Power Metal Regulatory News (POW)

23 February 2021

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

 Audited Results for the Year Ended 30 September 2020

Power Metal Resources plc (LON:POW), the AIM listed mineral resources exploration and development company, is pleased to announce its consolidated audited results for the year ended 30 September 2020 for the Company and its subsidiaries, Cobalt Blue Holdings ("CBH"), Regent Resources Interests Corp. ("RRIC"), and Power Metal Resources SA, ("PMR"), (together the "Group").

Highlights from the year under review:

Operational

· A strategic Australian gold joint venture was formed with Red Rock Resources plc (LON:RRR), with Power Metal Resources holding 49.9%. By year end the joint venture holding company, Red Rock Resources Australasia (Pty) Limited ("RRAL") had lodged 12 licence applications covering some 2,188 km2 in the Victoria goldfields region. Various technical work was completed in the year including project reports for 11 of the licence applications and a National Instrument 43-101 report for 8 of the licence applications as a group. A new office was secured in Ballarat town and an exploration manager appointed to the joint venture company;

· Following completion of ground geophysics in 2019 and the delineation of key drill targets, Power Metal Resources elected on 31 December 2019 to earn in to a 40% project holding at the Molopo Farms Complex Project, Botswana by expending US$500,000 on exploration, notably key target drilling in 2020. A maiden drill programme commenced in October 2020;

· A new strategic joint venture was formed between Power Metal Resources and Kavango Resources Plc (LON:KAV) in respect of the Kalahari Copper Belt and Ditau Camp Projects in Botswana, with each party having a 50% interest;

· Review work was undertaken in respect of the exploration and commercialisation options in respect of the Cobalt Blue nickel/cobalt project in Cameroon. No formal conclusions as to the way forward were reached in the financial year, with deliberations continuing post year end and leading to a decision to impair the value of the of the Cameroon project in full (£970,000);

· A new earn in agreement was formed over the Silver Peak Project, including a former working silver mine, in British Columbia, Canada. Due diligence programme sampling demonstrated bonanza grade silver from channel sampling;

· A pitting, sampling and mapping work programme was undertaken successfully at the Kisinka Project in The Democratic Republic of the Congo. X-ray fluorescence testing of the samples confirmed the presence of copper, with samples dispatched to South Africa for analysis and results received post year end. The results announced in November 2020 demonstrated high grade copper and cobalt values;

· Power Metal Resources increased its interest in the Haneti Nickel Project by 10% to 35% in the financial year and worked with joint venture partner AIM Listed Katoro Gold plc (LON:KAT) to plan for commencement of maiden drilling for nickel sulphide and Platinum Group Metals ("PGMs") at the Project;

· An agreement was signed in respect of the Alamo Gold Project in Arizona USA which saw Power Metal Resources acquire an option to earn in to a maximum 75% interest in the project. An initial reconnaissance survey conducted following the acquisition identified additional prospective areas which were pegged and added to existing claims, increasing the project footprint;

· A further strengthening of the Board saw Edmund Shaw, an experienced City finance professional, join the Board as Non-executive Director in February 2020;

· At the year-end 30 September 2020 the Company held a private and listed shares/warrants portfolio worth circa £1,481,000, including a £415,000 fair value uplift in the valuation of the portfolio of listed investments in other junior natural resource companies held by the Company over the course of the year;

· At the year end the Company held cash in GBP, USD, AUD and CAD of £913,000 in GBP equivalent.

Financial

· Loss for the year to 30 September 2020 of £1.4 million (2019: £1.6 million); 

· Pre non-controlling interest total equity of £3.6 million at the year-end (2019: £1.8 million); and 

· Raised £1.7 million (before issue costs) in new equity financing during the financial year, from a combination of new and existing shareholders, including the Directors, and an additional £266,000 of cash received by the Company during the year from exercises of Power Metal share warrants.

Post-year end

Expansion of exploration and activity across the Company's project portfolio including:

· Drilling programme commencement at the Molopo Farms Complex Project in Botswana (announced 15 October 2020), the Silver Peak Project in Canada (announced 10 November 2020) and the Haneti Nickel Project in Tanzania (announced 30 December 2020);

· Next stage exploration programmes commenced at the Kalahari Copper Belt and Ditau Projects in Botswana, the Alamo Gold Project in Arizona, USA and the Kisinka Project in The Democratic Republic of the Congo ("DRC");

· Continuation of corporate activities since the year end with participation in a rights issue for Kalahari Key Mineral Exploration (Pty) Limited and expansion of the Australian Gold Joint Venture with an application to increase the JV footprint by a further 148 km2 surrounding the Ballarat mine area; and

· Option agreement signed in January 2021 providing 60 business-days for due diligence which if successful would lead to the acquisition of First Development Resources Pty Limited, a private Australian company with copper-gold exploration interests in Paterson Province, Australia.

