REG - Sovereign Metals Ltd - Annual Report 2023
29/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230929:nRSc1033Oa&default-theme=true
RNS Number : 1033O Sovereign Metals Limited 29 September 2023
Sovereign Metals Limited
ANNUAL REPORT FOR THE FINANCIAL YEAR ENDED - 30 JUNE 2023
Sovereign Metals Limited ("Sovereign" or the "Company") (ASX:SVM, AIM:SVML)
advises that its 2023 Annual Report, has been published today at
https://sovereignmetals.com.au/company-reports/
(https://sovereignmetals.com.au/company-reports/) and as below.
The Company also advises that an Appendix 4G (Key to Disclosures: Corporate
Governance Council Principles and Recommendations) and 2023 Corporate
Governance Statement have been released today and are also available on the
Company's website at https://sovereignmetals.com.au/corporate-governance/
(https://sovereignmetals.com.au/corporate-governance/) .
CORPORATE DIRECTORY
abn 71 120 833 427
Directors Brokers
Mr Benjamin Stoikovich Chairman
Dr Julian Stephens Managing Director Berenberg, Gossler & Co, KG, London Branch
Mr Ian Middlemas Non-Executive Director 60 Threadneedle Street
Mr Mark Pearce Non-Executive Director
London EC2R 8HP
Mr Nigel Jones Non-Executive
United Kingdom
Director T: +44 20 3753 3132
Company Secretary Share Register
Mr Dylan Browne Australia
Computershare Investor Services Pty Ltd
Level 17
Registered and Principal Office
221 St Georges Terrace
Level 9,
Perth WA 6000
28 The Esplanade
Perth WA 6000
Telephone: 1300 850 505
International: +61 8 9323 2000
Telephone: +61 8 9322 6322
Facsimile: +61 8 9323 2033
Facsimile: +61 8 9322 6558
United Kingdom
Operations Office
Computershare Investor Services PLC
Area 4
The Pavilions,
Bridgewater Road,
Lilongwe
Bristol BS99 6ZZ
Telephone: +44 370 702 0000
Malawi
Solicitors
Stock Exchange Listings Thomson Geer
Australia
Australian Securities Exchange
ASX Code: SVM - Ordinary Shares Auditor
Ernst and Young
United Kingdom
London Stock Exchange (AIM)
Bankers
AIM Code: SVML - Depository Interests Australia - National Australia Bank Limited, Australia and New Zealand Banking
Group Limited
Malawi - Standard Bank
Nominated Advisor and Broker
SP Angel Corporate Finance LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
United Kingdom
Website
www.sovereignmetals.com.au (http://www.sovereignmetals.com.au)
Email
info@sovereignmetals.com.au (mailto:info@sovereignmetals.com.au)
CONTENTS
Directors' Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
To view the following sections, please refer to the full version of the Annual
Report on our website at www.sovereignmetals.com.au
Notes to the Financial Statements
Directors' Declaration
Auditor's Independence Declaration
Independent Audit Report
ASX Additional Information
DIRECTORS' REPORT
30 June 2023
The Directors of Sovereign Metals Limited present their report on the Group
consisting of Sovereign Metals Limited ("the Company" or "Sovereign" or
"Parent") and the entities it controlled at the end of, or during, the year
ended 30 June 2023 ("Group").
HIGHLIGHTS
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 at 222kt per
annum and potentially one of the world's largest natural graphite producers
outside of China at 244kt per annum for an initial 25 year life-of-mine
("LOM")
- Extremely low CO(2)-footprint operation incorporating climate-smart
attributes including hydro-mining with renewables power solution
- Initial Probable Ore Reserves declared of 538Mt, representing
conversion of 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
· The PFS demonstrated compelling economic outcomes
including:
- Post-tax NPV(8) of US$1,605m and post-tax IRR of 28%
- Average EBITDA of US$415m per annum
- Cash operating costs of US$404/t of product will position Kasiya as
the lowest cost producer of rutile and graphite globally
· Optimisation with Strategic Investor Rio Tinto to
Commence:
- Advancing into an optimisation phase prior to moving to the Definitive
Feasibility Study (DFS) and formal establishment of the Technical Committee
with the Company's strategic investor, Rio Tinto
Rio Tinto invests $40.6m to become a 15% Strategic Investor
· Subsequent to the end of the period, Rio Tinto made an
investment of A$40.6 million in Sovereign resulting in an initial 15%
shareholding plus options to increase their position to potentially 19.99%
within 12 months
· Investment proceeds will be used to advance the Kasiya
rutile-graphite project (Kasiya or Project) in Malawi
· Rio Tinto's investment represents a significant step
towards unlocking a major new supply of low-CO(2)-footprint natural rutile and
flake graphite
· Under the Investment Agreement, Rio Tinto will provide
assistance and advice on technical and marketing aspects of Kasiya including
with respect to Sovereign's graphite co-product, with a primary focus on
spherical purified graphite for the lithium-ion battery anode market
Strong Support from the Government of Malawi
· The Government 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
· The Government's public statement confirms its
commitment to ensuring the growth of the mining sector through deliberate
initiatives aiming at establishing a conducive investment environment in the
sector
· With mining being one of the key pillars for growth
under Malawi's economic development strategy (Agriculture, Tourism, Mining -
ATM Policy) and the potential for Kasiya to be a project of national
significance, the Government has constituted an Inter-ministerial Project
Development Committee to work alongside the Company
Indicated Resource Increased by over 80%
· Kasiya's Indicated Resource now stands at 1.2 Billion
tonnes at 1.0% rutile and 1.5% graphite with over 66% of tonnes now in the
Indicated category.
· Updated MRE moves over 0.5 Billion tonnes from Inferred
to Indicated - an increase of 81% to the Indicated category.
Downstream Testwork on Kasiya's Graphite shows Excellent Suitability for use
in Lithium-Ion Batteries
· Downstream testwork on Kasiya's graphite co-product
demonstrated it to have superior qualities showing excellent suitability for
use in lithium-ion batteries. Key outcomes include:
o Near perfect crystallinity - an indicator of battery anode performance
o Above benchmark >99.95% carbon purity achieved
o No critical impurities or deleterious elements commonly found in other
natural graphite sources
OPERATING AND FINANCIAL REVIEW
Sovereign is focused on the development of its Kasiya project in Malawi. The
recently announced Pre-Feasibility Study ("PFS") confirms Kasiya 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.
