Power Metal Resources #POW – Quarterly Business Update

Power Metal currently holds 12 properties covering 829.58km² within and surrounding the prolific Athabasca Basin, including a number of new property acquisitions and additional staked ground, secured in the last quarter.

Detailed data compilation has been completed and external datarooms opened for third parties in respect of the Athabasca properties.

The conditional disposal of one property, Reitenbach, was announced in August 2022, and work is in process to complete that transaction through a listing on the London capital markets for the proposed holding vehicle, Teathers Financial PLC, to be renamed Uranium Energy Exploration PLC.

A detailed update was announced in September 2022 covering a recently completed exploration programme covering Tait Hill, Thibault Lake and Clearwater and the launch of hyperspectral remote sensing review work at Cook Lake and E-12 properties. The update also included the expansion of the Tait Hill property and the staking of a new property Badger Lake, which followed on from the newly staked strategic Durrant Lake property, announced earlier in September.

Assay results from samples collected during recent ground exploration are awaited and extensive exploration work will continue across the Company’s Athabasca portfolio, where we believe we will see a direct line between investment and a material increase in the valuation of properties. 

Power Metal secured a conditional agreement to acquire an additional 58.7% of shares in project partner Kalahari Key Mineral Exploration Pty Limited (“KKME”) as announced on 18 May 2022:

https://www.londonstockexchange.com/news-article/POW/kalahari-key-botswana-acquisition/15458701

This acquisition, conditional on receipt of in country regulatory approval, will see Power Metal holding 87.71% of KKME which will hold 100% of the Molopo Farms Complex Project (“Molopo Farms”).  At Molopo Farms, Power Metal is targeting large-scale nickel-copper-PGE mineralisation.

KKME and Power Metal, working with advisers in Botswana, have prepared and submitted relevant documentation to the local authorities with regard to the approvals required to complete the aforementioned transaction.

In early August 2022, Power Metal announced the commencement of two moving loop electromagnetic (“MLEM”) surveys over two target areas related to the previous 2020/2021 drill programme drillholes K1-6 and K1-14. 

Later in August, the Company announced that the geophysical survey work had identified a large shallow dipping geophysical conductor, which drillhole K1-6 had intersected at its edge at a similar stratigraphic level to nickel-sulphide mineralisation identified from core review and assays from drillhole K1-6.

Following receipt of the survey results, accelerated plans were announced for follow up diamond drilling, the first drill programme operated and managed by Power Metal. The drill rig was mobilised 8 September 2022, with drilling commencing on 21 September at the first drillhole DDH1-6B targeting the core of the T1-6 conductor.

The latest update from site prior to preparation of this report saw the DDH1-6B drill progress at a depth of  ~450m.  Drilling is continuing and this hole currently has an expected total depth of 600m.

The Company’s Exploration Manager, Oliver Friesen, together with Roger Key (original founder of KKME), have attended site to meet with the local operational team and review operations, and further members of the Power Metal team are expected to attend site during the coming weeks.

Overall, the drill programme will include 5 or 6 holes for a total of 2,600m of diamond drilling, and will include two drillholes into target T1-6, located approximately 530m and 830m south of original hole K1-6, both designed to intersect the core of the geophysical conductor target.

Follow up geophysical work, including further analysis of historical airborne electromagnetic survey data enabled the estimation of the T1-6 conductor dimensions to have a strike length of 2,600m and a down dip extent of 1,000m.

Further MLEM surveys were completed over targets T1-14, T2-3 and T1-3. 

Target T2-3 was shown to host a large geophysical conductor open in all directions which was coincident with a magnetic body identified by a historical airborne magnetic survey. These historical results showed that the magnetic body coincident with the newly identified geophysical conductor was shown to extend for approximately 12km in an east-west direction.

Targets T1-6 and T2-3 have been designated high-priority A+ status, along with T1-3 where a further large geophysical conductor has been identified.  All three high-priority Company designated A+ targets are expected to be drilled as part of the ongoing drill programme. 

A further Company designated priority B target has been established at T1-14 and five further airborne EM targets (T1-2, 1-4, 1-5, 1-10 & 1-11) have been upgraded and are now designated as priority airborne conductors where follow up work is being considered.

Power Metal raised £1.08m in September 2022 to provide additional capital in support of the Molopo Farms Complex drill programme and a potential expansion of operations, as required.

In August 2022 Power Metal announced the commencement of RC drilling at the Tati Gold Project, designed to test the along strike and down dip  extension of quartz reefs associated with the historical Cherished Hope gold mine. 

In early September the Company announced the completion of 490m of RC drilling over 9 holes and the successful intersection of quartz reef in all holes drilled, with multiple holes intersecting multiple sub-parallel quartz reef structures.

Samples from the drilling have been sent for assay testing and the results are awaited.

Assay results from sampling of the fines dumps (waste material from the Cherished Hope mine) were also announced in early September confirming levels of residual gold at a grade that supports potential processing. 

Work is being undertaken to secure local approvals for processing and with potential processing partners, enabling potential revenue generation which can be reinvested into more extensive exploration at the Tati Project.