· Agreement signed by Power Metal Resources in January 2021 to acquire a package of gold exploration properties in Ontario Canada, followed by an option agreement providing 30 days for due diligence which if successful would lead to the acquisition of four additional exploration projects also in Ontario, Canada. In February 2021, the Company announced it had exercised the Option to acquire the McKellar Property by transferring total consideration of CAD$100,000 in cash and shares;

· In February 2021 RRAL received confirmation that three licence applications had been granted enabling the commencement of ground exploration in the Victoria Goldfields, Australia;

· In February 2021, the Company announced, subject to shareholder approval, a capital reduction to take place in order for distributions to be made to shareholders; and

· Warrant exercises since the year end have raised a further £2,638,470 for the Company.

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

"The audited results for the year ended 30 September 2020 demonstrate the pace of business development at Power Metal.

In the previous financial year the Company emerged from the refinancing in February 2019 with a new sense of energy and a promise to deliver an exciting investment proposition in resource exploration and development. As at today's date Power Metal is a global exploration company with precious and base metal projects across three continents.

Much of the development achieved in the Company was undertaken in the year ended 30 September 2020 and since then we have seen the launch of proactive exploration and corporate activities across multiple projects including district scale opportunities.

Power Metal is well funded with a strong working capital position and an objective to continue to build our "balance sheet" working capital to move the Company toward financial self sustainability.

We believe that 2021 and the coming years presents a great opportunity for junior resource opportunities and where possible we intend to take full advantage."

Notice of Annual General Meeting and Distribution of Accounts to Shareholders

The Company's Annual General Meeting will take place at 11.00 am on 30 March 2021 at Abbey House, 282 Farnborough Road, Farnborough, Hampshire, GU14 7NA. The Company's Annual Report and Accounts for the year ended 30 September 2020 will be posted to shareholders this week. Copies of the Notice of AGM and the Annual Report and Accounts will also be available on the Company's website at www.powermetalresources.com in due course.

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.

Chairman's Statement

As at 30 September 2020 and the date of this results statement, Power Metal Resources plc ("POW", the "Company" or the "Group") had two wholly owned subsidiaries, Cobalt Blue Holdings ("CBH") and Regent Resources Interests Corp. ("RRIC"), as well as a 70% shareholding in Power Metal Resources SA, which holds the interest in the Kisinka licence ("PMR").

Introduction

Power Metal Resources advanced considerably during the year with an expansion in its project portfolio across commodities, jurisdictions, and geological environments. The Company commenced the financial year with four largely base metal interests in Africa and ended the year with six African projects of substance, augmented by precious metal interests in North America and Australia. The Company is now, in effect, a global operating company.

The board believe that each of the Company's operational projects is capable of delivering a large scale metal discovery, in line with the Company's primary strategic objective. In the pursuit of this and with our project partners in-country we have designed and where possible implemented a structured exploration programme for each project.

COVID-19 restrictions around the world did impact the Company's operational activities in the year, mainly in respect of any localised restrictions impacting field operations. The Company's structured approach of working with local operating and management teams meant that aside from local restrictions, we have been able to operate effectively managing our global activities from our London headquarters.

During the year we raised £1.7million in equity financings to support our operational activities and providing sufficient working capital for the smooth running of the business overall. The financings were undertaken at the then market price to ensure we protected existing shareholders from heavily discounted financings as is our policy.

Power Metal Resources has continued to build its investment portfolio of listed and private interests and striving towards our objective of financial self-sustainability. At the year end the portfolio was already demonstrating material capital gains, something we trust we can continue to build upon in the 2021 financial year. Our growth in this area will be further emboldened with the corporate activity to spin-out certain interests into their own dedicated listed vehicles.

Operations Review

Projects 

Australia

Following a period of planning and preparation in April 2020 Power Metal Resources announced a new joint venture acquiring a 49.9% interest in Red Rock Australasia (Pty) Limited ("RRAL") a private Australian company, with the remaining 50.1% held by Red Rock Resources plc (LON:RRR).

