Results for the Year Ended 30 September 2019

RNS Number : 5292N

Power Metal Resources PLC

20 May 2020

 

20 May 2020

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

 Audited Results for the Year Ended 30 September 2019

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 2019 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

· Business restructuring and refinancing undertaken and approved by shareholders in February 2019, raising  1 million (before issue costs) in the financial year to support a reinvigorated business model (and a further £700,000 raised in December 2019) and a restructured Company Board;

· Operational work undertaken on the Company's Cameroon and the DRC projects, with notable success at the Kisinka Project in the DRC through a termite mound sampling programme highlighting an unexpected 6.8km long copper anomaly requiring further investigation;

· New operating joint investment project interests acquired in Tanzania and Botswana;

· In Tanzania an agreement was signed with AIM Listed Katoro Gold plc (LON:KAT) ("KAT") to acquire a shareholding in KAT and to enter a joint investment whereby Power Metal Resources ("POW") secured 25% interest in KAT's Haneti Project, a polymetallic exploration project, with advanced high profile nickel sulphide targets.  POW may increase its project to 35% through a payment to KAT of £25,000 by 31 May 2020;

· In Botswana an Acquisition and Earn-In Agreement was signed with Kalahari Key Mineral Exploration Pty Ltd ("KKME") to acquire a shareholding in KKME and a right to earn into a 40% interest in KKME's single project, the Molopo Farms Complex project (the "MFC Project") in south west Botswana, by expending US$500,000 on a drilling programme at the MFC Project in 2020.  (POW exercised that right to earn in on 31 December 2019);

· As part of the Tanzania and Botswana transactions POW acquired strategic shareholdings in KAT and KKME.  In respect of KAT the company acquired, and still holds 10 million shares at 1.0p, and 10 million warrants to subscribe for KAT shares, granted in two tranches of 2.5 million in March 2019 at 1.25p with a 3 year life to expiry, and 7.5 million granted in May 2019 at 1.25p with a 3 year life to expiry, all at a total cost of £100,000 and at the completion of the transaction equating to 5.95% of KAT issued share capital.  In KKME POW acquired 3,542 shares at a total cost of US$194,810 or circa £153,000, equating to 18.26% of KKME issued share capital; and

· Including the above KAT and KKME financial instruments at the year end 30 September 2019 the Company therefore held a shares/warrants portfolio worth circa £310,000.

Financial

· Loss for the year to 30 September 2019 of £1.6 million (2018: £6.6 million);
 

· Pre non-controlling interest total equity of £1.8 million at the year end (2018: £2.1 million); and
 

· Raised £1 million (before issue costs) in new equity financing during the financial year, from a combination of new and existing shareholders, including the Directors.

Post-year end

· On 3 December 2019, the Company entered into an agreement providing an opportunity to acquire a right to earn in to 60% of the Alamo project based in Arizona, USA over a four-year period. The project is prospective for gold and precious metals. Subject to a 45-day due diligence period which was subsequently extended to 30 June 2020 due to restrictions imposed by Covid-19;

· On 10 December 2019, the Company announced it had raised £700,000 (before costs), through a placing and subscription of 175,000,000 new ordinary shares at a price of 0.40 pence per share, £400,000 of which was allocated to enable the Company to exercise the option to earn-in to the Molopo Farms Complex project as part of the existing agreement with Kalahari Key Exploration Pty Limited;

· On 31 December 2019, the Company gave written confirmation to Kalahari Key Exploration Pty Limited to elect to earn in to a 40% interest in the Molopo Farms Complex. Combined with the existing 18.26% interest held in Kalahari Key, upon completion, the Company will hold a 50.96% interest in the project;

· In December 2019, the Company announced First Equity Limited were appointed as joint brokers to the Company. As at 30 September 2019 and at the date of this report, 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 (formerly ABM Kobald SAS), which holds the interest in the Kisinka licence ("Kobald");

· The Company also holds interest in Katoro Gold Plc ("Katoro"), Kibo Nickel Limited ("Kibo"), Kalahari Key Exploration Pty Limited ("Kalahari") and Kavango Resources Plc ("Kavango");

· In late Q4 2019 the first case of Covid-19 virus was discovered in China and the disease has since been designated pandemic status by the World Health Organisation spreading to a large number of countries around the world.  The impact of the Covid-19 virus has seen significant societal dislocation in many countries with normal patterns of life and work notably effected as large numbers of people have been limited to home based working and other restrictions to limit the spread of the virus and enable health providers to manage serious cases within their resources; 

· The impact of the Covid-19 virus also affected financial markets around the world impacting the AIM market where POW is listed and initially caused a fall in junior resource equity share prices and reduced confidence of investors in the junior resource sector.  That said, at the time of writing this report, there has been a significant rebound in the financial markets generally, on the AIM market and in the junior resource equity sector.  The outcome of the Covid-19 virus has therefore been to create significant market volatility and there is a reasonable expectation that such volatility may well continue for some time; and

