Power Metal Regulatory News (POW)

28 April 2021

Power Metal Resources plc

("Power Metal" or the "Company")

Conditional Australia Copper-Gold Acquisition

Power Metal Resources PLC (LON:POW) the AIM listed metals exploration and development company is pleased to announce an agreement has been reached for the acquisition of a 75% strategic interest in a UK special acquisition vehicle which is to acquire outright First Development Resources (Pty) Limited ("FDR Australia"), an Australian private company.

FDR Australia holds a portfolio of copper-gold focused exploration interests in the Paterson Province in the eastern Pilbara Region of Western Australia. The acquisition of FDR Australia will not be undertaken until the Ripon Hills Project has been successfully transferred into FDR Australia and a granted exploration licence has been received by FDR Australia in respect of the Wallal Project. Further announcements will be made by the Company as appropriate. 

CHIEF EXECUTIVE OFFICER STATEMENT

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

"The acquisition announced today provides Power Metal with a strategic interest in exploration properties in the Paterson Province, Western Australia. This region has seen considerable interest in recent years following the Havieron discovery by Greatland Gold plc and Winu discovery by Rio Tinto.

The level of interest in the region has intensified of late and the opportunity to secure a high-quality strategic licence footprint is diminishing. We needed to act to secure Power Metal's seat at the "Paterson" table.

We now have a seat at that table, but this is Power Metal and our policy is to carve out innovative pathways for value generation with each new transaction.

Through this acquisition we are creating a new strategic Australian copper-gold exploration vehicle with a view to listing this special acquisition vehicle on the London capital markets at the earliest opportunity.

There is a clear opportunity in the Paterson Province, something we intend to pursue with considerable vigour and as you will see below, we are aligning Power Metal with an experienced Australian team to support the business in the run up to the listing of the special acquisition vehicle.

For myself, and Andrew Bell Chairman of Power Metal, this transaction is reminiscent of the financing and restructuring of Greatland Gold we coordinated in April 2016, which rejuvenated that vehicle and provided the backdrop to the dramatic delivery for shareholders we saw there. It does Power Metal no harm if we aspire to achieve another positive outcome with this new opportunity."

BACKGROUND

This acquisition agreement (the "Agreement") underlying this transaction was finalised on 27 April 2021 and was based in part on an option agreement (the "Option") announced by the Company on 19 January 2021 and which may be viewed through the following link:

https://www.powermetalresources.com/n/n340/option-signed-australia-copper-gold-acquisition

After signing of the original option agreement which focused on two exploration projects being the Wallal Project and the Ripon Hills Project, three additional exploration properties became available for acquisition which would significantly enhance the overall exploration licence footprint.

Discussions with FDR Australia and associated project vendors ensued and due diligence work was undertaken on the wider exploration package. The discussions were extended to the consider the strategic opportunity to work together and potentially create a new London listed Australian exploration vehicle, focused on the Paterson Province, in Western Australia.

To secure the strategic footprint in one move it was necessary to pick apart the original option agreement and reconstruct the transaction.

The outcome of this is that Power Metal Resources will acquire an effective 75% interest in FDR Australia. This interest will be held through a 75% interest in a newly created UK private company, ("FDR UK"), which will ultimately hold 100% of the issued share capital of FDR Australia. The remainder 25% of FDR UK will be held by the vendors and associated parties, as outlined below.

FDR Australia's business interests are outlined below and include five exploration projects including one granted exploration licence (the Ripon Hills Project) and four licence applications (the Wallal, Wallal West 1, Wallal West 2 and Braeside West Projects).

The intention is to list FDR UK on the UK capital markets, on the most expedited pathway possible.

THE PATERSON PROVINCE

The Paterson Province is considered highly prospective for gold-copper and base metal mineral systems and is currently of particular focus for resource companies with a significant level of exploration activity underway across the region.

This level of interest follows recent high-profile copper and gold discoveries by Rio Tinto at their Winu property1 and by Greatland Gold plc (LON:GGP) with the Havieron discovery2. Notably, several major groups in search of Tier 1 deposits have entered into joint-venture / farm-in agreements with junior explorers to expedite exploratory work. 