During the financial year RRAL submitted 12 separate gold exploration licence applications in the Victoria Goldfields in the State of Victoria, Australia and covering a total of 2,188km2. Also, during the year RRAL consultants were engaged to prepare detailed project specific reports for each licence application and a National Instrument 43-101 Technical Report for 8 licence applications, which together formed the BMV Gold Project.

RRAL also established an enhanced operational office in Ballarat and employed an Exploration Manager and a community relations officer to coordinate and drive exploration programmes.

During the year work was also undertaken with RRAL's tenement management company and Victoria State Mines Department to advance licence applications to granted status. From the 12 licence applications portfolio, 3 priority licence applications were awarded highest ranking status during summer 2020 and advertised locally and regionally in accordance with application requirements (with 7 further licence applications granted highest ranking status to date post year-end). Licenses have been granted post the year end in respect of the 3 priority licence applications.

During the year RRAL noted the potential to list some or all of its interests on a North American Stock Exchange and received multiple approaches from third parties expressing an interest in its business, from the perspective of the potential listing and for separate potential joint ventures with RRAL on some or all of its interests.

Botswana - Molopo Farms Complex Project

Power Metal entered the financial year with an 18.26% stake in Kalahari Key Mineral Exploration (Pty) Limited ("KKME"), the 100% owner of the Molopo Farms Complex Project ("MFC Project"), its only project interest. The Company also held a right to elect to earn-in to a direct 40% interest in the MFC Project, expiring on 31 December 2019, by expending US$500,000 on exploration costs, notably project drilling, by 31 December 2020 (since extended to 30 April 2021).

In December 2019 and given the positive outcome from ground geophysics which identified multiple high impact nickel sulphide/Platinum Group Metal ("PGM") drill targets, the Company exercised its right to earn in to the MFC Project.

The earn in formally commenced in October 2020 with the commencement of drilling at the MFC Project.

Botswana - Ditau Camp Project and Kalahari Copper Belt

In April 2020 Power Metal Resources announced an option to acquire a 51% interest in the Ditau Camp Project (rare earths exploration in Botswana), which was at the time 100% held by Kavango Resources plc (LON:KAV). In parallel Power Metal Resources invested £38,000 into a zero coupon Convertible Loan Note, convertible into 4,750,000 shares in Kavango at 0.80p per share (conversion actioned in July 2020).

As part of this financing, Power Metal Resources on conversion in July 2020 also received 4,750,000 warrants to subscribe for a further 4,750,000 Kavango Resources shares at a fixed price of 1.0p, and with a life to expiry of 2 years. Should Power Metal Resources exercise the 1.0p warrants in full and within one year of their grant, it will receive a further 4,750,000 warrants to subscribe for Kavango Resources shares at a fixed price of 2.5p with the same expiry date as the 1.0p warrants noted above.

After a period of due diligence, project review and discussions with Kavango Resources plc, in September 2020 a new strategic joint venture was announced whereby Power Metal Resources acquired a 50% interest in the Ditau Camp Project and also two licences in the Kalahari Copper Belt (copper/silver exploration in Botswana), also previously owned outright by Kavango.

Consideration for the transaction was the payment of £75,000 cash and the issue of £75,000 of Power Metal Resources shares to Kavango (6 million new ordinary shares of 0.1 pence each in the Company at a price of 1.25p each and 5 million Power Metal Resources warrants at 2.0p with a two year life to expiry and in the event of early exercise of 2.0p warrants (within 12 months of issue), replacement warrants at 5.0p with the same life to expiry as the 2.0p warrants). In addition, Power Metal Resources agreed to sole fund the first US$150,000 (in total) of exploration costs at the strategic joint venture projects in the first two years.

The transaction between Kavango Resources plc and Power Metal Resources envisaged the listing of the joint venture interests on a Canadian or UK stock exchange in 2021, and the first £10,000 of corporate restructuring costs in respect of this were also to be paid by Power Metal Resources.

Initial exploration planning work on both joint venture properties was commenced during the financial year with ground operations commenced prior to the year end. Work in respect of the listing of the joint venture interests has been ongoing since the transaction was announced.

Cameroon

During the course of the financial year a project review was undertaken with Power Metal Resource's consultants to assess the exploration and commercialisation options in respect of 100% owned Cameroon project, held through Cobalt Blue Holdings Inc. ("CBH").