Figure 1: Sovereign's Kasiya project displaying its position 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 200km(2).
Rutile mineralisation lies in laterally extensive, near surface, flat
"blanket" style bodies in areas where the weathering profile is preserved and
not significantly eroded. Kasiya's graphite by-product MRE is 1.8Bt at 1.4%
graphite, containing over 24.4Mt of graphite.
PFS CONFIRMS KASIYA AS A MAJOR CRITICAL MINERALS PROJECT DELIVERING
INDUSTRY-LEADING ECONOMIC RETURNS AND SUSTAINABILITY METRICS
The PFS confirmed Kasiya as potentially a major critical minerals project with
an extremely low CO(2)-footprint delivering major volumes of natural rutile
and graphite while generating significant economic returns.
The PFS is an Association for the Advancement of Cost Engineering
International ("AACEI") Class 3 estimate with an accuracy of -20% and +25%.
ECONOMIC HIGHLIGHTS
US$1,605M 28% US$415M
After Tax NPV(8) After Tax IRR Ave. Annual EBITDA
US$16Bn US$404/t US$597M
Total Revenue Operating Cost Capex to 1(st) Production
(initial modelled 25 years LOM) (FOB Nacala per tonne of product)
· "Market Leader" Position in Two Critical Minerals:
- Positioned to potentially become the world's largest rutile
producer at 222kt per annum for an initial 25 year LOM
- Potentially one of the world's largest natural graphite
producers outside of China at 244kt per annum
- Natural rutile facing extreme global supply deficit estimated to
widen a further 40% over the next 5 years
- Natural graphite market moving into deficit as demand rapidly
grows in the lithium-ion battery and electric vehicle ("EV") sectors
- Initial Probable Ore Reserves declared of 538Mt, representing
conversion of 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
· Highly Compelling Cost Profile:
- Cash operating costs of US$404/t of product will position Kasiya
as the lowest cost producer of rutile and graphite globally
- Increased capital to first production is primarily due to
bringing forward capital items previously planned for Stage 2 including a rail
spur, full-scale water dam, integrated power and optimised graphite
production, as well as generally enhanced engineering and global cost
inflation
· Industry-Redefining Environmental and Social Advantages:
- Extremely low CO(2)-footprint operation incorporating
climate-smart attributes including hydro-mining with renewables power solution
- CO(2) emissions expected to be lowest in class versus existing
and planned operations and versus alternative synthetic products
- Low-impact operation with mineralisation at surface, zero-strip
ratio, low reagent usage, simple process flowsheet and progressive land
rehabilitation
Table 1: Key PFS Outcomes
Outcome Unit Kasiya
NPV(8) (real post-tax) US$ $1,605M
NPV(10) (real post-tax) US$ $1,205M
IRR (post-tax) % 28%
Capital Costs to First Production (Stage 1) US$ $597M
Expansion Capital (Stage 2) US$ $287M
Plant relocation US$ $366M
Operating Costs US$/t mined $8.74
Operating Costs US$/t product $404
Revenue to Cost Ratio X 2.8
NPV(8) / Capital Costs to First Production X 2.7
Throughput (Average LOM) Mtpa 21.5
Modelled Life years 25
Annual Production (Average LOM) - rutile ktpa 222
Annual Production (Average LOM) - graphite ktpa 244
Total Revenue (LOM) US$ $16,121M
Annual Revenue (Average LOM) US$ $645M
Annual EBITDA (Average LOM) US$/year $415M
Payback - from start of production years 4.3 years
RIO TINTO INVESTS $40.6M TO BECOME A 15% STRATEGIC INVESTOR
Subsequent to the end of the year, Sovereign completed a A$40.6 million
strategic investment by Rio Tinto Mining and Exploration Limited (Rio Tinto)
to advance Sovereign's world-class Kasiya Rutile-Graphite Project in Malawi.
Rio Tinto subscribed for 83.3 million new fully paid ordinary shares (Shares)
in Sovereign at a price of A$0.486 per Share for aggregate proceeds of A$40.6
million resulting in Rio Tinto holding approximately 15% of the ordinary
shares of the Company.
The subscription also involved Rio Tinto being granted A$0.535 options to
acquire 34.5 million further Shares in Sovereign on or before 21 July 2024
which could potentially result in Rio Tinto's shareholding in the Company
increasing up to 19.99% (based on the number of shares in issue in the Company
as at the date of this report).
The Company will use the proceeds from Rio Tinto's strategic investment to
fund the advancement of Kasiya, including advancing into an optimisation phase
prior to moving to the Definitive Feasibility Study ("DFS").
GOVERNMENT OF MALAWI APPLAUDS RIO TINTO'S INVESTMENT
In a Press Release issued on 20 July 2023, the Government of Malawi has
publicly applauded the timely investment by Rio Tinto and marked it as a
milestone towards realising the country's aspirations of growing the mining
industry as promoted in the Malawi Vision 2063, which identifies mining as a
priority industry.
The Government's statement confirms its commitment to ensuring the growth of
the mining sector through deliberate initiatives aiming at establishing a
conducive investment environment in the sector.
With mining being one of the key pillars for growth under Malawi's economic
development strategy (Agriculture, Tourism, Mining - ATM Policy) and the
potential for Kasiya to be a project of national significance, the Government
has constituted an Inter-ministerial Project Development Committee to work
alongside the Company.
INDICATED RESOURCE UPGRADE
In April 2023, Sovereign announced the updated MRE for its world-class Kasiya
rutile-graphite deposit in Malawi. The updated MRE resulted in over 0.5
Billion tonnes converting from Inferred to Indicated, an 81% increase in the
Indicated category. Kasiya now contains 1.2Bt @ 1.0% rutile and 1.5% graphite
in the Indicated category and a total MRE of 1.8Bt @ 1.0% rutile and 1.4%
graphite.
Kasiya remains the world's largest natural rutile deposit and one of the
largest flake graphite deposits.