· The majority of POW's active operations are in Africa, where to date the impact of the virus has been less disruptive, however there is potential for increasing disruption depending on the spread of the virus. As with most of our peers, the future impact of Covid-19 on POW operations is not fully understood at this point or indeed the extent to which the toughened market conditions will persist and potentially impact the Company's ability to operate efficiently and secure cash for operations from market financings should this be needed. That said at the time of writing we have just safely concluded an active field exploration programme in the DRC and in Botswana where our next field exploration is expected and the government has just published plans to undertake a controlled lifting of the virus lockdown during the course of May.  The impact of the virus on operations is clearly country specific and POW is keen to manage its field exploration programmes reflective of each operating environment and the local circumstances at the time.  Should field activities prove challenging or impractical to undertake, POW has a portfolio of interests where material work can be done to advance the business interests through office based activities to improve geological understanding and to effect corporate transactions in respect of existing or new opportunities. 

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

The audited results for the year ended 30 September 2019 cover a period of significant change for the Company with the financial and managerial restructuring in February 2019 providing an opportunity for a fresh start and new ideas.

In the year to September 2019 we progressed the Cameroon and DRC projects, with notable success in the DRC with the discovery of a 6.8km copper anomaly that is now under further examination.  In the year we also announced new strategic project opportunities in Tanzania with the Haneti Polymetallic project and Botswana with the Molopo Farms Complex project.

Since the year end we have added to the portfolio with a significant Australian gold joint venture and due diligence underway in respect of a gold opportunity in the USA and a rare earths project in Botswana.

The pace of growth in our business has been rapid, and this has been underpinned with a careful financing strategy to ensure the Company is robustly financed and may, if our objective is fulfilled, enable us to build our balance sheet toward financial self sufficiency.

The team at POW thank shareholders for their support and with board members and connected parties currently holding around 14% of the Company's shares we are aligned with all shareholders.  Success comes primarily with a large scale metal discovery, and we have a portfolio of interests where we believe that is possible."

Notice of Annual General Meeting and Distribution of Accounts to Shareholders

The Company's Annual General Meeting will take place at 9.00 am on 19 June 2020 at Abbey House, 282 Farnborough Road, Farnborough, Hampshire, GU14 7NA.  The Company's Annual Report and Accounts for the year ended 30 September 2019 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.

Power Metal Resources plc
Paul Johnson (Chief Executive Officer)	[phone]
SP Angel Corporate (Nominated Adviser and Broker)
Ewan Leggat	[phone]
SI Capital Ltd (Broker)
Nick Emerson	[phone]
First Equity (Joint Broker)
David Cockbill/Jason Robertson		[phone]

Chairman's Statement

As at 30 September 2019 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

The business restructuring and refinancing in February 2019 was undertaken on the premise that the Company would have a reinvigorated drive and direction.  It has indeed achieved this in respect of certain existing interests and new opportunities.

We have carried out exploration programmes in both Cameroon and the DRC and achieved in a cost-effective manner outcomes that advanced our understanding in both countries. The  6.8km copper anomaly identified in the DRC was an exciting and positive outcome on which we can build future programmes. 

We have secured new operational interests in two new African countries; a nickel-copper-PGM exploration project in Botswana and a polymetallic exploration project in Tanzania.  The potential scale of both opportunities led us to take a dual project holding company and project level interest, providing increased exposure for shareholders in these new interests.

We also have a burgeoning pipeline of new opportunities in existing commodities and jurisdictions, and also in new areas.  This has been evidenced by the transactional options we have announced to the market to date, and subject to ongoing work and discussions, further transactions may occur.

Company costs are controlled and are modest overall, both in terms of corporate costs and also investment in exploration.  POW pays modest board compensation compared to our market peers and our exploration work is carefully chosen to maximise return on modest spend programmes. This will continue and whilst we have comfortably raised £1.7million in calendar year 2019 we will seek to preserve working capital and minimise shareholder dilution wherever possible.

We have diverse business interests, a strong balance sheet versus our operational costs and a wide array of opportunity, from what appears to be at or near the bottom in the typical junior resource company cyclical sector pullback. Much has been achieved already, but there is a lot more to do and POW looks forward to announcing developments to the market in 2020.

Operations Review

Projects
 

Botswana

On 13 May 2019 POW entered into an Acquisition and Earn-In Agreement with Kalahari Key Mineral Exploration Pty Ltd ("KKME" or "Kalahari Key") to acquire 3,542 new ordinary shares equating to an 18.26% shareholding in Kalahari Key. This transaction was completed through two transactions:

-  POW acquired 3,157 new ordinary shares in Kalahari Key at US$55 per share for cash consideration of US$173,635.

-  In addition,  POW acquired 385 existing ordinary shares in Kalahari Key held by Value Generation Limited ("VGL"), a company beneficially owned by Paul Johnson, Executive Director of POW at US$55 per share for cash consideration of US$21,175. Given the planned active participation of POW and Paul Johnson in the management and operations of Kalahari Key and the MFC Project, the Board concluded it appropriate for the Company to acquire the VGL holding in Kalahari Key and thereby remove any potential conflict of interest going forward.

