Power Metallic's Lion MRE Is Out. Next Stop: PEA in H1 2027

0:00Thank you.

0:30Terry Lynch: Next is demonstrating scale. Terry, welcome to Mining Stock Daily. Great to be here, Michael. Good to see you again. Now, Terry, highlight the MRE for us. What do you want to underline? Yeah, I think the most important thing is the compelling economics it builds for the floor of the project, right? This was done with drilling up to April 19th, so probably by the time November, and November's up and we start the PEA, we'll have another 35 ,000 meters in. And so that's, this is just the floor and the floor shows, you know, I think a pretty robust set of numbers. Analysts suggest that you can probably build this thing for under 200 million because 59 % of it is open pitable, you know, with a crazy high grade.

1:13So, and the thing will pay out in a year. So, so that, those are the numbers that really stand out to us internally that, that such high degree of certainty with 85 % of it indicated big portion of it in the open pit, making it very economical. to get the thing rolling, and the sky is still on the expiration. You know, we had drilled for this to a depth of 610 meters. We indicated in the press release that we've got expiration results to 900 meters now that will come out by the end of September, indicating that we're still in the massive sulfide zone. So already lots of resources to be added to it.

1:53So the good news keeps on coming, we believe. So it was good to get the stake in the ground. And, you know, always, you know, you'd always like to get more tonnage. But, you know, what we got is more than enough to have a robust mind right now and lots more to come.

2:12Terry Lynch: Now, I hear you just regarding the floor. The stock did slide on the release of the MRE. Just mostly a case of investors who are expecting a larger resource. I noticed in your socials that you're responding to some questions about that. Yeah, yeah. You know, I think a couple things. You know, almost everyone is a sell-the-news company. It seems it doesn't really matter how good your news is. We've had some ridiculous news releases over the years, and they still sell them. I don't know why. And it's another case here because, you know, obviously, 7 million shares traded yesterday. So some people sold.

2:44But, you know, why did they buy? You know, why did the 7 million shares get bought? Well, they got bought because smart investors did the math and realized it's probably worth two and a half, three times what the price is at right now. and it's pretty much proven up. And there's obviously compelling upside. So these things happen in the life of a project where you trade out of one set of investors and into another. And that's probably what we did yesterday. And understandable, but we think the traders made a mistake and they'll rue the day.

3:14Terry Lynch: Talk about the mine sequencing. You mentioned it. There was both Open Pit and Underground that was mentioned in the news release for the MRE. What is the sequencing and how do you get to the high grade? Yeah, so the high grade is just God's gift to us. Thank you, big guy. I really appreciate it. And, you know, the open pit portion is 3.45%. 59 % of the tons are open pitable. So that's really good. So obviously an open pit, you know, it's, I think it's, I don't know, 250 a ton to operate versus 70 bucks underground so big economic difference right so so that that cash flow that you get from uh from the open pit funds everything right so that what's what you know drives the uh capex being so low and the operating profits being so high so that uh that's the real sort of um you know prize um now the the good news is you know this project type the orthomagnetic nickel copper pgs they're they're very rare been about 20 in the history of the world.

4:18The world's biggest, most profitable mines, including Nyrilsk, the archetype of this type of project, but others like Marinsky's Reef in South Africa, Xinxuan in China, you know, Ciccati, the last known discovery of this type about 18 years ago by Anglo-American and Finland, they're all very big. I mean, the average metal contained tons is probably over three million, the smallest maybe a million and a quarter. We're about, I don't know, around 400 ,000 or so. And so obviously, a long ways to go to get to be the smallest. And we don't think we'll end up there. We think these things take time to find and develop.

4:56But the good news is we've made an enormous first start and have proven it. And we can, I think, advance in two paths. One of continued exploration to grow the resource, but at the same time, advance towards becoming a mine. And people say, well, why would you do that? Well, two reasons. One, if you can build a mine for a couple hundred million and pay it out in a year, I think that's good. That's good economic principle. So then you can fund from cash flow as opposed to diluting your shareholders. So that's number one. Number two, there's a lot of government money around, but they want it for mines, not for arm-waving.

5:30So you've got to get through the reports and prove them that you're going to be a mine. And then you can get a lot of really attractive, even free money from the governments. And that just benefits all the shareholders. So that's why we made the decision. But at the same time, you know, because we're, you know, a high-grade mine and we can advance our exploration very quickly, you know, while we're going through the process of the reports, we can continue to upgrade the resource. So we can still have a growth story on the resource. And that's what we're doing here. The MRE was in April. The PEA, which we'll start basically now, we'll get out sometime in H1, hopefully early in H1, hopefully in Q1.

6:09and it'll carry the resources drilled up until the end of November. So all of a sudden, you add another six months of growth, right? And then when you get the PEA done, we'll move through to our feasibility study. We'll probably be able to drill through the end of 2027, pretty much, to add to the feasibility. So there's a lot of neat ways that you can approach this on an exploration and development path to continue to keep the market's attention on the growth, but also drive the government's attention on the advancement of the project towards being a mine.