The pace of the review work was impacted by the additional pressures placed on the Company's managerial and technical team managing potential disruptions due to the COVID-19 pandemic and also given the large amount of corporate work underway to assess, negotiate and conclude new commercial acquisitions.

The Cameroon review continued post year and included an assessment of new additional exploration data in respect of the project.

Given the proximity of the Cameroon project to the Nkamouna/Nada cobalt, nickel and manganese deposit, the Company considered that the Cameroon project may hold value and may justify additional exploration work. Notwithstanding this the directors reviewed the likely cost to renew exploration licences and thereafter to undertake sufficient exploration work. The likely cost for renewal and further exploration represented a material proportion of existing Company resources. When comparing this with the other project opportunities now in the Company's expanded portfolio the directors determined a material commitment of financial and managerial resources to the Cameroon project was not in the best interests of the Company.

As a result of the above the directors assessed the carrying value of CBH at the year end and took the decision to impair the asset in its entirety. This impairment was due to the partly disappointing results of the exploration previously conducted, with no definitive additional information received from our review highlighting a clear and cost-effective pathway for further project development.

Furthermore, the effect of COVID-19 inhibited exploration during the year. The project licences were due for renewal in the first quarter of 2021, and the renewal costs were considered likely to be expensive and, given the lack of work recently there was a material risk that the renewals may not be granted.

It was therefore decided, reluctantly, to not undertake further material operations in Cameroon and the asset was written down.

Note: With respect to Nkamouna, Geovic published an NI 43-101 compliant Mineral Resource1 on the Nkamouna deposit with a total Measured, Indicated and Inferred Mineral Resource of 323mt of 0.21% cobalt, 0.61% nickel and 1.26% manganese.

 1 Source: NI 43-101 Technical Report, Geovic Mining Corp by SRK Consulting, 02 June 2011 (viewable at Edgar Online)

Canada

In August 2020, a 30-day option agreement was signed in relation to the Silver Peak silver project in British Columbia, Canada. The Silver Peak Project consists of a portfolio of mineral claims (the "claims") 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 option fee paid was £26,819 with £12,500 payable through the issue of 1,000,000 Power Metal shares at a price of 1.25p and £14,319 payable in cash.

Due diligence was undertaken, and the option exercised in September 2020 enabling Power Metal Resources to earn in to a 30% interest.

On option exercise Power Metal Resources paid £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 at a price of 1.25p per Option Exercise Share.

In addition, the Vendors were 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 Resources must then spend CAD$250,000 (£143,193) on Project exploration, within 12 months (the "Exploration Spend") and of this amount CAD$25,000 was expended on the due diligence exploration programme, leaving CAD$225,000 (£128,874) outstanding at the year end.

Subject to meeting the Exploration Spend and the receipt of satisfactory findings from exploration work, and by 31 August 2021, Power Metal Resources 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 Resources having a choice to pay this in cash, or in Company shares, as follows.

Final Payment payable in cash:

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

- Should Power Metal Resources 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 volume weighted average price of ("VWAP") of Power Metal Resources shares 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.

Final Payment payable in shares:

- By payment of CAD$200,000 (£114,554) through the issue of Power Metal Resources 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 Resources elect to make the Final Payment in Power Metal Resources 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 and with a three-year life to expiry.

During the course of due diligence conducted in August and September channel sampling was undertaken at the property and assay results included Bonanza silver (Ag) and significant copper (Cu) and lead (Pb) grades returned from two 0.5m long channel samples taken across the Victoria Vein.

A further next stage exploration programme was planned and attempted post year end, including exploration drilling, however this was only partially completed due to weather conditions in the area.

The Democratic Republic of the Congo (DRC)

Following the discovery of a 6.8km copper anomaly at the Company's 70% owned Kisinka Project near Lubumbashi in the DRC, Power Metal Resources conducted a follow-up pitting, sampling and mapping programme in early 2020.

The programme was conducted successfully on the ground with in-country X-ray Fluorescence (XRF) of samples confirming the previously identified copper anomaly. Samples were prepared for assay testing in South Africa, the results from which were received post year-end and which confirmed high grade copper and cobalt.

The licence renewal at Kisinka Project was to be applied for in the year but the decision was taken instead to convert the licence to a Permis d'Exploitation (production licence) with a 25 year life. As part of the process 50% of the less prospective ground is to be surrendered, leaving the Company with 41 carrés miniers (each 84.95 ha).

