Power Metal Resources (LSE:POW) rocketed by nearly 50% to 0.3p a share on Wednesday after revealing plans to take operatorship of a major potential rare earth elements project in Botswana.
The firm has conditionally acquired a 51% stake in the Ditau Project from its AIM-listed peer Kavango Resources (LSE:KAV) for £150,000 paid in shares at 0.42p each.
The Ditau project is made up of two licences covering 1,386km2 with the main focus being ten large geological formations known as ‘ring structures’. One of the largest of these is 7 kilometres by 5 kilometres across.
Power Metal’s chief executive Paul Johnson said the acquisition offers “a great deal of promise” and that Ditau is “highly prospective” for commercial deposits of rare earth elements and niobium. It is especially unusual to find these kinds of elements in high enough concentrations to make exploration economically viable.
Power Metal said mining would target carbonatite magmatism on site, the primary source of niobium and other rare earth elements.
Niobium is a ductile metal mainly used as an alloy for steel, which can then be turned into pipeline construction and superalloys for heat resistant equipment like jet engines.
Carbonatites are the most important sources of highly sought-after rare earth elements like neodymium and praseodymium. These are mostly used for manufacturing neomagnets, which are essential parts of electric vehicles. Tesla, for example, uses a magnetic engine in its Model 3 car.
The deal between the two companies is subject to a 30-day due diligence report. This will start when international travel restrictions due to the coronavirus pandemic are lifted, or on 1 September 2020, whichever is sooner.
If the acquisition completes, Power Metal will become the operator of the Ditau Project and will confirm a new project work programme.
Power Metals has also paid Kavango £38,000 in the form of a convertible loan note. This is either repayable on 31 March 2021 or convertible at any time into Kavango shares at 0.8p, with a zero coupon.