What do you hope to achieve with Power Metal in the remainder of 2022?
Power Metal is not playing by the same old book when it comes to your average resource exploration company, we like to think that we are far more aspirational. I expect that trend to continue through the balance of 2022, and it would be great to see investors continue to support us as we move along this path.
Our principal reason for existing is to generate outsized returns for our investors in the medium to long term and we have been building the company with this in mind since early 2019. Building this type of company takes time, it requires patience and ultimately it sometimes takes vision to see the end game, as each detailed step is layered in.
As you progress, the meaningful events emerge and we are now executing them corporately with the disposal of Kanye Resources to Kavango Resources (LON: KAV) followed by the listing of First Class Metals (LON: FCM) last Friday, with both turning former project investments into listed investments on the balance sheet.
Further known corporate events are expected during the balance of 2022 as detailed below, and in addition we expect further corporate transactions to take place.
What’s important to note is that value generation through corporate activity such as disposals or new listings of portfolio assets is just a part of our business. Because at Power Metal, our exploration interests remain the focus for the company and here too we have been building to the point where we have multiple significant programmes which are planned for 2022 that could prove transformational for the company and our shareholders.
What is the rationale for making disposals from the portfolio?
The markets have conditioned us as investors to expect quite a low bar from resource exploration companies. Each one typically carries a high corporate overhead and only a few projects that usually do not deliver the significant exploration results needed to deliver transformational returns for their investors.
Instead, we chose to expand the Power Metal business model through organic growth and acquisition during challenging market conditions when new opportunities became available. We created our business to be much larger and more diverse than the typical resource company which puts us in a position where we can create value through two avenues, being 1) through corporate activity (disposals and new listings), and 2) internal exploration.
As a result, disposals or creation of new listings, with certain of our interests, has been a fundamental part of our business strategy for some time. Those disposals will add to our cash and listed investments and build the balance sheet and financial strength of the company.
In your opinion, what are the asset disposal highlights thus far?
In July we have announced the disposal of our 50% interest in the Kanye Resources JV to partner Kavango Resources. We have also just seen the listing of First Class Metals PLC on the London Stock Exchange. So, the initial steps have been taken and the value added to our balance sheet (circa £3.3m) is considerable.
We now have three important listings in process with Golden Metal Resources PLC which is at the end of the preparatory process, First Development Resources Ltd which is mid-way and New Ballarat Gold Corporation PLC which is at an earlier stage in the process.
Golden Metal Resources and First Development Resources have completed a combined £1,875,000 of pre-IPO financings, and at the pre-IPO valuation level Power Metal’s interest is valued at £5,887,500 across both companies.
Each spin-out/listing business operates in a distinct geographic area, with a dynamic portfolio of interests. I say dynamic because we have continuously invested in project development since acquisition, to ensure that on listing of each, the market will see proactive newsflow from exploration work where we have a robust understanding of the geological potential. That’s important to secure traction on listing and a buoyant market environment when the companies arrive as newly listed vehicles.
We are very optimistic and enthusiastic that each spin-out/listing has the ingredients to capture the market’s attention and create a successful listing. This for me is the central principle of undertaking disposals of any kind, especially when the disposal is for stock in listed companies.
With numerous strategic and substantial investments in listed companies, Power Metal will be positioned extremely well for capital growth.
You are clearly moving to focus Power Metal onto what you call “Priority Exploration” projects. What does this mean for shareholders?
As our disposals continue, and our strategic investments reach their market listings, the focus of Power Metal is turning to the advancement of key internal exploration projects.
We consider it important to narrow the focus of our internal exploration on a number of strategic interests enabling us to more fully articulate to shareholders the current value of a project, the geological proposition and what we are seeking to achieve with the next exploration steps.
The ability to clearly articulate our thoughts on each key project is something we have not been able to do so far with our extensive portfolio, and perhaps is one reason the market hasn’t fully engaged with all of our work.
In the last quarterly report we outlined the projects we feel at this point fall into the Priority Exploration Project category.
The latest position for each project is below:
Athabasca Basin – Canada
Uranium projects, with planned upcoming exploration programme across 4 of our properties and building on the extensive desktop work undertaken to prioritise key targets.
Authier North – Canada
Lithium project which is adjacent to the development stage Authier lithium project owned and operated by ASX listed Sayona Mining. Work undertaken following initial field exploration in 2021 has identified specific targets for follow up work.
Molopo Farms Complex – Botswana
Following up on the positive first drill programme (incl. the discovery of nickel sulphides) with a second diamond programme targeting an economic nickel – platinum group element discovery.
Tati Project – Botswana
Various work streams including reverse circulation drilling and sampling of fines dumps to assess the potential for near term gold production.
There are other interests that we are currently developing that may be added to our Priority Exploration Projects, however at the moment the above four projects are the exploration focus of the company.
You also talk openly about an increasing focus on uranium opportunities. What is your strategy here?
In the uranium space you have to move fast and move decisively, which is what we did in September 2021 by staking a large portfolio of properties in the prolific Athabasca Basin. We now sit with 10 properties covering a combined 721km2.
Our business has wider uranium interests including that through the Selta Project in the Northern Territory, Australia through 62.12% owned First Development Resources. We also continue to look for new additions.
Our approach with uranium in our business will be the same as all other areas, to build strong in-house exploration interests and to create value through corporate transactions that cover operational costs and deliver considerable near-term upside. Power Metal is, and always will be, run as a business that targets financial self-sufficiency.