Tanzania

Power Metal Resources entered the financial year with a 25% interest in the Haneti Project, a polymetallic exploration project covering circa 5,000 km2 acquired in May 2019 and with the balancing 75% held by London listed Katoro Gold plc (LON:KAT) ('Katoro Gold'). The original agreement in May 2019 allowed Power Metal Resources to increase its holding in the Haneti Project by a further 10%, provided payment of £25,000 was made to Katoro Gold by 18 May 2020.

This agreement was varied in the financial year and the deadline extended until 31 August 2020 and on 20 August 2020 Power Metal Resources elected to increase its holding in the Haneti Project to 35% and made the payment of £25,000 to Katoro Gold.

During the year Katoro Gold received approaches from external third parties with a view to earn-in, joint venture or similar, in respect of the Haneti Project, with a primary focus on the nickel sulphide exploration potential.

In addition, planning and preparations were made for the launch of a maiden drill programme at Haneti Project targeting nickel sulphide and PGM targets with rotary air blast, then diamond drilling. This programme was commenced post year end.

USA

In December 2019 Power Metal Resources signed an agreement with the holders of an option to earn in to a 60% interest in the Alamo Gold Project in Arizona USA (the "Option"). This agreement enabled Power Metal Resources to acquire the Alamo Gold Option, in exchange for certain cash and equity-based payments to the Optionees and subject to Power Metal Resources exercising the Option and assuming the financial commitments under the earn in arrangement specified in the Option.

The Alamo Gold Project (the "Project") is a package of mining claims initially covering an area of approximately 766 acres and is situated in west-central Arizona, USA. The Project was originally identified as prospective for gold following the discovery of native gold nuggets (the "Nuggets") near surface in numerous locations within the Project boundaries.

The geological environment supports further exploration to investigate the source of the nugget gold and the potential for a large, mineralised gold system. In addition, the region in which the Project is situated is prospective for precious and base metals, with regional mines that have produced silver, lead, gold, zinc and copper.

A due diligence site visit was undertaken in January 2020 and after a period of option acquisition and earn in agreement renegotiation, Power Metal Resources elected to acquire and exercise the Option in July 2020, with amended terms including the right for Power Metal Resources to earn-in up to a 75% interest in the Project.

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

Frisco as property owners had agreed an Option over the Project where, in exchange for the coverage of certain annual property payments and costs expended on exploration, the Option holders could earn into a project ownership stake. This was called a Right to Earn-in ("RTEI").

The Option holders in this case were Joe Carrabba, a former board director of Newmont Goldcorp and Murray Nye, the CEO of Winston Gold Corp, (together the "Vendors"). 

Power Metal Resources acquired the Option from the Vendors. The Option provides a right to earn-in to up to a 75% interest in the Project by covering property payments over a four-year period and exploration expenditure over a three year period as outlined below.

The property payments and exploration spend is detailed below:

Power Metal Resources has agreed to guarantee to pay the Year 1 property payments of U$50,000 and first year exploration spend of US$100,000, in total US$150,000 (circa £119,530). After this commitment, Power Metal Resources is not locked-in to any further payments on the Project.

To acquire the Option, Power Metal Resources paid the Vendors consideration of £48,000 (circa US$60,132) ("Initial Consideration") payable through the issue of 8,000,000 new shares ("Consideration Shares") at a price of 0.6p per share and to grant a warrant over 8,000,000 new shares at an exercise price of 1.0p per share with a three year life to expiry.

The Consideration Shares were subject to a period of four months and one day where they could not be sold or transferred without the express written approval of the Company. Were Power Metal Resources shares trading at a VWAP of 1.5p or more for seven consecutive trading days, the Consideration Shares were to become freely tradable.

In addition, upon earning into a 75% ownership (as outlined below) Power Metal Resources would pay the Vendors a further US$200,000 (circa £143,000) in cash or, at the Company's sole volition, shares at a volume weighted average price ("VWAP") based on the seven trading days prior to the announcement of a 75% ownership interest ("Final Consideration").

If Power Metal Resources earn-in to a 75% interest in the Project the total effective cost of the Option acquisition from the Vendors will be the Initial Consideration of £48,000 together with the Final Consideration of £160,000, for a total of £208,000.

