Disposal of Victoria Goldfields JV Interest

Power Metal Resources PLC (AIM:POW), the London listed exploration company with a global project portfolio, announces the signing of a Heads of Terms Agreement ("HoT" or the "Agreement") to conditionally dispose of the Company's entire 49.9% interest in New Ballarat Gold Corporation plc ("NBGC") (the "Transaction") which wholly owns Red Rock Australasia Pty Limited ("RRAL"), the local operating company holding exploration interests in the Victoria Goldfields, Australia and in South Australia.

Sean Wade, Chief Executive Officer of Power Metal Resources plc, commented:

"Power Metal has now agreed to dispose of its interest in NBGC to joint venture partner Red Rock Resources plc.

"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."

HoT HIGHLIGHTS

The Transaction

Power Metal to conditionally dispose of its 49.9% interest in NBGC and, POW's interest in loans to NBGC and RRAL (together the "Interests"), to joint venture ("JV") partner Red Rock Resources plc ("RRR") for consideration up to £1,500,000 potentially payable in cash, RRR ordinary shares and RRR warrants, and other items of contingent consideration (the "Consideration").

The Transaction is conditional upon the completion of due diligence by RRR (to be completed by 19 April 2024), funding, the approval of RRR shareholders at any General Meeting called to approve the issue of the initial RRR share and warrant consideration, relevant board and regulatory approvals, and completion of final documentation (the "Conditions Precedent").

Subject to the Conditions Precedent being satisfied, the transaction will complete ("Completion"). Completion must occur within 13 weeks of 8 March 2024, being the date of the HoT, or the Agreement will be terminated (the "Long Stop Date").

The Consideration

The Consideration of up to £1,500,000 is payable as follows:

• Upon Completion, £250,000 in convertible loan notes ("CLNs") with a conversion price equal to the price of any placement of new ordinary shares of RRR raising proceeds of over £200,000. Should conversion not be undertaken within 6 months of the HoT date, the CLNs of £250,000 are repayable immediately as cash.
• Upon RRR shareholder approval for this item within the Consideration, £250,000 payable through the issue of 166,666,667 RRR new ordinary shares ("RRR Shares") at a price of 0.15 pence per Share (or by cash at RRR's election) and 166,666,667 warrants to subscribe for RRR Shares each exercisable into one new RRR Share at a price of 0.25p and exercisable during a period expiring 3 years after the date of their issue.
• £250,000 payable in cash two months after Completion.
• £250,000 payable in cash nine months after Completion or, at RRR's election, through the issue of RRR Shares equal to the value of £250,000, the price of which to be calculated by reference to the last 10 trading days' volume-weighted average price ("VWAP") immediately prior to the date nine months after Completion, provided that if RRR Shares are issued then accompanying warrants with a three year life to expiry and each converting into one RRR Share at a 50% premium to the price of issue of the RRR Shares will also be issued on the basis of one warrant for every two RRR Shares issued.
• £250,000 payable on an announcement by RRR via a regulatory news service, or a declaration by a Qualified or Competent person (as those terms are defined in the AIM Note for Mining Companies), of a 20,000 oz gold or gold equivalent JORC Resource according to the JORC 2012 Code (or any applicable similar standard or replacement JORC standard) from within the boundaries of the current licence area. The £250,000 is payable in cash or at RRR's election, through the issue of RRR shares to the value of £250,000, calculated by reference to the last 10 trading days' VWAP immediately prior to the trigger for this payment, provided that if RRR Shares are issued then accompanying warrants with a three year life to expiry and each converting into one RRR Share at a 50% premium to the price of issue of the RRR Shares will also be issued on the basis of one warrant for every two RRR Shares issued.
• £250,000 payable on an announcement by RRR via a regulatory news service, or a declaration by a Qualified or Competent person (as those terms are defined in the AIM Note for Mining Companies), of a 200,000 oz gold or gold equivalent JORC Resource according to the JORC 2012 Code (or any applicable similar standard or replacement JORC standard) from within the boundaries of the current licence area. The £250,000 is payable in cash or at RRR's election, through the issue of RRR shares to the value of £250,000, calculated by reference to the last 10 trading days' VWAP immediately prior to the trigger for this payment, provided that if RRR Shares are issued then accompanying warrants with a three year life to expiry and each converting into one RRR Share at a 50% premium to the price of issue of the RRR Shares will also be issued on the basis of one warrant for every two RRR Shares issued.

Additional HoT terms

The HoT contains additional terms including, inter alia:

• POW will retain its existing Gross Production Royalty ("GPR") of 0.75% over the footprint covered by RRAL exploration interests.
• RRR will ensure key licence retention and specifically those licences containing the Ajax and Berringa mines.
• POW will retain the right to purchase any individual exploration licences that are to be surrendered by RRAL or where expenditure commitments will not be satisfied and a reduced expenditure has not been agreed, for consideration of A$1 per licence.
• From the date of the Agreement until Completion or the Long Stop Date, whichever shall be sooner, POW and RRR commit to contribute A$20,000 per month towards the costs of RRAL, with any further costs to that date being met by RRR.
• RRR has committed that no significant exploration interests of, or controlling interest in, NBGC/RRAL may be transferred out, or disposed of, or agreed to be so transferred or disposed by NBGC/RRAL, to another party without an opportunity being given to POW to match the terms offered by such other party; and
• Should RRR dispose in whole or part of any of the Interests within 12 months of the HoT, 15% of disposal proceeds after agreed costs will be payable to POW, or 5% in months 13-24 (the "Disposal Premium"). (Note: any amount payable under the Disposal Premium is capped such that the total aggregate Consideration for the Transaction shall not exceed 74.9% of Power Metal's market capitalisation as at the date of the Agreement, using the mid-market closing price of Power Metal ordinary shares on the trading day immediately prior to the date of the HoT).
• POW retains certain buyback rights in respect of its 49.9% holding in the event of a payment default by RRR exceeding 60 days from due date, save as caused by force majeure.
• POW holds a separate convertible loan note which together with interest and charges amounts to £94,400 of which £50,000 is payable in cash upon Completion and the remaining £44,400 is payable in cash two months after Completion, as part of the HoT.

The Interests

The Power Metal book value of NBGC/RRAL Interests at the current date is £870,784.

The Interests include the following licenses (granted and in application) held by RRAL: