Proposed Capital Reduction

Power Metal Resources plc (AIM:POW, OTCQB:POWMF), the London-listed natural resources exploration company and project incubator with a global project portfolio, announces a proposed normal course reduction of capital (the "Capital Reduction"), to ensure there are sufficient distributable reserves to facilitate a return of capital to shareholders.

The Company recognises the importance of providing returns for the Company's investors and considers it highly desirable that the Company has the maximum flexibility to return value to Shareholders via a distribution of reserves.

The capacity of a UK company to make distributions is restricted by the sufficiency of distributable reserves. Under the Companies Act, a company may, with the sanction of a special resolution passed by its Shareholders and confirmation of the High Court of Justice in London ("the Court"), reduce or cancel its share capital, share premium account, capital redemption reserve and other reserves. It may then apply the sums resulting from such reduction to its distributable reserves. These sums may then be treated as distributable for the purposes of making future returns to Shareholders.

The Company will, accordingly, be seeking Shareholder approval to cancel the entire amount standing to the credit of its Share Premium account as at the date when the relevant Court order is made. Subject to confirmation by the Court and the reduction of capital taking effect, the amount so cancelled will be credited to the Company's distributable reserves. This will improve the Company's distributable reserves position and will provide the Company with flexibility to support, amongst other things, Ordinary Share buy-backs and the payment of dividends or other distributions to Shareholders in the future.

The Company will, in due course, update Shareholders on the timing of a Notice of General Meeting to approve the Capital Reduction and the subsequent application to the Court.