Table 2: Kasiya Total Indicated + Inferred Mineral Resource Estimate at 0.7%
rutile cut-off grade
Classification Resource Rutile Grade Contained Rutile Graphite Grade (TGC) (%) Contained Graphite
(Mt)
(%)
(Mt)
(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
The updated MRE has further defined broad and contiguous zones of high-grade
rutile and graphite which occur across a very large area of over 201km(2).
Rutile mineralisation is concentrated in laterally extensive, near surface,
flat "blanket" style bodies in areas where the weathering profile is preserved
and not significantly eroded. Graphite is depleted near surface with grades
improving at depths generally >4m to the base of the saprolite zone which
averages about 22m.
Sovereign's 2022 drill program at Kasiya used push tube ("PT") core holes to
in-fill and convert Inferred mineralisation into the Indicated category. The
consistency and robustness of the geology allowed for an efficient conversion
of this previously Inferred material on a near-identical one-for-one basis to
the Indicated category.
A total of 66% of the MRE now reports to the Indicated category @ 1.0% rutile
and 1.5% TGC - up from 33% previously. Overall, the new Indicated components
show coherent, broad bodies of mineralisation that have coalesced well,
particularly in the southern parts of the MRE.
Further advancement in this MRE update was the application of air-core ("AC")
drilling to define the depth of mineralisation in a number of selected
higher-grade areas. As expected, this drilling shows that high-grade rutile
and graphite mineralisation extends to the base of the soft saprolite unit
terminating on the saprock basement averaging about 22m depth. This deeper AC
drilling targeted early-scheduled mining pits mainly in the southern areas of
the MRE footprint.
A number of higher-grade graphite zones at depth were identified which are
generally associated with higher grade rutile at surface. Some of these zones
have graphite grades at depths >6m in the 4% to 8% TGC range and represent
significant contained coarse flake graphite tonnages.
ESG FRAMEWORK ADVANCES SOCIAL INITIATIVES IN MALAWI
Sovereign has established an Environmental, Social and Governance ("ESG")
framework to advance Sovereign's Corporate Social Responsibility in Malawi
which continues to undertake several initiatives to assist in the development
of Malawi and its local communities, including:
· Promoting education in Malawi through a Schools Upgrade
Program and creation of a Scholarship Program for high school learners
· Advancing local community infrastructure including
construction of a new Community Centre and commissioning of water bores across
the Company's licence area to provide local communities with drinking water
· Establishing international standard mining industry
facilities with the construction of an extensive rutile sample laboratory in
Lilongwe
· Employment of a diverse workforce and developing key
exploration and mining-applicable skills through training programs
Continuing engagement with key stakeholders from local communities through to
Government level
Corporate
Subsequent to 30 June 2023, the Group completed a A$40.6 million strategic
investment by Rio Tinto to advance Kasiya. Rio Tinto subscribed for 83.3
million Shares in Sovereign at a price of A$0.486 per Share for aggregate
proceeds of A$40.6 million resulting in Rio Tinto holding approximately 15% of
the ordinary shares of the Company. The subscription also involved Rio Tinto
being granted unlisted options, exercisable at $0.535 each on or before 21
July 2024, to acquire 34.5 million further Shares in Sovereign which could
result in Rio Tinto's shareholding in the Company potentially increasing up to
19.99% (based on the number of shares on issue in the Company as at the date
of this report).
Results of Operations
The net loss of the Group for the year ended 30 June 2023 was $5,819,873
(2022: $13,719,731). Significant items contributing to the year end loss
include the following:
· Exploration and evaluation expenses of $10,627,458 (2022:
$8,072,133) 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 $2,083,592
(2022: $2,941,985) relating to performance rights. The fair value of
performance rights are recognised over the vesting period of the incentive
security;
· Business development expenses of $2,096,822 (2022: $1,964,460)
which includes the Group's investor relations activities including but not
limited to public relations costs, marketing and digital marketing, broker
fees, travel costs, conference fees, business development consultant fees and
costs of the Group's AIM listing; and
· A one-off gain of $9,480,980 (2022: nil) from the demerger of NGX
Limited (NGX) 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 2023, the Group had cash and cash equivalents of $5,564,376 as
at 30 June 2023 (2022: $18,892,741) and borrowings of nil (2022: nil). The
Group had net assets of $9,672,569 at 30 June 2023 (2022: $25,161,138), a
decrease of $15,488,569 or approximately 62% compared with the previous year.
The decrease is largely driven by the reduction in cash due to expenditure
activities and the impact of the demerger of NGX Limited during the financial
year.
At the date of this report, the Company had cash and cash equivalents of
approximately $43 million and no debt.
Business Strategies and Prospects for Future Financial Years
The objective of the Group is to create long-term shareholder value through
the discovery, development and acquisition of technically and economically
viable mineral deposits.
To date, the Group has not commenced production of any minerals. To achieve
its objective, the Group currently has the following business strategies and
prospects over the medium to long term:
· Following completion of the PFS at Kasiya, the Company
will advance into an optimisation phase prior to moving to the DFS with
support from the Company's strategic investor, Rio Tinto;
· Conduct further exploration programs across rutile
targets identified on the Group's tenements; and
All of these activities are inherently risky and the Board is unable to
provide certainty that any or all of these developments will be able to be
achieved. The material business risks faced by the Group that are likely to
have an effect on the Group's future prospects, and how the Group manages
these risks, include:
· The Group's exploration properties may never be brought
into production - The exploration for, and development of, mineral deposits
involves a high degree of risk. Few properties which are explored are
ultimately developed into producing mines. To mitigate this risk, the Group
will undertake systematic and staged exploration and testing programs on its
mineral properties and, subject to the results of these exploration programs,
the Group will then progressively undertake a number of technical and economic
studies with respect to its projects prior to making a decision to mine.
However there can be no guarantee that the studies will confirm the technical
and economic viability of the Group's mineral properties or that the
properties will be successfully brought into production;
· The Group's activities will require further capital -
The exploration and any development of the Group's exploration properties will
require substantial additional financing. Failure to obtain sufficient
financing may result in delaying or indefinite postponement of exploration and
any development of the Group's properties or even a loss of property interest.
