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#SVML Sovereign Metals LTD – Half-year Report

INTERIM FINANCIAL REPORT

FOR THE HALF YEAR ENDED

31 DECEMBER 2024

 

abn 71 120 833 427

ASX: SVM; aim:SVML; OTCQX: SVMlf

 

CORPORATE DIRECTORY

Directors
Mr Benjamin Stoikovich          Chairman

Mr Frank Eagar                        Managing Director and CEO

Mr Ian Middlemas                   Non-Executive Director

Dr Julian Stephens                  Non-Executive Director

Mr Mark Pearce                      Non-Executive Director

Mr Nigel Jones                                      Non-Executive Director

 

CFO and Company Secretary
Mr Dylan Browne

 

London Office
Unit 3C, 38 Jermyn Street, London
SW1Y 6DN, United Kingdom
Telephone: +44 207 478 3900

 

Cape Town Office

Ground Floor, Block C,
The Terraces, Steenberg Office Park
Cape Town, South Africa

Telephone: +27 21 065 1890

 

Operations Office

Area 4

Lilongwe

Malawi

 

Registered and Principal Office
Level 9, 28 The Esplanade
Perth WA 6000
Telephone: +61 8 9322 6322

 

Stock Exchange Listings
Australia

Australian Securities Exchange
ASX Code: SVM – Ordinary Shares

 

United Kingdom

London Stock Exchange (AIM)

AIM Code: SVML – Depository Interests

 

Quotations

United States

OTCQX Best Market

OTCQX code: SVMLF

Nominated Advisor & Broker

SP Angel Corporate Finance LLP

Prince Frederick House

35-39 Maddox Street

London W1S 2PP, United Kingdom

Brokers

Stifel Nicolaus Europe Limited
150 Cheapside

London EC2V 6ET

United Kingdom

T: +44 20 7710 7600

 

Berenberg, Gossler & Co, KG, London Branch
60 Threadneedle Street
London EC2R 8HP
United Kingdom
T: +44 20 3753 3132

 

Share Register
Australia

Computershare Investor Services Pty Ltd
Level 17
221 St Georges Terrace
Perth  WA  6000
Telephone:                  1300 850 505
International:              +61 8 9323 2000
Facsimile:                     +61 8 9323 2033

 

United Kingdom

Computershare Investor Services PLC
The Pavilions,
Bridgewater Road,
Bristol BS99 6ZZ
Telephone: +44 370 702 0000

 

Solicitors
Thomson Geer

Simmons & Simmons

 

Auditor
Ernst & Young – Perth

 

Bankers
Australia – National Australia Bank Limited

Malawi – Standard Bank

 

CONTENTS

 

Directors’ Report

Consolidated Statement of Profit or Loss and Other Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Directors’ Declaration

Competent Person Statement

Auditor’s Independence Declaration

Independent Auditor’s Review Report

 

DIRECTORS’ REPORT

The Directors of Sovereign Metals Limited present their report on Sovereign Metals Limited (Sovereign or the Company or Parent) and the entities it controlled at the end of, or during, the half year ended 31 December 2024 (Consolidated Entity or Group).

REVIEW AND RESULTS OF OPERATIONS

KASIYA RUTILE-GRAPHITE PROJECT

Sovereign is focused on the development of its Kasiya rutile-graphite project (Kasiya or the Project) in Malawi. The recently completed Optimised Pre-Feasibility Study (OPFS) confirmed Kasiya as a potentially major critical minerals project delivering industry-leading economic returns and sustainability metrics.

The Company’s objective is to develop a large-scale, long life rutile-graphite operation, focusing on developing an environmentally and socially responsible, sustainable operation.

A map of a project Description automatically generated

Figure 1: Kasiya Regional Project Location

HIGHLIGHTS DURING AND SUBSEQUENT TO PERIOD END

Optimised PFS Results Reaffirm Kasiya’s Globally Strategic Significance

·           In January 2025, the OPFS was completed with oversight from Sovereign-Rio Tinto Technical Committee

·           Results of the OPFS reaffirm Kasiya’s potential to become the largest and lowest-cost producer of natural rutile and natural flake graphite while generating exceptional economics

·           Various optimisations have led to superior project delivery, operational flexibility, environmental and social outcomes compared to the 2023 Prefeasibility Study (PFS)

Pilot Phase Advanced to Rehabilitation Stage following Mining Trials and Backfilling

·           In December 2024, material mined and stockpiled during the Pilot Mining and Land Rehabilitation (Pilot Phase) was placed back in the test pit, filling it to its original ground level

·           On-site soil remediation and land rehabilitation activities are underway, testing Sovereign’s proposed rehabilitation approach and demonstrating how mined land can support sustainable farming post-closure

Rio Tinto Invests Additional A$19m Increasing Shareholding to 19.9%

·           In July 2024, Rio Tinto invested a further A$18.5 million via the exercise of options to increase its shareholding in Sovereign. To date Rio Tinto has invested A$60 million for 19.9% of Sovereign

Positive Test Results for Use of Kasiya Graphite

·           Very high quality Coated Spherical Purified Graphite (CSPG) anode material produced from Kasiya graphite concentrate with performance characteristics comparable to highest quality natural graphite battery material produced by dominant Chinese anode manufacturers

·           In November 2024, Sovereign announced that preliminary tests confirmed that graphite concentrate produced from Kasiya exhibits prerequisite characteristics for selling graphite to the refractory materials sector

·           In February 2025, further test work confirmed Kasiya’s graphite also has the key characteristics required for use in expandable (fire retardant) and expanded (gaskets, seals, and brake lining) applications

Infill Drilling Program Complete

·           In October 2024, Sovereign announced the completion of an infill drilling program designed to upgrade Kasiya’s Mineral Resource Estimate (MRE) and to facilitate conversion of Ore Reserves from Probable to Proven category, with the upgrade due in the coming months

Next Steps

·           Sovereign will continue to advance the Definitive Feasibility Study (DFS), provide updates on the rehabilitation component of the Pilot Phase, publish an upgrade to the MRE, continue with further graphite testwork to support potential offtake discussions and further its community and social development programs in Malawi

A large area of dirt with a hole in the middle Description automatically generated with medium confidence An aerial view of a farm AI-generated content may be incorrect.

Figure 2: Pilot Phase test pit during mining trials (left) and subsequently backfilled and rehabilitated (right)

Optimised PFS Results Reaffirm Kasiya’s Globally Strategic Significance

Subsequent to the half year, the Company announced the results of an OPFS for Kasiya which was undertaken following a strategic investment by Rio Tinto Mining and Exploration Limited (Rio Tinto) in 2023. Under the Investment Agreement, a joint Technical Committee was established to oversee the development of Kasiya; the OPFS was conducted with oversight from the Sovereign-Rio Tinto Technical Committee.

Following input from various organisations, including internationally recognised, independent consultancies, the Company’s owner’s team, and subject matter experts from Rio Tinto, the OPFS has reconfirmed Kasiya as a leading global future supplier of strategic critical minerals outside of China.

The OPFS proposes a large-scale, long-life operation to deliver substantial volumes of natural rutile and graphite while generating significant returns. Table 1 below summarises the key findings from the OPFS and includes a comparison to the PFS results released 16 months ago, in September 2023. It is important to note that the results for the 2023 PFS in Table 1 have not been updated or adjusted for inflation since their release.

TABLE 1: KEY OPFS METRICS

 

 

 

 

Units

OPFS Results

Jan 25

2023 PFS

Sep 23

Production

 

 

Initial Mine Life

Years

25

25

Plant Throughput (Stage 1: Years 1-4)

Mtpa

12

12

Plant Throughput (Stage 2: Years 5-25)

Mtpa

24

24

Average Annual Rutile Produced (95%+TiO2)

ktpa

222

222

Annual Average Graphite Produced (96% TGC)*

ktpa

233

244

Operating and Capital Expenditure

 

 

Capex to First Production (Stage 1)

US$M

665

597

Total LOM Development Capex

US$M

1,127

1,250

Total LOM Sustaining Capex

US$M

397

470

Operating Costs (FOB Nacala)

US$/t product

423

404

Financial Performance

 

 

Total Revenue*

US$M

16,367

16,121

Annual Revenue (Average LOM)

US$M

640

645

Annual EBITDA (Average LOM)

US$M

409

415

NPV8 (real, pre-tax)

US$M

2,322

2,419

IRR (pre-tax)

%

27%

32%

Revenue to Cost Ratio

x

2.8

2.8

*Annual average graphite produced includes 292kt of graphite processed and sold in two years post cessation of active ore mining. Average graphite produced during the 25-year initial mine life only is 240ktpa; total revenue during the same period is US$15,990 million. All rutile is produced and sold during the 25-year initial mine life. Note: All cashflows and costs are presented in US$ real January 2025 terms unless otherwise stated. Operating costs exclude mineral royalties and community development support costs.

Summary of Optimisations

The OPFS optimises seven key areas compared to the 2023 PFS, as summarised below.

Mining Method

The PFS proposed a 25-year initial LOM based on a hydraulic mining process where slurry material would be screened and pumped overland to the processing plants.

