Transaction Update - Pilot Mountain Project

24 January 2022

Power Metal Resources PLC

("Power Metal" or the "Company")

 Transaction Update - Pilot Mountain Project

Transaction Complete and Power Metal Agrees Terms for the Early Clearance of the Tail Benefit Held by Thor Mining on the Pilot Mountain Project, Nevada, USA

Power Metal Resources PLC (LON:POW) the London AIM listed company which finances and manages global resource exploration projects, announces a transaction update following the exercise of the option (the "Option") on the Pilot Mountain Project ("Pilot Mountain" or the "Project") located in Nevada, United States of America ("USA") (the "Transaction").

The Company's announcement in respect of the Transaction of 1 November 2021 may be viewed through the following link: https://www.londonstockexchange.com/news-article/POW/acquisition-of-pilot-mountain-project/15193667 

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

"I am pleased to confirm completion of the Pilot Mountain transaction and the further signing of a Variation Agreement enabling Power Metal to secure early clearance of the tail benefit.

Our ongoing technical work in respect of the Pilot Mountain project has increasingly demonstrated significant upside potential within the existing 2018 Mineral Resource Estimate and we considered there was a reasonable likelihood that the tail benefit would become payable within the 2 year payment period.

The early clearance of the tail benefit also frees Power Metal from any future contractual financial encumbrance in respect of the Project.

The recent classification of tungsten as a critical mineral from the United States Geological Survey, and the lack of primary domestic tungsten production makes the Project in our view highly strategic, both now, and potentially much more so in the future with successful further exploration work which will be undertaken by Golden Metal Resources." 

HIGHLIGHTS

Transaction Completion

Power Metal subsidiary Golden Metal Resources Limited ("Golden Metal UK") has established a new wholly owned subsidiary Golden Metal Resources Australia Pty Limited ("Golden Metal Australia") which has now completed the 100% acquisition of the Pilot Mountain project.

Variation Agreement

The terms of the Transaction are outlined below, and included the Tail Benefit of deferred consideration of US$500,000 (c£368,000)  payable to Thor Mining plc (the "Vendor" or "Thor Mining") in the event that Golden Metal UK publishes a JORC or 43-101 compliant resource at Pilot Mountain which increases against current declared levels by 25% across total indicated and inferred categories within two years after the Transaction agreement date.

Power Metal has now agreed terms to secure the early clearance of this Tail Benefit through the payment of £50,000 cash and issue to Thor Mining of 4 million Power Metal new ordinary shares of 0.1p each in the Company at an issue price of 2.5p per share (£100,000) ("Variation Shares").

Power Metal and Thor Mining plc have signed a Variation Agreement to effect the above.  Following completion of the payments due under the Variation Agreement, all amounts due or potentially due under the Transaction have now been settled in full and no further consideration is due.

Listing of Golden Metal

Golden Metal UK is making good progress with its proposed listing process and a further update will be provided in the near future.

TRANSACTION INFORMATION

Power Metal subsidiary Golden Metal Resources Limited ("Golden Metal UK") has established a new wholly owned subsidiary Golden Metal Resources Pty Limited ("Golden Metal Australia") which has now completed the 100% acquisition of the Pilot Mountain Project.

Power Metal has paid US$115,000 in cash consideration to Thor Mining and US$1,650,000 of consideration through the issue to Thor Mining of 48,118,920 new Ordinary Shares at an issue price of 2.5 pence per share ("Initial Consideration Shares").

Thor Mining will hold the Initial Consideration Shares in full for a minimum of 6 months after the Option Exercise date and thereafter the Initial Consideration Shares will become freely tradable in 25% instalments (25% tradable 6 months after Option Exercise date, 50% - 9 months after Option Exercise date, 75% - 12 months after Option Exercise date and 100% - 15 months after Option Exercise date.)  This trading restriction period may be varied with the written agreement of both parties.

In addition, Power Metal have issued to Thor Mining 12.5 million warrants to subscribe for Ordinary Shares with an exercise price of 4p per Ordinary Share and life to expiry of 3 years from the Option Exercise date ("Initial Consideration Warrants").  Should the volume weighted average price ("VWAP") of Power Metal shares meet or exceed 10 (ten) pence for 5 consecutive trading days Power Metal may serve notice on Thor Mining providing 14 calendar days to exercise and pay for the Initial Consideration Warrants or the Initial Consideration Warrants will be cancelled.

