Earlier this week, Power Metal Resources (LSE:POW) outlined in detail its plans to "push on with existing interests more innovatively and aggressively" following a recent £1 million fundraise.
The company's chief executive Paul Johnson said he and his team are pursuing two key objectives. The first of these is to make one or more major metal discoveries within the firm's gold, base, and strategic metal projects. It will then look to crystallise the value of any such discovery for the benefit of shareholders.
Although Johnson said each of Power Metal's five projects has the potential to deliver such a discovery, he highlighted three standout opportunities for the remainder of 2020.
The first is the firm's 51%-held Molopo Farms Complex project in Botswana, where drilling over coming months will target major nickel, copper, and platinum group metal ("PGM") targets. The second is its Haneti polymetallic project in Tanzania, where exploration drilling plans are being developed to target major nickel, copper, and PGM targets.
The third, and arguably most exciting, opportunity is its Australia gold joint venture with AIM peer Red Rock Resources. The two firms have been building up their position in the highly-prospective region of Victoria over the past few months, and proactive exploration may be completed in 2020 subject to permitting developments.
"So now we find ourselves with a diverse and exciting portfolio of project interests, and with the support of shareholders and investors in the recent financing, a considerable working capital position with which to drive forward those interests," added Johnson. "If we are fortunate in making a major discovery in just one of our projects, we could create significant value for our shareholders."
Power Metal's second key objective is to build up its working capital and balance sheet towards what it describes as "financial self-sufficiency". Moving forward, the company means that it aims to reduce its reliance on funding from the market to achieve its business objectives. This is something the firm does not feel like many of its junior resource peers are pursuing, highlighting their reliance on a "more traditional model of cash burn for exploration" in Monday's release.
Johnson said that his firm would achieve financial independence in three different ways.
The first is by taking positions in project holdings companies alongside direct project participation. This is something it has already done at Molopo Farms with Kalahari Key and Haneti with Katoro Gold, and in Botswana with Kavango Resources.
"The aim is that successful project development will drive the value of the ultimate holding company in which Power Metal has a stake, driving the value of our investment in that company higher," the company added.
Alongside this, the firm said it is working to monetise its existing project interests, as already described. Finally, it will invest in other junior resource sector opportunities, having recently established a "Junior Resource Fund" that allows it to invest up to £75,000 in value cases it finds across the market.
"In the current climate there are opportunities for significant capital returns to be generated from investment in junior resource equity or related financial instruments," it added.
Rounding up, Johnson added: "I am keen for us to be bold and adventurous with reward weighted risk-taking, but with solid underlying principles of risk management covering geopolitical, commodity, operational and financial considerations. In other words, combining boldness with risk management means diversification, which is what we have achieved.
Many companies put their business case forward-focused around a single major project and concentrate their energies around that. I understand this, but it's not the Power Metal approach, where instead, in our view, we have numerous major projects, each of which is capable of delivering a transformational discovery and by virtue of this shareholder wealth."
Author: Daniel Flynn
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