Power Metal Regulatory News (POW)

26 November 2021

Power Metal Resources PLC

("Power Metal" or the "Company")

Kavango Option - Kalahari Key Botswana

Kavango Resources plc Secures Option to Acquire Up to 51.15% of Kalahari Key Mineral Exploration Pty Ltd which will own 100% of the Molopo Farms Complex Project, Botswana

Power Metal Resources PLC (LON:POW) the London listed exploration company seeking large-scale metal discoveries across its global project portfolio announces a 3 month option has been signed (the "Option") whereby Kavango Resources plc (LON:KAV)("Kavango") may acquire up to 51.15% of the issued share capital of Kalahari Key Mineral Exploration Pty Limited, Botswana ("Kalahari Key") ("KKME") (the "Acquisition").

Kalahari Key, which would be restructured on Option exercise as outlined below, currently has an effective 60% interest in the Molopo Farms Complex Project (the "MFC Project" or the "Project") after Power Metal completed the earn-in to an effective 40% direct Project interest announced 22 April 2021 (the "Earn-In"). 

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

"It has been clear for some time that the ownership structure of Kalahari Key needed to be streamlined and that we needed to ensure a heightened level of operational efficiency on the ground in Botswana.

We are therefore pleased to see Kavango demonstrate an interest in the MFC Project through this Option announced today which helps achieve both outlined objectives.

Power Metal has an existing working relationship with Kavango in the Kanye Resources joint venture covering a number of projects in Botswana and we are confident that should Kavango exercise the Option, we look forward to a positive working relationship with them as MFC Project partners going forward.

Notably the Option fee is covered by an immediate Option work programme that will provide valuable additional information about the MFC Project and whatever the Option outcome will move the Project considerably forward from a technical perspective.

We believe that the MFC Project is a considerable opportunity based on real world evidence already secured from Project exploration to date, including assay samples of up to 1.7% nickel sulphides in the second drill hole, KKME1-6. Now is the time to accelerate the MFC Project and we look forward to getting on with that."

TRANSACTION HIGHLIGHTS

Should Kavango exercise the Option it will acquire the majority of Kalahari Key shares in issue including the 5,313 shares currently held by Power Metal, but excluding the 3,802 shares held by one shareholder, Evrima plc (LON:EVA).

Power Metal will retain its 40% Project interest secured through the Earn-In. This interest will not be at Project level, but through a 40% shareholding in Kalahari Key which will be restructured following the Kavango Option exercise.

Following Option exercise and restructuring the new ownership structure of Kalahari Key is expected to be as follows:

CONSIDERATION RECEIVABLE BY POWER METAL

On Option exercise Power Metal will sell its 5,313 Kalahari Key shares to Kavango and will receive Kavango new ordinary shares of 0.1 pence each ("Kavango Shares") and warrants with an exercise price of 8.5p and a life to expiry of 2 years ("Kavango Warrants"). 

The number of Kavango Shares to be paid is variable and dependent on the price of Kavango Shares at the time of Option exercise - but Power Metal expects to receive as payment approximately 5,162,500 Kavango Shares equating to disposal consideration of between £283,938 (at 5.5p per Kavango Share) and £454,300 (at 8.8p per Kavango Share), plus 5,162,500 Kavango Warrants.

Further detailed consideration terms are provided below.

THE KAVANGO OPTION WORK PROGRAMME

In return for being granted the Option, Kavango proposes to complete the following work programme at the MFC Project (the "Work Programme"):

I. Spectral to perform a single "moving loop" survey over Target 1, to be paid for by Kavango.

II. Kavango to perform soil geochemical analysis over Target 2. KKME to provide details of an outline soil-sampling programme, to be signed off by Kavango's Exploration Manager. Kavango to provide a maximum of 2 teams for a maximum of 1 calendar month to perform the soil sampling programme.

III. Kavango to arrange for the remaining core from Target 3 to be cut and sent for analysis. KKME to provide confirmation of the quote received for lab analysis. 

IV. Kavango to input the regional borehole data from Targets 1, 2 & 3 into a unified 3D model. KKME has indicated this data is in Microsoft Excel. KKME to provide Kavango with said data.

V. Kavango to send thin sections of core samples taken from the 3 bore holes drilled at Targets 1, 2 & 3 for university analysis.

VI. Kavango to fund a contract agreed with Bell Geophysics for a reinterpretation and inclusion of gravity data for the northern part of the licence block.

In the event that Kavango does not exercise the Option, Kavango will turn over to KKME all data gathered from the Work Programme, which will then become the property of KKME.

TRANSACTION HIGHLIGHTS

- Kavango has signed a 3 month Option commencing 25 November 2021 to acquire all the shares of Kalahari Key excluding the 3,802 shares which will be retained by existing holder Evrima plc.

- On a fully diluted basis Kalahari Key will have 25,733 shares in issue (assuming 1,100 Kalahari Key share options are exercised) and, assuming all Kalahari Key options are exercised, 21,931 Kalahari Key shares would be acquired by Kavango.

- Power Metal holds 5,313 shares (or 20.65% of Kalahari Key on a fully diluted basis, or 24.23% excluding the Evrima holding) and this Power Metal holding will be sold to Kavango as part of the transaction.

- Following Option exercise the capital structure of Kalahari Key will be restructured. 

- Power Metal will exchange its 40% direct MFC Project interest for a 40% shareholding in the restructured Kalahari Key.