There can be no assurance that additional capital or other types of financing
will be available if needed or that, if available, the terms of such financing
will be favourable to the Group;
· The Group is subject to sovereign risk of the Republic
of Malawi - The Group's operations in the Republic of Malawi are exposed to
various levels of political, economic and other risks and uncertainties. The
Republic of Malawi is a developing country and there can be no assurances that
the risks of operating in the Republic of Malawi will not directly impact the
Group's operations. During the period, the Government of Malawi proposed a new
Mines and Minerals Bill (2023) ("New Bill") which was passed by the Malawian
Parliament and awaits Malawian Presidential Assent and publication in the
Malawi Gazette before coming into force. If approved, the New Bill will
replace the Mines and Minerals Act (2019) ("Mines Act"). The New Bill
introduces amendments to improve transparency and governance of the mining
industry in Malawi. Sovereign notes the following updates in the New Bill
which may affect the Company in the future: (i) Exploration Licenses ("ELs")
will now be granted for an initial period of 5 years with the ability to
extend by 3 years on two occasions (total 11 years); (ii) the Malawian
Government maintains a right to free equity ownership for large-scale mining
licences but the New Bill proposes to remove the automatic free government
equity ownership with the right to be a negotiation matter; and (iii) A new
Mining and Regulatory Authority will be responsible for implementing the
objectives of the New Bill;
· The Group may be adversely affected by fluctuations in
commodity prices and/or foreign exchange - The price of rutile, graphite and
other commodities fluctuates widely and is affected by numerous factors beyond
the control of the Group. Future production, if any, from the Group's mineral
properties will be dependent upon the price of rutile and graphite and other
commodities being adequate to make these properties economic. Current and
planned development activities are predominantly denominated in US dollars and
the Group's ability to fund these activities may be adversely affected if the
Australian dollar continues to fall against the US Dollar. The Group currently
does not engage in any hedging or derivative transactions to manage commodity
price or foreign exchange risk. As the Group's operations change, this
policy will be reviewed periodically going forward; and
· Global financial conditions may adversely affect the
Group's growth and profitability - Many industries, including the mineral
resource industry, are impacted by these market conditions. Some of the key
impacts include contraction in credit markets resulting in a widening of
credit risk, devaluations and high volatility in global equity, commodity,
foreign exchange and precious metal markets, and a lack of market liquidity.
Due to the current nature of the Group's activities, a slowdown in the
financial markets or other economic conditions may adversely affect the
Group's growth and ability to finance its activities.
DIRECTORS
The names of Directors in office at any time during or since the end of the
financial year are:
Current Directors
Mr Benjamin Stoikovich Chairman
Dr Julian Stephens Managing Director
Mr Ian Middlemas Non-Executive
Director
Mr Mark Pearce
Non-Executive Director
Mr Nigel Jones
Non-Executive Director
Unless otherwise disclosed, Directors held their office from 1 July 2022 until
the date of this report.
CURRENT DIRECTORS AND OFFICERS
Benjamin Stoikovich
Chairman
Qualifications - B.Eng, M.Eng, M.Sc, CEng, CEnv
Mr Stoikovich is an experienced mining executive and corporate finance
professional residing in London. Mr Stoikovich is currently the Chief
Executive Officer of GreenX Metals Limited (ASX: GRX) and was formerly a
Director of the Mining and Metals Corporate Finance Division of Standard
Chartered Bank in London, with extensive experience in financing the
development of African mining projects and exposure to the mineral sands
sector.
Mr Stoikovich started his career as a mining engineer with BHP Billiton in
Australia, gaining broad experience across mine operations management and
qualifying as a mine manager. He holds a post graduate degree in Environmental
Engineering and UK professional designation as a Chartered Environmentalist
(CEnv) with wide ranging experience of managing the environmental, social and
sustainability aspects of mining projects across the life-cycle and the ESG
requirements of the investment community. Mr Stoikovich was appointed a
Director of the Company on 13 October 2020. During the three year period
to the end of the financial year, Mr Stoikovich held a directorship in
GreenX Metals Limited (June 2013 - present).
Julian Stephens
Managing Director
Qualifications - B.Sc (Hons), PhD, MAIG
Dr Stephens originally identified and secured the Malawi properties acquired
by Sovereign in 2012. He has since been closely involved with the subsequent
exploration and development of these projects, including the discovery of the
Kasiya rutile deposit.
Dr Stephens has extensive experience in the resources sector having spent in
excess of 25 years in board, executive management, senior operational and
economic geology research roles for a number of companies. He has spent over a
decade working on African projects, particularly projects in Malawi. Dr
Stephens holds a PhD from James Cook University, Queensland and is a member of
the Australian Institute of Geoscientists.
Dr Stephens was appointed a Director of Sovereign Metals Limited on 22 January
2016 and subsequently appointed Managing Director on 27 June 2016. During the
three year period to the end of the financial year, Dr Stephens did not hold
any other directorships in publicly listed companies.
Ian Middlemas
Non-Executive Director
Qualifications - B.Com, CA
Mr Middlemas is a Chartered Accountant and holds a Bachelor of Commerce
degree. He worked for a large international Chartered Accounting firm before
joining the Normandy Mining Group where he was a senior group executive for
approximately 10 years. He has had extensive corporate and management
experience, and is currently a director of a number of publicly listed
companies in the resources sector.
Mr Middlemas was appointed a Director of Sovereign Metals Limited on 20 July
2006. During the three year period to the end of the financial year, Mr
Middlemas has held directorships in Constellation Resources Limited (November
2017 - present), Apollo Minerals Limited (July 2016 - present), GCX Metals
Limited (October 2013 - present), Berkeley Energia Limited (April 2012 -
present), GreenX Metals Limited (August 2011 - present), NGX Limited (April
2021 - present), Salt Lake Potash Limited (Receivers and Managers Appointed)
(January 2010 - present), Equatorial Resources Limited (November 2009 -
present), Odyssey Gold Limited (September 2005 - present), Piedmont Lithium
Limited (September 2009 - December 2020) and Peregrine Gold Limited (September
2020 - February 2022).