Should Thor Mining exercise the Initial Consideration Warrants above within 12 months from the Option Exercise date, Thor Mining will receive one for one replacement warrants to subscribe for Ordinary Shares at a fixed price of 8p per Ordinary Share, and life to expiry ending 3 years from the date of Option Exercise ("Super Warrants"). Should the Power Metal volume weighted average share price meet or exceed 20p for five consecutive trading days Power Metal may at any time issue Thor Mining with a written notice providing 14 days to exercise and pay for the Super Warrants or the Super Warrant will be cancelled.

All Option Exercise Consideration items outlined above have now been paid or issued in full.

Tail Benefit

Power Metal was to issue Thor Mining with a further US$500,000 of consideration in new Ordinary Shares if Golden Metal UK publishes a JORC or 43-101 compliant resource at Pilot Mountain which increases against current declared levels by 25% across total indicated and inferred categories within two years after the Agreement date.  The number of Ordinary Shares to be issued was to be calculated based on the volume weighted average Power Metal share price in the ten trading days immediately preceding the announcement by Golden Metal of the JORC or 43-101 compliant increase.

With the Variation Agreement announced today, the above Tail Benefit is now eliminated.

Additional Terms

Thor Mining and their professional corporate, licensing and geological teams will continue to work with Power Metal and Golden Metal to assist with Pilot Mountain ownership transfer and to manage local corporate & exploration/development operations in the 12 months following the Option Exercise date. Power Metal and Golden Metal will pay for any assistance provided post Transaction on reasonable commercial terms to be agreed.

PILOT MOUNTAIN OWNERSHIP STRUCTURE

Wholly owned¹ Power Metal subsidiary Golden Metal Resources UK through its wholly owned subsidiary Golden Metal Resources Australia Pty Ltd., now holds 100% of Black Fire Industrial Minerals Pty Ltd., (Australian private company) which owns 100% of Industrial Minerals (USA) Pty Ltd., (Australian private company) which owns 100% of: BFM Resources Inc., and Pilot Metals Inc., (USA private companies) which own tenements covering the entire Pilot Mountain Project and the 2018 Mineral Resource Estimate.²

Further disclosures

As at the date of option announcement on 31.08.21 the following disclosures were made:

As at 30 June 2020 BFM Resources Inc had Gross Assets of AUD$21,449 (circa £11,317) and incurred no profit or loss (AUD$Nil) for the year ended 30 June 2020.

As at 30 June 2020 Pilot Metals Inc had Gross Assets of US$3,055,411 (circa £2,226,602) and a loss of US$106,164 (circa £77,366) for the year ended 30 June 2020.

As at 30 June 2020 Black Fire Industrial Minerals Pty Ltd on a consolidated basis had Gross Assets of AUD$5,181,951 (circa £2,738,397) and a loss of AUD$154,690 (circa £81,746) for the year ended 30 June 2020.

It is further noted that since the announcement of the Pilot Mountain option, Thor Mining plc transferred the Pilot Mountain project and all holding companies to "Held for Sale Assets" with a written down value of £1,050,000 as at 30 June 2021 their reported financial year end.

ADMISSION AND VOTING RIGHTS

Application will be made for the 4,000,000 Tail Benefit Shares to be admitted to trading on AIM which is expected to occur on or around 31 January 2022 ("Admission"). The Tail Benefit Shares will rank pari passu in all respects with the Ordinary Shares of the Company currently traded on AIM.

Following Admission, the Company's issued share capital will comprise 1,448,339,986 ordinary shares of 0.1p each. This number will represent the total voting rights in the Company and may be used by shareholders as the denominator for the calculation by which they can determine if they are required to notify their interest in, or a change to their interest in, the Company under the Financial Conduct Authority's Disclosure and Transparency Rules.

Reference Notes:

¹  As announced on 9.12.21 Golden Metal Resources Limited has undertaken a pre-IPO financing raising £750,000.  Following the issue of shares in respect of this financing Power Metal will hold 83.13% of Golden Metal Resources Limited.

² https://www.thormining.com/sites/thormining/media/pdf/asx-announcements/20182019/20181214-pilot-mountain-resource-update.pdf

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 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:

^A should Kavango exercise their option to acquire Kalahari Key, Power Metal interest would reduce to 40% of the Molopo Farms Complex project

^B assuming all licences held by URE Metals Pty Limited are granted as outlined in the Company's announcement of 19.11.21 resulting in the issue of First Development Resources Ltd shares to URE vendors