There’s a revolution underway at Power Metal Resources (LON: POW), with transformational spin-offs just waiting in the wings. 

Each entity Power Metal nurtures and separately lists helps to make it that much more appealing, maximising value for shareholders by supporting the funding and development of the company’s own projects. 

With this in mind, we spoke to Power Metal’s chief executive Paul Johnson to get an in-depth look at his plans for two spin-offs in particular: Golden Metal Resources and FDR UK.

Golden Metal’s “considerably scalable” Pilot Mountain project

Key to the upcoming listing of spin-off Golden Metal Resources is Pilot Mountain – a recently acquired tungsten-copper-silver-zinc project.

The JORC-compliant Mineral Resource Estimate (“MRE”) for the Nevada-based project is 12.53 million tonnes at 0.27% tungsten trioxide, equivalent to 34.3kt of contained tungsten metal, about $1.1 billion of in-situ metal value. The MRE also includes significant silver, copper and zinc.

Right now is an ideal time to have exposure to tungsten in particular, with the current lack of primary US domestic production even putting the metal on the United States Geological Survey’s (USGS) list of 50 “critical minerals”.

As Johnson explains:

“Pilot Mountain has traditionally been seen as a tungsten opportunity because the tungsten is by far the largest component of the JORC compliant resource.”

However, this could just be the start for Pilot Mountain, with its MRE currently being based on just two of four known deposits across the property known as Desert Scheelite and Garnet. This means there’s significant upside potential within the remaining prospects, Gun Metal and Good Hope. 

Johnson also notes that the area in the centre of the four Pilot Mountain deposits “has never been really tested”, adding:

“We think the resource is considerably scalable from the roughly $1.5 billion in in-situ metal currently on the project – with significant expansion potential at the relatively untested copper rich-zones. We also think that, with current metal prices being higher than they were when the scoping study was undertaken in 2018, we could redo the scoping study with the new pricing of the metals.”

His conclusion from all of this potential, then, is that:

“We could end up with a much longer mine life than the current eight years outlined in the previous scoping study, and potentially a much more valuable project without even having to step foot on the Property. Every which way, exploration or development, the project is scalable.”

Newly acquired from Thor Mining (LON: THR), Pilot Mountain has plenty to offer investors and planning for phase one exploration is already underway.

Not only that, but Pilot Mountain sits alongside Golden Metal’s other projects in the mining-friendly Nevada, which include the Golconda Summit gold project, Stonewall gold-silver project, and Garfield gold-copper project.

High-impact exploration programs, including trenching and drilling, are planned for all four Golden Metal properties once the spin-off completes its IPO.

Uranium and rare earths join FDR UK’s already enticing copper-gold portfolio

Another of Power Metal’s exciting planned spin-offs is First Development Resources (“FDR”), which boasts a portfolio of gold-copper exploration interests in Western Australia’s Paterson Province.

Paterson is the site of some of the largest copper-gold deposits on the planet – including the world-renowned Telfer gold and Nifty copper mines.

Nifty, currently owned by Cyprium Metals (ASX: CYM), has produced in excess of 700,000 tonnes of copper in its lifetime. Newcrest Mining’s (ASX: NCM) 20-million-ounce Telfer project produced 416,000 ounces of gold alone in fiscal 2021 and 13,000 tonnes of copper.

Rio Tinto (LSE: RIO) and Greatland Gold (LSE: GGP) have also made major Paterson discoveries in recent years, including Rio Tinto’s 503 million tonne copper-equivalent North Winu. Newcrest, meanwhile, has teamed up with Greatland on the Havieron joint venture.

Power Metal’s plan is to list the ultimate holding company for First Development Resources, FDR UK, on the London capital markets, where it can begin to advance its three highly prospective prospects– Wallal, Braeside West, and Ripon Hills.

Wallal also shares an extended licence border with Rio Tinto Exploration. Braeside West, meanwhile, is enhanced by the recent base metal discovery out of Rumble Resources (ASX: RTR), hosted in a similar geological environment.

Following an initial deal in January, Power Metal’s interest in FDR has continued to grow – ultimately leading to a 100% acquisition.

As Johnson says:

“As we did more work, we got more attracted to it and there were some more licences that we brought into the package in April. We increased the size and changed the structure so we owned 75%, because we wanted to list it in London, and we wanted to bring our partners in Australia on board.

“Then we did even more work, and we've gone ‘this is really getting interesting now.’ So, we increased the amount of consideration and we bought 100% of it.”

FDR UK has also acquired private Australian company URE Metals, owner of the Selta uranium-rare earth elements project in the Northern Territory.

This boosts FDR UK’s profile even more, especially when considering the sharp rise in the price of uranium of late. Futures for the radioactive element hit a nine-year high in September, as many are convinced that the nuclear energy it facilitates is essential when it comes to ending the world’s reliance on fossil fuels.

There’s also a growing interest in sourcing rare earth elements outside of China, which generated 80% of rare earth imports in 2019. Taking on additional interests in this area could well prove to be yet another catalyst for investment.

Ultimately, Power Metal’s aim is to undertake a pre-IPO to seek institutional support and then list FDR UK on London’s AIM market.

Upcoming spin-offs central to Power Metal’s uniquely appealing strategy

Spin-offs like FDR UK and Golden Metal are important to the Power Metal strategy. This strategy, as Johnson has explained in previous interviews, entails handing over responsibility for projects in exchange for shares and warrants in spin-off companies.

This means the company can opt to sell shares in these spin-offs over time in order to increase Power Metal’s own working capital, which can subsequently be used to fund the development of its own projects.

It’s a challenge to the typical model, which usually involves developing individual projects and depending solely on these for success. This added diversification is a major selling point for Power Metal.

Given the tough conditions in the exploration space right now, the shares are still affordable – an affordability that might not last.

Johnson concludes:

“Power Metal is not in the business of being like the majority. Our differentiated model including spin-offs gives us an edge that others don’t have, but will strengthen our company markedly for the exciting times that lie ahead." 

If the company’s spin-offs deliver on their potential, and their success feeds back into Power Metal itself as a major share and warrant holder, the potential on offer could be significant.

Author: Anna Farley

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