Upon acquisition of the Option, Power Metal Resources became the operator of the Project, working in conjunction with a newly appointed North American gold advisory committee and forming an operating committee with the current Project owners, Frisco.

Project Pipeline

Power Metal Resources management have an extensive network of contacts in the exploration business and through this network have access to a pipeline of potential new project interests. All material opportunities are reviewed from a technical and commercial perspective and the Company remains open to the acquisition of further new projects if of sufficient merit when set against the Company's existing portfolio of interests.

Corporate Social Responsibility ("CSR")

The Company maintains a focus on CSR through internal policies and our approach to external operational activities.

The priority given to this aspect of our work is shown in the fact that at RRAL we recruited a community relations officer as the second employee engaged, in order to start community engagement even in advance of any license grant.

The Company will continue to prudently invest in the regions we have business activities, in support of the communities where we operate. As an early stage Company, Power Metal Resources is keen to employ workers from the areas in which we operate projects, and to operate in a safe, responsible, and reasonable manner.

As certain projects mature, we would expect our community engagement to become more extensive in line with the level of operational activities.

Financial Review

The Group recorded an audited loss after tax for the year to 30 September 2020 of £1.4 million (2019: £1.6 million). The loss per share from continuing activities was 0.025p (2019: 0.55p).

The Group's exploration activities during the financial year under review were funded through the issue of shares to either raise cash or in lieu of fees. In aggregate, new ordinary shares were issued during the financial year, raising a total of approximately £1.7 million before placement costs (2019: £1 million). In addition, during the financial year the exercise of warrants brought an additional £0.266m cash into the Company.

We ended the financial year with a cash balance of £0.91 million (2019: £0.17 million), which was enhanced post financial year end by the exercise of warrants bringing an additional £2.6 million into the Company post year end.

Targets for 2021

Our operational targets for the remainder of 2021 are:

· To focus on applying financial resources diligently, with controlled corporate costs and focused investment in exploration of our project portfolio;

· To continue to build working capital, preferably through organic means, and move towards financial self-sufficiently being defined as an ability to fund the Company's operations without absolute reliance on equity financings;

· To continue to build our internal resources and external network and to develop our managerial and operational teams to provide confidence in the market of our abilities to achieve our strategic business objective of large scale metal discoveries;

· To proactively continue corporate work to achieve crystallisation of value from spin-outs of certain project interests into their own listed entities; and

· To continue to review new opportunities and where financially and operationally practical to acquire additional interests.

Board Changes

In February 2020 Edmund Shaw was appointed to the Board as Non-executive Director and in September 2020 Iain Macpherson stepped down from the Board as Non-executive Director.

Outlook

After the restructuring and refinancing of financial year 2019, and the corporate growth of 2020, we now look to 2021 as the year of expansive exploration across the Company's project interests combined with corporate activity related to potential spin-outs and new joint venture partnerships. Our aims are simple, to secure a large scale metal discovery and to build our working capital rapidly and organically, while maintaining the strength of our 'balance sheet'.

Andrew Bell

Executive Chairman

22 February 2021

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2020

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2020

The financial statements of Power Metal Resources plc, company number 07800337, were approved by the board of Directors and authorised for issue on 22 February 2021.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2019

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2020

CONSOLIDATED STATEMENT OF CASH FLOWS

AS AT 30 SEPTEMBER 2020

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2020

1. Reporting entity

Power Metal Resources plc is a public company limited by shares which is incorporated and domiciled in England and Wales. The address of the Company's registered office is 201 Temple Chambers, 3-7 Temple Avenue, London EC4Y 0DT. The consolidated financial statements of the Company as at and for the year ended 30 September 2020 include the Company and its subsidiaries. The Group is primarily involved in the exploration and exploitation of mineral resources in Africa, Australia, Canada and the US.

2. Going concern

The financial statements are prepared on a going concern basis. In assessing whether the going concern assumption is appropriate, the Directors have taken into account all relevant available information about the current and future position of the Group, including current level of resources, additional funding raised during the year and post year-end, and the required level of spending on exploration and drilling activities. As part of their assessment, the Directors have also taken into account the ability to raise new funding whist maintaining an acceptable level of cash flows for the Group to meet all commitments.