Based on findings from the mining trials undertaken as part of the Pilot Phase, the OPFS proposes a large-scale open-pit dry mining operation using draglines and trucking of material to the processing plants. The change in mining method has not changed the initial mine life of 25 years.

Operating Model

The 2023 PFS envisaged mining would take place on a contractor basis.

During the OPFS, Sovereign undertook a trade-off analysis between the following operating options:

·           Fully owner-operated mine with draglines and trucks purchased by the owner

·           Owner-operated mine with draglines and trucks leased by the owner

·           Mining contractor operation using excavators and trucks

Due to the preference for draglines and benefit of flexibility, an owner-operated mine with leased equipment is selected as the preferred operating model.

Plant Configuration

Dry mining Kasiya means the material received at the plant is not pre-wet and pre-scrubbed. Therefore, the OPFS proposes a process plant front end consisting of two scrubbers and two oversize screens per 12Mt plant. No further changes are proposed to the processing plant flowsheet.

Plant Location

Per the 2023 PFS, mining would commence in the southern area of the Kasiya deposit, ramping up to 12Mt per annum (Mtpa) and then scaling up to 24Mtpa in Year 5 by constructing a second plant module in the same area, reaching nameplate capacity by the end of that year.

In Year 10 of production, another new 12Mtpa plant module would be built and commissioned in the northern area of Kasiya, supported by the relocation to the north of one of the southern plants to maintain a steady state of 24Mtpa.

However, the OPFS has determined the most efficient plant locations to be an initial 12Mtpa South Kasiya plant followed by the construction of another 12Mtpa North Kasiya plant in year 5 of production, negating any relocation requirements in later years.

The OPFS maintains the ROM schedule with operations commencing with 12Mtpa of throughput during the first four years of production (Stage 1) and expanding to 24Mtpa in year 5, with full capacity reached by end of year 5 (Stage 2).

Tailings Management

Per the PFS, a conventional process would be used to produce rutile and graphite concentrate with tailings in separate sand and fines streams being pumped to a conventional TSF. Mined out pit areas would be backfilled as part of a rehabilitation process. 

The OPFS proposes maximising backfilling of pits as undertaken during the Pilot Phase and the introduction of mud farming on the TSF to accelerate dewatering. This approach has reduced tailings volumes in the TSF by 44% from 187 Mm³ to 105 Mm³.

Mud farming is a technique used by Rio Tinto at operations such as its 100%-owned Weipa bauxite operations in Queensland, Australia, which has been in production since 1963 and produced 35.1Mt of bauxite in 2023.

Water Management

The PFS proposed that the primary water supply for the Kasiya mining complex would be created by building a water storage dam and collecting run-off water from the greater catchment area. Following the introduction of dry mining and mud farming, the size of the water storage dam proposed in the PFS has been significantly reduced, with less process water required and more process water recovered.

The OPFS mining trials and material deposition tests indicated a water demand of 10.2 Mm³ per annum, almost a 40% decrease in water requirement from the PFS (16.7 Mm³). The effect on the  water storage dam wall could be a reduction in volume from 0.79 Mm³ to 0.57 Mm³ and a reduction in dam wall height from 20 metres to 17 metres.

Power

The 2023 PFS envisaged a hybrid hydro-generated grid power plus solar power system solution.

The Malawi grid reliability has improved since completion of the PFS and is expected to further improve considerably with the commissioning of the country’s first HV transmission interconnector to Mozambique in Q2 2025.

This will provide the Project with sufficient power and therefore the OPFS proposes to connect the Project’s power system to the hydro-sourced grid network only. This mitigates any risks associated with commissioning a new solar power project and reducing the overall power tariff by eliminating the need for an Independent Power Producer as per the 2023 PFS.

Pilot Phase Advanced to Rehabilitation Stage Following Mining Trials and Backfilling

In December 2024, the Company announced that the test pit mined during the Pilot Phase at the Kasiya Project had been successfully backfilled. This allowed Sovereign to commence on-site soil remediation and land rehabilitation activities, testing our proposed rehabilitation approach and demonstrating that the mined land can support sustainable farming post-closure.

During the Pilot Phase mining trials, 170,000m3 was mined using a conventional excavator fleet. The fleet was used to place mined material back into the pit, filling the pit to the original ground level in less than two months and ahead of schedule.

In March 2025, the Company announced the success of the rehabilitation program with landowners given immediate access to land to start maize crop farming without missing a planting season.

Positive Test Results for Use of Kasiya Graphite in Refractory and Expandable Markets

The Company has announced that downstream testwork targeting the traditional graphite market, conducted at leading independent consultancies ProGraphite GmbH (ProGraphite) and Dorfner Anzaplan (DorfnerA) in Germany, have delivered very positive test results, which will be used for customer engagement and potential offtake discussions.

Preliminary tests confirmed that graphite concentrate produced from Kasiya in Malawi exhibits prerequisite characteristics required for graphite sales into the refractory materials sector and for use in expandable (fire retardant) and expanded (gaskets, seals, and brake lining) applications.

Traditional demand for natural graphite is primarily tied to the steel industry where it is used as a component in bricks that line both blast and electric arc furnaces (“refractories”) and as a liner for ladles and crucibles. It is used in brake linings, gaskets and clutch materials in the automotive industry. Graphite has many other industrial uses in lubricants, carbon brushes for electric motors, fire retardants, and insulation and reinforcement products.

Graphite’s key properties for use in refractory applications are its resistance to oxidation, chemical inertness and good thermal conductivity.

A key use for expandable graphite is as a flame retardant. Growth for expandable graphite flame retardants, is driven by concerns over halogen-based flame retardants, which include brominated and chlorinated flame retardants. Many of these chemicals are now recognised as global contaminants and are associated with adverse health effects in animals and humans, including endocrine and thyroid disruption, immunotoxicity, reproductive toxicity, and cancer (National Institute of Health).

Expanded graphite is used in gaskets, seals, brake linings, bi-polar plates for fuel cells, and thermal management in electronic devices, where the inherent properties of graphite are combined with the flexibility of expanded graphite.

 

A blue pie chart with white text AI-generated content may be incorrect.

Figure 3: Natural graphite market per application (Benchmark Minerals Intelligence, 2025)

Infill Drilling Program Complete

In October 2024, the Company announced the completion of an infill drilling program at Kasiya to support an upgrade of the MRE.

Aircore drilling, supported by hand auger, push tube and diamond core drilling, was completed in the southern part of Kasiya. The drilling was focused on the designated pits proposed to provide ore feed in the first eight years of the Project’s production schedule. Ore Reserves in these areas are expected to convert from the Probable to Proven category with an upgrade of the current MRE from Indicated to the Measured category under the JORC (2012) Code. 

Offsite laboratories in South Africa and Australia will assay all samples for rutile and graphite. The drilling program’s results and subsequent Resource upgrade are expected in early 2025.

Kasiya is already the world’s largest rutile deposit and second-largest flake graphite deposit, with over 66% of the current MRE in the Indicated category.

Corporate Update

Sovereign remains in a strong financial position with cash at bank of approximately A$34 million and no debt.

Next Steps

The Company plans to update the market on the following progress in the coming months:

·           Planned MRE upgrade

·           Further graphite test work results as the Company continues to advance the qualification of its graphite product for the lithium-ion battery and traditional graphite sectors

·           Progress in discussions with future potential end-users of rutile and graphite

·           Updates on community and social development programs

·           Further rehabilitation aspects of the Pilot Phase

·           Progress of the DFS, which is targeted for completion in Q4, 2025

 

DIRECTORS

The names of Directors in office at any time during the financial period or since the end of the financial period are:

Mr Benjamin Stoikovich      Chairman

Mr Frank Eagar                      Managing Director and CEO

Mr Ian Middlemas                Non-Executive Director

Dr Julian Stephens                Non-Executive Director

Mr Mark Pearce                    Non-Executive Director

Mr Nigel Jones                      Non-Executive Director

All Directors were in office from 1 July 2024 until the date of this report, unless otherwise noted.

OPERATING RESULTS

The net operating loss after tax for the half year ended 31 December 2024 was $19,546,116 (2023: $6,976,503) which is attributable to:

(i)         Interest income of $1,025,751 (2023: $938,402) earned on cash term deposits held by the Group;

(ii)        exploration and evaluation expenditure of $16,495,513 (2023: $5,027,397) in relation to the Kasiya Project. This is attributable to the Group’s accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to acquisition of the rights to explore and up to the completion of feasibility studies; and

(iii)       non-cash share based payment expenses of $1,904,852 (2023: $1,089,974) relating to performance rights. The fair value of incentive options and rights is measured at grant date and recognised over the period during which the performance rights holders become unconditionally entitled to the incentive securities.

FINANCIAL POSITION

At 31 December 2024, the Company had cash and cash equivalents of $33,531,689 (30 June 2024: $31,564,130) and no debt (30 June 2024: nil). The Company had net assets of $35,927,994 (30 June 2024: $34,358,774), an increase of $1,569,220 or approximately 4% compared with the prior period. This is largely attributable to the increase in cash reserves following the investment made by Rio Tinto in the period offset by exploration and evaluation spend on the project to complete the Pilot Phase and OPFS.  

SIGNIFICANT POST BALANCE DATE EVENTS

On 22 January 2025, the Company announced the results of an OPFS for Kasiya which reaffirm Kasiya’s potential to become the largest and lowest-cost producer of natural rutile and natural flake graphite while generating exceptional economics.

Other than the above, there are no matters or circumstances which have arisen since 31 December 2024 that have significantly affected or may significantly affect:

·       the operations, in periods subsequent to 31 December 2024, of the Group;

·       the results of those operations, in periods subsequent to 31 December 2024, of the Group; or

·       the state of affairs, in periods subsequent to 31 December 2024, of the Group.

AUDITOR’S INDEPENDENCE DECLARATION

Section 307C of the Corporations Act 2001 requires our auditors, Ernst & Young, to provide the directors of Sovereign Metals Limited with an Independence Declaration in relation to the review of the half year financial report. This Independence Declaration is on page 17 and forms part of this Directors’ Report.

This report is made in accordance with a resolution of the directors made pursuant to section 306(3) of the Corporations Act 2001.

 

For and on behalf of the Directors

 

 

Frank Eagar

Managing Director and CEO

7 March 2025

 

 

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR ENDED 31 DECEMBER 2024

 

Notes

Half Year Ended
31 December 2024
$

Half Year Ended
31 December 2023
$

Interest income

1,025,751

938,402

Exploration and evaluation expenses

(16,495,513)

(5,027,397)

Corporate and administrative expenses

(779,930)

(572,119)

Business development expenses

(1,004,695)

(996,548)

Share based payment expense

9(a)

(1,904,852)

(1,089,974)

Other expenses

3

(386,877)

(173,386)

Demerger expenses

(55,481)

Loss before income tax

 

(19,546,116)

(6,976,503)

Income tax expense

Loss for the period

 

(19,546,116)

(6,976,503)

 

Other comprehensive income, net of income tax:

Items that may be reclassified subsequently to profit or loss

Exchange differences on foreign entities

80,624

3,530

Other comprehensive income for the period, net of income tax

80,624

3,530

Total comprehensive loss for the period

 

(19,465,492)

(6,972,973)

Loss attributable to members of Sovereign Metals Limited

 

(19,465,492)

(6,972,973)

 

Total comprehensive loss attributable to members of Sovereign Metals Limited

 

(19,465,492)

(6,972,973)

 

Basic and diluted loss per share from continuing operations (cents per share)

(3.3)

(1.1)

 

 

The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2024

 

Notes

31 December 2024
$

30 June 2024
$

ASSETS

Current Assets

Cash and cash equivalents

33,531,689

31,564,130

Other receivables

4

506,258

315,597

Other financial assets

 

175,000

560,000

Total Current Assets

 

34,212,947

32,439,727

 

 

 

Non-current Assets

 

 

Property, plant and equipment

5

2,009,700

1,149,771

Exploration and evaluation assets

6

5,086,129

5,086,129

Total Non-current Assets

 

7,095,829

6,235,900

 

 

 

TOTAL ASSETS

 

41,308,776

38,675,627

 

 

LIABILITIES

 

 

Current Liabilities

 

 

Trade and other payables

 

5,184,642

4,138,353

Provisions

 

86,849

56,782

Other financial liabilities

7(a)

41,378

35,288

Total Current Liabilities

 

5,312,869

4,230,423

 

 

 

Non-Current Liabilities

 

 

Other financial liabilities

7(b)

67,913

86,430

Total Non-Current Liabilities

 

67,913

86,430

 

 

 

TOTAL LIABILITIES

 

5,380,782

4,316,853

NET ASSETS

 

35,927,994

34,358,774

 

 

EQUITY

 

 

Issued capital

8

136,965,491

117,835,631

Reserves

9

(1,374,794)

(3,360,270)

Accumulated losses

(99,662,703)

(80,116,587)

TOTAL EQUITY

35,927,994

34,358,774

 

 

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR ENDED 31 DECEMBER 2024

 

Issued Capital
$

Share Based Payment Reserve
$

Demerger Reserve

$

Foreign Currency Translation Reserve

$

Accumulated Losses
$

Total Equity
$

Balance at 1 July 2024

117,835,631

3,605,751

(7,336,678)

370,657

(80,116,587)

34,358,774

Net loss for the period

(19,546,116)

(19,546,116)

Other comprehensive income

80,624

80,624

Total comprehensive income/(loss) for the period

80,624

(19,546,116)

(19,465,492)

Transactions with owners, recorded directly in equity

 

 

 

 

 

 

Issue of placement shares

19,174,395

19,174,395

Cancelation of unvested performance rights

(22,754)

(22,754)

Share based payment expense

1,927,606

1,927,606

Share issue costs

(44,535)

(44,535)

Balance at 31 December 2024

136,965,491

5,510,603

(7,336,678)

451,281

(99,662,703)

35,927,994

Balance at 1 July 2023

74,508,488

4,155,950

(7,336,678)

(139,498)

(61,515,693)

9,672,569

Net loss for the period

(6,976,503)

(6,976,503)

Other comprehensive income

3,530

Total comprehensive income/(loss) for the period

3,530

Transactions with owners, recorded directly in equity

Issue of placement shares

40,598,258

40,598,258

Transfer from SBP reserve upon conversion of performance rights

2,853,400

(2,853,400)

Share based payment expense

1,089,974

1,089,974

Share issue costs

(124,515)

Balance at 31 December 2023

117,835,631

2,392,524

(7,336,678)

(135,968)

(68,492,196)

44,263,313

 

 

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR ENDED 31 DECEMBER 2024

 

Half Year Ended
31 December 2024
$

Half Year Ended
31 December 2023
$

Cash flows from operating activities

Payments to suppliers and employees – exploration and evaluation

(15,479,030)

(5,433,663)

Payments to suppliers and employees – other

(1,764,767)

(1,616,960)

Interest received

1,031,209

744,942

Net cash used in operating activities

(16,212,588)

(6,305,681)

 

Cash flows from investing activities

 

Payments for purchase of plant and equipment

(916,061)

(205,902)

Repayment of loan receivable from NGX Limited

34,434

Net cash used in investing activities

(916,061)

(171,468)

 

Cash flows from financing activities

 

Proceeds from issue of shares

19,174,395

40,598,258

Payments for share issue costs

(44,535)

(248,778)

Payments for finance lease

(31,777)

Net cash from financing activities

19,098,083

40,349,480

 

Net increase in cash and cash equivalents

1,969,434

33,872,331

Net foreign exchange differences

(1,875)

Cash and cash equivalents at the beginning of the period

31,564,130

5,564,376

Cash and cash equivalents at the end of the period

33,531,689

39,436,707

 

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE HALF YEAR ENDED 31 DECEMBER 2024

 

1.       MATERIAL ACCOUNTING POLICY INFORMATION

Sovereign Metals Limited (the “Company”) is a for profit company limited by shares and incorporated in Australia, whose shares are publicly traded on the Australian Securities Exchange, the AIM Market of the London Stock Exchange and a Quotation on OTCQX in the U.S. The consolidated interim financial statements of the Company as at and for the period from 1 July 2024 to 31 December 2024 comprise the Company and its subsidiaries (together referred to as the “Group”). The nature of the operations and principal activities of the Group are as described in the Directors’ Report.

This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the audited annual report of Sovereign for the year ended 30 June 2024 (where comparative amounts have been extracted from) and any public announcements made by the Group during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

(a)       Basis of Preparation of Half Year Financial Report

The consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain financial instruments. Cost is based on the fair values of the consideration given in exchange for assets.  All amounts are presented in Australian dollars, unless otherwise stated. There have been no changes in the critical accounting judgements or key sources of estimation since 30 June 2024.

(b)       Statement of Compliance

The consolidated interim financial report complies with Australian Accounting Standards, including AASB 134 which ensures compliance with International Financial Reporting Standard (“IFRS”) IAS 34 “Interim Financial Reporting” as issued by the International Accounting Standards Board. The accounting policies adopted in the preparation of the half-year financial report are consistent with those applied in the preparation of the Group’s annual financial report for the year ended 30 June 2024, except for new standards, amendments to standards and interpretations effective 1 July 2024. In the current half year, the Group has adopted all of the new and revised Standards and Interpretations issued by the AASB that are relevant to its operations and effective for the current annual reporting period. The adoption resulted in no material impact.

(c)       Issued standards and interpretations not early adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the reporting period ended 31 December 2024. Those which may be relevant to the Group are set out in the table below. The impact of these standards are still being assessed.

Standard/Interpretation

Application Date of Standard

Application Date for Group

AASB 2014-10 Amendments to Australian Accounting Standards – Sale or

Contribution of Assets between an Investor and its Associate or Joint Venture

1 January 2025

1 July 2025

AASB 18 Presentation and Disclosure in Financial Statements

1 January 2027

1 July 2027

2.       SEGMENT INFORMATION

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. The Consolidated Entity has one operating segment, being exploration in Malawi.