Mark Pearce
Non-Executive Director
Qualifications - B.Bus, CA, FCIS, FFin
Mr Pearce is a Chartered Accountant and is currently a director of several
listed companies that operate in the resources sector. He has had
considerable experience in the formation and development of listed resource
companies. Mr Pearce is also a Fellow of the Institute of Chartered
Secretaries and a member of the Financial Services Institute of Australasia.
Mr Pearce was appointed a Director of Sovereign Metals Limited on 20 July
2006. During the three year period to the end of the financial year, Mr
Pearce has held directorships in Constellation Resources Limited (July 2016 -
present), GreenX Metals Limited (August 2011 - present), Equatorial Resources
Limited (November 2009 - present), GCX Metals Limited (June 2022 - present),
NGX Limited (April 2021 - present), Peregrine Gold Limited (September 2020 -
February 2022), Odyssey Gold Limited (September 2005 - August 2020), Salt Lake
Potash Limited (Receivers and Managers Appointed) (August 2014 - October 2020)
and Apollo Minerals Limited (July 2016 - February 2021).
Nigel Jones
Non-Executive Director
Qualifications - MA
Mr Jones has over 30 years of mining industry experience with 22 years in a
number of senior roles at Rio Tinto Group, where most recently, Mr Jones was
Managing Director of Rio Tinto's Simandou iron ore project, one of the world's
largest proposed mining developments.
In this role, he was accountable for all aspects of the project's development,
including its complex ESG strategy. Such aspects included impacts on natural
ecosystems, biodiversity, and community and government relations.
Mr Jones was also a member of the senior leadership team of the Energy and
Minerals product group, which incorporated Rio Tinto's titanium dioxide
feedstock businesses in Canada and southern Africa. Prior roles in Rio Tinto
included Head of Business Development, Head of Business Evaluation and
Managing Director of the group's Marine operations.
Mr Jones was appointed a Director of Sovereign Metals Limited on 10 February
2022. During the three year period to the end of the financial year, Mr Jones
held a directorship in Berkeley Energia Limited (June 2017 - November 2020).
Mr Dylan Browne
Company Secretary
Qualifications - B.Com, CA, AGIA ACG
Mr Browne is a Chartered Accountant and Associate Member of the Governance
Institute of Australia (Chartered Secretary) who is currently Company
Secretary for a number of ASX and European listed companies that operate in
the resources sector. He commenced his career at a large international
accounting firm and has since been involved with a number of exploration and
development companies operating in the resources sector, based in London and
Perth, including Berkeley Energia Limited, Apollo Minerals Limited, GreenX
Metals Limited and Papillon Resources Limited. Mr Browne successfully listed
Prairie Mining Limited on the Main Board of the London Stock Exchange ("LSE")
and the Warsaw Stock Exchange and oversaw Berkeley's listings on the Main
Board LSE and the Madrid, Barcelona, Bilboa and Valencia Stock Exchanges. Mr
Browne was appointed Company Secretary of the Company on 29 April 2021.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year consisted of development
of Kasiya. No significant change in the nature of these activities occurred
during the year.
DIVIDENDS
No dividends have been declared, provided for or paid in respect of the
financial year ended 30 June 2023 (30 June 2022: nil).
LOSS PER SHARE
2023 2022
Cents
Cents
Basic and diluted loss per share (1.24) (3.17)
CORPORATE STRUCTURE
Sovereign Metals Limited is a company limited by shares that is incorporated
and domiciled in Australia. The Company has prepared a consolidated financial
report including the entities it incorporated and controlled during the
financial year.
CONSOLIDATED RESULTS
2023 2022
$
$
Loss of the Group before income tax expense (5,819,873) (13,719,731)
Income tax expense - -
Net loss (5,819,873) (13,719,731)
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In March 2023, Sovereign successfully demerged its standalone graphite
projects; Nanzeka Project, Malingunde Project, Duwi Project and Mabuwa Project
into NGX Limited. The demerger has allowed Sovereign and the existing
management team to focus on Kasiya, while retaining extensive graphite
exposure via Kasiya's graphite co-product.
There are no significant changes in the state of affairs of the Group during
the year not otherwise disclosed in this report.
SIGNIFICANT POST BALANCE DATE EVENTS
Subsequent to 30 June 2023, the Group completed a A$40.6 million strategic
investment by Rio Tinto to advance Kasiya. Rio Tinto subscribed for 83.3
million Shares in Sovereign at a price of A$0.486 per Share for aggregate
proceeds of A$40.6 million resulting in Rio Tinto holding approximately 15% of
the ordinary shares of the Company. The subscription also involved Rio Tinto
being granted unlisted options, exercisable at $0.535 each on or before 21
July 2024, to acquire 34.5 million further Shares in Sovereign which could
result in Rio Tinto's shareholding in the Company potentially increasing up to
19.99% (based on the number of shares on issue in the Company as at the date
of subscription).
On 25 August 2023, the Company issued 2.5 million Shares to SCP Resource
Finance as a 3% advisory fee on the amount of Rio Tinto's initial investment.
There are no other matters or circumstances which have arisen since 30 June
2023 that have significantly affected or may significantly affect:
· the operations, in financial years subsequent to 30 June 2023 of
the Group;
· the results of those operations, in financial years subsequent to
30 June 2023 of the Group; or
· the state of affairs, in financial years subsequent to 30 June
2023 of the Group.
INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF SOVEREIGN
As at the date of this report, the Directors' interests in the securities of
the Company are as follows:
Interest in Securities at the Date of this Report
Current Directors Ordinary Shares((i)) Performance Rights - Pre-Feasibility Study Milestone((ii)) Performance Rights - Definitive Feasibility Study Milestone ((iii))
Benjamin Stoikovich 3,590,000 600,000 600,000
Julian Stephens 15,657,518 900,000 1,200,000
Ian Middlemas 16,100,000 - -
Mark Pearce 4,295,842 225,000 300,000
Nigel Jones - 225,000 300,000
Notes:
(i) "Ordinary Shares" means fully paid ordinary shares in the
capital of the Company;
(ii) "Performance Rights - "Pre-Feasibility Study Milestone"
means an unlisted performance right that converts to one Share in the capital
of the Company upon satisfaction of the relevant milestone; and
(iii) "Performance Rights - "Definitive Feasibility Study
Milestone" means an unlisted performance right that converts to one Share in
the capital of the Company upon satisfaction of the relevant milestone.
