Power Metal Resources PLC
Power Metal Resources PLC (POW) is a British company with mining interests in Africa. It has particular interests in Lithium, cobalt, copper and nickel. These four metals have gained much importance lately due to its use in modern-day high tech automotive traction batteries. With the major world economies giving a push to electric vehicles, partly in order to combat air pollution and partly to combat high petroleum prices, the fortunes of every downstream entity, be it battery manufacturers, metal extractors and metal miners look promising.
The Company, Power Metal Resources PLC, is a pre-production, exploration and drilling stage company. It has operations in Sierra Leone where it has a license in and operates within the Ferensola gold project. In Cameroon It has a license in the Nkamouna cobalt nickel- manganese project, which it had obtained with the acquisition of Cobalt Blue Holdings in August 2018, the Company started exploration work on this project post financial results announcement date on 14 November 2018. In Ivory Cost the Company, with the acquisition of Regent Resources Interests Corporation. The Company also acquired the right to earn into 70% of Lizetta-II chrome, nickel and cobalt exploration license, exploration work on this site commenced on this site on 16 October 2018, post results date. In the Democratic Republic of Congo, the Corporation has a 70% interest in the Kisinka cobalt-copper project, where sampling work is currently going on.
The Company was formerly known as African Battery Metals PLC, it is listed on AIM at the London stock exchange, and its shares traded with the ticker name POW. It has three subsidiaries, Blue Horizon (Sl) ltd, Cobalt Blue Holdings inc and Regent Resources Interests corporation all part of its continuing exploratory work in Africa.
The Company during May 2019 acquired an interest in Kalahari Key Mineral Exploration Limited in Botswana. The latter operates the Molopo farms project in Botswana with prospects for nickel and platinum group metals. The Company is attaching high priority to this project, where the exploration work is close to completion.
Financial highlights – (6 months ended 31 March 2019)
The Company is an exploration stage mineral mining company and does not have any revenues. It has several promising mineral prospects from where it intends to make a gain when they start production. Currently, it is only funding its projects with equity and has no exposure to long term debt.
The Company had faced major trouble at the London Stock Exchange in 2018, when its shares were suspended for trading from 11 December 2018, when it struggled to find resources to continue operations. However, with the successful equity fundraising exercise that the Company concluded in February 2018, trading on its shares commenced on the concerned stock exchange.
The Company in its interim revenue statement published for the half-yearly period ended 31 March 2019 has stated that it has incurred an operating loss of £335000 for the half-year period against an operating loss of £886,000 for the half-year period ended 31 March 2018. The total loss for the half-yearly period ended 31 March 2019 was £365,000 whereas for the half-year period ended 31 March 2018 it was £967,000. The basic and diluted loss per share from continuing operations for the half-year period ended 31 March 2019 was 0.17 pence, and it was 1.67 pence per share (1.5 pence from continuing operations and 0.62 pence from discontinued operations) for the half-year period ended 31 March 2018.
The less expenditure in this period was on account of the curtailed administrative expenditure of £335000 and nil losses on account of discontinued operations for the half-yearly period ended 31 March 2019 compared to £593,000 administrative expenditure and £293,000 loss from discontinued operations for the half-year period ended 31 March 2018.
(Source – Company’s Half Yearly report)
Solvency – The Company as on 31 March 2019 has intangible assets to the tune of £2.082 million, which is lower than what it was on 31 March 2018. This is on account of impairment of exploratory work done in the Democratic Republic of Congo and writing off of expenditure incurred thereon.
The Company’s total assets are £2.894 million, compared to total liabilities of £130,000 providing a coverage 22.26 times total assets over total liabilities. Its current assets stand at £785,000 and can cover all of the Company’s liabilities by 6.038 times. The current liabilities of the Company as on 31 March 2019 stood at £130,000 providing coverage of 2.07 times.
The Company has a strong solvency position.
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(Source – Company’s Half Yearly report)
Cash Generation – The company’s cash generation was stronger for the half-year as it raised £1 million via an equity issue in February 2019. The cash and cash equivalents generated for the period ended 31 March 2019 stood at £689,000, compared to cash generation of £601,000 for the half-year ended 31 March 2018.
There was less cash spending on operating activities this half-year (£303,000 for the period ended 31 March 2019 compared to £817,000 for the half-year ended 31 March 2018). However, the cash loss on account of foreign exchange translations was at £30,000 for the period ended 31 March 2019 while for the half-year ended 31 March 2018 it was £1000.
The Company has a comfortable cash generation to continue its operations for the next financial year.
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(Source – Company’s Half Yearly report)
Power Metal Resources PLC Share Price Performance
The Company opened trade on 31 July 2019 at 0.58GBX on AIM at the London stock exchange, from the previous day close of 0.52GBX, a gain of 11.53%, at the time of writing this report (2.00 AM, GMT) it was trading at 0.58 GBX. The Company has a 52-week high of 4.30 GBX and a 52-week low of 0.30 GBX. The Company has a market capitalization of £1.91 million.
The Company has multiple interests in Lithium, cobalt, nickel, copper, gold and platinum spread across Africa. The Company still wants to acquire more interests in projects active across that continent. However, doing so that will unnecessarily thin out its resources, as it will be divided among so many of its active projects. The suspension of trading of its shares on London Stock exchange in December of 2018 has put the Company and its shareholders at serious risk. The Company did resolve it by raising funds via the issue of £1 million in equity, but such an event deeply erode market confidence on the stock.
The Company, in its annual statement, has stated that it still wants to go ahead with its current strategy to acquire more interests in new projects. This can very well be viewed as a negative about this Company; it should instead focus more on projects already at hand and conserve cash till they see the end of each project’s exploratory lifecycle at the least, before taking up any new projects. The Company runs the risk of a repeat of the November 2018 fiasco.
The Company also faced challenges this year with the Ferensola gold project In Sierra Leone, the geological feature of the project is challenging, and the Company could not commence operations despite promising drilling and soil sampling results. The reason for this was that the Corporation was looking for a joint-venture or a farm-in partner, as it did not have resources to do it on its own, despite several expressions of interest, not partner could be finalized and the operations had to be suspended at the site, though the Company still holds the rights on this license.
On the Kisinka copper-cobalt project in the Democratic Republic of Congo, the companies drilling, and sampling work came out with a not so encouraging result. The samples revealed, cobalt yields to be in a range of 0.002% and 0.021% while for copper, it was close to 0.058%. At these grade levels, the extraction of these metals would have been uneconomical. Hence the Company was forced to abandon its operations at this site as well, though still with-holding the rights.
The company’s other two exploratory interests in Ivory Coast and Cameroon have commenced exploratory work in their respective sites, results of which will be known during the next financial year.
The Company has too many risk factors at its disposal for the time being. There is no clarity on any of its assets in terms of the exploratory work actually yielding any value. There is also no clarity on how much more cash outgo the Company might require into bringing any of its projects to fruition. This stock is very scarcely being traded on the AIM at the London stock exchange, that makes it a partly illiquid stock.