Should the Power Metal volume weighted average share price meet or exceed 20p for five consecutive trading days Power Metal may at any time issue Thor Mining with a written notice providing 14 days to exercise and pay for the Super Warrants or the Super Warrant will be cancelled.

Tail Benefit

POW will issue Thor Mining with a further US$500,000 of Ordinary Shares if Golden Metal publishes a JORC or 43-101 compliant resource at Pilot Mountain which increases against current declared levels by 25% across total indicated and inferred categories within two years after the Agreement date. The number of Ordinary Shares to be issued will be calculated based on the volume weighted average Power Metal share price in the ten trading days immediately preceding the announcement by Golden Metal of the JORC or 43-101 compliant increase.

Additional Terms

Thor Mining and their professional corporate, licensing and geological teams will continue to work with Power Metal and Golden Metal to assist with Pilot Mountain ownership transfer and to manage local corporate & exploration/development operations in the 12 months following the Option Exercise date. Power Metal and Golden Metal will pay for any assistance provided post Acquisition on reasonable commercial terms to be agreed.

ADMISSION AND VOTING RIGHTS

Application will be made for the 500,000 Option Shares to be admitted to trading on AIM which is expected to occur on or around 7 September 2021 (“Admission”). The Option Shares will rank pari passu in all respects with the ordinary shares of the Company currently traded on AIM.

Following Admission, the Company’s issued share capital will comprise 1,240,567,944 ordinary shares of 0.1p each. This number will represent the total voting rights in the Company and may be used by shareholders as the denominator for the calculation by which they can determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority’s Disclosure and Transparency Rules.

COMPETENT PERSON STATEMENT

The technical information contained in this disclosure has been read and approved by Mr Nick O’Reilly (MSc, DIC, MIMMM, MAusIMM, FGS), who is a qualified geologist and acts as the Competent Person under the AIM Rules – Note for Mining and Oil & Gas Companies. Mr O’Reilly is a Principal consultant working for Mining Analyst Consulting Ltd which has been retained by Power Metal Resources PLC to provide technical support.

Reference Notes

1 JORC (2012): The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’) is a professional code of practice that sets minimum standards for Public Reporting of minerals Exploration Results, Mineral Resources and Ore Reserves. The current edition of the JORC Code was published in 2012, and is available at http://www.jorc.org/docs/JORC_code_2012.pdf

2 Fraser Institute: https://www.fraserinstitute.org/categories/mining

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (“MAR”), and is disclosed in accordance with the Company’s obligations under Article 17 of MAR.

For further information please visit https://www.powermetalresources.com/ or contact:

Power Metal Resources plc

Paul Johnson (Chief Executive Officer)

+44 (0) 7766 465 617

NOTES TO EDITORS

Power Metal Resources plc (LON:POW) is an AIM listed metals exploration company which finances and manages global resource projects and is seeking large scale metal discoveries.

The Company has a principal focus on opportunities offering district scale potential across a global portfolio including precious and base metal exploration in North America, Africa and Australia.

Project interests range from early-stage greenfield exploration to later-stage prospects currently subject to drill programmes.

Power Metal will develop projects internally or through strategic joint ventures until a project becomes ready for disposal through outright sale or separate listing on a recognised stock exchange thereby crystallising the value generated from our internal exploration and development work.

Value generated through disposals will be deployed internally to drive the Company’s growth or may be returned to shareholders through share buy backs, dividends or in-specie distributions of assets.


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