3.       OTHER EXPENSES

31 December 2024
$

31 December 2023
$

Foreign exchange (loss)/gain

(1,877)

1,614

Fair value movements in other financial assets

(385,000)

(175,000)

 

(386,877)

(173,386)

4.       CURRENT ASSETS – OTHER RECEIVABLES

31 December 2024
$

30 June 2024
$

Accrued interest

140,454

145,913

GST receivable

95,664

81,051

Prepayments

203,559

52,655

Other

66,581

35,978

 

506,258

315,597

5.       NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT

Office Furniture and Equipment

$

Computer Equipment

$

Plant & Equipment

$

Right of use

$

Assets under construction

$

Total

$

Carrying amount at
1 July 2024

152,163

68,566

496,953

 

116,447

 

315,642

1,149,771

Additions

31,758

30,516

768,298

73,062

903,634

Depreciation charge

(15,546)

(17,761)

(64,801)

(21,663)

(119,771)

Foreign exchange differences

10,217

3,557

33,604

4,257

24,431

76,066

Carrying amount at
31 December 2024

178,592

84,878

1,234,054

 

99,041

 

413,135

2,009,700

At cost

227,879

153,292

1,803,664

134,091

388,704

2,707,630

Accumulated depreciation, amortisation and impairment

(49,287)

(68,414)

(569,610)

(35,050)

24,431

(697,930)

6.       EXPLORATION AND EVALUATION ASSETS

31 December 2024
$

(a)        Movement in Exploration and Evaluation Assets

Kasiya Rutile-Graphite Project:

Carrying amount as at 1 July 2024

5,086,129

Carrying amount at 31 December 2024(i)

5,086,129

Note:

(i)               The ultimate recoupment of costs carried forward for exploration and evaluation is dependent on the successful development and commercial exploitation or sale of the respective areas of interest.

7.       OTHER FINANCIAL LIABILITIES

31 December 2024
$

30 June 2024
$

(a)        Current liabilities

Lease Liability(i)

41,378

35,288

(b)        Non-Current liabilities

 

Lease Liability(i)

67,913

86,430

Note:

(i)               The Company has a lease agreement for the rental of a property. Refer to Note 5 for the carrying amount of the right of use asset relating to the lease. The following are amounts recognised in the Statement of Profit and Loss: (i) amortisation expense of right of use asset $21,663 (30 June 2024: $17,454); (ii) interest expense on lease liabilities of $14,311 (30 June 2024: $12,961); and (iii) rent expense of $5,660 (30 June 2024: $7,922).

8.       CONTRIBUTED EQUITY

31 December 2024
$

30 June 2024
$

(a)        Issued and Paid Up Capital

599,879,879 (30 June 2024: 563,003,401) fully paid ordinary shares (Note 8(b))

136,965,491

117,835,631

(b)       Movements in Ordinary Share Capital were as follows:

Date

Details

Number of Shares


$

1 Jul 24

Opening balance

563,003,401

117,835,631

4 Jul 24

Issue of ordinary shares on exercise of Rio Tinto Options

34,549,598

18,484,035

13 Sep 24

Issue of ordinary shares to Rio Tinto

1,290,392

690,360

13 Sep 24

Issue of advisory fee shares

1,036,488

31 Dec 24

Share issue costs

(44,535)

31 Dec 24

Closing balance

599,879,879

136,965,491

9.       RESERVES

31 December 2024
$

30 June 2024
$

Share-based Payments Reserve (Note 9(a))

5,510,603

3,605,751

Foreign Currency Translation Reserve – exchange differences

451,281

370,657

Demerger Reserve

(7,336,678)

(7,336,678)

 

(1,374,794)

(3,360,270)

(a)       Movements in Options and Performance Rights were as follows:

Date

Details

Number of Unlisted  Performance Rights


$(i)

1 Jul 2024

Opening balance

17,860,000

3,605,751

Various

Issue of performance rights

4,725,000

31 Dec 2024

Cancelation of unvested performance rights

(425,000)

(22,754)

31 Dec 2024

Share based payment expense

1,927,606

31 Dec 2024

Closing balance

22,160,000

5,510,603

Note

(i)               The value of performance rights granted during the period is estimated as at the grant date based on the underlying share price with the expense recognised over the vesting period in accordance with Australian Accounting Standards.

10.     COMMITMENTS AND CONTINGENCIES

(a)     Commitments

 

31 December 2024
$

30 June 2024
$

Exploration Commitments – Kasiya Rutile-Graphite Project:

Within one year

201,477

107,155

After one year but not more than five years

82,043

46,705

 

283,520

153,860

As a condition of retaining the current rights to tenure to exploration tenements, the Group is required to pay an annual rental charge and meet minimum expenditure requirements for each tenement. These obligations are not provided for in the financial statements and are at the sole discretion of the Group. The majority of the remaining exploration commitments relate to licences with a term greater than one year. For the purposes of disclosure, the Group has apportioned the remaining commitments on an equal monthly basis over the remaining term of the exploration licences.

(b)       Contingencies

At the last annual reporting date, the Consolidated Entity did not have any material contingent liabilities.  There has been no material change in contingent assets and liabilities of the Consolidated Entity during the half year.

11.     DIVIDENDS PAID OR PROVIDED FOR

No dividend has been paid or provided for during the half year (2023: nil).

12.     FAIR VALUE OF FINANCIAL INSTRUMENTS

The net fair value of financial assets and financial liabilities approximates their carrying value.

13.     SUBSEQUENT EVENTS AFTER BALANCE DATE

On 22 January 2025, the Company announced the results of an OPFS for Kasiya which reaffirm Kasiya potential to become the largest and lowest-cost producer of natural rutile and natural flake graphite while generating exceptional economics.

Other than the above, there are no matters or circumstances which have arisen since 31 December 2024 that have significantly affected or may significantly affect:

·       the operations, in periods subsequent to 31 December 2024, of the Group;

·       the results of those operations, in periods subsequent to 31 December 2024, of the Group; or

·       the state of affairs, in periods subsequent to 31 December 2024, of the Group.

 

DIRECTORS’ DECLARATION

 

In accordance with a resolution of the Directors of Sovereign Metals Limited, I state that:

In the opinion of the Directors:

(a)       the financial statements and notes thereto are in accordance with the Corporations Act 2001, including:

(i)         complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001; and

(ii)        giving a true and fair view of the consolidated entity’s financial position as at 31 December 2024 and of its performance for the half year ended on that date.

(b)       there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to section 303(5) of the Corporations Act 2001.

On behalf of the Board

 

 

Frank Eagar

Managing Director and CEO

 

7 March 2025

 

 

Competent Person Statement

The information in this announcement that relates to Production Targets, Ore Reserves, Processing, Infrastructure and Capital and Operating Costs is extracted from an announcement dated 22 January 2025, which is available to view at www.sovereignmetals.com.au. Sovereign confirms that: a) it is not aware of any new information or data that materially affects the information included in the original announcement; b) all material assumptions and technical parameters underpinning the Production Target, and related forecast financial information derived from the Production Target included in the original announcement continue to apply and have not materially changed; and c) the form and context in which the relevant Competent Persons’ findings are presented in this presentation have not been materially modified from the original announcement.

The information in this announcement that relates to the Exploration Results (metallurgy – rutile and graphite) is extracted from announcements dated 8 May 2024, 15 May 2024, 4 September 2024, 21 November 2024, 19 February 2025 and 26 February 2025 which are available to view at www.sovereignmetals.com.au. Sovereign confirms that a) it is not aware of any new information or data that materially affects the information included in the original announcement; b) all material assumptions included in the original announcement continue to apply and have not materially changed; and c) the form and context in which the relevant Competent Persons’ findings are presented in this report have not been materially changed from the announcement.

The information in this announcement that relates to the Mineral Resource Estimate is extracted from Sovereign’s 2024 Annual Report and is based on, and fairly represents information compiled by Mr Richard Stockwell, a Competent Person, who is a fellow of the Australian Institute of Geoscientists (AIG). Mr Stockwell is a principal of Placer Consulting Pty Ltd, an independent consulting company. Sovereign confirms that a) it is not aware of any new information or data that materially affects the information included in the original announcement; b) all material assumptions included in the 2024 Annual Report continue to apply and have not materially changed; and c) the form and context in which the relevant Competent Persons’ findings are presented in 2024 Annual Report have not been materially changed from the disclosure in the 2024 Annual Report.

