Power Metal Regulatory News (POW)

21 April 2020

Power Metal Resources plc ("POW" or the "Company")

Arizona USA - Alamo Gold Project Update

Power Metal Resources plc (LON:POW) the AIM listed metals exploration and development company is pleased to provide an update in respect of the Alamo gold project (the "Project") in Arizona, USA.

Readers are advised to review the Company's announcement dated 3 December 2019 outlining the terms of the Alamo gold project transaction and which can be viewed through the following link:

https://www.powermetalresources.com/n/n169/arizona-usa-alamo-project-opportunity

In addition, the Company's announcement dated 4 February 2020 which provided an update on progress with due diligence, including the results of a site visit and which may be viewed through the following link:

https://www.powermetalresources.com/n/n175/arizona-usa-alamo-project-update

HIGHLIGHTS:

· Following a successful site visit in January 2020, the Company's local partner has now completed the staking of additional claims to significantly expand the Project footprint;

· The additional claim areas are being registered with the County and Bureau of Land Management and the footprint of the Project will cover the area potentially containing a proximal bedrock gold source for the gold nugget mineralisation identified near surface (circa 60 ounces of gold nuggets at surface having been found in the original project area); 

· The Project due diligence period for POW has been extended to 30 June 2020 with the agreement of all parties, with no extension fees payable, reflecting the disruption to normal activity due to lockdowns in respect of Covid-19; 

· In addition the Company is reviewing additional gold project opportunities in the US to potentially build a US gold operations portfolio.

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

"I am pleased to confirm the expansion of the Project footprint to cover the gold prospective area identified during our due diligence site visit. The due diligence period extension to 30 June 2020 enables the Company to complete due diligence activities and navigate through the disruption caused by lockdowns in respect of Covid-19.

In addition to the Alamo gold project, we are increasingly aware of additional US gold exploration opportunities and there is the prospect of building a gold portfolio around the Alamo gold project.

There is a window of opportunity that has emerged, partly due to the challenging conditions and also because our partners and contacts in country have access to an extensive range of opportunities. We will use the additional time available to us to complete Project due diligence and to examine new opportunities."

VENDORS AND FORMATION OF SPECIAL ADVISORY COMMITTEE

The right to earn into the Alamo Project is held by the vendors Joe Carrabba and Murray Nye (see below and the "Vendors")

Subject to successful completion of project due diligence and POW exercising the right to earn into the Alamo Project, the Company will form an advisory committee on which the Vendors will collaboratively work alongside POW in the development of the Project.

The respective experience of the Vendors in both operating and developing mining projects through all phases of the development curve, as outlined below, will prove valuable when assessing how best to augment value in the Alamo Project.

Joe Carrabba

Mr Carrabba is a seasoned mining executive, who has held senior positions in the industry including as a director of Newmont Goldcorp Corp and as former President and Chief Operating Officer of the largest independent iron ore producer in the U.S., Cliffs Natural Resources Inc.

Murray Nye 

Mr Nye has extensive experience in international corporate finance and currently serves as the Chief Executive Officer of Winston Gold Corp (CSE: WGC). Prior to Winston, Mr Nye was the former CEO of RX Exploration Inc. ("RX") where he brought the historic Drumlummon Gold/Silver mine back into production. During Mr Nye's tenure, the market valuation of RX increased from a base of circa $1.5m to circa $80m

UPDATED TRANSACTION TERMS

The Project is currently 100% owned by Frisco Gold Corporation, Bullhead City, Arizona, USA.

The Vendors currently hold an option for a right to earn in to 60% of the Project by covering property payments over a four-year period and exploration expenditure over a three-year period, (the "Option") as outlined below. POW has signed an agreement to acquire the Option, subject to the satisfactory completion of due diligence.

· On 3 December 2019 POW entered into a 45-day due diligence period to enable Project inspection and an initial work programme including Nugget verification and geochemical sampling to validate Project prospectivity (the "Due Diligence Period"). The fee payable to the Vendors to enter into the Due Diligence Period was US$25,000 payable through the issue of 4,852,125 new ordinary shares of 0.1 pence each ("New Ordinary Shares") (the "Due Diligence Shares") at price of 0.4p per share (£19,409). 

· On 4 February the Due Diligence period was extended to 20 April 2020, to enable the acquisition of additional claims in the area of the original claims package thus covering the zone of prospectivity identified and to enable certain additional exploration work to be undertaken to increase knowledge of the prospective mineralisation. 

· The Due Diligence period has been further extended to 30 June 2020 to allow time for additional Due Diligence work to be completed reflecting the disruption to operational activities resulting from the various restrictions imposed by the Covid-19 pandemic. There are no additional fees payable by the Company in respect of this extension. 

· To acquire the Option from the Vendors, on satisfactory completion of due diligence, POW would pay the Vendors a further US$250,000 payable through the issue of 38,814,500 New Ordinary Shares (the "Consideration Shares") at a price of 0.5p per share (£194,073) and grant a warrant over 38,814,500 New Ordinary Shares (the "Consideration Warrants") at an exercise price of 1.0p per share and with a three year life to expiry. 

· The Consideration Shares shall also be subject to a period of four months where they may not be sold without the express written approval of the Company. Should POW shares trade at a VWAP of 1.5p or more for seven consecutive trading days, the Consideration Shares would become freely tradable. 

· Upon acquiring the Vendors' Option POW will be the operator of the Project, working in conjunction with a newly appointed advisory committee including Joe Carrabba and Murray Nye, and will seek to form an Operating Committee with the current project owners. 

· Upon acquiring the Vendors' Option and establishment of the advisory committee POW will award share options over 2,500,000 New Ordinary Shares to Joe Carrabba and Murray Nye respectively (5 million options in total). The share options will be awarded for advisory committee services and will be exercisable at 1.0p per New Ordinary Share and have a life to expiry of three years. These share options may however only be exercised if the share price of POW exceeds a VWAP of 1.5p for seven consecutive trading days. 

· After acquiring the Vendors' Option, POW can earn into a 60% interest in the Alamo Project by expending US$1,100,000 (circa £850,000) on property payments over a four-year period and exploration work costs over a three year period. First year costs are modest and would amount to US$150,000 (circa £116,232). 

· Upon completion of the earn into the Project, POW must contribute to 60% of ongoing Project expenditure to maintain its 60% interest. Likewise, following the POW earn in, Frisco Gold Corporation must contribute to 40% of Project expenditure to maintain their 40% holding. If either party does not contribute in line with their percentage ownership they will dilute their ownership percentage in line with a standard industry dilution formula.

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 exploring for the key metals used in power generation, transmission, storage and utilisation. The Board and team of advisors, who have proven expertise in exploration, mining and project generation, have identified an opportunity to utilise the Company's position to become a leader in the London market for investors to gain exposure to the power metal commodity suite, particularly cobalt, lithium, copper and nickel.