Power Metal Regulatory News (POW)

15 April 2020

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

Conditional Acquisition - Botswana

Power Metal Resources plc (LON:POW), the AIM listed metals exploration and development company, is pleased to announce the conditional acquisition of a 51% interest in the highly prospective Ditau Project, located in Botswana (the "Acquisition").

Highlights

§ Subject to satisfactory completion of due diligence POW is to acquire 51% of the Ditau Project from Kavango Resources plc, ("Kavango" LON:KAV) for £150,000 payable through the issue of 35,714,286 new ordinary shares of 0.1 pence each ("POW Shares") in POW at an issue price of 0.42p per POW Share; 

§ The Acquisition is subject to due diligence for which the parties have agreed due diligence period of 30-days which will commence from removal of COVID-19 related international travel and work restrictions, or 1 September 2020, whichever is earlier; 

§ The highly prospective Ditau Project is targeting the discovery of commercial deposits of Rare Earth Elements ("REE"); 

§ Ten geophysical "ring structures" identified at Ditau, including one 7km by 5km magnetic anomaly, are potentially related to carbonatite magmatism which is the primary source of niobium and REEs; 

§ On Completion of the Acquisition POW will become the operator of the Ditau Project and will confirm a new project work programme; 

§ In addition, POW has invested £38,000 in Kavango via a convertible loan note (the "CLN") with a term to 31 March 2021; 

§ The CLN is convertible into new ordinary shares of 0.1 pence each in Kavango ("Kavango Shares") at a price of 0.80p per new Kavango Share ("KAV Conversion Shares"); 

Each Kavango Conversion Share comes with an attached warrant to subscribe for an additional new Kavango Share at a price of 1.0p each, with a 3 year life to expiry, and a further early conversion warrant at 2.50p, as outlined below.

Paul Johnson, Chief Executive Officer, Power Metal Resources commented: "POW is building a portfolio of potentially exciting opportunities, with the conditional acquisition of the Ditau Project offering a great deal of promise.

The POW team has a strong connection with research leaders in the area of carbonatite geology, and we believe that know-how, when applied to the extensive information gathered by Kavango to date, will make a significant difference.

Not only can we help augment the forward direction for the Ditau Project, but also open up new commercial avenues for a more rapid project advancement."

Note - Paul Johnson, Chief Executive Officer of Power Metal Resources plc holds 5,091,544 shares in Kavango Resources plc ("Kavango") representing 2.71% of the issued share capital of Kavango following completion of this transaction and has therefore abstained from board decision making in respect of this Conditional Acquisition.

DITAU PROJECT BACKGROUND

Ditau comprises of two prospecting licences, which cover an area of 1,386km2. Surface prospecting work by Kavango has involved geochemical soil sampling and magnetic and gravity geophysical surveys. Analysis of results from this work, and pre-existing airborne magnetic geophysics data, has enabled the identification of 10 separate magnetic "ring structures" within the Ditau license area.

One of these ring structures is a 7km by 5km magnetic and gravity anomaly (the "Ditau Prospect"). In Q1 2019 Kavango conducted an initial 1,000m diamond drill programme at the Ditau Prospect across two holes, 1.8km apart.

Drill core assay and whole rock geochemistry results from the two holes were released in August 2019 and whilst they did not identify economic mineralization, the results confirmed the presence of highly altered Karoo sediments, sitting above a mafic intrusive body. The alteration observed in the drill cores stretched to >300m depth.

These results were considered encouraging because the age of the Karoo rocks (c.120million years), the high level of their alteration and the fact this alteration stretched to >300m depth; valuable geological pointers, when exploring for potentially economic mineral deposits.

Further, the geochemistry obtained from the drill core of the two Ditau Prospect holes suggested the metasomatic alteration encountered was due to a process known as fenite alteration or "fenitization". Fenite alteration is particularly associated with carbonatite intrusions, where it occurs as an aureole or halos around the carbonatite intrusive, and it has significant potential to be used as an exploration tool to find mineralised intrusions in a similar way alteration patterns are used in other ore systems, such as porphyry copper deposits.

Carbonatites and alkaline-silicate rocks are the most important sources of Rare Earth Elements and niobium. REEs include much sought after elements, such as Neodymium and Praseodymium, which are used in the manufacture of the new generation of electric vehicles (EVs) and other high tech applications.

By way of comparison, Kavango consider the post-Karoo age of the fenitized rocks intersected by drilling at the Ditau Prospect, is comparable to the post-Karoo at the Longonjo carbonatite which is being developed as a neodymium and praseodymium open pit mine, by Pensana Metals Limited in Angola.

Ongoing work to confirm presence of carbonatites at Ditau

Subsequent to the release of the August drill results from Ditau, Kavango learned that Canadian miner Falconbridge Limited ("Falconbridge") drilled into 3 carbonatites (the "Falconbridge Carbonatites") in the early 1970s at a location less than 50km from Ditau and hosted by similar Karoo country rocks.

Falconbridge was looking for kimberlites in this area, which lies within a cluster of over 20 kimberlites discovered at the same time. Kimberlites, otherwise known as "diamond pipes", are the most important source of diamonds mined today. However, carbonatites have similar looking magnetic and gravity anomalies to these diamond-bearing formations.

The carbonatites that Falconbridge intersected were just below the Kalahari sand cover and therefore would have been amenable to open pit mining. This implies they are post-Karoo age and therefore potentially comparable to the Ditau ring structures. 

Although the Falconbridge Carbonatites are located outside of the Kavango held ground the company is reviewing the Falconbridge results and designing an orientation study to assist in the characterisation and exploration vectoring for the Ditau ring-structures. As part of this orientation study the Falconbridge Carbonatites will be surveyed using ground magnetic and gravity geophysics and soil geochemistry.

POW will provide further updates, concerning future work plans at Ditau on successful completion of due diligence and the subsequent Acquisition completion.

ACQUISITION TERMS

POW has 30 days from the removal of current COVID-19 related international travel and work restrictions, to undertake due diligence work in respect of the Ditau Project, or 1 September 2020 whichever is earlier. Travel restrictions are specifically in respect of freedom of movement between the UK, Botswana and South Africa; and work restrictions in respect of the ability to operate in Botswana and conduct site- based due diligence in-country.

Upon satisfactory completion of due diligence, where POW proceeds with the Acquisition, POW will pay Kavango Resources £150,000 to acquire a 51% interest in the Ditau Project through the issue of 35,714,286 POW Shares at a price of 0.42p per share.

The 35,714,286 new POW Shares issued to Kavango Resources will be subject to a 6-month lock in period and subsequent 6-month orderly market provision thereafter, unless agreed in writing by POW.

On completion of the Acquisition, POW will become operator of the Ditau Project. All future spending at Ditau will be conducted on a pro-rata "fund or dilute" basis.

PARTICIPATION IN KAVANGO RESOURCES CONVERTIBLE LOAN NOTE INSTRUMENT

POW has invested £38,000 in Kavango via a convertible loan note with a term to 31 March 2021.

The CLN is repayable on 31 March 2021 or is convertible at any time into new ordinary shares of 0.1 pence each in Kavango at a price of 0.80p per new Kavango Share and carries a zero coupon.

Each Kavango Conversion Share comes with a warrant to subscribe for a new Kavango Share each at a price of 1.0p with a three-year life to expiry from 21 April 2020.

Should any warrants be exercised within one year, a replacement warrant will be issued to subscribe for a further Kavango Share each at a price of 2.50p, also expiring three years from 21 April 2020.

Competent Person's 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.

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.