6:46Terry Lynch: What were the factors in terms of it making a lower cost CapEx for building a mine? And also, Terry, you have to know from people that are putting out reports on this as well, there's been a lot of cost creep just because of what it happened to do with material costs and also with labor costs as well too. what uh as you kind of look forward as well to uh how do you think you're going to be keeping a cap on capex costs yeah well you know the great thing is you know the open pit is basically a shovel and and labor you know in diesel you know i mean it it's uh whereas in in in underground it's a it's a lot more complicated engineering structural you know it's just just a lot more moving pieces so i think it's just uh you know just the stats of it is just radically different and cost curves for both approaches.

7:33And you have a lot less moving parts in an open pit mine, so a lot less cost to contain. So I think we're likely to be in very good shape there. And the inflation hits two things, Michael. It hits the commodity prices too on the upside. So yeah, there may be inflation, but inflation is probably likely to be our friend. I think we did the economics at 480 copper. copper skulls to$7 today or something like that. What might it be by the time we're ready to produce this thing in 2031, 2032? It could be$10. It could be$20. I don't know. It's probably going to be a lot more than$7.

8:16Terry Lynch: In the news release, you asked where did the nickel go. Any thoughts on that in terms of getting the nickel up? Yeah, I think our thinking is it's obviously deeper in the structure. I mean there's always the chance that it got eroded away or faulted out but in the history of these projects the 20 that have been discovered if you look at it there's basically for every on average for every ton of nickel you yep pardon me every ton of copper you find you find five tons of nickel because they are nickel sulfide projects so so what happened here is we probably found almost three to one copper to nickel.

8:53And the question is, you know, where is the nickel? Well, the nickel is down there. And probably the way to visualize it is that if you think about your hand and your fingers on your hand represent the line zone or the pipes and your palm represents the nickel, the nickel is going to be deeper. It's a heavier, it tends to sort of go deeper. Like if you look at Raglan, for example, the great Glencore mine up in Northern Quebec, it's at you know 12 1500 meters but they had to draw all the way down there to get it going and and you know it's really quite an engineering feat to do that where luckily for us we're drilling cost effectively we're making money mining all the way down and generally these things will be connected at the bottom so it's quite likely as as we drill the line zone out we'll find where it comes from and that could be uh super you know impactful the uh the cool thing about these projects historically is that the mother zone is usually, you know, multiple times bigger than the line zone or the fingers.

9:57So there are the, you know, the chutes, the pipes. So it could really be, you know, that's what would make it a world-class project, which is what we always sort of thought it had the potential to do. And, you know, from an investor perspective, you know, I think it's a very asymmetric risk, right? If you're an investor, that's the thing you should cue in on. You should cue in and say, hey, how much risk does it have in this investment? How much upside? So what's the risk in Power Metallic? Well, you know what? We've probably, you know, we've bounced down to 80 cents a few times in the last 18 months and it's always bounced up from there.

10:31So maybe that's the downside really. And if you looked at it and the, especially now that this, you know, results is out and, you know, clearly build the mine. Now, the upside, well, the upside is, it's got to be at least, you know, we potentially get to be the average, you know, project here, which would be 3 million tons, which would be, you know, almost seven, eight times where we're at today. And if we believe currently we're at, you know, basically, I'm thinking we're like 30, 40 % of our fair value. Think about it. It's like it's probably 20 times. So your downside is, you know, maybe 30, 40%.

11:08your upside is, you know, 20x. So those are the types of deals, you know, that, you know, on the quick and dirty that you want to look at and obviously do more due diligence. But, and there's a few of them in the mining sector, but Power Metallic is definitely one of them. And we think it's something for people to be considering.

11:25Terry Lynch: What's the current cash position now at Power Metallic, Terry? And how far do you think the current funding is going to take you? Yeah, we just raised 28 million in June. So we think we're good, certainly through the end of the year. we've told people that we're going to we've applied to NASDAQ in fact the last issue that we had to do for NASDAQ was to deliver a technical report which is what the MRE is and we'll drop that and then hope to get listed in NASDAQ somewhere between October 15th and November 15th and when we do that we have to, we'll use the American Depository Receipt Program, the ADR and that will require us to waste 15 million US at that time so I think Well, obviously, other than that raise, we are well-funded, so no urgent need for cash.

12:14Terry Lynch: So then, I guess the two milestones looking ahead is going to be both NASDAQ and then getting that PA, which you're kind of guessing, H1, Q1 of 2027. And I guess that will be the next milestone in terms of seeing what the drill results and the scope and the size of this thing is going to be correct? Well, you know what, we're going to give an exploration update in about two weeks sometime in that sort of, we're just waiting on the assays on those deeper holes. That'll be super exciting for shareholders because that'll show the continuity of the, of the, of the resource. And that will have direct implications into how much time there is going to be and directly create value.

12:54I think it'll really send the stock, you know, that would be, I would think, super attractive. And so we'll have ongoing assay releases, which we think will continue to grow the resource. And that should, you know, each release should grow the resource and therefore grow the value. And then, of course, the NASDAQ listing should definitely be a catalyst because access to better capital markets should be beneficial to all shareholders. And then, of course, the PEA will sometime between Q1 and Q2 next year will be the next big one.

13:30Terry Lynch: Gary Lynch, thank you for speaking with Mining Stock Daily. Michael, thanks for having us. Cheers for now. The information presented should not be considered investment advice. Mining Stock Daily and its affiliates are not responsible for any loss arising from any investment decision in connection with the material presented herein. Please do your own research or speak with a licensed financial representative before making any investment decisions.