At the time Kalahari Key's sole asset was a 100% interest in the Molopo Farms Complex nickel-copper-PGM exploration project (the "MFC Project").

Alongside the share acquisition POW had the right by 31 December 2019 to elect to earn into a 40% direct project interest in the MFC project by investing US$500,000 in the Project by 31 December 2020 (the "Earn-in").

POW elected to Earn-In on 31 December 2019 and based on Kalahari Key's current issued share capital will, on completion of the Earn-In, hold an effective economic interest of 50.96% in the Project.

As a result of the election to Earn-In and in accordance with the Agreement, in January 2020, Paul Johnson (POW CEO) joined the board of Kalahari Key and Andrew Bell (POW Chairman) joined the MFC Project Operating Committee.

At the time of the Acquisition and Earn-In Agreement the MFC Project consisted of three licences covering an area of 2,725 square kilometres considered prospective for nickel-copper-PGMs mineralisation and were 100% owned by KKME.

Originally, in November 2016 Kalahari Key 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.

The investment made in Kalahari Key of US$194,810 was, along with other KKME working capital, deployed principally into a ground geophysics programme at the MFC Project to follow up on a successful Helicopter Airborne Electromagnetic project which has identified 17 subsurface conductor targets. The ground geophysics programme proved very successful with 11 subsurface targets confirmed and 5 or 6 high profile targets.

A gravity survey was then conducted post year end which confirmed all targets to be sulphides rather than graphite and an environmental management plan was prepared in Q4 2019 and submitted for local regulatory approvals in January 2020, prior to drilling commencement in 2020 over principal targets.

Interest in the MFC Project has been shown by a number of large mining companies and also by financiers looking to provide funding to Kalahari Key and/or at project level.  POW has an anti-dilution right within its shareholding in Kalahari Key and thus may maintain its 18.26% corporate stake should it wish to do so. It also has fund or dilute protection on its 40% direct MFC Project interest.

The POW team are working with Kalahari Key to assess interest shown in the company and the MFC Project.

Cameroon

In Cameroon a pitting and sampling programme was conducted which confirmed the exploration undertaken successfully intersected the distinct laterite profile that is most likely to be mineralised at average depths of 5m and deeper, which is consistent with depths in the mineralized zones at the adjacent Nkamouna project.

The initial emphasis of the project was to identify cobalt mineralisation and the work conducted indicated that cobalt exploration is best focused on the thicker lateritic cover and POW's consultants recommended concentration of future work at higher elevations where these thicker profiles are more likely to occur. The sampling programme also highlighted elevated levels of titanium and vanadium requiring further investigation.

In conjunction with its POW consultants the Company is considering the various options with regard to this project, ensuring as with all project interests the most optimal allocation of Company working capital.

Note : With respect to Nkamouna,  Geovic published an NI 43-101 compliant Mineral Resource ¹  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)

The Democratic Republic of the Congo

At the Company's Kisinka Copper-Cobalt project POW conducted a termite mound sampling programme through which it confirmed the presence and potential significance of copper mineralisation along the Undifferentiated Roan horizons within the license.

Undifferentiated Roan represents Roan rocks of the Roan 1, Roan 2 and Roan 3 Subgroups and the Neoproterozoic Roan Group of central Africa which are host to some of the world's largest and highest-grade sedimentary rock-hosted copper-cobalt deposits the copper belts of Zambia and the DRC.

Given the substantial 6.8km length and size of the copper anomalous area and the presence of rocks from the important mineral-bearing R2 stratum in a licence along strike, there were sufficient indications that the tenement may be host to a significant copper target to justify further exploration.

A further exploration programme, to include pitting and sampling within the mineralised area, is to be undertaken.

Ivory Coast

No further work was undertaken at the Lizetta-II project in the Ivory Coast in the year ended 30 September 2019 and the current expectation is that the Company will focus its working capital on other project interests.  This situation has been primarily driven by working capital constraints and notably the need to allocate working capital to more advanced exploration interests where the prospect of a large scale discovery, in line with the Company's objectives, is nearer term and more obviously identifiable. There is evidence that the thesis of an emerging and previously barely exposed base metal province has investor credibility, the Company needs to reset its relationship with its local partner through renewed activity. However, there are no budget or substantive expenditure plans currently, therefore the Directors have deemed it appropriate to impair the asset by 100% in the year ended 30 September 2019, as detailed in Note 14.

Should any further developments corporately or from an exploration perspective arise, the Company will inform the market accordingly.

Tanzania

POW announced an Investment and Option Agreement with London AIM listed Katoro Gold ("Katoro") (LON:KAT) in March 2019.

