Power Metal Resources (LSE:POW) has exercised its option to earn-in to a 40% direct stake in the highly prospective Molopo Farms Complex (MFC) nickel-copper-PGM project in Botswana.

On Tuesday, the business said it had written to the 2,7525km2 asset’s owner Kalahari Key Mineral Exploration to confirm that it will take the position in exchange for $500,000 worth of funding in 2020. This money, which Power Metal said is fully covered by its existing cash resources, will be used to support the drilling of critical targets for mineralisation.

Alongside its 40% direct interest, the firm owns an 18.26% position in Kalahari Key’s equity, giving it an effective 50.96% position in the MFC property.

In the second quarter of 2019, a helicopter-borne electromagnetic (EM) survey was completed over the MFC project feeder zone, identifying 17 sub-surface conductor targets.  Subsequent follow-up ground EM surveys over 14 of these targets – the results of which were released in October 2019 – produced five high priority targets across the asset. These are all thought to be of ‘considerable size and scale’, and potentially even home to massive nickel sulphides due to their location, geological setting, and associated magnetic response.

Eight drill holes have now been designed to penetrate all targets, and Kalahari Key has engaged a local consulting firm to complete a pre-drilling environmental management plan for the project. Meanwhile, Power Metal and Kalahari Key are awaiting the final results of a gravity survey over the priority target to reduce the chance that they are graphite rather than sulphide bodies as much as possible. Finally, the two businesses are in discussions with drilling conductors, with several expressing interest in completing initial work on the MFC in exchange for a combination of equity and cash.

Power Metal’s chief executive Paul Johnson said the business chose to earn-in to a significant position in the asset following the ‘very encouraging’ results yielded from work to date.

‘In recent weeks we have held a number of meetings and discussions with the KKME team and there is clear and growing confidence in the potential of the MFC project for a nickel discovery,’ he said on Tuesday. ‘We are now working with the KKME team on preparations and options for an upcoming drill programme and will provide further updates to the market as material developments occur.’

He added that, if initial exploration work at proves to be successful, the project’s potential valuation could rise ‘dramatically’ and attract interest from larger mining companies.

‘I would like to be clear that exploration drilling of the nature we plan to support is high risk, albeit the in-depth preparatory work undertaken by KKME helps to mitigate that risk and increase the chance of success,’ said Johnson. ‘That said, I also want to be clear why we are enthusiastic and have decided to proceed with the earn in opportunity. It is rare for investors in the junior resource space to have exposure to near term drill campaigns that could have the potential to yield a large-scale nickel sulphide discovery and we believe that the MFC project is one such opportunity.’

Author: Daniel Flynn

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