Overall, engagement with uranium provides Power Metal investors exposure to one of the most exciting green metals which on occasion, during times of unique supply/demand fundamentals, can deliver dramatic returns in uranium exploration companies. We believe that one of these set ups could currently be unfolding in the uranium space.
Apart from general market conditions, which most companies blame for share price declines, what other factors do you see as impacting your share price and what action are you taking to address these factors?
When you have your own money invested in a business you want to be involved closely as an investor or as a company manager. I have over half a million of my own money invested in the business, alongside almost four years of my professional life. The decline in our share price over the last 18 months is personally impactful.
General market conditions can’t be easily dismissed, we are in a cyclical sector and no matter what you do the price of any one company will be affected considerably by adverse market conditions. That said, general market conditions should not be an excuse for inaction and with Power Metal we continue to fight for our business and its shareholders across several fronts.
We have been through a horrible 18 months in the junior resource sector but conditions that have dragged us down in share price, when they eventually turn, will deliver enhanced upside.
Outside of general market conditions we have a complex business proposition that has held up to 15 global project packages and a very fast paced news flow. All our projects have now received initial exploration investment and the vast majority have moved up the value curve.
At present we have not received full market recognition for the depth of our portfolio, but we knew this was a risk, and had to weigh up whether we could carry the market to the point where the value would be clear and compelling. I think we have made it, and for me the listing of First Class Metals on Friday was an important strategic shift point for us.
Now it’s about further embedding clarity in our business, a process we started with the latest quarterly report where we group our projects into exploration, disposal and pending decision categories. You can read that report here:
https://www.londonstockexchange.com/news-article/POW/quarterly-business-update/15558742
I have seen the negative comments regarding warrant exercises suppressing the share price and don’t share the same view entirely. Our largest warrant exercise batches were when our share price was over 2.5p around late 2020 and early 2021, albeit the market was more buoyant then, and that money was deployed into building the company we have today.
More recently with less liquid markets, the tail end of the final batch of 0.75p warrants has I think affected the market share price and investor confidence. These warrants are now behind us, and it does take a cloud away for sure, so that has cleared itself.
We have for some time published our outstanding warrants and options, not something that is a requirement and not done by many companies. We believe in full transparency with our shareholders which is why you can see the latest position on our website.
Ultimately, I think the biggest factor that affects investors is confidence in the proposition and belief that the company can deliver. I have run resource companies for a decade and delivered some big returns for investors along the way, almost all in scenarios where it was a battle initially to convince investors that our business model would or could deliver.
So, the important thing now is that we work harder than ever as each corporate value and exploration value event hits the newswires and show how the immense amount of work we have done over recent years is now yielding significant steps up in the inherent value of the company. That will drive the share price!
In addition to the above responses I would like to add one important point:
One year ago on 31.7.21 our market capitalisation was circa £24million. Today on 31.7.22 our market capitalisation is down about 40% to circa £14m. That is despite the following material events happening over the last year:
- Acquisition of Pilot Mountain project in Nevada (Nov 21) completing the Golden Metal Resources PLC portfolio and enabling the preparation for the spin-out listing to commence.
- Acquisition of the Paterson region (Oct 21) and Northern Territory uranium/rare earths (Nov 21) projects, forming the project portfolio of First Development Resources and enabling the preparation for its spin-out listing to commence.
- Staking and acquisition of the Athabasca uranium project portfolio (commenced Sept 21) with the company now holding 10 properties covering 721km2 of ground in this prolific uranium region. Initial exploration demonstrating high-grade uranium.
- Staking of the Gawler property in South Australia, giving the company exposure to 1,994km2 of ground in proximity to the world-famous Olympic Dam Mine.
- Sale of the Schreiber-Hemlo projects to First Class Metals, now listed with a value of Power Metal’s holding of approaching £2million.
- Exploration progress and additional staking at the Tati Project in Botswana with a first pass reserve circulation drilling programme delivering 3m of 5.17g/t Au from only 9m downhole, confirming near surface gold potential. The discovery of fines dumps offering the prospect of early gold production and potential extension of gold mineralisation from the Cherished Hope gold mine within the boundaries of our newly staked licence footprint.
- Increase of granted licences in the New Ballarat Gold portfolio in the Victoria Goldfields of Australia from 7 licences covering 848km2 to 15 covering 1,841km2, and the acquisition of a licence covering the Berringa gold mine, with historic high-grade gold production and the potential of a significant remaining gold endowment.
- Further drill assay results demonstrating up to 1.7% nickel from drillhole KKME1-6 at the Molopo Farms Complex in Botswana, further validating the exploration potential of this key project and a conditional transaction to increase Power Metal’s exposure to the project from circa 53% to 87.71%.
- Initial and overlimit assays results from drilling at the Silver Peak project in British Columbia, Canada, showing bonanza grade silver up to 10,131g/t Ag-eq.
The list above represent just some of the key developments over the past year. Our business has progressed on almost every level, albeit on reflection much of our time so far in 2022 has been spent in the background doing the things we need to do as a business to capitalise on the successes achieved. Preparations for listing take time, as does reorganisation of project ownerships and planning for the progression of key project exploration. Those labours we expect to bear fruit in the coming weeks, months and years.
As to stock market valuations, I find as a private investor I am continually drawn to Warren Buffet’s famous quote: “the stock market is designed to transfer money from the active to the patient”. As CEO of Power Metal I think Robert Arnott’s quote is poignant: “in investing, what is comfortable is rarely profitable.”
Power Metal has a brilliant team who have spent a lot of time building communication tools to help investors. These tools can be seen on our twitter account @PowerMetRes and on our website www.powermetalresources.com.
Should you have any questions please contact us: [email protected]