Under the Agreement POW was able to acquire up to 10 million new ordinary shares of 1.0 pence each in the capital of Katoro ("Katoro Ordinary Shares"), together with up to 10 million warrants over Ordinary Shares, and an option to acquire, subject to the completion of due diligence by POW, up to a 35% interest in Katoro's 100% owned Haneti Nickel Project ("Haneti" or the "Haneti Project") in Tanzania (the "Option") for a total consideration of up to £125,000.  To date two of three stages of this acquisition have been completed as outlined below.

In March 2019 for a consideration of £25,000, POW acquired 2,500,000 new Katoro Ordinary Shares (the "Tranche 1 Shares"), equating to an issue price of 1.0 pence per share.  POW was then granted 2,500,000 warrants to subscribe for 2,500,000 new ordinary shares at a price of 1.25 pence per share with a three year expiry term to 15 March 2022 and the Option to acquire a further 7,500,000 Katoro Ordinary Shares and warrants on the same terms, and up to 35% of the Haneti Project held by KAT.

In May 2019 POW exercised its option to invest a further £75,000 to acquire an additional 7,500,000 new Katoro Ordinary Shares at a price of 1.0 pence per share (the "Tranche 2 Shares"). POW was also granted a further 7,500,000 warrants to subscribe for 7,500,000 new Katoro Ordinary Shares at a price of 1.25 pence per share with a three-year life to expiry term to 15 May 2022 (the "Warrants").

Of the Tranche 2 Shares and Warrants, 6,100,000 Tranche 2 Shares ("Initial Instalment Shares") were issued immediately and the remaining 1,400,000 Tranche 2 Shares ("Second Instalment Shares") and Warrants were issued following Katoro's Annual General Meeting, which was held in June 2019 and where additional authority to issue new ordinary shares of 1.0p was approved by shareholders.

Overall, at the time of transaction completion POW held 10,000,000 Katoro Ordinary Shares and 10,000,000 Katoro Warrants, representing a 5.95% holding in KAT's then issued share capital.

By subscribing for the tranche 2 shares POW also acquired a 25% direct interest in the Haneti Project, with Katoro holding the remaining 75% interest.  POW's holding is subject to a fund or dilute clause whereby the Company must fund its 25% share of costs or dilute in line with standard industry fund or dilute principles. In addition, by subscribing for the Tranche 2 shares POW has a right, by 15 May 2020 to acquire a further 10% interest in the Haneti Project, increasing its interest to 35%, by paying Katoro £25,000.

The Haneti Project covers a large scale polymetallic system with identified potential for nickel (sulphide and laterite), Platinum Group Metals ('PGMs'), copper, gold, lithium and rare earth elements ("REEs").

The principle target zone is an 80 km long ultramafic belt with grades from surface sampling of up to 13.6% nickel and 2.33 g/t combined platinum and palladium.

During the year POW has worked with its partner KAT to formulate the way forward for the project, including exploration planning and implementation, a process that has been punctuated by external interest in the project and addressing that interest, which continues at present.

Corporate Social Responsibility ("CSR")

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

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, POW 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 2019 of £ 1.6 million (2018: £6.6 million). The loss per share from continuing activities was 0.55p (2018: 1.83p).

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 £ 1.2 million before placement costs (2018: £3.9 million).

We ended the financial year with a cash balance of £ 0.17 million   (2018: £0.15 million), which was enhanced post financial year end by a further equity issue of approximately £0.7 million (before costs) in December 2019.

Targets for 2020

Our operational targets for the remainder of 2020 are:

· To focus on applying working capital diligently, with controlled corporate costs and focused investment in operating projects that demonstrably have the best potential to deliver a large scale metal discovery;

· 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 a large scale metal discovery;

· To continue to review new opportunities and where financially and operationally practical to acquire additional interests within the power metal commodity suite in Africa and where appropriate in other commodities and jurisdictions.

Board Changes

In February 2019 former CEO Roger Murphy stepped down as part of the business restructuring and refinancing exercise.  Following publication of the Annual Results for 30 September 2018 in March 2019, Matt Wood also stepped down as Finance Director.

As part of the shareholder approved business restructuring and refinancing in February 2019, Andrew Bell joined as Executive Chairman and Paul Johnson as Executive Director.  Paul Johnson became CEO of the Company in August 2019.

Ed Shaw was appointed to the Board as Non-Executive Director in February 2020.

Outlook

2019 was a year of reconstruction for the Company, with existing interests as at February 2019 reviewed and work undertaken in Cameroon and the DRC. We had some notable success in our initial exploration, notably in respect of the discovery of a 6.8km copper anomaly in the exploration work undertaken at the Kisinka project in the DRC.

As a business, and in a challenging junior resource sector market we had new opportunities all around and took the business forward with new additional operating interests in Botswana and Tanzania, working with new joint investment partners.

As a business we now have three clear strategic interests in Botswana, the DRC and Tanzania, and we have a robust working capital position and a demonstrable ability to access working capital on reasonable terms as and when required.