Ore Reserve for the Kasiya Deposit

 

Classification

Tonnes
(Mt)

Rutile Grade
(%)

Contained Rutile
(Mt)

Graphite Grade (TGC) (%)

Contained Graphite
(Mt)

RutEq. Grade*
(%)

Proved

Probable

 538

1.03%

5.5

1.66%

8.9

2.00%

Total

 538

1.03%

5.5

1.66%

8.9

2.00%

* RutEq. Formula: Rutile Grade x Recovery (100%) x Rutile Price (US$1,484/t) + Graphite Grade x Recovery (67.5%) x Graphite Price (US$1,290/t) / Rutile Price (US$1,484/t). All assumptions are from the Kasiya PFS ** Any minor summation inconsistencies are due to rounding

Kasiya Total Indicated + Inferred Mineral Resource Estimate at 0.7% rutile cut-off grade (inclusive of Ore Reserves)

Classification

Resource
(Mt)

Rutile Grade
(%)

Contained Rutile
(Mt)

Graphite Grade (TGC) (%)

Contained Graphite
(Mt)

Indicated

 1,200

1.0%

12.2

1.5%

18.0

Inferred

 609

0.9%

5.7

1.1%

6.5

Total

 1,809

1.0%

17.9

1.4%

24.4

Forward Looking Statement

This release may include forward-looking statements, which may be identified by words such as “expects”, “anticipates”, “believes”, “projects”, “plans”, and similar expressions. These forward-looking statements are based on Sovereign’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Sovereign, which could cause actual results to differ materially from such statements. There can be no assurance that forward-looking statements will prove to be correct. Sovereign makes no undertaking to subsequently update or revise the forward-looking statements made in this release, to reflect the circumstances or events after the date of that release.

 

AUDITOR’S INDEPENDENCE DECLARATION

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INDEPENDENT AUDITOR’S REVIEW REPORT

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SCP Equity Research – Today’s Sovereign Metals Updated PFS a Significant Success

250122-scp-svm-pfs

Read the full note here: 250122-scp-svm-pfs

Sovereign Metals #SVML #SVM – Kasiya – Optimised PFS Results

Sovereign Metals Limited (ASX:SVM; AIM:SVML; OTCQX: SVMLF) (Sovereign or the Company) is
pleased to announce the results of an Optimised Pre-feasibility Study (OPFS) for its Kasiya RutileGraphite Project (Kasiya or the Project) undertaken following a strategic investment by Rio Tinto Mining and Exploration Limited (Rio Tinto) in 2023, which established a joint Technical Committee to advance the development of Kasiya.

Following input from various organisations, including world-class consultancies, the Company’s owner’s team, and subject matter experts from Rio Tinto, the OPFS has reconfirmed Kasiya as a leading global future supplier of strategic critical minerals outside of China.

The OPFS proposes a large-scale, long-life operation to deliver substantial volumes of natural rutile and graphite while generating significant returns.

Table 1 summarises the key findings from the OPFS and includes a comparison to the PreFeasibility Study (PFS) results released 16 months ago, in September 2023. It is important to note that the results for the 2023 PFS in Table 1 have not been updated or adjusted for inflation since their release in September 2023.

SUMMARY OF OPTIMISATIONS

The OPFS optimises seven key areas compared to the 2023 PFS as summarised below.

Mining Method
The PFS proposed a 25-year initial LOM based on a hydraulic mining process where slurry material would be screened and pumped overland to processing plants.

Based on findings from the mining trials undertaken as part of the Pilot Mining and Land Rehabilitation (Pilot Phase), the OPFS proposes a large-scale open-pit dry mining operation using draglines and trucking of material to the processing plants. The change in mining method has not changed the initial mine life of 25 years.

Operating Model

The 2023 PFS envisaged mining would take place on a contractor basis.

During the OPFS, Sovereign undertook a trade-off analysis between the following operating options:
• Fully owner-operated mine with draglines and trucks purchased by the owner
• Owner-operated mine with draglines and trucks leased by the owner
• Mining contractor operation using excavators and trucks

Due to the preference for draglines and maintaining flexibility, an owner-operated mine with leased equipment is selected as the preferred operating model.

Plant Configuration
Dry mining Kasiya means the material received at the plant is not pre-wet and pre scrubbed. Therefore, the OPFS proposes a process plant front end consisting of two scrubbers and two oversize screens per 12Mt plant. No further changes are proposed to the processing plant flowsheet.

Plant Location
Per the 2023 PFS, mining would commence in the southern area of the Kasiya deposit, ramping up to 12Mt per annum and then scaling up to 24Mt per annum in Year 5 by constructing a second plant module in the same area, reaching nameplate capacity by the end of the year.

In Year 10 of production, another new 12Mt per annum plant module would be built and commissioned in the northern area of Kasiya, supported by the relocation to the north of one of the southern plants to maintain a steady state of 24Mt per annum.

However, the OPFS has determined the most efficient plant locations to be an initial 12Mtpa South Kasiya plant followed by the construction of another 12Mtpa North Kasiya plant in year 5 of production, negating any relocation requirements in later years.

The OPFS maintains the ROM schedule with operations commencing with 12Mt per annum of throughput during the first four years of production (Stage 1) and expanding to 24Mt per annum in year 5, with full capacity reached by end of year 5 (Stage 2).

Tailings Management

Per the PFS, a conventional process would be used to produce rutile and graphite concentrate with tailings in separate sand and fines streams being pumped to a conventional TSF. Mined out pit areas would be backfilled as part of a rehabilitation process.

The OPFS proposes maximising backfilling of pits as undertaken during the Pilot Phase and the introduction of mud farming on the TSF to accelerate dewatering. This approach has reduced tailings volumes in the TSF by 44% from 187 Mm³ to 105 Mm³.

Mud farming is a technique used by Rio Tinto at operations such as its 100%-owned Weipa bauxite operations in Queensland, Australia, which has been in production since 1963 and produced 35.1Mt of bauxite in 2023.

Water Management
The PFS proposed that the primary water supply for the Kasiya mining complex would be created by building a dam and collecting run-off water from the greater catchment area. Following the introduction of dry mining and mud farming, the size of the water dam proposed in the PFS has been significantly reduced, with less process water required and more process water recovered.

The OPFS mining trials and material deposition tests indicated a water demand of 10.2 Mm³ per annum, almost a 40% decrease in water requirement from the PFS (16.7 Mm³). The effect on the raw water dam wall could be a reduction in volume from 0.79 Mm³ to 0.57 Mm³ and a reduction in dam wall height from 20 metres to 17 metres.

Power
The 2023 PFS envisaged a hybrid hydro-generated grid power plus solar power system solution.

The Malawi grid reliability has improved since completion of the PFS and is expected to further improve considerably with the commissioning of the country’s first HV transmission interconnector to Mozambique in Q2 2025.

This will provide the Project with sufficient power and therefore the OPFS proposes to connect the Project’s power system to the hydro-sourced grid network only. This mitigates any risks associated with commissioning a new solar power project and reducing the overall power tariff by eliminating the need for an Independent Power Producer as per the 2023 PFS.

OPTIMISATION MAINTAINS KASIYA’S GLOBAL LEADER POTENTIAL

Kasiya, located in central Malawi, is the world’s largest known natural rutile deposit and second largest flake graphite deposit.

Natural Rutile is the purest, highest-grade form of naturally occurring titanium feedstock.

Natural Graphite is required for various technological and industrial applications.

Both titanium and graphite have been designated “Critical Minerals” by the USA and the EU.
In December 2024, NATO designated both titanium and graphite as defence-critical, strategic minerals essential for the Allied defence industry.

Over the 25-year LOM, Kasiya is set to produce an average of 222kt of natural rutile and 233kt of natural flake graphite per annum. At steady state throughput of 24 million tonnes of ore per annum the Project is anticipated to produce approximately 246kt of natural rutile and 265kt of natural graphite per annum, positioning Sovereign as potentially the world’s largest producer of natural rutile and natural flake graphite.

Further, the depletion of rutile reserves at Lenoil Company Limited’s Area 1 Mine1 in the coming 2-3 years and the recent cessation of mining activities at Energy Fuels Inc.’s Kwale Operations2 in Kenya means that Sovereign could potentially become the world’s only primary natural rutile producer of scale (see Appendix 2).

The incremental cost of producing a tonne of graphite from Kasiya under the OPFS is US$241/t3. Based on public disclosures by listed graphite companies that have undertaken project studies up to a pre-feasibility stage or later, an incremental graphite cost of production of US$241/t would make Sovereign the world’s lowest-cost graphite producer outside of China (see Appendix 3).

The rutile-graphite-rich mineralisation will be extracted from surface and trucked to the process plant front end to scrub and screen ROM before it enters a Wet Concentration Plant (WCP) where a low-energy requirement, chemical-free process using gravity spirals produces a Heavy Mineral Concentrate (HMC). The HMC is transferred to the dry Mineral Separation Plant (MSP) where premium quality rutile (+95% TiO2) is produced via electrostatic and magnetic separation.

The high quality Kasiya rutile product will be amenable for use in high-end titanium products including aerospace and defence applications.

Graphite rich concentrate is collected from the gravity spirals and processed in a separate graphite flotation plant, producing a high purity, high crystallinity and high value coarse-flake graphite product.

1 In 2024, the previous owner of the Area 1 Mine, Sierra Rutile Limited, was acquired by Lenoil Company Limited, a private company based in Sierra Leone. 2 In 2024, the previous owner of the Kwale Operations, Base Resources Limited was acquired by Energy Fuels Inc., a US-based uranium and critical minerals company.
3 Incremental cost of graphite production is calculated with the following costs attributed to rutile production: all mining costs, all G&A, all material handling costs except for graphitic fines reclamation and graphite concentrate transport, and approximately half of total processing costs. Incremental cost of graphite production therefore includes only those costs incurred on top of primary rutile production to produce an incremental tonne from the process plant and transport the graphite to market. Unit cost of rutile production under this scenario would be US$628/t (FOB Nacala)).