A project site visit has taken place at the Tati Project, led by the Company’s Exploration Manager Oliver Friesen.  A further update from this site visit and the findings is expected.

On 8 July 2022 Power Metal announced the conditional disposal of its Kanye Resources interest to its joint-venture partner Kavango Resources plc (LON:KAV)(“Kavango”).

The disposal is subject to the publication of a prospectus by Kavango including provision for the transaction.

Full terms and disposal consideration payable to Power Metal may be viewed in the announcement linked below:

https://www.londonstockexchange.com/news-article/POW/conditional-disposal-of-kanye-resources-interests/15532470

On completion of the transaction Power Metal will receive consideration including shares & warrants in Kavango and a net smelter royalty.  The shares element comprises 60m Kavango shares valued at £1.14m as at the date of this report.

Kavango has announced multiple operational updates recently including the commencement of drilling at Prospecting Licence PL 082 in the Kalahari Copper Belt in Botswana (not part of the Kanye Resources joint venture), targeting a large-scale copper-silver discovery or discoveries.  Drilling under the joint venture completed earlier in the year has identified the potential for an iron oxide copper gold ore (“IOCG”) system at the Ditau project, also in Botswana.

FCM secured a listing on the London Stock Exchange in late July 2022 with Power Metal holding a current interest of 27.91%, worth circa £2.6m as at the date of this report.

Since listing FCM have announced a massive sulphide discovery, high-grade nickel assays and a new acquisition with an associated £1.08m financing.

Going forward FCM will now be recognised in the listed investments held by Power Metal and covered within the Management – Financial – Compliance section below.

GMT produced an operational update in August 2022, confirming the completion of an Induced Polarisation (“IP”) survey at the Pilot Mountain Project and completion of a high-resolution soil geochemical survey at the Garfield Project .

Both surveys are expected to deliver an enhanced understanding of the additional prospectivity across the two projects and notably, to highlight new target areas for future exploration. 

Pre-IPO work for GMT is essentially complete, with some ongoing work to keep the listing documentation up to date and in a state of preparedness for listing.  GMT is seeking to list at the earliest opportunity.

GMT continues to work on the development of relationships in the USA, and elsewhere, which may potentially lead to grants, direct project investment, corporate investment and liaison from potential downstream users of tungsten, being the primary commodity from the flagship Pilot Mountain Project.

Since commencement of listing preparations, in our view, the inherent value of GMT’s interests led by the flagship Pilot Mountain Project, has increased.  Tungsten is a critical mineral per the United States Geological Survey, and currently there is increasing interest in homeland security in the USA for critical minerals.  Global tensions have further increased the urgency for that critical mineral security and Pilot Mountain, which hosts one of the largest known undeveloped tungsten deposits located within the USA, could play an important part.

The IPO listing, which could be triggered at any time going forward, will enable GMT to move forward at pace with advanced exploration including planned drilling at Pilot Mountain.

FDR published a full company update in late July 2022 providing the latest corporate and geological developments across its Western Australia and Northern Territory interests. The highlights of which included:

· The appointment of DDH1 Drilling Limited to undertake the Phase I diamond core drilling programme at the Wallal Project in the Paterson to target the eastern magnetic bullseye anomaly identified during the in-depth desktop review. The Heritage Clearance Survey required to facilitate the drilling works was undertaken in September 2022.

· The finalisation of the desktop review of Braeside West and Ripon Hills projects in the Eastern Pilbara. The review identified multiple mineral targets in both the project areas which are similar to the gold and base-metal mineral deposits and occurrences located within the Rumble Resources Ltd, Braeside Project situated to the east.

· Reconnaissance at the Selta Project in the Northern Territory confirmed the presence of pegmatites. Litho-geochemical analysis of samples recovered suggests the area is dominated by a zoned pegmatite system originating from nearby granites and supports the lithium and rare-earth element prospectivity of the region.

A follow up field visit was conducted in August/September 2022, which included all projects held by FDR.

Extensive exploration targets have been identified across all FDR properties with further work ongoing to refine post listing exploration plans across the entire portfolio.

Pre-IPO work streams continue, with a significant proportion of work now undertaken.

Through its Australian operating subsidiary, Red Rock Australasia Pty Ltd, NBGC has a substantial licence footprint within the Victoria Goldfields, Australia, which is comprised of 15 granted exploration licences covering 1,835km² and 5 licence applications covering 493km².

The portfolio of interests includes the substantial licence footprint above, and within it, two former high-grade working mines (Ajax and Berringa) where our technical team believe a considerable, and potentially high-grade, gold endowment remains.

In August we published the exploration target for Berringa, with a median target range of 246,812 ounces of gold and an upper target of 853,037 ounces. This followed on from the announcement of the conditional acquisition of Berringa in July 2022, when we published a risk weighted exploration target of 697,000 ounces of gold.

The completion of the Berringa acquisition was announced in September 2022, and we are now working with the local team to finalise drill plans across both properties with a view to drilling commencing in 2022.  It is noted the licence containing Berringa is subject to renewal in November 2022.

