16 February 2021

Power Metal Resources plc ("Power Metal" or the "Company")

Shareholder Distributions Update

Power Metal Resources plc (LON:POW) the AIM listed metals exploration and development company is pleased to announce it is to take steps to enable the Company to make distributions to shareholders.

Paul Johnson Chief Executive Officer of Power Metal Resources plc commented:

"Power Metal continues to advance its business model centred around two key objectives, namely, to seek large scale metal discoveries through project exploration and to pursue financial self-sufficiency by building the Company's "balance sheet" working capital.

We have made a good start and as of close of business on Friday 12 February 2021 the Company's working capital including cash and listed investments amounted to circa £2.98 million.  The Company has no debt and is either on track or ahead of schedule with project funding requirements.

We now have ground exploration underway across multiple projects and expect to deliver a series of technical findings to the market, including the results of drill programmes, in the near future. 

With extensive exploration now underway we are also undertaking corporate work that we expect will see some of the Power Metal interests spun-out into their own vehicles listed on recognised stock exchanges in North America and the UK.  This will help us to organically build our working capital by exchanging certain project interests for a blend of shares and warrants in the listed entities, and various project level financial interests such as royalties in spun out projects.

Alongside building corporate working capital, and dependent on the quantum of any proposed spin out transactions the Company may wish to undertake distributions to shareholders.  To enable distributions to occur the Company must take certain preparatory steps which are outlined in further detail below".

BACKGROUND

Within Power Metal's project portfolio there are a number of business interests where the Company is considering disposals, joint ventures or other commercial agreements. This includes business interests that may become the subject of disposal into separate listed vehicles.

As payment in respect of commercial transactions the Company would expect to receive a financial return which will likely include a combination of cash, shares, warrants, royalties or similar.

The receipt of cash and other assets will help to achieve the Company's objective of building working capital toward financial self-sustainability.  However, the Company may also wish to distribute cash or blocks of shares issued as consideration to Power Metal shareholders and with that in mind we need to take steps to enable the Company to have the ability to undertake distributions.

At present the Company has carried forward losses and under UK company law cannot undertake distributions unless it undertakes what is technically called a Capital Reduction process (see below).

This process first requires the approval of shareholders at a General Meeting which we intend to undertake in due course, possibly in conjunction with the Company's Annual General Meeting following the release of the audited Financial Results for the year ended 30 September 2020.  In addition, the Company has to secure approval from the High Court of England and Wales (the "High Court"), further details of which are provided below.

Overall, this is a modest cost exercise and the Power Metal Board consider it should be undertaken to put the Company in a state of preparedness for any potential future shareholder distributions.

The taking of these measures does not imply that the Company intends to make such distributions in the near future.

CAPITAL REDUCTION (the process required to enable shareholder distributions to be undertaken)

The intention of the Company is to undertake a Capital Reduction exercise (the "Capital Reduction") to implement a reduction in the share capital of the company by cancelling the existing deferred shares and reducing or cancelling the share premium account.

The Capital Reduction is a standard and largely administrative process and will not change the number of ordinary shares in issue.

The Capital Reduction when complete simply permits a company carrying historical retained losses to distribute cash or other assets to shareholders.

This could not be done otherwise because UK company law prohibits such distributions when a company's accounts show historical retained losses.

In order to undertake the proposed Capital Reduction, the Company will require shareholder approval at a General Meeting ("GM").  Further details on this GM will be announced in due course when the documentation has been prepared.

In addition, the Capital Reduction requires High Court approval and the Company's lawyers will undertake this element on behalf of the Company.

Following and subject to shareholder and High Court approval, and compliance with the court order so issued from the High Court, the Company would be able to pay dividends or make distributions to shareholders.

DISTRIBUTION POLICY

The Company's initial priority is to build its "balance sheet" working capital through spin outs to further increase the financial strength of the Company.

Thereafter and subject to the approval of shareholders and the High Court of the Capital Reduction, the Company may wish to distribute cash or other assets to shareholders. This may occur in various circumstances and could include where the Company disposes of an interest or interests for cash or equity and wishes to return some of the value generated to shareholders. Such distributions may also require further shareholder approval under market rules.

To be clear any such distributions would only be made by reference to shareholders on the register at a specified record time and date.

The Company reserves the right to announce distributions without notice and it is the Company's intention that, subject to relevant laws and regulations, any distribution announcement will incorporate a contemporaneous record date.

DISTRIBUTION TAXATION REVIEW

The Company is to undertake a full review of taxation in respect of distributions to ensure the optimal distribution strategies whilst remaining in full compliance with UK tax law.

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For further information please visit https://www.powermetalresources.com/ or contact:

Notes to Editors:

Power Metal Resources plc (LON:POW) is an AIM listed metals exploration and development company seeking a large scale metal discovery.

The Company has a global portfolio of project interests including precious metal exploration in North America and Australia together with base and strategic metals exploration in Africa. Project interests range from early stage greenfield exploration to later stage prospects currently subject to drill programmes.

The Board and its team of advisors have expertise in project generation, exploration and development and have identified an opportunity to utilise the Company's position to become a leader in the London market for investors wishing to gain exposure to proactive global metals exploration.