In the current business climate, the Directors acknowledge the COVID-19 pandemic and has implemented logistical and organisational changes to underpin the Group's resilience to COVID-19, with the key focus being minimising the impact on critical work streams, ensuring business continuity and conserving cash flows. COVID-19 may impact the Group in varying ways leading to the Group reducing all non-essential expenditure, the potential impairment of assets held, the Group's ability to finance exploration and drilling activities and meet commitments relating to its investments, including for transactions entered into after the financial reporting date (note 10) The inability to gauge the length of such disruption further adds to this uncertainty. For these reasons, the preservation of cash flows is a primary focus for the Directors.

The Directors have stress tested the Group's cash projections, which involves preserving cash flows and adopting a policy of minimal cash spending for a period of at least 12 months from the date of approval of these financial statements. The Directors believe the measures they have put in place and will result in sufficient working capital and cash flows to continue in operational existence, assuming that all exploration and drilling activities are managed carefully and curtailed if necessary. For the Group to carry out the desired levels of exploration and drilling activities, the Directors believe that it needs to secure further funding either from a strategic partner or subsequent equity raisings in the next financial year, which the Group has succeeded in completing over recent years. Taking these matters in consideration, the Directors continue to adopt the going concern basis of accounting in the preparation of the financial statements.

The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be appropriate.

3. Intangible assets Prospecting and exploration rights

Rights acquired with subsidiaries are recognised at fair value at the date of acquisition. Other rights acquired and development expenditure are recognised at cost.

Exploration and evaluation costs arising following the application for the legal right, are capitalised on a project-by-project basis, pending determination of the technical feasibility and commercial viability of the project. When a project is deemed not feasible, related costs are expensed as incurred. Costs incurred include any costs pertaining to technical and administrative overheads. Administration costs that are not directly attributable to a specific exploration area are expensed as incurred, and subsequently capitalised if it is reasonably certain that a resource will be defined.

Capitalised development expenditure will be measured at cost less accumulated amortisation and impairment losses.

4. Operating expenses

Auditor's remuneration in respect of the Company amounted to £23,500 (2018: £27,000).

5. Intangible assets

The opening balance of intangible assets was initially recognised on the acquisition of the three subsidiaries, Power Metal Resources SA (formerly ABM Kobald SAS), (PMR), Cobalt Blue Holdings (CBH) and Regent Resources Interests Corporation (RRIC), which was impaired in full at 30 September 2019, and subsequently written off.

The Directors regularly assess the carrying value of the Group's assets, including its prospecting and exploitation rights, and write off any exploration expenditure that they believe to be unrecoverable.

PMR

Following the discovery of a 6.8km copper anomaly at the Company's 70% owned Kisinka Project near Lubumbashi in the DRC, Power Metal conducted a follow pitting, sampling, and mapping programme in early 2020. The programme was conducted successfully on the ground with in-country X-ray Fluorescence (XRF) of samples confirming the previously identified copper anomaly. Samples were prepared for assay testing in South Africa, the results from which were received post year-end, but which confirmed high grade copper and cobalt.

The licence renewal at Kisinka Project was to be commenced in the year but the decision was taken instead to convert the licence to a Permis d'Exploitation (production licence) with a 25 year life. As part of the process 50% of the less prospective ground is to be surrendered, leaving the Company with 41 carrés miniers (each 84.95 ha).

As a licence in a prospective area and close to existing discoveries, with a significant apparent discovery awaiting confirmation, this license in the Board's view is likely to have a value greatly in excess of sums expended, and the carrying value is not subject to any impairment.

CBH

At the reporting date, the Group held four Cameroon-based nickel-cobalt exploration licences through two 100% owned subsidiaries of CBH. These licences expire in the first quarter of 2021, unless renewed.

The locations of the four licences held and the Ntam Est licence applied for are either adjacent to, or within 50km of the Nkamouna/Mada Cobalt Project ("Nkamouna/Mada") in Cameroon, formerly owned by ex-TSX-listed Geovic Mining Corp ("Geovic"), where in 2011 SRK Consulting (US) Inc. reported a giant NI 43-101 compliant cobalt/nickel resource.

The directors assessed the carrying value of CBH at the year end and took the decision to impair the asset in its entirety. This was due to the disappointing results of the exploration during the year, combined with the effect of COVID-19 inhibiting exploration and lacklustre cobalt prices at a time when other prices were performing strongly. Additionally, the licences are due for renewal in the first quarter of 2021 which would be expensive and, given the lack of work may not be granted, therefore it was decided not to conduct further operations in Cameroon and the asset was written down.

Intangible assets are not pledged as security or held under any restriction of title.