Kasiya’s graphite has been confirmed to produce outstanding anode materials suitable for battery production as well as demonstrating suitability for traditional industrial uses such as the production of refractory materials.

The Project has excellent surrounding infrastructure including sealed roads, a high quality rail line connecting to the deep-water port of Nacala on the Indian Ocean and hydro-sourced grid power.

For the duration of the operation, Kasiya’s highly sought-after rutile and graphite products will be railed directly from a purpose-built rail dry port at the mine site eastward via the Nacala Logistics Corridor (NLC) to the port of Nacala. The southern port of Beira, connecting Kasiya via the recently refurbished Sena Rail Line, offers a secondary export route.

Enquiries
Frank Eagar, Managing Director & CEO
South Africa / Malawi
+27 21 065 1890

Sapan Ghai, CCO
London
+44 207 478 3900

Link here to view full OPFS and Appendices

#SVML Sovereign Metals LTD – 2024 Annual Report

2024 ANNUAL REPORT

Sovereign Metals Limited (ASX: SVM, AIM: SVML, OTCQX: SVMLF) (Sovereign or the Company) advises its 2024 Annual Report has been published today at https://sovereignmetals.com.au/company-reports/ and is attached as a PDF to this news release.

The Company has also published an Appendix 4G (Key to Disclosures: Corporate Governance Council Principles and Recommendations) and 2024 Corporate Governance Statement today which are available at https://sovereignmetals.com.au/corporate-governance/ and are attached as a PDF to this news release.

Further, the Company advises that its Annual General Meeting (AGM) will be held on Friday, 22 November 2024.

An item of business at the AGM will be the re-election of Directors. In accordance with clause 6.2(f) of the Company’s Constitution, the closing date for receipt of nominations from persons wishing to be considered for election as a Director is Friday, 4 October 2024. Any nominations must be received at the Company’s registered office no later than 5.00pm (Perth time) on Friday, 4 October 2024.

Further information about the AGM, including the Notice of AGM, will be provided to shareholders in October 2024. 

2024 OPERATING AND FINANCIAL REVIEW

KASIYA RUTILE-GRAPHITE PROJECT

Sovereign is focused on the development of its Kasiya rutile-graphite project (Kasiya or the Project) in Malawi where a Pilot Mining and Land Rehabilitation Program (Pilot Phase) is in progress as part of an ongoing PFS Optimisation Study.

The Company’s objective is to develop a large-scale, long life rutile-graphite operation, focusing on developing an environmentally and socially responsible, sustainable operation.

A map of a large area with a route Description automatically generated with medium confidence

Figure 1: Sovereign’s Kasiya project displaying location in South-East Africa

Kasiya is the largest rutile deposit in the world with more than double the contained rutile as its nearest rutile peer, Sierra Rutile. The Kasiya Mineral Resource Estimate (MRE) is 1.8 Billion tonnes (Bt) at 1.0% rutile resulting in 17.9 Million tonnes (Mt) tonnes of contained natural rutile and 24.4Mt of contained graphite. The MRE has broad zones of very high-grade rutile which occurs contiguously across a very large area of over 200km2. Rutile mineralisation lies in laterally extensive, near surface, flat “blanket” style bodies in areas where the weathering profile is preserved and not significantly eroded.

HIGHLIGHTS

Highlights during and subsequent to the end of the financial year were as follows:

Rio Tinto investment to become a 19.9% Strategic Investor 

·           Rio Tinto has invested ~$60 million since July 2023 to become a 19.9% strategic investor in Sovereign

·           Investment proceeds used to continue advancing the Kasiya Project in Malawi

·           Pilot Mining and Land Rehabilitation Program (Pilot Phase) and infill drilling program at Kasiya has been overseen by the Rio Tinto-Sovereign Technical Committee

·           Rio Tinto’s investment represents a significant step towards unlocking a major new supply of low-CO2 natural rutile and flake graphite

·           The Government of Malawi applauded the timely investment by Rio Tinto and marked it as a milestone towards realising the country’s aspirations of growing the mining sector as a priority industry

Kasiya Optimisation Advances to Pilot Phase

·           Sovereign commenced the Pilot Phase at Kasiya as part of the ongoing PFS Optimisation Study

·           In July 2024, the dry mining component of the Pilot Phase was successfully completed, confirming Kasiya can be efficiently mined using standard mobile excavators and trucks, demonstrating operational alternatives as part of ongoing PFS Optimisation Study

·           Hydraulic mining trial has since commenced at the Kasiya Pilot Site which is expected to take approximately three months to complete and includes backfilling of the main trial pit, deposition and rehabilitation testwork

·           Results from the Pilot Phase, in particular the analysis of dry-mining versus hydraulic mining, will be fundamental for the ongoing Optimisation Study

·           Significant field activities and a number of test work programs are ongoing in order to provide data for the PFS Optimisation Study

·           Government of Malawi demonstrated strong support for with all required approvals and community permissions for the Pilot Phase obtained within three months

A large open pit with many layers of dirt Description automatically generated with medium confidence

Figure 2: Kasiya Pilot Phase Test Pit mined to 20 metres depth

Key Management Appointments to Drive Project Optimisation and Development at Kasiya

·           Appointment of experienced African based mining executive, Mr Frank Eagar, as the new Managing Director and CEO

·           Previous Managing Director Dr Julian Stephens transitioned to Non-Executive Director

·           Key technical appointments of experienced African engineering, social, environmental and legal teams to work on project optimisation and advancing the development of the Kasiya Project

Infill Drilling Program To Upgrade Kasiya Resource

·           Infill drilling has commenced with focus on the southern part of the MRE, which intends to provide ore feed for the first eight years of production

·           Program aims to upgrade the MRE in this area from Indicated to Measured category, allowing conversion of Ore Reserves from Probable to Proven category

·           Resource upgrade expected in early 2025

Pre-Feasibility Study Confirms Kasiya as a Major Critical Minerals Project 

·           “Market Leader” Position in Two Critical Minerals:

–    Positioned to become the world’s largest rutile producer and potentially one of the world’s largest natural graphite producers outside of China

–    Extremely low CO2-footprint operation incorporating climate-smart attributes with renewables power solutions

–    Initial Probable Ore Reserves declared of 538Mt, representing only 30% of the total Mineral Resource

–    Substantial production rate and mine life upside exists as the PFS modelling was limited to only 25 years

Outstanding Battery Anode Material Produced from Kasiya Graphite

·           Kasiya graphite concentrate confirmed to be an excellent feedstock for natural graphite anode materials suitable for lithium-ion battery production

·           Kasiya natural graphite presents a unique, low-cost opportunity to develop lithium-ion battery supply chains outside of China

·           Very high quality Coated Spherical Purified Graphite (CSPG) anode material produced from Kasiya graphite concentrate has performance characteristics comparable to the highest quality natural graphite battery material produced by dominant Chinese anode manufacturers

o    Electrochemical testing achieved very high first cycle efficiencies of 94.2% to 95.8% supporting long battery life

o    Excellent initial discharge capacities greater than 360mAh/g as required for highest quality natural graphite anode materials

o    Very low specific surface areas (known as BET) of 2.0m2/g minimising the loss of lithium in the first cycle

o    Excellent tap densities of 1.11 to 1.18g/cm3 meaning higher electrical storage

·           Outstanding anode material results are attributed to the unique geological setting of the highly weathered Kasiya orebody compared to fresh rock hosted graphite deposits, including:

o    high purity of the natural flake,

o    near perfect crystallinity, and

o    very low levels of sulphur and other impurities.

·           Further optimisation testwork to commence using additional concentrate being generated at pilot-scale facility in South Africa

·           Results will form the basis for ongoing and future discussions with potential offtakers

Commencement of Trading on OTCQX Markets

·           In July 2024, Sovereign upgraded to the OTCQX Market, the top tier of the OTC Markets, providing access to a broader eligible U.S. investor base

·           OTCQX quotation follows increased U.S. investor and strategic interest in Sovereign and its Kasiya Rutile-Graphite Project in Malawi

Key Appointments

·           Appointment of highly experienced environmental and social specialist Mr Marco Da Cunha, as its new Lead Environmental, Social and Governance Officer. Mr Da Cunha has almost 20 years of experience in environmental and social management and more recently was part of Rio Tinto’s Simandou iron ore project team in Guinea

·           Highly experienced, Africa-based social specialist consultancy, SocialEssence were appointed to the Company’s owners team to lead social and community development programs in Malawi. SocialEssence has a strong and successful track record of implementing social responsibility programs across southern Africa, including at First Quantum Minerals’ Zambian project

·           Three senior appointments and promotions across Sovereign’s key legal, permitting and technical functions in Malawi, strengthening the Company’s in-country capabilities

·           In July 2024, appointment of consultant Dr Surinder Ghag to Sovereign’s owner’s team as Chief Technology Officer – Graphite. Dr Ghag will assist Sovereign’s graphite strategy in product qualification the for the lithium-ion battery industry

Commissioning of Sustainable Farming Initiative in Malawi

·           Sovereign initiated and progressed with its Conservation Farming Program (Farming Program) in Malawi as part of its sustainability initiatives related to the development of Kasiya

·           The Program is aimed at improving the livelihoods of local communities through the creation of successful smallholder farmers.