In parallel, steps are being taken to move the IPO preparatory process forward.  With the newly generated dual model of near-term production potential from former high-grade producing gold mines and a large blue-sky exploration footprint, together with appropriate ownership structures and management team, we believe NBGC will represent a compelling investment opportunity.

The primary acquisition focus for the foreseeable future is on further uranium projects as has been demonstrated with the recent expansion of the Company’s existing Athabasca Basin focused uranium portfolio.

Outside uranium, Power Metal will only engage with exceptional acquisitions which complement the existing portfolio. 

Should the Company’s drill programme at Molopo Farms in Botswana prove successful and recognising the significance of that project, there will be an immediate cessation in the review of any new opportunities.  This would allow the Company to devote more managerial & technical time as well as financial resources to that project.

Power Capital Investments (“Power Capital”) has to date reviewed a number of opportunities for the investment in and advancement of new project opportunities. 

The aim is for Power Capital to be a leading new project finder, attracting external capital for its own operations and run by its own dedicated team under the umbrella of Power Metal.

The Board currently comprises:

Scott Richardson Brown – Interim Non-executive Chairman

Paul Johnson – Chief Executive Officer

Ed Shaw – Non-executive Director

Owain Morton – Non-executive Director

Owain Morton joined the board of Power Metal on 10 October 2022, bringing geological and mine engineering expertise onto the Board.

Power Metal is seeking to add further board members and has been liaising with various candidates in this regard. The Company also remains active reviewing new board members for spin-out and associated vehicles.

Power Metal has built a strong operational team which along with the board now comprises eleven team members based out of our UK office. 

We work extensively overseas and have developed equally strong operational partnerships in countries around the world, forming an efficient and cost effective hub-and-spoke operational model.

Power Metal is actively seeking to bring new team members in to support the growth in business and we continue to invite talented individuals from all backgrounds who feel they can contribute to our work to reach out and contact us through the following link:

https://www.powermetalresources.com/join-us/

T he Company has received many emails from potential new team members and retains details of all to enable a rapid acceleration of operations where and when required.

Where possible the Company has sought to incentivise all team members and external advisers & consultants with exposure to equity upside.  This was further advanced earlier this month with the creation of a pool of 25m warrants for external advisers and consultants (“Adviser Warrants”). The Adviser Warrants carry an exercise price of 3.25p, a life to expiry of 3 years and a condition that the volume weighted average share price (“VWAP”) of the Company must exceed 5.0p for ten consecutive days prior to exercise. Adviser Warrants may be accelerated or cancelled by the Company should the VWAP exceed 10.0p for five consecutive days.

Cash and Listed Investments

Current cash and listed investments as at the date of this report amount to £4.4m.

Pre-IPO Vehicles

Power Metal has holdings in three current vehicles undertaking a planned IPO including:

–  Golden Metal Resources (Nevada, USA)

–  First Development Resources (WA and NT, Australia)

–  Uranium Energy Corporation (Saskatchewan, Canada)

Based on the most recent financings undertaken for each of the above vehicles the total value Power Metal’s holdings in the above vehicles amounts to £6.25m.

In addition, Power Metal is seeking with JV partners (Red Rock Resources PLC) to undertake a listing of NBGC, the valuation of which is not confirmed at the current time.

The listing of further project packages may be undertaken which will be incorporated into the above list as appropriate.

Project Investments & Intercompany Loans

As at 30 September 2022 Power Metal’s remaining assets comprising project investments and intercompany loans, amounted to £4.5m.

Future Financing Sources

The Company has multiple sources of potential additional financing:

–  As an AIM listed vehicle traditional equity financing can be undertaken to raise additional sums where considered necessary as demonstrated in September 2022 with the £1.08m financing undertaken.

–  Through the exercise of financing and transactional warrants or the exercise of director, team member or adviser options. A full breakdown of all warrants and options outstanding is available on the Company’s website through the following link:

https://www.powermetalresources.com/warrants-options-outstanding/

–  In addition to the above, the Company will benefit from the planned listings of the pre-IPO vehicles as outlined above which will if successful and in line with expected valuations on listing, add considerably to overall Power Metal asset value.  This was recently demonstrated with the IPO of FCM which now carries a value of £2.6m for Power Metal’s holding.

–  It is anticipated that further value generative events may occur including additional spin-outs into new listed vehicles and outright disposal of certain business interests.  One item currently in process is the disposal of the Kanye Resources interest highlighted above, from which consideration payable to Power Metal includes 60m Kavango shares currently valued at £1.14m.

The Company’s year end is 30 September 2022 and it is expected that the audited financial accounts for the full year will be published in February 2023.

Power Metal is now well advanced with preparation of a new environmental, social and governance (“ESG”) initiative which will be launched by the end of December 2022.

The Company is also updating its Financial Position and Prospects Procedures (“FPPP”) which is an underlying governance document.  This work will be completed by the end of December 2022 and this will be included in the updated year end Corporate Governance Statement, covered in the audited financial accounts and on the Company’s website in Q1 2023.

The above ESG and FPPP initiatives are being managed by Jamie Tosh, Power Metal’s Commercial Operations Manager, and who holds a Diploma in Corporate Governance from the UK Corporate Governance Institute.