The area also has developed mine and processing infrastructure due to the presence of established mining operations, including Newcrest Mining's Telfer Mine3 and the X-Metals Nifty Copper Operation4 (planned as a mine restart).

FDR AUSTRALIA AND ITS BUSINESS INTERESTS

FDR Australia currently holds five project interests (the "FDR Australia Interests") as follows:

The Wallal Project - E45/5816 - Licence Application

E45/5816, the Wallal Project is an exploration licence application held outright by FDR Australia and covering 390km2 in the western quadrant of the Paterson Province with a favourable lithospheric setting for substantial base metal deposits consistent with Rio Tinto's (ASX: RIO) Winu discovery - predominantly copper-gold-silver with a JORC compliant Inferred Resource of 503Mt @ 0.45% Cu equivalent. 

Ripon Hills Project - E45/5088 - Granted Exploration Licence

E45/5088, the Ripon Hills Project is a granted exploration licence covering 42km2 prospective for base metal-gold mineralisation and is proximal to Rumble Resources' (ASX: RTR) Braeside Project where significant new base metal discoveries have been made5.

The Ripon Hills Project will be transferred at nil cost to FDR from current owner Great Sandy Pty Ltd ("Great Sandy") a private Australian Company (the consideration for the transfer will be satisfied by Great Sandy nominees receiving a proportion of consideration outlined below.) (Note: The mineral rights for manganese and iron are excluded for the Ripon Hills Project.)

Wallal West 1 Project - E45/5853 - Licence Application

E45/5853, the Wallal West 1 Project, is an exploration licence application covering 96km2 prospective for base metals and gold.

The ownership rights to the Wallal West 1 Project will be transferred at nil cost to FDR Australia from current owner Pardoo Resources Pty Ltd ("Pardoo") a private Australian Company (the consideration for the transfer will be satisfied by Pardoo nominees receiving a proportion of consideration outlined below".)

Wallal West 2 Project - E45/5880 - Licence Application

E45/5880 the Wallal West 2 Project, is an exploration licence application covering 86km2 prospective for base metals and gold.

The ownership rights to the Wallal West 2 Project will be transferred at nil cost to FDR Australia from current owner Pardoo (the consideration for the transfer will be satisfied by Pardoo nominees receiving a proportion of consideration outlined below".)

Braeside West Project - E45/5854 - Licence Application

E45/5854 the Braeside West Project, is an exploration licence application covering 137km2 prospective for copper-lead-zinc and manganese mineralisation.

The ownership rights to the Braemore West Project will be transferred at nil cost to FDR Australia from current owner Pardoo (the consideration for the transfer will be satisfied by Pardoo nominees receiving a proportion of consideration outlined below".) (Note: The mineral rights for manganese and iron are excluded for the Braeside West Project.)

FDR Australia Additional Disclosure

In the 6 months ended 31 December 2020 FDR Australia made an operating loss of A$18,914 (circa £10,707) and as at 31 December 2020 FDR had net liabilities of A$19,939 (circa £11,287).

EXPLORATION RATIONALE

The Company believe that securing a footprint in the prospective Paterson Province in Western Australia has the potential to deliver significant value for shareholders.

While the area has excellent mining infrastructure, there are many parts of the region - highly prospective for copper-gold mineralisation - which are under-explored. In turn, this significantly enhances the upside potential as much of the area is masked by surficial cover. 

Using an array of modern exploration techniques, comprising reconciling geophysics and geochemical surveys, the exploration would seek to efficiently and cost effectively identify priority test-drill targets.

TRANSACTION TERMS - ACQUISITION OF FDR AUSTRALIA

Power Metal will, subject to local regulatory approvals and through a new special acquisition vehicle acquire an effective 75% interest in FDR Australia, an Australian private company holding five exploration projects.

The 75% interest will be held through a special acquisition vehicle, namely a new UK private company (FDR UK) which will acquire a 100% interest in FDR Australia and in which Power Metal will hold a 75% interest.

The intention is to list FDR UK on a recognised stock exchange in the London capital markets at the earliest opportunity.

The vendors of the FDR Australia interests include the shareholders of FDR Australia and various third parties with interests in the exploration properties included in this announcement (the "Vendors"). The Vendors will hold the remaining 25% interest in FDR UK.