As we continue to see what we expect will be a recovering junior resource climate we are well positioned and look to the future with some confidence.  The impact of Covid-19 has in recent months caused material disruption and we are justifiably noting that disruption again and highlighting that its continuing impact could impact our plans, operations and aspirations as noted elsewhere.  However what should also be highlighted is that the uncertainty in the world that exists today, as in disruptive times past, could drive increasing investment demand for precious metals for portfolio security and base metals through the extensive infrastructure programmes that are being discussed as part of government stimuli in various countries around the world.

Aside from Covid-19 factors, there has been an underinvestment in exploration and new mine development across multiple areas in the resource sector.  Given the availability of supply is a key factor in the supply/demand dynamic that governs metal prices and the valuation of resource projects, we consider supply attrition over many years, and especially of late, to be a contributing feature to rising metal prices in the years ahead.

The future is all the brighter with strong shareholder support and a growing shareholder register.  We know that the Company has more work to do to restore investor and shareholder confidence and we are committed to work hard in this area.  For those who have helped our business in the last year, we are grateful.  We trust by actions rather than merely words on a page, we can show the wider investing world that Power Metal Resources plc is an exciting and investable proposition, whereby the negative events of the past, in a number of respects, are surpassed by the potential of the future.

Andrew Bell

Executive Chairman

20 May 2020

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2019

									Notes						2019 £'000				2018 £'000
Revenue
Cost of sales															-				-
Gross profit															-				-
Operating expenses									4						(668)				(1,146)
Impairment									7						(954)				-
Fair value gains through profit or loss															36				-
Loss from operating activities															(1,586)				(1,146)
Loss before tax															(1,586)				(1,146)
Taxation															-				-
Loss for the year from continuing operations														(1,586)				(1,146)
Discontinued operations
Loss from discontinued operations								5						-				(5,494)
Net loss for the year														(1,586)				(6,640)
Other comprehensive income Items that will or may be reclassified to profit or loss; Exchange translation														63				(39)
Exchange differences arising on translation of discontinued operation												5		-				(531)
Total other comprehensive income/(expense)														63				(570)
Total comprehensive expense for the year														(1, 523)				(7,210)
Loss for the period attributable to:
Owners of the parent														(1,539)				(6,494)
Non-controlling interests														(47)				(146)
														(1,586)				(6,640)
Total comprehensive loss attributable to:
Owners of the parent														(1,466)				(7,059)
Non-controlling interests														(57)				(151)
														(1,523)				(7,210)
Loss per share from continuing operations attributable to the ordinary equity holder of the parent:
Basic and diluted loss per share (pence)										10				(0.55)				(1.83)
Loss per share from discontinued operations attributable to the ordinary equity holder of the parent:
Basic and diluted loss per share (pence)										10				-				(8.78)
Total basic and diluted loss per share (pence)										10				(0.53)				(10.61)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2019

					Notes			2019 £'000		2018 £'000
Assets
Intangible assets					7			1,126		2,082
Financial assets								309		-
Non-current assets								1,435		2,082
Trade and other receivables					8			32		39
Cash and cash equivalents								171		147
Current assets								203		186
Total assets								1,638		2,268
Equity
Share capital					9			6,843		6,606
Share premium								13,228		12,453
Capital redemption reserve								5		5
Share based payment reserve								1,195		1,086
Exchange reserve								39		(34)
Accumulated losses								(19,530)		(17,991)
Total								1,780		2,125
Non-controlling interests								(208)		(151)
Total equity								1,572		1,974
Liabilities
Trade and other payables					11			66		279
Deferred consideration								-		15
Current liabilities								66		294
Total liabilities								66		294
Total equity and liabilities								1, 638		2,268

The financial statements of Power Metal Resources plc, company number 07800337, were approved by the board of Directors and authorised for issue on 20 May 2020. 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2018

	Share capital		Share premium		Capital redemption reserve			Share based payment reserve		Exchange reserve		Accumulated  losses		Total		Non-controlling interests		Total Equity
	£'000		£'000		£'000			£'000		£'000		£'000		£'000		£'000		£'000
Balance at 1 October 2017	6,330		9,049		-			1,013		531		(11,497)		5,426		-		5,426
Loss for the year	-		-		-			-		-		(6,494)		(6,494)		(146)		(6,640)
Reclassification arising on subsidiary disposal	-		-		-			-		(531)		-		(531)		-		(531)
Total other comprehensive expense	-		-		-			-		(34)		-		(34)		(5)		(39)
Total comprehensive expense for the year	-		-		-			-		(565)		(6,494)		(7,059)		(151)		(7,210)
Issue of ordinary shares	212		1,783		-			-		-		-		1,995		-		1,995
Issue of ordinary shares for acquisitions	64		1,847		-			-		-		-		1,911		-		1,911
Costs of share issues	-		(154)		-			-		-		-		(154)		-		(154)
Repurchase of own shares	-		-		5			-		-		-		5		-		5
Share-based payments	-		(72)		-			73		-		-		1		-		1
	276		3,404		5			73		-		-		3,758		-		3,758
Balance at 30 September 2018	6,606		12,453		5			1,086		(34)		(17,991)		2,125		(151)		1,974