- Following Option exercise and restructuring the new ownership structure of Kalahari Key will be as follows:

- The Option has been secured by Kavango in exchange for completion of a Kavango funded defined Option exploration work programme at the MFC Project.

- The consideration for the Acquisition will be satisfied through the issue of new ordinary shares of Kavango ("Kavango Shares") at a price to be determined as detailed further below and the grant of Kavango warrants with an exercise price of 8.5p each with a 2-year life to expiry (the "Consideration").

- Should Kavango exercise the Option the number of Kavango Shares to be issued is variable. However, should the Kavango price remain in the range of 5.0p to 8.8p, the Consideration will comprise 21,307,500 Kavango Shares and 21,307,500 Kavango Warrants. Full details of the calculation method is outlined below.

- The Consideration value is between £1,170,000 and £1,875,000 (dependent on the price of Kavango Shares at the time the Option is exercised), plus the value of the Kavango Warrants awarded.

- Should Kavango exercise the Option, on a fully diluted basis as described above, and assuming the share price of Kavango remains in the 5.0 - 8.8p range Power Metal expects to receive 5,162,500 Kavango Shares equating to disposal consideration of between £283,938 (at 5.5p per Kavango Share) and £454,300 (at 8.8p per Kavango Share). In addition Power Metal expects to receive 5,162,500 Kavango Warrants as described above.

- Should the Kavango share price on a volume weighted average share price in the ten days prior to the Option exercise fall below 5.0p or rise above 8.8p the number of Kavango shares to be issued would change but the Consideration value would remain unchanged. Please see below for further information in respect of the disposal consideration and the calculation of Kavango Shares and Kavango Warrants that could be issued.

- Further transaction information is available below and in the Kavango market news announcement released today and below.

CONSIDERATION SHARES/WARRANTS CALCULATION

The Option has a 3-month term, valid commencing 25 November 2021, which gives Kavango the exclusive right (at its sole discretion) to acquire 100% of the fully diluted share capital in KKME, in exchange for:

- 21,307,500 million Kavango Shares, issued at a price of 5.5p per share and credited as fully paid, with half the shares subject to a 6-month lock-in and the remaining shares subject to a 12-month lock-in, both from the Option exercise date (the "Acquisition Shares").

- If at the time of exercising the Option, the Kavango share price has traded below 5p on a 10-day Volume Weighted Average Price ("VWAP") (the "Lower Price") in the ten trading days immediately preceding the Option exercise date, then Kavango will issue the Acquisition Shares at the Lower Price for a total consideration of £1,170,000.

- If at the time of exercising the Option, the Kavango share price has traded above 8.8p on a 10-day Volume Weighted Average Price ("VWAP") (the "Upper Price") in the ten trading days immediately preceding the Option exercise date, Kavango will issue Aquisition Shares at the Upper Price for a total consideration of £1,875,000.

- 1-for-1 two-year warrants exercisable at 8.5p per new Kavango Share, which are subject to an acceleration clause, whereby if Kavango's shares close above 17p for 5 trading days, Kavango may write to warrant holders at any time providing 10 working days' notice of accelerated exercise, with 10 working days thereafter for payment (the "Acquisition Warrants").

- Should Kavango exercise the Option, on a fully diluted basis as described above, and assuming the share price of Kavango remains in the 5.0 - 8.8p range Power Metal expects to receive 5,162,500 Kavango Shares equating to disposal consideration of between £283,938 (at 5.5p per Kavango Share) and £454,300 (at 8.8p per Kavango Share). In addition Power Metal expects to receive 5,162,500 Kavango warrants as described above.

- Kavango will issue the Acquisition Shares and Acquisition Warrants directly to KKME shareholders, pro-rated in their respective allocations.

- The Acquisition Warrants will be transferable between KKME shareholders, with the written permission of Kavango.

- Kavango will complete the Work Programme in exchange for the Option

MOLOPO FARMS PROJECT - FURTHER INFORMATION

- KKME has a 60% interest in the MFC Project, which is a nickel/copper/platinum group elements exploration project located in southern Botswana

- The MFC Project covers 1,723km2

- Exploration targets lie under Kalahari Cover

- Primary exploration strategy led by advanced geophysics

- Spectral Geophysics ("Spectral") historically engaged to complete ground-based surveys

- KKME drilled 3 boreholes in October 2020 ("Targets 1, 2 & 3"), each of which encountered ultramafic rocks

- Magmatic nickel sulphides were identified in Borehole K1-6 ("Target 2"; https://www.londonstockexchange.com/news-article/POW/botswana-molopo-farms-complex-further-assays/15148836

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 - Background

Power Metal Resources plc (LON:POW) is an AIM listed metals exploration company which finances and manages global resource projects and is seeking large scale metal discoveries.

The Company has a principal focus on opportunities offering district scale potential across a global portfolio including precious, base and strategic metal exploration in North America, Africa and Australia.

Project interests range from early-stage greenfield exploration to later-stage prospects currently subject to drill programmes.

Power Metal will develop projects internally or through strategic joint ventures until a project becomes ready for disposal through outright sale or separate listing on a recognised stock exchange thereby crystallising the value generated from our internal exploration and development work.

Value generated through disposals will be deployed internally to drive the Company's growth or may be returned to shareholders through share buy backs, dividends or in-specie distributions of assets.

Power Metal Exploration Programmes Underway/Results Awaited

Power Metal has exploration programmes completed or underway, with results awaited, as outlined below: