Power Metal Resources plc (LON:POW) the AIM listed metals exploration and development company is pleased to announce that following the successful completion of project due diligence, Power Metal has agreed terms to acquire an option (the “Option”) to earn-in to the Alamo Gold Project (the “Project”) in west-central Arizona, USA (the “Agreement”).
Acquisition of an option to earn-in to the Alamo Gold Project in west-central Arizona USA. Also, a novated earn-in agreement with the underlying property owners whereby Power Metal can earn a 50%, then 75%, ownership interest in the Project.
Expands Power Metal operations into North American gold exploration supported by a newly formed North American Gold Advisory Committee of highly seasoned US gold professionals.
Cost to Power Metal
Staged consideration to acquire the Option to earn-in and then staged expenditure on the Project through property payments and exploration spend.
Maximum upfront commitment risk is £48,000 on the Option acquisition and year one property payments and exploration spend of circa £119,530.
Full terms outlined below including annual breakdown of costs.
Investigate the source of the nugget gold mineralisation and the potential for a large mineralised gold system.
Power Metal and Frisco are now finalising the initial exploration programme which is likely to be centred on geochemical sampling and project mapping and further details of which will be announced in the near term.
CHIEF EXECUTIVE OFFICER’S STATEMENT
Paul Johnson Chief Executive Officer of Power Metal Resources plc commented
“This is a major step forward for Power Metal, giving the Company an opportunity to expand its gold project portfolio and starting a journey into North American gold interests just as the gold sector is showing exciting strength around the world.
We will start exploration soon and begin delivering project news to our shareholders in the near term. We are seeking a major gold discovery and we need to get on with the exploration work as soon as possible.
To take this step into North America would be bold for a junior exploration company out of London, but we are working with enormously experienced partners and with the assurance of their experience captured in the form of a newly created North American Gold Advisory Committee.
Power Metal advances at pace and we look forward to bringing more updates from the Alamo Gold Project and North America, in the near term.”
The original announcement in respect of the transaction was released on 3 December 2019 and can be viewed through the following link:
Since the above December 2019 announcement Power Metal undertook a site visit in January 2020 and agreed extensions to the original due diligence period to provide the parties more flexibility in the face of the COVID-19 disruption.
The site visit in January was successful with nugget gold being recovered from shallow trenches on site and a fuller understanding of the Project and its potential being secured from on-site inspection and discussions with the operating team members on the ground.
During the visit it was also agreed that additional claims should be pegged to build the Project footprint immediately and ensure sufficient ground was held to cover the potentially mineralised system. Those claims were pegged and registered with the Bureau of Land Management and County authority.
Following discussions with all parties to the transaction the original terms agreed in December 2019 have been adjusted and the final agreed terms are detailed below. Power Metal is grateful to all parties who have been supportive and commercial at all stages.
The Alamo gold project is a package of mining claims 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.
Gold Nugget Discovery and Source Identification
The native gold nuggets at the Project occur in shallow arroyos (a steep-sided gully formed by the action of fast-flowing water in an arid or semi-arid region) and on hill-side occurrences. The arroyos are generally shallow depressions with sediment fill of up to one metre.
We understand that circa 60 ounces of gold Nuggets have already been found on the Project area, by prospectors using metal detectors, with the largest Nugget weighing in at 5 ounces.
Nuggets have been obtained from the arroyo sediments by metal detecting and by small-scale dry washer mining methods. The composition of the nuggets is of particular geological interest in that both smooth/rounded and crystalline nuggets have been recovered, which suggests some difference in the distance of travel from their bedrock source (rounded nuggets having typically travelled some distance whereas the source of crystalline nuggets would be more proximal) pointing to potential scale and further prospectivity.
There is much debate in geological literature regarding nugget formation and there is work to undertake on the ground in Arizona to build the technical understanding of the Project including nugget identification, distribution and investigation of the bedrock source.
OWNERSHIP STRUCTURE – ALAMO GOLD 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”).
THE TRANSACTION TERMS
Acquiring the Option to Earn-in
Power Metal will acquire 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, (the “Option”) as outlined below.
To acquire the Option Power Metal is to pay the Vendors consideration of £48,000 (circa US$60,132) (“Initial Consideration”) payable through the issue of 8,000,000 new Ordinary Shares (the “Consideration Shares”) at a price of 0.6p per Ordinary Share and to grant a warrant over 8,000,000 new Ordinary Shares (the “Consideration Warrants”) at an exercise price of 1.0p per Ordinary Share with a three year life to expiry.
The Consideration Shares shall be subject to a period of four months and one day where they may not be sold or transferred without the express written approval of the Company. Should Power Metal shares trade at a VWAP of 1.5p or more for seven consecutive trading days, the Consideration Shares would become freely tradable.
In addition, upon earning into a 75% ownership (as outlined below) Power Metal will pay the Vendors a further US$200,000 (circa £160,000) in cash or, at the Company’s sole volition, new Ordinary 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 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 will be the operator of the Project, working in conjunction with a newly appointed North American gold advisory committee (see below) and will seek to form an operating committee with the current Project owners, Frisco.
Earning-in to the Alamo Gold Project
After acquiring the Vendors’ Option, Power Metal can earn-in to up to a 75% interest in the Alamo Gold Project by expending US$250,000 (circa £199,560) on property and final earn-in payments over a four year period and exploration spend of $850,000 (circa £678,504) over a three year period.
The property payments and exploration spend is detailed below:
|Cost Analysis||Property Payments US$||Exploration Spend US$||Final 75% Payment US$||Annual Total US$|
Power Metal 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 is not locked-in to any further payments on the Project.
It should be noted that during the due diligence period Power Metal paid costs of approximately US$10,754 to enable additional claims to be pegged and registered and these costs are to be offset against year one exploration spend commitment.
Should Power Metal cover year one and year two property payments and agreed exploration spend totalling US$450,000 (circa £358,392) it will earn-in to a 50% project ownership interest.
Should Power Metal continue with property payments of US$100,000 in total and exploration spend of $500,000 in total in years three and four it will earn-in to a 75% interest in the Project subject to a final earn-in payment of US$50,000.
If either party does not contribute in line with their percentage ownership they will dilute their ownership percentage in line with a standard industry dilution formula.
Overall Transactional Cost Analysis
Assuming a full earn-in to a 75% interest in the Project the following payments, in cash or shares as outlined above, will be as follows:
|Cost Analysis||Vendor Option Payments US$||Property Payments US$||Exploration Spend US$||Final 75% Payment US$||Annual Total US$|
FORMATION OF A NORTH AMERICAN GOLD ADVISORY COMMITTEE
As part of the transaction the Vendors will join a newly formed North American Gold Advisory Committee (“NAGAC”). The respective experience of the Vendors in both operating and developing mining projects through all phases of the development curve, as outlined below, will prove valuable when assessing how best to augment value in the Alamo Project and the consideration of further new gold opportunities in North America.
In addition, the NAGAC will also be joined by Joe Bardswich, a Professional Engineer, based in Arizona, with extensive experience of all facets of mining.
Background to NAGAC Members:
Mr Carrabba is a seasoned mining executive, who has held senior positions in the industry including as a director of Newmont Goldcorp Corp and as former President and Chief Operating Officer of the largest independent iron ore producer in the U.S., Cliffs Natural Resources Inc.
Mr Nye has extensive experience in international corporate finance and currently serves as the Chief Executive Officer of Winston Gold Corp (CSE: WGC). Prior to Winston, Mr Nye was the former CEO of RX Exploration Inc. (“RX”) where he brought the historic Drumlummon Gold/Silver mine back into production. During Mr Nye’s tenure, the market valuation of RX increased from a base of circa $1.5m to circa $80m
Mr Bardswich is Director and President of Golden Vertex Corporation and is a Professional Engineer in the Province of Ontario, a life member of the Canadian Institute of Mining and Metallurgy (CIM) and is a “ Qualified Person” as defined in NI 43-101 standards for Mineral Disclosure.
OPTIONS AWARD TO ADVISORY COMMITTEE MEMBERS
Power Metal will award warrants over 2,500,000 new Ordinary Shares to Joe Carrabba, Murray Nye and Joe Bardswich respectively (7.5 million “Committee Warrants” in total).
The Committee Warrants will be awarded for advisory committee services for the period ended 31 December 2020 and will be exercisable at 1.0p per new Ordinary Share and have a life to expiry of three years. The Committee Warrants may however only be exercised if the share price of Power Metal exceeds a VWAP of 1.5p for seven consecutive trading days.
Following the above Agreement Power Metal and Frisco are now finalising the initial exploration programme, which is likely to be centred on geochemical sampling and project mapping and further details of which will be announced in the near term.
COMPETENT PERSON STATEMENT
The technical information contained in this disclosure has been read and approved by Mr Nick O'Reilly (MSc, DIC, 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.
ADMISSION AND TOTAL VOTING RIGHTS
Application will be made for the 8,000,000 Consideration Shares to be admitted to trading on AIM which is expected to occur on or around 28 July 2020 ("Admission"). Following Admission of Consideration Shares, POW's ordinary issued share capital will comprise 771,216,542 ordinary shares of 0.1 pence each.
This number will represent the total voting rights in the Company, and following Admission, 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. The new shares will rank pari passu in all respects with the ordinary shares of the Company currently traded on AIM.
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.
22 July 2020