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2019

	Share capital		Share premium		Capital redemption reserve		Share based payment reserve		Exchange reserve		Accumulated losses		Total		Non-controlling interests		Total Equity
	£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000		£'000
Balance at 1 October 2018	6,606		12,453		5		1,086		(34)		(17,991)		2,125		(151)		1,974
Loss for the year	-		-		-		-		-		(1,539)		(1, 539)		(47)		(1,586)
Total other comprehensive expense	-		-		-		-		73		-		73		(10)		63
Total comprehensive expense for the year	-		-		-		-		73		(1,539)		(1,466)		(57)		(1,523)
Issue of ordinary shares	237		950		-		-		-		-		1,187		-		1,187
Costs of share issues	-		(93)		-		-		-		-		(93)		-		(93)
Share-based payments	-		(82)		-		109		-		-		27		-		27
	237		775		-		109		-		-		1,121		-		1,121
Balance at 30 September 2019	6,843		13,228		5		1,195		39		(19,530)		1,780		(208)		1,572

CONSOLIDATED STATEMENT OF CASH FLOWS

AS AT 30 SEPTEMBER 2019

							Notes		2019 £'000		2018 £'000
Cash flows used in operating activities
Loss for the year									(1,586)		(6,640)
Adjustments for:
- Fair value adjustment									(36)		-
- Impairment							7		954		5,713
- Expenses settled in shares									186		307
- Finance expense									-		5
- Share-based payment expense									27		73
-  Foreign exchange differences									65		(623)
-  Loss on disposal of fixed assets									-		141
									(390)		(1,024)
Changes in working capital:
- Decrease in trade and other receivables							8		8		71
- Decrease in trade and other payables							11		(209)		(240)
Net cash used in operating activities									(591)		(1,193)
Cash flows from investing activities
Purchase of intangibles							7		(15)		(206)
Purchase of financial assets at fair value through profit or loss									(273)		-
Cash acquired with subsidiary									-		50
Net cash outflows from investing activities									(288)		(156)
Cash flows from financing activities
Proceeds from issue of share capital							9		1,000		1,689
Issue costs							9		(93)		(226)
Repayment of short term loans									-		(15)
Repayment of loan under equity agreement									-		(133)
Net cash inflows from financing activities									907		1,315
Increase/(decrease) in cash and cash equivalents									28		(34)
Cash and cash equivalents at beginning of year									147		180
Exchange (loss)/gain on cash and cash equivalents									(4)		1
Cash and cash equivalents at 30 September									171		147

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 2019

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 2019 include the Company and its subsidiaries. The Group is primarily involved in the exploration and exploitation of mineral resources in Africa.

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 in February 2020 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 27) 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 together with the funds raised in February 2020 (note 27), and a planned fundraising in November 2020 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 need to complete a fundraising in November 2020 indicates that a material uncertainty exists which may cast significant doubt on the Group's and Parent Company's ability to continue as a going concern and therefore its ability to settle it debts and realise its assets in the normal course of business.

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

Operating expenses include:					2019		2018
					£'000		£'000
Staff costs (note 9)					184		465
Foreign exchange gain					(4)		(8)
Share based payment expense					28		-
Auditor's remuneration - audit services					27		23

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

5.  Discontinued operations

On 27 September 2018, the Group agreed to place Blue Horizon (SL) into voluntary liquidation.

The results of the discontinued operations, which have been included in the consolidated income statement, were as follows;

	2019		2018
	£'000		£'000
Expenses	-		(622)
Loss of discontinued operation			(622)
Loss on disposal of subsidiary	-		(4,872)
Loss from discontinued operations	-		(5,494)
Reclassification of  translation reserve of discontinued operations	-		(531)
Total comprehensive expense from discontinued operations	-		(6,025)
Loss per share relating to discontinued operations (pence)			(8.78)
Net cash outflows from operating activities			(332)
Net cash outflows from investing activities	-		-
Net cash decrease incurred by subsidiary	-		(332)

The following assets and liabilities were reclassified as held for sale in relation to the discontinued operation:

	2019		2018
	£'000		£'000
Carrying amount of net assets disposed	-		(3,950)
Loss on disposal before income tax and reclassification of foreign currency translation reserve	-		(3,950)
Reclassification of foreign exchange currency reserve	-		531
Write off of loan balances and realised exchange losses	-		(1,453)
Loss on disposal after income tax	-		(4,872)

The tax losses to be forfeited as a result of the discontinuation and subsequent disposal of Blue Horizon are £9,994,420 comprising of £622,000 for the loss to 30 September 2018 and the brought forward losses attributable to the subsidiary of £9,372,420.

6.  Property, plant and equipment

				Land and buildings £'000		Plant and equipment £'000		Fixtures and fittings £'000			Total £'000
Cost
Balance at 1 October 2017					159		595		44		798
Disposals					(159)		(595)		(43)		(797)
Balance at 30 September 2018					-		-		1		1
Balance at 1 October 2018					-		-		1		1
Additions					-		-		-		-
Balance at 30 September 2019					-		-		1		1
Depreciation
Balance at 1 October 2017					97		518		42		657
Disposals					(97)		(518)		(41)		(656)
Balance at 30 September 2018					-		-		1		1
Balance at 1 October 2018					-		-		1		1
Disposals					-		-		-		-
Balance at 30 September 2019					-		-		1		1
Carrying amounts
At 30 September 2018					-		-		-		-
At 30 September 2019					-		-		-		-

7.  Intangible assets

											Prospecting and exploration rights £'000
Cost
As at 1 October 2017											5,661
Additions											2,082
Effect of movements in exchange rate											52
Balance at 30 September 2018											7,795
As at 1 October 2018											7,795
Effect of movements in exchange rate											(2)
Balance at 30 September 2019											7,793
Impairment
As at 1 October 2017											-
Charge											5,713
Balance at 30 September 2018											5,713
As at 1 October 2018											5,713
Charge											954
Balance at 30 September 2019											6,667
Net book value
At 30 September 2018											2,082
At 30 September 2019											1,126

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).

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

The Company holds the rights to a licence held by PMR, in the Democratic Republic of Congo. The two phases of exploration carried out since acquisition in December 2017 of the Kisinka licence is now being followed up by as recently announced by a third programme of pitting, geology, and sampling in order to define better the significant 6.8km copper anomaly identified in the first programme, as well as to test for cobalt. 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. Through one of these subsidiaries CBH has also applied for two further Cameroon-based nickel-cobalt exploration licences. These licences expire in the first quarter of 2021, unless renewed. The licences may be renewed three times for periods of two years provided that obligations have been met by the licensee.

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 results of the exploration carried out in early 2019 confirmed that the licences contain tropical laterite material, like Nkamouna/Mada, but the exploration to date has not identified cobalt or nickel mineralisation. The work undertaken has identified a need to move exploration to higher elevations to target enhanced cobalt mineralisation.

Further exploration, though not currently budgeted, is planned and an assessment of this next stage will be carried out in due course. The long time horizon and very large scale of the target mineralisation make this a strategic asset where the Company could well recover its investment through sale or joint venture. The directors believe the carrying value of the should not in be subject to impairment.

RRIC

The Company also held the right to earn into 70% of the Lizetta II chrome, nickel, cobalt exploration licence ("Lizetta-II") in Côte d'Ivoire by expending a total of USD 850,000 on the project over the period to June 2021, through RRIC. RRIC entered into the above agreement with Regent Resources Capital Corporation (RRCC). Lizetta-II is located 77km NW of Bouake, which is 342km north of Abidjan, the commercial capital of Côte d'Ivoire , and covers approximately 380 sq. km. Local infrastructure includes road access, the proximity of major river creeks and electric networks sufficient for any industrial operations on the property. Historical data shows anomalous concentrations of nickel, cobalt and chromite mineralisation in the ultramafic rocks of the Marabadiassa-Alekro area. An independent assessment commissioned by RRCC confirmed the potential to host cobalt, nickel and chrome mineralisation of economic potential and proposed an initial field programme consisting of historical data compilation, geological mapping, geophysical surveys, trenching and RC drilling. The proposed follow-up phase would be extensive drilling to allow the definition of a JORC/NI 43-101 code compliant resource.

During the year under review, no exploration activities relating to the Group's exploration activities on the Lizetta-II have been capitalised. As at the end of the year ended 30 September 2019, the Directors believe that a

100% impairment charge in relation to the asset, amounting to £954,000 is prudent due to the cease of exploration. The high valuation on Sama provides evidence that the thesis of an emerging and previously barely explored base metal province has investor creditability, but the lack of recent activity by them of other parties along trend means the Company needs to reset its relationship with its local partner through renewed activity. There is no budget or plan that currently exists in relation to this.

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

8.  Trade and other receivables

						2019 £'000		2018 £'000
Other receivables						11		20
Prepayments						21		19
						32		39

9.  Share capital

					Number of ordinary shares
					2019		2018
Ordinary shares in issue at 1 October					136,579,143		31,187,691
Issued for cash					200,000,000		41,716,667
Issued in settlement for expenses					36,258,958		5,308,722
Company buy back					-		(5,324,384)
Issued in relation to acquisitions					-		63,690,447
In issue at 30 September - fully paid (par value 0.1p)					372,838,101		136,579,143

					Ordinary share capital
					2019 £'000		2018 £'000
Balance at beginning of year					6,606		6330
Share issues					237		281
Consolidation					-		(5)
Balance at 30 September					6,843		6,606

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

On 28 January 2019, the Company completed, subject to shareholder approval, a refinancing and business strategic update, including the placing and subscription of 200,000,000 new Ordinary Shares of 0.5 pence each, raising £1,000,000.

On the same day, the Company announced that Red Rock Resources plc, a company associated with the  incoming Executive Chairman, and Paul Johnson, the incoming Executive Director, were each awarded 5,000,000 new Ordinary Shares at 0.5 pence each as payment for restructuring fees; £50,000 of costs were settled by this share issue.

The Company also issued 13,402,938 ordinary shares at 0.5 pence each for the settlement of creditor balances and 3,056,020 ordinary shares at 0.5 pence each to Roger Murphy and Matthew Wood in lieu of Directors fees, £82,295 of costs were settled by these share issues. Roger Murphy and Matthew Wood resigned as directors of the company on 15 February 2019 and 29 March 2019, respectively.

In August 2019, the Company announced the payment of certain cash fees through an issue of 9,800,000 ordinary shares at a price of 0.55p per share. The fees payable amounted to a cash value of £53,900.

10.  Loss 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  1,539,176 (2018: £6,642,581), and a weighted average number of ordinary shares in issue of 278,814,166 (2018: 62,547,951).

No Directors exercised options or warrants in the year ended 30 September 2019 (2018: Nil).

11.  Trade and other payables

						2019 £'000		2018 £'000
Trade payables						20		127
Accrued expenses						46		152
						66		279

12.  Subsequent events

On 3 December 2019, the Company entered into an agreement in respect of the Alamo project in Arizona, USA. The Alamo project is a package of mining claims covering an area of approximately 340 acres in west-central Arizona. The project is prospective for gold, and precious and base metals, with regional mines that have produced silver, lead, gold, zinc and copper. The Company has signed an agreement providing an opportunity to acquire a right to earn in to a 60% interest over a four-year period in the Alamo project, subject to a 45-day due diligence period.

On 10 December the Company announced it had raised £700,000 (before costs) through a placing and subscription at a price of 0.40 pence per share through the issue of 175,000,000 new ordinary shares of 0.1 pence each. Each placing and subscription share had an attaching warrant which was issued on the same day. The warrants are exercisable at 0.70 pence per new ordinary share, which are subject to an acceleration clause whereby should the volume weighted average share price exceed 2.25 pence for 10 consecutive working days, the Company may write to warrant holders providing 10 working days' notice of accelerated exercise. Paul Johnson and Andrew Bell subscribed for £25,000 each on the same terms as the other investors.

Additionally, the Company announced First Equity Limited are to be appointed as joint brokers to the Company with effect from admission of the Placing and Subscription shares to trading on the AIM market of the London Stock Exchange.

On the 31 December 2019, the Company confirmed written confirmation had been made to Kalahari Key Mineral Exploration Pty Limited to elect to earn in to a 40% interest in the Molopo Farms Complex. To earn in to the 40%, the Company must expend $500,000 on project related expenditure to support drilling of key nickel-copper-PGM targets in 2020. The spend requirement is fully covered by the Company's existing cash resources following the fundraising in December 2019, £400,000 of which was allocated to enable the Company to exercise the option to earn-in to this project. The Company holds 18.26% of Kalahari Key Exploration Pty Limited, therefore upon completion, the Company will hold 50.96% of the project. The change in control is a non-adjusting event as at the end of the financial year, the exploration work had not been conducted and the Company did not have a practical ability to exercise substantive rights. As the exploration work carried out post-year end was favourable, and the Company have elected to earn in to the 40% additional interest in the project, this has resulted in the Company gaining significant influence and control over Kalahari Key.

In January 2020, an outbreak of a corona virus, now classified as COVID‑19, was detected in China's Hubei province. During the following months, COVID‑19 has spread steadily throughout the World and on 11 March 2020, The World Health Organisation ("WHO") declared the outbreak a global pandemic. In order to stem the spread of the virus, Governments around the World are taking drastic steps which include compulsory closure of various businesses, shops and schools and are also heavily restricting of movement of people with lock down. Due to the rapid development of COVID‑19, the degree of uncertainty involved and the unprecedented nature of the challenges posed by the coronavirus situation, the Directors' are of the opinion that it is too soon to quantify what financial impact that the COVID‑19 pandemic will be, but are monitoring the situation closely

In February 2020, the Company announced the appointment of Ed Shaw as a non-executive director, and was granted options over 5 million ordinary shares of 0.1 pence each at an exercise price of 1.0 pence per ordinary share, vesting immediately, in line with the previous grant of share options to directors.

On 15 April 2020, the Company entered into an agreement providing an opportunity to acquire a 51% interest in the Ditau project, currently held 100% by Kavango Resources plc. The project is prospective for rare earth metals.  The acquisition is subject to a due diligence period ending 1 September 2020 at the latest.

In April 2020, POW announced the commencement of a new joint venture with Red Rock Resources Plc to build a strategic gold exploration portfolio in Australia.

 

END

 

 

FR EBLFLBELFBBV