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Paul Johnson says Power Metal Resources’ financial position is secure and portfolio opportunities remind him of early-stage Metal Tiger

Power Metal Resources has a diverse portfolio of assets across sub-Saharan Africa

Power Metal Resources -

If it wasn’t for the mandatory close period in which directors aren’t allowed to buy shares, Paul Johnson of Power Metal Resources Ltd (LON:POW) would be in the market in a big way right now.

He can’t be though, because the company’s auditors have had to put their operations on go-slow due to the coronavirus and new protocols, meaning that Power Metal’s results have been delayed a little, meaning in turn that Johnson, a consummate trader, is unlikely to be able to go into the market any time soon.

To some degree he felt that the company’s credibility was at stake too, although investors may be inclined to be forgiving in the current circumstances.

“We wanted to file on time,” he says. “We worked very hard to and were right on schedule until the impact of Covid-19 on auditor work programmes. After all, you want to appear to be efficient when the company has been restructured and refinanced, and is building itself up again.”

Still, it could be worse.

In as tough a market as anyone has seen since 2008 at the very least, Power Metal Resources is in relatively good shape, even if the shares have been beaten down in line with peers, to a 12 month low of 0.21p.

The company raised £700,000 back in December, meaning, as Johnson says, that “there’s cash in the system.”

Back then, some of the new money was earmarked to allow Power Metals to exercise its option to earn in to the Molopo Farms complex in Botswana, currently being worked by Kalahari Key, a company in which Power Metals already owns an 18.26% stake. It’s a project that looks highly prospective for nickel, copper and platinum group metals.

Four months on, the team are working through environmental approvals, and drill preparations and so there is still some time before launch of the Botswana drill programme.  So with most of the current work being office based, there hasn’t been much disruption to plans as yet.

“The company is in a reasonably flexible position finance wise, with a mix of cash resources and an investment portfolio,” says Johnson.

“We spend when and what we want to, apart from core listing related advisory fees. But importantly, if we ever needed capital I am confident we can access it on reasonable terms which I am done in many companies many times over the last few years. ”

That’s one tick in the box.

Another is that, to some extent, Johnson has been here before.

“Power Metal is a little bit of a boutique play,” he says.

“It reminds me of the situation with Metal Tiger in 2014 and the build up that we did from the old Brady Exploration. What helped us then was our investment in Kibo Mining when we made £1mln quite rapidly from a £150,000 outlay. Suddenly we came onto peoples’ radars.”

Is there a similar opportunity with Katoro Gold PLC (LON:KAT), in which Power Metals has a sizeable stake?

Katoro is run by the same team that’s behind Kibo, so Johnson is on familiar ground here, albeit that the commodity in question, gold, is different. But the opportunity could in the end be even bigger. Katoro recently executed a deal that could take it into gold production in short order, allowing it to generate significant cash flow to complement the development of its significant landholdings in Tanzania.

The potential is there, and Johnson makes no bones about his aspirations for the company.

“The next thing I’d like to see is a proper valuation of Katoro,” he says.

“If that goes to 10p per share then we’re sat with £1.875mln on the balance sheet. And I’m pretty sure that if you look at Katoro you’re as close as you can get to as optimum a business model in this market: tailings, gold, strong economics and no complicated mining. I don’t expect there’ll be difficulty in getting the finance to get that project moving.”

Meanwhile, operations continue elsewhere on Power Metal’s portfolio of assets, with generally little impact from the coronavirus to date.

At the company’s 70%-owned Kisinka copper-cobalt project in the Democratic Republic of Congo work is continuing unhindered. This includes a pitting programme chasing copper and cobalt mineralisation after a successful termite mound sampling programme last year, and the consequent analysis.

And the company also has interests in other projects in Ivory Coast, Cameroon and Tanzania.

But, says Johnson, “the main thrust and drive operationally for us is DRC and Botswana.”

And, notwithstanding current impediments to the normal course of business, he still has one eye on growth.

“I would like us to build a bigger Botswana portfolio,” he says. “Botswana is a great place to build an exploration portfolio being safe, secure and supportive of respectful in-country operators.”


Quick facts: Power Metal Resources

Price: 2.1 GBX

Market: AIM
Market Cap: £18.23 m

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