SHARE OPTIONS AND PERFORMANCE RIGHTS
At the date of this report the following options and rights have been issued
by the Company over unissued capital:
· 34,549,598 Unlisted Options exercisable at $0.535 each
on or before 21 July 2024;
· 6,100,000 Performance Rights subject to the
Pre-Feasibility Study Milestone that expire on 30 September 2023; and
· 7,810,000 Performance Rights subject to the Definitive
Feasibility Study Milestone that expire on 31 October 2025.
During the year ended 30 June 2023 and up to the date of this report, 150,000
ordinary shares have been issued as a result of the exercise of options and/or
conversion of performance rights.
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the Company's Directors
held during the year ended 30 June 2023, and the number of meetings attended
by each Director.
Board Meetings ESG Committee
Current Directors Eligible to Attend Number Eligible to Attend Number
Attended
Attended
Benjamin Stoikovich 4 4 2 2
Julian Stephens 4 4 - -
Ian Middlemas 4 4 - -
Mark Pearce 4 4 - -
Nigel Jones 4 4 2 2
The Board as a whole currently performs the functions of an Audit Committee,
Risk Committee, Nomination Committee and Remuneration Committee. However this
will be reviewed should the size and nature of the Company's activities
change.
The ESG Committee was established to support the Company's ongoing commitment
to environmental, health and safety, corporate social responsibility,
corporate governance, sustainability and other public policy matters relevant
to the Company. Please refer to the Corporate Governance section on page 57
for further discussion on the Company's Corporate Governance Statement and
policies.
REMUNERATION REPORT (AUDITED)
This Remuneration Report, which forms part of the Directors' Report, sets out
information about the remuneration of Key Management Personnel ("KMP") of the
Group.
Details of KMP
The KMP of the Group during or since the end of the financial year is as
follows:
Directors
Mr Benjamin Stoikovich Chairman
Dr Julian Stephens Managing Director
Mr Ian Middlemas Non-Executive
Director
Mr Mark Pearce
Non-Executive Director
Mr Nigel Jones
Non-Executive Director
Other KMP
Mr Frank Eagar General
Manager - Africa (appointed 30 November 2022)
Mr Paul Marcos Head of
Project Development
Mr Sam Cordin Business
Development Manager
Unless otherwise disclosed, the KMP held their position from 1 July 2022 until
the date of this report.
Remuneration Policy
The Group's remuneration policy for its KMP has been developed by the Board
taking into account the size of the Group, the size of the management team for
the Group, the nature and stage of development of the Group's current
operations, and market conditions and comparable salary levels for companies
of a similar size and operating in similar sectors.
In addition to considering the above general factors, the Board has also
placed emphasis on the following specific issues in determining the
remuneration policy for KMP:
· the Group is currently focused on undertaking
exploration, appraisal and development activities;
· risks associated with small cap resource companies
whilst exploring and developing projects; and
· other than profit which may be generated from asset
sales, the Company does not expect to be undertaking profitable operations
until sometime after the commencement of commercial production on any of its
projects.
Executive Remuneration
The Group's remuneration policy is to provide a fixed remuneration component
and a performance based component (options, performance rights and a cash
bonus, see below). The Board believes that this remuneration policy is
appropriate given the considerations discussed in the section above and is
appropriate in aligning executives' objectives with shareholder and business
objectives.
Fixed Remuneration
Fixed remuneration consists of base salaries, as well as employer
contributions to superannuation funds and other non-cash benefits. Fixed
remuneration is reviewed annually by the Board. The process consists of a
review of company and individual performance, relevant comparative
remuneration externally and internally and, where appropriate, external advice
on policies and practices.
Performance Based Remuneration - Short Term Incentive
Some executives are entitled to an annual cash bonus upon achieving various
key performance indicators ("KPI's"), as set by the Board. Having regard to
the current size, nature and opportunities of the Company, the Board has
determined that these KPI's will include measures such as the successful
completion of business development activities (e.g. project acquisition and
capital raisings) and exploration activities (e.g. completion of exploration
programs within budgeted timeframes and costs). The Board assesses
performance against these criteria annually.
During the 2023 financial year, a total bonus sum of $270,000 (2022:
$230,000), representing 100% of KMP entitlement, was accrued to executives
after achievement of KPIs set by the Board. For the 2023 year, the KPI areas
of focus included: (a) announcement of upgraded resources at Kasiya in April
2023 (b) progression with the Pre-Feasibility study (PFS) at the Kasiya Rutile
Project (Kasiya); (c) announcement of downstream testwork for the Kasiya
graphite co-product; (d) completion of the NGX Demerger; (e) completion of
successful drilling programs at Kasiya; (f) announcement of rutile offtake and
a marketing alliance with Mitsui & Co Ltd; and (g) announcement of rutile
offtake with The Chemours Company. Specific KPIs are set and weighted
individually for each KMP and are designed to drive successful business
outcomes. No cash bonuses were forfeited during the financial year.
Performance Based Remuneration - Long Term Incentive
The Group has a long-term equity incentive plan ("Incentive Plan") comprising
the grant of Performance Rights and/or Incentive Options to reward KMP and key
employees and contractors for long-term performance. To achieve its corporate
objectives, the Group needs to attract, incentivise, and retain its key
employees and contractors. The Board believes that grants of Performance
Rights and/or Incentive Options to KMP will provide a useful tool to underpin
the Group's employment and engagement strategy.
(i) Performance Rights
The Group has an Incentive Plan that provides for the issuance of unlisted
performance share rights ("Performance Rights") which, upon satisfaction of
the relevant performance conditions attached to the Performance Rights, will
result in the issue of an Ordinary Share for each Performance Right.
Performance Rights are issued for no consideration and no amount is payable
upon conversion thereof. The Incentive Plan enables the Group to: (a) recruit,
incentivise and retain KMP and other key employees and contractors needed to
achieve the Group's business objectives; (b) link the reward of key staff with
the achievement of strategic goals and the long-term performance of the Group;
(c) align the financial interest of participants of the Plan with those of
Shareholders; and (d) provide incentives to participants of the Incentive Plan
to focus on superior performance that creates Shareholder value.
