Power Metal Resources plc has signed a binding £2 million subscription as loan notes with a possible further £10m initial investment for a proposed Canada uranium joint venture.
DISCUSSIONS
Through its local subsidiary, the company holds 16 properties over a combined 92,407ha (924.07km2), surrounding and within the Athabasca Basin in northern Saskatchewan.
The investment follows Power Metal’s statement in March that it was considering merging its uranium portfolio with some of its other assets to secure investment.
ACAM LP will subscribe for 2m unsecured notes for a five-year term with 13,333,333 attached warrants exerciseable at a price of 15 pence per share.
Power Metal can choose whether to make interest payments in cash or shares, and will use 20% of any future fundraise to redeem the notes for cash.
The company will also use a portion from the proceeds of any assets’ sale in excess of £300,000 to redeem notes for cash.
Power Metal can additionally redeem the notes at any time without fee or penalty.
ACAM also has an eight-week exclusivity period for the proposed joint venture and a non-binding term sheet for an initial £10m investment into Power Metal Canada for a 70% equity interest.
Proceeds would go towards an exploration programme including drilling.
Power Metal would potentially receive additional cash of up to £4m, conditional on a sale transaction completing or other value realisation by ACAM.
The balance of the proceeds of the notes will be used for general corporate purposes.
Two of the portfolio’s properties, Reitenbach and E-12, which were previously under conditional sale to Power Metal’s subsidiary Uranium Energy Exploration (UEE), are now “unlikely” to be sold.
Power Metal said that if the joint venture completes, UEE’s IPO would be aborted with the costs met through proceeds of the notes.
Chief executive Sean Wade, who is a director of Power Metal and UEE, added: “We announced we were looking at various options to maximise value from our uranium portfolio and whilst these discussions are still taking place, I am pleased to announce that we are making progress to finalise a transaction that we are confident will crystallise significant value for our shareholders.
“Whilst there can be no guarantee that the joint venture will complete, we are confident that we will achieve a successful outcome.
“ACAM have already made a significant commitment to the company pursuant to the subscription and we look forward to working with them to successfully conclude the proposed joint venture.”