·           During the year, the Company announced that it is estimated the Farming Program has tripled crop yields  in a season that is predicted to have 20% lower yields due to El Niño weather.

A collage of two people in a field of corn Description automatically generated

Figures 3 & 4 – Left: planted field using traditional techniques & Right: Field farmed under the Program showing substantially more crop growth

Partnering with International Development Organisation in Malawi

·           During the year, Sovereign entered into a Memorandum of Understanding (MoU) with The Palladium Group – a US-based international development entity operating in Malawi

·           Palladium implements several development projects, including the Feed the Future Malawi Growth Poles Project, which invests in local rural communities to advance sustainable, climate-smart, and inclusive wealth creation

·           Sovereign and Palladium will collaborate around Sovereign’s Kasiya Project to provide key agricultural inputs, training, technologies, and financing to develop and integrate smallholder farmers into the emerging high growth agriculture value chains

A large open pit with many layers of dirt Description automatically generated with medium confidence

Figure 5: Kasiya Pilot Phase Test Pit mined to 20 metres depth

Results of Operations

The net loss of the Group for the year ended 30 June 2024 was $18,600,894 (2023: $5,819,873). Significant items included in the year end loss are the following:

·      Interest income of $1,821,876 (2023: $268,967) earned on term deposits held by the Group.

·      Exploration and evaluation expenses of $14,831,671 (2023: $10,627,458) in relation to the Group’s projects in Malawi. This is attributable to the Group’s accounting policy of expensing exploration and evaluation expenditure incurred by the Group subsequent to acquisition of the rights to explore and up to the completion of feasibility studies;

·      Non-cash share-based payments expenses totalling $2,303,201 (2023: $2,083,592) relating to performance rights. The fair value of incentive options and rights is measured at grant date and recognised over the period during which the option and rights holders become unconditionally entitled to the incentive securities;

·      Business development expenses of $2,340,819 (2023: $2,096,822) which includes the Group’s investor and shareholder relations activities including but not limited to public relations costs, marketing and digital marketing, broker and advisor fees, travel costs, conference fees, business development consultant fees and costs of the Group’s ASX and AIM listings; and

·      A one-off gain of in 2023 of $9,480,980 (2024: nil) from the demerger of NGX Limited (NGX) and its graphite projects relating to the difference between the fair value of the in-specie distribution of NGX shares to existing Sovereign shareholders and the carrying value of the net assets demerged, less costs.

Financial Position

As at 30 June 2024, the Group had cash and cash equivalents of $31,564,130 as at 30 June 2024 (2023: $5,564,376) and no debt (2023: nil). The Group had net assets of $34,358,774 at 30 June 2024 (2023: $9,672,569), an increase of $24,686,205 or approximately 72% compared with the previous year. This is largely attributable to the increase in cash reserves following the investment made by Rio Tinto in the year.

Following the additional $19.1 million invested by Rio Tinto since 30 June 2024, Sovereign remains in strong financial position with cash at bank of approximately $43 million and no debt.

ENQUIRIES

Frank Eagar (South Africa/Malawi)
CEO & Managing Director

+27 21 065 1890

Sapan Ghai (London)
CCO

+44 207 478 3900

Nominated Adviser on AIM and Joint Broker

 

SP Angel Corporate Finance LLP

+44 20 3470 0470

Ewan Leggat

Charlie Bouverat

 

 

Joint Brokers

 

Stifel

+44 20 7710 7600

Varun Talwar

 

Ashton Clanfield

 

 

 

Berenberg

+44 20 3207 7800

Matthew Armitt

 

Jennifer Lee

 

 

 

Buchanan

+ 44 20 7466 5000

 

MST Access – Sovereign Metals #SVML Charging Up a World-Leading Rutile & Graphite Operation

#SVML #SVM Sovereign MetalsMST Financial Access note by Michael Bentley: Charging up a World Leading Rutile & Graphite Operation

✅ Kasiya project hosts the world’s largest #rutile deposit and world’s 2nd largest flake #graphite deposit

✅ SVML to become world’s largest scale, lowest cost rutile producer as supply shortfall emerges

✅ Low cost, large scale, attractive end markets | Rio Tinto getting set (now owns 19.9%)

✅ MST Access currently values SVML at £0.72 (A$1.41) – currently £0.30

https://www.mstaccess.com.au/company/sover

Sovereign Metals #SVML – Quarterly report for the period ended 30 June 2024

Sovereign Metals Limited (Company or Sovereign) (ASX:SVM & AIM:SVML) is pleased to provide its quarterly report for the period ended 30 June 2024.

HIGHLIGHTS

Rio Tinto Invests Additional A$18.5m via Option Exercise

·     In July 2024, Rio Tinto invested a further A$18.5 million via the exercise of options, to increase its shareholding in Sovereign to 19.76%

·        Investment proceeds to be used to continue advancing the Kasiya Rutile-Graphite Project in Malawi

·        Rio Tinto’s further investment represents another significant step towards unlocking a major new supply of low-CO2-footprint natural rutile and flake graphite. Under the Investment Agreement between Sovereign and Rio Tinto, Rio Tinto continues to provide assistance and advice on technical and marketing aspects of Kasiya

·        Following the additional A$18.5 million invested by Rio Tinto, Sovereign remains in strong financial position with cash at bank of approximately A$50.0 million and no debt

Mining Development Agreement signed by the Malawi Government

·     In July 2024, Sovereign notes that Mkango Resources Limited (Mkango) signed a Mining Development Agreement with the Malawi Government on terms similar to assumptions used in the Company’s Pre-Feasibility Study

·        Mkango announced that the Malawi Government would receive a 5% royalty of gross revenues and 10% non-diluting equity interest in the project, while Mkango will be exempt from customs and excise duties and pay a 30% corporate tax rate

Kasiya Optimisation Advances to Pilot Phase

·       During the quarter, Sovereign commenced a pilot mining and land rehabilitation program (Pilot Phase) at Kasiya as part of the ongoing PFS Optimisation Study

·       At the end of July 2024, the dry mining component of the Pilot Phase was successfully completed, confirming Kasiya can be efficiently mined using standard mobile excavators and trucks, demonstrating operational alternatives as part of ongoing PFS Optimisation Study

·        Test pit mined as planned and on schedule to a depth of 20 metres, excavating approximately 170,000 bench cubic metres

·        Empirical data generated from the Pilot Phase will assist towards determining optimal excavation, material handling, processing, backfilling and rehabilitation approaches

·       Demonstrates strong support for mining projects in Malawi with all required approvals and community permissions for the Pilot Phase obtained within three months

·       The test pit will be backfilled, and multiple rehabilitation strategies will be implemented to demonstrate successful restoration of agricultural land

·        Excavated material will be processed through cyclones on-site for tailings deposition testwork as well as at Sovereign’s laboratory in Malawi to generate additional bulk samples for graphite product qualification

Downstream Testwork Demonstrates High-Quality Graphite for Lithium-Ion Batteries

·     During the quarter, Spherical Purified Graphite (SPG) with world-leading specifications successfully produced from Kasiya demonstrating all required parameters within industry standards with spheronisation yields of up to 68% with further scope to optimise in future testwork

·        Kasiya’s spherical purified graphite (SPG) showed exceptionally low levels of residual impurities achieving a 99.99% loss-on-ignition (LOI)

·        Testwork was undertaken as part of the Company’s graphite strategy to qualify and commercialise graphite concentrate for use in the lithium-ion battery sector

Testwork Delivers Superior Quality, Low Impurity Graphite for Battery Anodes

·       During the quarter, graphite circuit feed prepared at Sovereign’s existing Lilongwe laboratory facility has produced high quality concentrates in benchtop and pilot-scale flotation and cleaning

·        Four independent laboratories all successfully produced high-grade graphite concentrate averaging over 97% Total Graphite Content (TGC) with flotation recoveries exceeding 90%

·        Flotation results demonstrated 1.44% TGC run-of-mine Kasiya ore upgrades to more than 55% TGC rougher concentrate without crushing or milling; process steps typically required for producing graphite concentrates from hard-rock deposits; contributing to the unique low cost characteristics of Kasiya’s saprolite hosted graphite

·       Graphite concentrates show exceptionally low levels of sulphur compared to typical hard-rock graphite peers – a key metric to qualify as active anode material for lithium-ion batteries

·       Results are part of ongoing testwork being undertaken as part of the Company’s graphite marketing and active anode qualification strategy, supervised by Dr Surinder Ghag

Commencement of Trading on OTCQX Markets

·      Subsequent to the quarter, Sovereign upgraded to the OTCQX Market, the top tier of the OTC Markets, providing access to a broader eligible U.S. investor base