6. Trade and other receivables

7. Share capital

All ordinary shares rank equally with regard to the Company's residual assets.

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.

Both classes of deferred shares (Deferred and Deferred A), do not entitle the holders thereof to receive notice of or attend and vote at any general meeting of the Company or to receive dividends or other distributions or to participate in any return on capital on a winding up unless the assets of the Company are in excess of £1,000,000,000,000. The Company retains the right to purchase the deferred shares from any shareholder for a consideration of one penny in aggregate for all that shareholder's deferred shares. As such, the deferred shares effectively have no value. Share certificates will not be issued in respect of the deferred shares.

Issue of ordinary shares

In October 2019, the Company issued 4,852,125 new ordinary shares to enter into a due diligence period to enable inspection, verification and sampling in respect of the Alamo project.

In December 2019, the Company announced a share placing of 175,000,000 new ordinary shares of 0.1 pence each, at a price of 0.40 pence per share, raising £700,000.

In July 2020, the Company announced it had raised £1,000,000 through a subscription of 210,526,316 new ordinary shares of 0.1 pence each at a price of 0.475 pence per share.

In July 2020, the Company acquired an option providing a right to earn-in up to a 75% interest in the Alamo Gold project. The Company paid the vendors a total consideration of £48,000 for the option, through the issue of 8,000,000 new ordinary shares at a price of 0.60 pence per share.

On 17 August 2020, the Company paid for a 30-day exclusivity period for due diligence in respect of the Silver Peak project, for £14,319 in cash and £12,500 payable through the issue of 1,000,000 shares in the Company at a price of 1.25 pence per share.

In August and September 2020, 31,100,000 were issued in relation to warrant exercises; 16,100,000 were exercised at a price of 1.0 pence per share, and 15,000,000 were exercised at a price of 0.70 pence per share.

On 14 September 2020, the Company exercised the option over the Silver Peak project, enabling the Company to earn-in to a 30% interest. The Company acquired the option for total consideration of £129,683, comprising £17,183 in cash and £112,500 through the issue of 9,000,000 new ordinary shares at a price of 1.25 pence per share.

In September 2020, the Company acquired a 50% interest in four Botswana prospecting licences with a view to holding them in a Botswana private holding company as a joint venture with Kavango Resources plc. Consideration for the acquisition consisted of £75,000 cash and the issue of 6,000,000 shares in the Company to Kavango Resources plc, at a price of 1.25 pence each, totalling £75,000.

8. Earnings per share

Basic and diluted loss per share

The calculation of basic and diluted loss per share is based on the loss attributable to ordinary shareholders of £1,381,290 (2019: £1,539,176), and a weighted average number of ordinary shares in issue of 558,893,170 (2019: 278,814,166).

9. Trade and other payables

10. Subsequent events

Drilling programme commencement at the Molopo Farms Complex Project in Botswana (announced October 2020), the Silver Peak Project in Canada (November 2020) and the Haneti Nickel Project in Tanzania (December 2020);

Next stage exploration programmes commenced at the Kalahari Copper Belt and Ditau Projects in Botswana, the Alamo Gold Project in Arizona, USA and the Kisinka Project in The Democratic Republic of the Congo ("DRC");

Continuation of corporate activities since the year end with participation in a rights issue for Kalahari Key Mineral Exploration (Pty) Limited and expansion of the Australian Gold Joint Venture with an application to increase the JV footprint by a further 148 km2 surrounding the Ballarat mine area;

Option agreement signed in January 2021 providing 60 business days for due diligence which if successful would lead to the acquisition of First Development Resources Pty Limited, a private Australian company with copper-gold exploration interests in Paterson Province, Australia;

Agreement signed by Power Metal Resources in January 2021 to acquire a package of gold exploration properties in Ontario Canada, followed by an option agreement providing 30 days for due diligence which if successful would lead to the acquisition of four additional exploration projects also in Ontario, Canada. In February 2021, the Company announced it had exercised the Option to acquire the McKellar Property by transferring total consideration of CAD$100,000 in cash and shares;

In February 2021 RRAL received confirmation that three licence applications had been granted enabling the commencement of ground exploration in the Victoria Goldfields, Australia;

In February 2021, the Company announced, subject to shareholder approval, a capital reduction to take place in order for distributions to be made to shareholders; and

Warrant exercises since the financial year end have raised a further £2,638,470 for the Company.