Power Metal Resources #POW – Option agreement for Canadian Silver Project, complements the Company’s Alamo Gold Project in Arizona, USA.

Power Metal Resources plc (LON:POW) the AIM listed metals exploration and development company is pleased to  announce the Company has signed an option agreement (the “Option Agreement”) in respect of the Silver Peak Project (the “Silver Peak Project” or the “Project”) in British Columbia, Canada. The Project includes the Eureka-Victoria Silver Mine, the first Crown-granted mineral property in British Columbia.

HIGHLIGHTS:

CHIEF EXECUTIVE OFFICER’S STATEMENT

Paul Johnson Chief Executive Officer of Power Metal Resources plc commented “The Option over the Silver Peak Project provides Power Metal and its shareholders with exposure to a silver project with previous history of production in a safe jurisdiction and with a number of well-defined exploration objectives.

“We enter this opportunity at a time when silver has been experiencing a significant increase in price and when the underlying value of silver projects is, in our view, going to follow.  

“We also consider that this silver project complements the Company’s Alamo Gold Project interest in Arizona, USA, the agreement for which was signed and announced to the market recently and where exploration work is now underway.

“Taking both projects together, we are now beginning to build a robust North American precious metal focused portfolio, with strong exploration potential and backed by operational and advisory teams who are at the heart of mining and exploration in North America.”

THE PROJECT

The Silver Peak Project consists of a portfolio of mineral claims covering an area of approximately 46.02 km², over a system of high grade, intrusion related, polymetallic Ag-Pb-Zn-Cu veins, part of the historical Eureka-Victoria Silver Mine, at Silver Peak in southern British Columbia, Canada.

The Project is located on Silver Peak Mountain which is 6 km south of the paved TransCanada Highway and the town of Hope. A good quality gravel municipal road along Silver Creek, passes by the entrance to the project mine access road. A logging/mining road which was upgraded in 2011, then extends upwards to the workings.

Originally discovered in the late 1860s the Silver Peak mines reportedly exploited near-surface oxide material ranging 500 to 658 oz/ton silver, via underground adits on two main veins varying in width from 1.5 to 6 m. Mining continued intermittently on a small scale under various ownership until 1981.

The property was subject to minor surface and underground sampling and mapping programmes between 2009 and 2011, confirming the tenor and extent of high grade silver mineralisation in the Eocene age conglomerate hosted siderite-tetrahedrite veins, with grab sample assays up to 22,600 g/t Ag⁽¹⁾.

Underground sampling in 2011 along the strike of the Victoria Vein returned a grade of 8,889 g/t Ag, with a grab sample from the Victoria Vein face assayed at 15,517 g/t Ag, 4.3% Pb, 2.94% Cu and 2,756ppm Bi. Bench scale metallurgical testwork in 2011 returned silver leach recoveries of up to 80% using a 0.4% Ag (4,000g/t) feed sample⁽¹⁾.

(1)  Data as reported in the National Instrument 43-101 Technical Summary Report on the Eureka-Victoria Mine Property 10.3.13

Exploration Potential

Whilst the Project can demonstrate a long history of high grade silver production, the resource potential of the Eureka and the Victoria vein systems, which each range over 625m long, has never been formally assessed or drill tested at depth or along strike.

A systematic phased exploration programme is envisaged to test the resource potential of the Eureka and Victoria vein systems at depth and along strike.

THE TRANSACTION TERMS

The Vendor

The Project is currently 100% owned by private vendors Michael Nugent and Jo Shearer (the “Vendors”).

Option

Power Metal has secured a 30-day Option period to undertake due diligence in respect of the Project.

The Option fee payable is a total of £26,819 payable as CAD$25,000 (circa £14,319) cash and £12,500 through the issue of 1,000,000 new Ordinary Shares in the Company at a price of 1.25 pence each (the “Option Shares”).

The CAD$25,000 cash payment includes approximately CAD$6,670 to cover the cost of additional claims to increase the Project footprint which have now been secured and are included in the Project description above.

Right to Earn-in

Power Metal may within the 30-day Option period, exercise its right to earn-in to a project interest and upon exercise will make a further payment of £129,683 to the Vendors comprising CAD$30,000 (£17,183) cash and £112,500, through the issue of 9,000,000 new Ordinary Shares (the “Option Exercise Shares”) at a price of 1.25p per Option Exercise Share.