In addition to the 25% holding in FDR UK the consideration payable to the Vendors and related transaction terms are as follows:

- Power Metal will pay initial consideration of A$50,000 in cash (circa £27,798) and £275,000 payable through issue to the Vendors of 10 million new Power Metal Ordinary Shares of 0.1p ("Ordinary Shares) at an issue price of 2.75 pence per share ("Initial Consideration Shares") (note: A$20,000 (circa £11,322) will be used to eliminate shareholder loans in the accounts of FDR Australia and therefore on its acquisition by FDR UK, FDR Australia will carry no liabilities). The cash component of the consideration above will be funded from Power Metal existing cash resources.

- In addition, Power Metal will issue the Vendors 10 million warrants with an exercise price of 4.5p per new Ordinary Share and life to expiry of 3 years from the date of issue ("Initial Consideration Warrants"). Should the volume weighted average price ("VWAP") of Power Metal shares meet or exceed 7.0 (seven) pence for a 5 consecutive trading days Power Metal may serve notice on the Vendors providing 10 trading days to exercise and pay for the Initial Consideration Warrants or the Initial Consideration Warrants will be cancelled.

- The acquisition of FDR Australia by FDR UK will not be undertaken until the Ripon Hills Project has been successfully transferred into FDR Australia and a granted licence has been received by FDR Australia in respect of the Wallal Project.

- The initial consideration items outlined above (cash, Initial Consideration Shares and Initial Consideration Warrants) will not be paid until FDR UK acquires 100% of FDR Australia and until the regulatory approvals have been received including any such approval required from the Foreign Investment Review Board ("FIRB"), Australia enabling that acquisition to proceed.

In addition, subject to the acquisition of FDR Australia by FDR UK:

- Excluding the Wallal Project, upon grant of each of the three additional exploration licence applications (Wallal West 1 & 2 and Braeside West) and ownership transfer to FDR Australia a further £80,000 consideration is payable through the issue of 2,500,000 new Ordinary Shares at an issue price of 3.2p each ("Grant Shares"). Should all three licence applications be granted the total consideration payable is £240,000 (being £80,000 per granted exploration licence application) through the issue of 7,500,000 new Ordinary Shares at an issue price of 3.2p each.

- Excluding the Wallal Project, upon grant of the each of the three additional exploration licence applications (Wallal West 1 & 2 and Braeside West) and ownership transfer to FDR Australia Power Metal will issue the Vendors 2,500,000 warrants with an exercise price of 5p per new Ordinary Share and life to expiry of 3 years from the date of issue ("Grant Warrants") for each exploration licence application granted. Should the VWAP of Power Metal shares meet or exceed 10.0 (ten) pence for a 5 consecutive trading days Power Metal may serve notice on the Vendors providing 10 trading days to exercise and pay for the Grant Warrants or the Grant Warrants will be cancelled. Should all three licence applications be granted a total of 7,500,000 Grant Warrants will be issued.

- The Vendors will retain a 2% net smelter royalty ("NSR") over all licences included in this transaction and FDR UK will have the right to purchase 1% of this NSR for A$1,000,000

- The Vendors and their professional licensing and geological teams will continue to work with Power Metal to manage local corporate operations, undertake initial ground exploration and potentially to further build the licence footprint in the Paterson Province.

- A suitable advisory team will be promptly established to manage the corporate activities required to seek a potential listing of FDR UK on the UK capital markets.

COMPETENT PERSON STATEMENT

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

References:

Source 1: Rio Tinto PLC announcement https://www.riotinto.com/en/news/releases/2020/Rio-Tinto-reveals-maiden-Resource-at-Winu-and-new-discovery

Source 2: Greatland Gold PLC announcement https://polaris.brighterir.com/public/greatland_gold/news/rns/story/wkqm9ow 

Source 3: Newcrest Mining Ltd : https://www.newcrest.com/our-assets/telfer 

Source 4: Metals X Ltd: https://www.metalsx.com.au/copper/ 

Source 5 : Rumble Resources Ltd: http://rumbleresources.com.au/braeside_project.php 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

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 metals exploration in North America and Australia together with base and strategic metal exploration in Africa. Project interests range from early stage greenfield exploration to later stage prospects currently subject to drill programmes.

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.