Power Metal Resources plc (LON:POW) the AIM listed metals exploration and development company is pleased to announce that it has provided written confirmation to Kalahari Key Mineral Exploration Pty Limited (“KKME”) that POW has elected to earn in to a 40% interest in the Molopo Farms Complex (“MFC”) project currently 100% owned by KKME.
To earn in to the 40% MFC project interest POW must expend US$500,000 on project related expenditure to support drilling of key nickel-copper-PGM targets in 2020. The spend requirement of US$500,000 is fully covered by POW’s existing cash resources.
In addition to the 40% direct project interest that will be allocated on completion of the earn in, POW also holds 18.26% of KKME equity and therefore upon earn in completion, POW will hold an effective economic interest of 50.96% in the MFC project.
Paul Johnson Chief Executive Officer of Power Metal Resources plc commented: “Progress achieved at the MFC project has been very encouraging in 2019, with the helicopter airborne electromagnetic work delivering 17 subsurface conductor targets and the ground geophysics highlighting 5 key targets for initial drilling.
In recent weeks we have held a number of meetings and discussions with the KKME team and there is clear and growing confidence in the potential of the MFC project for a nickel discovery. We are now working with the KKME team on preparations and options for an upcoming drill programme and will provide further updates to the market as material developments occur.
I would like to be clear that exploration drilling of the nature we plan to support is high risk, albeit the in-depth preparatory work undertaken by KKME helps to mitigate that risk and increase the chance of success. That said, I also want to be clear why we are enthusiastic and have decided to proceed with the earn in opportunity. It is rare for investors in the junior resource space to have exposure to near term drill campaigns that could have the potential to yield a large-scale nickel sulphide discovery and we believe that the MFC project is one such opportunity.
If exploration work proves to be successful, the potential valuation of the MFC project could rise dramatically and the project could attract considerable interest from larger mining companies, as evidenced by the interest already shown to date and by the companies that hold ground in the vicinity of the MFC project.”
KKME AND MFC PROJECT BACKGROUND
KKME, registered in Botswana, is a mineral exploration and geological consultancy company.
The MFC Project consists of three licenses covering an area of 2,725 square kilometres that are considered prospective for nickel-copper-PGMs mineralisation and are 100% owned by KKME.
In November 2016 the company acquired two mineral exploration licences (PL310/2016 and PL311/2016) from the Botswana Government. The licences cover the eastern and central parts of a shear/feeder zone through the centre of the Bushveld-related Molopo Farms Complex in southern Botswana. A third licence (PL202/2018) was acquired in early 2018 immediately to the south of PL311/2016.
A helicopter-borne electro-magnetic (“EM”) survey over the Molopo Farms Feeder Zone project area completed in Q2 2019 identified 17 sub-surface conductor targets and follow up ground EM surveys over 14 of the targets produced at least 6 high priority targets of considerable size and scale for which 8 drill holes have been designed to penetrate all targets.
The targets are highly conductive bodies which could potentially be host to massive nickel sulphides due to the spatial location, particular geological setting and associated magnetic response.
Further work has been undertaken to select the top priority targets and 5 were selected as a focus for the initial drilling programme.
KKME appointed consultants Wellfields Consulting Services in Gaborone, Botswana to complete a pre-drilling Environmental Management Plan (“EMP”) and fieldwork in respect of this EMP has now been completed and KKME await receipt of the EMP report.
KKME have implemented gravity surveys over the 5 drill targets, to eliminate as far as possible any chance that the targets are graphite rather than sulphide bodies, since the former although conductive would not be of interest, although this is considered unlikely given the geological setting. The final gravity survey report is awaited.
Further liaison with drilling contractors is underway, including some who have expressed a willingness to consider equity in lieu of cash for a portion of their drilling costs in respect of the initial programme.
There is interest in the MFC Project from third parties and KKME are maintaining liaison with external organisations.
FURTHER INFORMATION ON THE POW PROJECT LEVEL EARN-IN TO THE MFC PROJECT
Not later than 31 December 2019 POW was able to elect, at its sole discretion, to earn-in to 40% of the MFC Project by entering into and then fulfilling a commitment to spend US$500,000 ("Committed Spend") during the period to 31 December 2020. With today’s announcement this earn-in is now effectively underway.
An MFC Project operational committee (the "Committee") will now be established comprising members Roger Key (KKME Director), Andrew Bell (POW Director) and Andrew Moore (KKME Director). The Committee will determine the allocation of the Committed Spend and management of operational activities. Upon completion of the earn-in expenditure requirement POW will hold 40% of the MFC Project. Paul Johnson (POW Director) will join the Board of KKME.
The Committed Spend will be applied primarily to the completion of drilling of high profile targets at the MFC Project.
A joint venture agreement will now be established between the parties which will determine strategy, operational management and corporate structuring. This will include the usual fund or dilute provisions unless an alternate structure is agreed by the parties.
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.
31 December 2019