In addition, on exercise the Vendors will be granted 9,000,000 warrants to subscribe for new Ordinary Shares in the Company at a price of 1.75p with a three-year life to expiry.

Power Metal must then spend CAD$250,000 (£143,193) on Project exploration, within 12 months of the Option exercise date (the “Exploration Spend”).

Acquisition of Project Interest

Subject to meeting the Exploration Spend and the receipt of satisfactory findings from exploration work, and by 31 August 2021, Power Metal may elect to acquire a 30% interest in the Project by making a final payment of CAD$200,000 (£114,554 and the “Final Payment”) with Power Metal having a choice to pay this in cash, or in Company shares, as follows:

Final Payment payable in cash:

–  Power Metal can make a final cash payment of CAD$200,000.

–  Should Power Metal make the Final Payment as cash, warrants will also be issued to the Vendors in such volume as equates to CAD$100,000 divided by the 7-trading day VWAP of Power Metal immediately preceding the day of announcing the acquisition of the Project interest and at a price that equates to a 30% premium to the 7-day VWAP and with a three year life to expiry.

Note: by way of example if the Acquisition of Project Interest Final Payment is paid as cash.

If the CAD/GBP translation rate on the acquisition date is 0.57277 then CAD$100,000 equals £57,277.  If at that time the 7-day VWAP of Power Metal is 3.0p, then £57,277 divided by 3.0p would equate to 1,909,233 warrants to be issued, and the warrant exercise price would be 3.9p.

Final Payment payable in shares:

–  By payment of CAD$200,000 (£114,554) through the issue of Power Metal shares at a price based on the 7-trading day VWAP preceding the date of announcing the acquisition of the Project interest (“Final Payment Shares”).

–  Should Power Metal elect to make the Final Payment in Power Metal shares then the Vendors will be granted warrants to subscribe for new Ordinary Shares in such volume as equates to 50% of the Final Payment Shares and at an exercise price equating to a 30% premium of the issue price of the Final Payment Shares.

Note: by way of example if the Acquisition of Project Interest Final Payment is paid as shares.

If the CAD/GBP translation rate on the acquisition date is 0.57277 then CAD$200,000 equals £114,554.  If at that time the 7-day VWAP of Power Metal is 3.0p, then £114,554 divided by 3.0p would equate to 3,818,467 new Ordinary Shares being issued to the Vendors.

In addition, 50% of the new Ordinary Shares would equate to 1,909,233 warrants to be issued, and the warrant exercise price would be 3.9p.

After the Acquisition of Project Interest

After completion of the Final Payment the ownership structure will be the Project Vendors 70% and Power Metal 30%.  Both parties must contribute to exploration costs thereafter, in line with their ownership percentage, or dilute in accordance with standard industry dilution provisions.

The Vendors will retain a 2% Net Smelter Royalty over the total Project.

Summary of Transaction Costs

For ease of reference the overall transaction costs are summarised below:

NEXT STEPS

Power Metal will now undertake accelerated due diligence and i f due diligence is successful it is the Company’s intention to exercise the Option securing the right to earn-in to a project interest and then implement an early exploration programme.

COMPETENT PERSON STATEMENT

The technical information contained in this disclosure has been read and approved by Mr Nick O’Reilly (MSc, DIC, 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.

ADMISSION AND TOTAL VOTING RIGHTS

Application will be made for the 1,000,000 Option Shares to be admitted to trading on AIM which is expected to occur on or around 24 August 2020 (“Admission”). Following Admission of the Option Shares, POW’s ordinary issued share capital will comprise 772,216,542 ordinary shares of 0.1 pence each.

This number will represent the total voting rights in the Company, and following Admission, 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. The new shares will rank pari passu in all respects with the ordinary shares of the Company currently traded on AIM.

The information contained within this announcement is considered to be inside information prior to its release, as defined in Article 7 of the Market Abuse Regulation No.596/2014 and is disclosed in accordance with the Company’s obligations under Article 17 of those Regulations.

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

Notes to Editors:

Power Metal Resources plc (LON:POW) is an AIM listed metals exploration and development company seeking a large scale metal discovery.

The Company has a global portfolio of project interests including precious metal exploration in North America and Australia together with base metal exploration in Africa. Project interests range from early stage greenfield exploration to later stage drill ready prospects.

The Board and its team of advisors have expertise in project generation, exploration and development and have identified an opportunity to utilise the Company’s position to become a leader in the London market for investors wishing to gain exposure to proactive global metals exploration.