·        OTCQX quotation follows increased U.S. investor and strategic interest in Sovereign and its Kasiya Rutile-Graphite Project in Malawi

Partnering with International Development Organisation in Malawi

·        During the quarter, Sovereign has entered into an MoU with The Palladium Group – a US-based international development entity operating in Malawi

·       Palladium implements several development projects, including the Feed the Future Malawi Growth Poles Project, which invests in local rural communities to advance sustainable, climate-smart, and inclusive wealth creation

·      Sovereign and Palladium will collaborate around Sovereign’s Kasiya Project to provide key agricultural inputs, training, technologies, and financing to develop and integrate smallholder farmers into the emerging high growth agriculture value chains

Classification 2.2: This announcement includes Inside Information

ENQUIRIES

Mr Frank Eagar (South Africa/Malawi)
Managing Director and CEO

+27 21 065 1890

Sam Cordin (Perth)
+61(8) 9322 6322

Sapan Ghai (London)
+44 207 478 3900

 

 

Nominated Adviser on AIM and Joint Broker

 

SP Angel Corporate Finance LLP

+44 20 3470 0470

Ewan Leggat

Charlie Bouverat

 

 

Joint Brokers

 

Stifel

+44 20 7710 7600

Varun Talwar

 

Ashton Clanfield

 

 

 

Berenberg

+44 20 3207 7800

Matthew Armitt

 

Jennifer Lee

 

 

 

Buchanan

+ 44 20 7466 5000

 

Evening Standard – Sovereign Metals #SVML and Rio

Sovereign Metals #SVML featured in Graeme Evans market round up in the Evening Standard. The Company hopes to develop a world class mine capable of supplying critical minerals to the titanium pigment, titanium metal & lithium-ion battery industries

The Times – Rio Tinto digs deep for African mine, exercising another £9.7m in investment options in Sovereign Metals

Sovereign Metals #SVML featured by Emma Powell in The Times

Rio Tinto digs deep for African mine, exercising another £9.7m in investment options in Sovereign Metals.

Rio has the option to become the operator of the #Kasiya project on arm’s length terms & to gain marketing rights to 40% of products

Sovereign Metals #SVML – Rio Tinto To Invest Additional A$18.5m via Option Exercise

Sovereign Metals Limited (ASX: SVM; AIM: SVML) (Sovereign or the Company) is pleased to announce that Rio Tinto Mining and Exploration Limited (Rio Tinto) has notified the Company that it has exercised all its share options to increase its shareholding in Sovereign to 19.76%.

Highlights:

·   

Rio Tinto to invest A$18.5 million via the exercise of options, to increase its shareholding in Sovereign to 19.76%

·   

Investment proceeds to be used to continue advancing the Kasiya Rutile-Graphite Project in Malawi

·   

Rio Tinto’s further investment represents another significant step towards unlocking a major new supply of low-CO2-footprint natural rutile and flake graphite

·   

Under the Investment Agreement between Sovereign and Rio Tinto, Rio Tinto continues to provide assistance and advice on technical and marketing aspects of Kasiya

Rio Tinto has exercised 34,549,598 share options to acquire the same number of new fully paid ordinary shares (Shares) in Sovereign at A$0.535 per Share for proceeds of A$18,484,035.

The Company will use the proceeds from Rio Tinto’s additional strategic investment to continue advancing Sovereign’s Tier 1 Kasiya Rutile-Graphite Project (Kasiya or the Project) in Malawi. This includes progressing the current optimisation study for Kasiya which is focused on the development of a world-class mine capable of supplying critical minerals to the titanium pigment, titanium metal and lithium-ion battery industries. Under the Investment Agreement between Sovereign and Rio Tinto, Rio Tinto continues to provide assistance and advice on technical and marketing aspects of Kasiya.

Funds from the option exercise are expected to be received by Friday, 5 July 2024.

Sovereign’s Chairman, Ben Stoikovich, commented: “Rio Tinto’s further investment in Sovereign reaffirms Kasiya’s position as one of the most significant critical minerals projects globally. With Rio Tinto’s wealth of experience as one of the world’s largest and most accomplished global mining companies, Kasiya is well-positioned to potentially become a market leader in low-CO2-footprint natural rutile and graphite.”

Sovereign’s Managing Director, Frank Eagar, commented: “In collaboration with Rio Tinto, we have made significant progress in advancing Kasiya over the course of this year, including the successful launch of the pilot phase mining in May. We are excited about Rio Tinto’s further investment in Sovereign, which represents another significant step towards unlocking a major new supply of low-CO2-footprint natural rutile and flake graphite.”

BACKGROUND TO RIO TINTO’S STRATEGIC INVESTMENT

In July 2023, Rio Tinto agreed to initially subscribe for and purchase 83,095,592 Shares in Sovereign at a price of A$0.486 per Share for aggregate proceeds of A$40.4 million. Rio Tinto’s initial subscription price reflected a 10% premium to the 45-day volume weighted average price on the ASX as at close on 14 July 2023 and resulted in Rio Tinto holding approximately 15% of the ordinary shares of the Company. 

The subscription also involved Rio Tinto being granted options to acquire 34,549,598 further Shares in Sovereign within 12 months of the initial subscription.

Sovereign and Rio Tinto also entered into an Investment Agreement pursuant to which a joint technical committee has been established between Sovereign and Rio Tinto to advance the development of Kasiya. Please refer to the Company’s announcement on 17 July 2023 for further details.

For acting as financial advisor and subject to receipt of exercise funds, an advisory fee of 3% is payable to SCP Resource Finance (SCP) on the amount of Rio Tinto’s exercise of options investment and, subject to shareholder approval, can be paid by way of the issue of ordinary shares to SCP, with 1,036,488 shares being issuable to SCP. A notice of meeting (and explanatory statement) will be sent out to shareholders in the coming weeks.

ENQUIRIES

Frank Eagar (South Africa/Malawi)
Managing Director

+61(8) 9322 6322

Sam Cordin (Perth)
Business Development

+61(8) 9322 6322

Sapan Ghai (London)
CCO

+44 207 478 3900

 

Nominated Adviser on AIM and Joint Broker

 

SP Angel Corporate Finance LLP

+44 20 3470 0470

Ewan Leggat

Charlie Bouverat

 

 

Joint Brokers

 

Stifel

+44 20 7710 7600

Varun Talwar

 

Ashton Clanfield

 

 

 

Berenberg

+44 20 3207 7800

Matthew Armitt

 

Jennifer Lee

 

 

 

Buchanan

+ 44 20 7466 5000

The information contained within this announcement is deemed by Sovereign to constitute inside information as stipulated under the Regulation 2014/596/EU which is part of domestic law pursuant to the Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310) (“UK MAR”). By the publication of this announcement via a Regulatory Information Service, this inside information (as defined in UK MAR) is now considered to be in the public domain. The person responsible for arranging for the release of this announcement on behalf of Sovereign is Mr Dylan Browne (Company Secretary).

Admission

Subject to receipt of exercise funds, an application to AIM will be made for the 34,549,598 Shares to be admitted to trading on AIM (the AIM Admission). It is expected that AIM Admission will take place and dealings will commence on AIM on or around 8.00 a.m. on 12 July 2024.

Total Voting Rights

Immediately following the AIM Admission, the Company’s issued share capital will be 597,552,999 Shares, with each share carrying the right to one vote. The Company does not hold any Ordinary Shares in treasury. The total voting rights figure immediately following the AIM Admission of 597,552,999 may be used by shareholders (and others with notification obligations) as the denominator for the calculations by which they will determine whether they are required to notify their interest in, or a change to their interest in, the Company under the Disclosure Guidance and Transparency Rules.

Forward Looking Statement

This release may include forward-looking statements, which may be identified by words such as “expects”, “anticipates”, “believes”, “projects”, “plans”, and similar expressions. These forward-looking statements are based on Sovereign’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Sovereign, which could cause actual results to differ materially from such statements. There can be no assurance that forward-looking statements will prove to be correct. Sovereign makes no undertaking to subsequently update or revise the forward-looking statements made in this release, to reflect the circumstances or events after the date of that release.

Anglesey Mining #AYM – Alan Green talks to CEO Rob Marsden at Parys Mountain

Alan Green talks to recently appointed Anglesey Mining #AYM CEO Rob Marsden direct from the Company’s flagship Parys Mountain mine. Rob discusses his career, in particular the years he spent working at Rio Tinto and also the 3 years he spent heading up the Rio investment committee, charged with seeking new investment opportunities for the mining giant. Rob then covers his work as a consultant, working around the world and then the time he spent with former CEO Jo Battershill at Parys Mountain a few years ago, which led up to his joining the board. Rob provides his overview of the latest assay results from hole NCZ003, and explains how he believes the previous drilling in the 1960’s and 1970’s can give the team ‘incredible confidence’ going forward. We then look at how the team plan to approach the pre feasibility study, via both divergent and convergent phases leading to a robust PFS ahead of the move to feasibility study. Rob then maps out what investors can expect in the coming weeks and months, and how this week he has assembled a team of colleagues including a longstanding veteran Rio Tinto geologist who will bring ‘fresh eyes’ to the project.

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