Power Metal Resources (LON: POW | FRA:2M5) unveiled its brand new ‘incubator’ business on Monday, aiming to support small find ventures in the junior resource space. This could well bring even more value and compelling projects down the line.
The subsidiary is named Power Capital Investments and is to be fully funded, initially, by Power Metal. This incubator business will actively seek out “small, entrepreneurial business ventures” with major growth potential.
Power Capital will then support these junior resource businesses. This includes through business management, as well as corporate and project development. The goal of this is to help such businesses “scale rapidly and realise their potential”.
Alongside all of this, the incubator business may offer financial support. The subsidiary will develop these ventures until they are sold, publicly listed, or incorporated within the firm’s own portfolio. Though, this does depend on “key performance indicators” that will be established later.
Power Capital, and therefore Power Metal, will be a major shareholder in the ventures it develops. This means the company could see “significant capital appreciation” as a result of successful ventures.
Not only that, but the firm will also then have a new resource project pipeline for potential operational development.
The company described Power Capital as “the next step” in its plans for “a strong, diversified and successful company” and creating significant shareholder value.
Chief executive Paul Johnson highlighted the plethora of opportunities around the world that have “huge potential for discovery” but cannot always get off the ground as a result of funding restrictions and insufficient managerial resources for corporate development.
Johnson explained that Power Metal will choose “only the very best of these opportunities” to nurture “in exchange for equity”.
This is a natural extension of Power Metal’s dual model approach, in which the firm not only develops projects for internal development but also with the goal of spinning out some projects into their own vehicles, typically to be listed.
The company then hands over responsibility for these projects, receiving shares and warrants in exchange. These can then be sold for additional working capital and mean that the company does not need to engage in continuous fundraising.
An example of this would be the company’s Australian gold joint venture with Red Rock Resources (LON: RRR). Power Metal has a 49/9% stake in the joint venture, named Red Rock Australasia, with plans underway to list core Red Rock Australasia assets via a Canadian IPO.
As with these spin-offs, the incubator business is another way to bring in additional working capital without the need to fundraise.
Shares in Power Metal were up 3% on Tuesday morning in recognition of the incubator business’ potential. On a one-year basis, the firm’s shares are up close to 700%.
“It is expected that over time, Power Capital will further strengthen Power Metal’s portfolio of projects and create further value for our shareholders, as successful ventures are either incorporated into our portfolio, sold, or listed publicly,” Johnson concluded.
Author: Anna Farley
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