Performance Rights granted under the Incentive Plan to eligible participants
will be linked to the achievement by the Group of certain performance
conditions as determined by the Board from time to time. These performance
conditions must be satisfied in order for the Performance Rights to vest. Upon
Performance Rights vesting, Ordinary Shares are automatically issued for no
consideration. If a performance condition of a Performance Right is not
achieved by the expiry date then the Performance Right will lapse.
During the financial year, 1,410,000 Performance Rights were granted to KMP
under the Plan and a further 360,000 separate to the Plan. No Performance
Rights held by KMP lapsed during the financial year.
The vesting conditions of the Performance Rights are performance conditions as
follows:
a. Pre-Feasibility Study Milestone means announcement on or before 30
September 2023, of a positive Pre-Feasibility Study for the Malawi Rutile
Project in accordance with the provisions of the JORC Code which demonstrates
the following:
i. A minimum net present value of US$1,000M (using a minimum discount rate
of 8%);
ii. A minimum life of mine of 20 years; and
iii. A minimum internal rate of return of 25%.
b. Definitive Feasibility Study Milestone means announcement on or before
31 October 2025, of a positive Definitive Feasibility Study for the Malawi
Rutile Project in accordance with the provisions of the JORC Code which
demonstrates the following:
i. A minimum net present value of US$1,000M (using a minimum discount rate
of 8%);
ii. A minimum life of mine of 20 years; and
iii. A minimum internal rate of return of 25%.
(ii) Incentive Options
The Incentive Plan also that provides for the issuance of unlisted incentive
options ("Incentive Options") as part of remuneration and incentive
arrangements in order to attract and retain services and to provide an
incentive linked to the performance of the Group. The Board's policy is to
grant Incentive Options to KMP with exercise prices at or above market share
price (at the time of agreement). As such, the Incentive Options granted to
KMP are generally only of benefit if the KMP performs to the level whereby the
value of the Group increases sufficiently to warrant exercising the Incentive
Options granted. Other than service-based vesting conditions (if any) and the
exercise price required to exercise the Incentive Options, there are no
additional performance criteria on the Incentive Options granted to KMP, as
given the speculative nature of the Group's activities and the small
management team responsible for its running, it is considered that the
performance of the KMP and the performance and value of the Group are closely
related. The Group prohibits executives from entering into arrangements to
limit their exposure to Incentive Options granted as part of their
remuneration package.
During the financial year, no Incentive Options were granted, exercised or
lapsed to KMP.
Remuneration Policy for Non-Executive Directors
The Board policy is to remunerate Non-Executive Directors at market rates for
comparable companies for time, commitment and responsibilities. Given the
current size, nature and risks of the Company, incentive options and
performance rights have been used to attract and retain Non-Executive
Directors. The Board determines payments to the Non-Executive Directors and
reviews their remuneration annually, based on market practice, duties and
accountability. Independent external advice is sought when required.
The maximum aggregate amount of fees that can be paid to Non-Executive
Directors is subject to approval by shareholders at a General Meeting and is
currently $500,000. Director's fees paid to Non-Executive Directors accrue on
a daily basis. Fees for Non-Executive Directors are not linked to the
performance of the economic entity. However, to align Directors' interests
with shareholder interests, the Directors are encouraged to hold shares in the
Company and Non-Executive Directors have received incentive options and
performance rights in order to secure their services and as a key component of
their remuneration.
Fees for the Chairman are $95,000 (£50,000) per annum (2022: $36,000) and
fees for Non-Executive Directors' are $76,000 (£40,000) to $20,000 per annum
(2022: $73,000 (£40,000) to $20,000 per annum). Non-Executive Directors may
receive additional remuneration for other services provided to the Company,
including but not limited to, membership of committees including the ESG
Committee. The Chair of the ESG Committee currently receives £10,000 (2022:
£10,000) for chairing the ESG Committee.
Relationship between Remuneration of KMP and Shareholder Wealth
During the Company's exploration and development phases of its business, the
Board anticipates that the Company will retain earnings (if any) and other
cash resources for the exploration and development of its resource projects.
Accordingly the Company does not currently have a policy with respect to the
payment of dividends and returns of capital. Therefore there was no
relationship between the Board's policy for determining, or in relation to,
the nature and amount of remuneration of KMP and dividends paid and returns of
capital by the Company during the current and previous four financial years.
The Board did not determine, and in relation to, the nature and amount of
remuneration of the KMP by reference to changes in the price at which shares
in the Company traded between the beginning and end of the current and the
previous four financial years. However, as noted above, a number of KMP have
received incentive options which generally will only be of value should the
value of the Company's shares increase sufficiently to warrant exercising the
incentive options, and performance rights which are linked to the achievement
of certain performance conditions.
Relationship between Remuneration of KMP and Earnings
As discussed above, the Company is currently undertaking exploration and
development activities, and does not expect to be undertaking profitable
operations (other than by way of material asset sales, none of which is
currently planned) until sometime after the successful commercialisation,
production and sales of commodities from one or more of its projects.
Accordingly the Board does not consider earnings during the current and
previous four financial years when determining, and in relation to, the nature
and amount of remuneration of KMP.
General
In addition to a focus on operating activities, the Board is also focused on
finding and completing new business and other corporate opportunities. The
Board considers that the prospects of the Company and resulting impact on
shareholder wealth will be enhanced by this approach. Accordingly, the Board
may pay a bonus or issue securities to KMP (executive or non-executive) based
on their success in generating suitable new business or other corporate
opportunities. A bonus may be paid or an issue of securities may also be made
upon the successful completion of a new business or corporate transaction.
Where required, KMP receive superannuation contributions, equal to 10.5% of
their salary, and do not receive any other retirement benefit. From time to
time, some individuals have chosen to sacrifice part of their salary to
increase payments towards superannuation. Effective 1 July 2023, the
superannuation contribution rate is 11%.
All remuneration paid to KMP is valued at cost to the Company and expensed.
