Power Metal Resources scraps JV with Red Rock Resources to pursue new ventures

14 March 2024 10:41

Power Metal Resources (AIM:POW) has signed a Heads of Terms (HoT) agreement, transferring its 49.9 per cent interest in the New Ballarat Gold Corporation (NBGC) to Joint Venture (JV) partner Red Rock Resources in exchange for potential consideration of £1,500,000.

This development closely follows yesterday’s announcement where POW expressed its optimism regarding the Power Arabia Project.

The agreement

Following the completion of due diligence by Red Rock on April 19, the terms of the agreement will be finalised, with a requirement for them to be solidified within 13 weeks thereafter.

The consideration will be disbursed in five separate payments as outlined below.

Initially, £250,000 will be paid in convertible loan notes, with a conversion price tied to any placement of new Red Rock shares exceeding £200,000.

Subsequently, subject to shareholder approval, another £250,000 will be paid through the issuance of Red Rock ordinary shares.

Following this, two additional payments of £250,000 each are expected, one within two months and the other nine months post-completion, with the latter payment being either in cash or shares.

Finally, £500,000 will be paid in two instalments after Red Rock announces specific JORC Resources, totalling 20,000 oz and 200,000 oz gold or gold equivalent.

Retained provisions

Despite the anticipated disposal of the JV, the HoT includes supplementary provisions.

Notably, Power Metal will retain its existing 0.75 per cent Gross Production Royalty (GPR) over the area covered by Red Rock Australasia Limited (RRAL) exploration interests, while also securing the option to acquire any individual exploration licenses surrendered by RRAL.

Moreover, Power Metal will retain specific buyback rights concerning its 49.9 per cent stake, triggered if Red Rock defaults on payments exceeding 60 days past their due date within 13 weeks after March 8.

Company commentary

Sean Wade, the Chief Executive Officer of Power Metal Resources, stated that the disposal will create opportunities for POW to pursue new ventures and expand its business interests.

“Power Metal has now agreed to dispose of its interest in NBGC to joint venture partner Red Rock Resources plc,” he said.

“The Transaction enables the ownership of NBGC to be focused in one entity which is the optimal holding structure for its continuing development. It is also part of a streamlining process of the Power Metal portfolio converting the NBGC interest into a balance sheet investment holding and additional incoming cash.

“The Transaction is the fourth undertaken by Power Metal in various structures over the last two years and which have together significantly built the underlying working capital of the Company and its overall balance sheet strength.

“This disposal will further enable Power Metal to concentrate its managerial, operational and financial resources on retained high-value business interests and new opportunities.”

Power Metal Resources AIM-listed share-price is currently trading at at 0.80 pence (10:30 am UTC+ 8 hours).

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