Incentive options are valued using the Black Scholes option valuation
methodology. The value of these incentive options is expensed over the vesting
period. The fair value of performance rights granted is estimated as at the
date of grant using the share price at the grant date. The value of the
performance right is expensed over the vesting period.
Remuneration of KMP
Details of the nature and amount of each element of the remuneration of each
KMP of the Company for the year ended 30 June 2023 and 30 June 2022 are as
follows:
2023 Short-Term Benefits Post Employ-ment Superann- Non-Cash Equity Other Total Percentage Performance Related
uation
$
$ Options/ Rights Non-Cash Benefits %
$
$
Salary & Fees Cash Bonus
$
$
Directors
Benjamin Stoikovich((i)) 207,059 - - 184,988 - 392,047 47
Julian Stephens 350,000 170,000 27,500 216,135 - 763,635 51
Ian Middlemas 36,000 - 3,780 - - 39,780 -
Mark Pearce 20,000 - 2,100 111,705 - 133,805 83
Nigel Jones 93,932 - - 105,836 - 199,768 53
Other KMP
Frank Eagar((ii)) 217,710 - - 214,674 432,384 50
Paul Marcos 270,000 50,000 27,500 214,237 561,737 47
Sam Cordin 205,000 50,000 26,775 120,432 - 402,207 42
1,399,701 270,000 87,655 1,168,007 - 2,925,363
2022 Short-Term Benefits Post Employ-ment Superann- Non-Cash Equity Other Total Percentage Performance Related
uation
$
$ Options/ Rights Non-Cash Benefits %
$
$
Salary & Fees Cash Bonus
$
$
Directors
Benjamin Stoikovich((i)) 153,450 - - 136,313 - 289,763 47
Julian Stephens 300,000 100,000 27,500 340,782 - 768,282 57
Ian Middlemas 36,000 - 3,600 - - 39,600 -
Mark Pearce 20,000 - 2,000 215,680 - 237,680 91
Nigel Jones((iii)) 33,693 - - 36,013 - 69,706 52
Other KMP
Paul Marcos 250,000 50,000 27,292 355,267 682,559 59
Sam Cordin 180,000 80,000 26,000 136,313 - 422,313 51
973,143 230,000 86,392 1,220,368 - 2,509,903
Notes:
(i) In addition to Non-Executive Directors fees, Selwyn
Capital Limited, an entity associated with Mr Stoikovich, was paid, or is
payable, A$117,254 (2022: $124,703) for additional services provided in
respect of corporate and business development activities which is included in
Mr Stoikovich's salary and fee amount.
(ii) Appointed 30 November 2022.
(iii) Appointed 10 February 2022.
Performance Rights Holdings of KMP
2023 Held at 1 July 2022 Granted as Compen-sation Options/ Rights Exercised Options/ Rights Expired Net Change Other Held at Vested and Exercisable at 30 June 2023((ii))
(#)
(#)
(#)
(#)
(#)
30 June 2023
(#)
(#)
Directors
Benjamin Stoikovich 840,000 360,000 - - - 1,200,000 -
Julian Stephens 2,100,000 - - - - 2,100,000 -
Mark Pearce 525,000 - - - - 525,000 -
Nigel Jones 525,000 - - - - 525,000 -
Other KMP
Frank Eagar -((i)) 1,200,000 - - - 1,200,000 -
Paul Marcos 1,200,000 - - - - 1,200,000 -
Sam Cordin 840,000 210,000 - - - 1,050,000 -
Notes:
(i) As at date of appointment.
(ii) There are no performance rights that are vested but not yet
exercisable.
Incentive Securities Granted to KMP
Details of unlisted incentive securities granted by the Company to KMP of the
Group during the past two financial years are as follows:
Options/ Rights Grant Expiry Exercise Price Grant Date Fair Value((i)) No. Granted((ii)) Total Value of Options/ Rights Granted No. Vested at 30 June 2023((iii))
Date
Date
$
$
$
Director
Benjamin Stoikovich Rights 18-Nov-22 30 Sep 23 - 0.460 240,000 110,400 -
Rights 18-Nov-22 31 Oct 25 - 0.460 120,000 55,200 -
Mark Pearce Rights 25-Nov-21 30 Sep 23 - 0.650 225,000 146,250 -
Rights 25-Nov-21 31 Oct 25 - 0.650 300,000 195,000 -
Nigel Jones Rights 9-Feb-22 30 Sep 23 - 0.470 225,000 105,750 -
Rights 9-Feb-22 31 Oct 25 - 0.470 300,000 141,000 -
Other KMP
Frank Eagar Rights 9-Sep-22 30 Sep 23 - 0.440 500,000 220,000 -
Rights 9-Sep-22 31 Oct 25 - 0.440 700,000 308,000 -
Paul Marcos Rights 6-Sep-21 30 Sep 23 - 0.545 450,000 245,250 -
Rights 6-Sep-21 31 Oct 25 - 0.545 750,000 408,750 -
Sam Cordin Rights 20-Dec-22 30 Sep 23 - 0.410 90,000 36,900 -
Rights 20-Dec-22 31 Oct 25 - 0.410 120,000 49,200 -
Notes:
(i) The fair value of the unlisted performance rights as at grant
date is consistent with the closing share price of the Company as at that
date.
(ii) Each unlisted performance right converts into one ordinary share
of Sovereign Metals Limited subject to the performance conditions being met;
(iii) The vesting conditions are performance conditions as follows:
a. Pre-Feasibility Study Milestone means announcement on or before
30 September 2023, of a positive Pre-Feasibility Study for the Malawi Rutile
Project in accordance with the provisions of the JORC Code which demonstrates,
a) a minimum net present value of US$1,000M (using a minimum discount rate of
8%), b) a minimum life of mine of years; and c) a minimum internal rate of
return of 25%.
b. Definitive Feasibility Milestone means announcement on or
before 31 October 2025, of a positive Definitive Feasibility Study for the
Malawi Rutile Project in accordance with the provisions of the JORC Code which
demonstrates, a) a minimum net present value of US$1,000M (using a minimum
discount rate of 8%), b) a minimum life of mine of years; and c) a minimum
internal rate of return of 25%.
The performance rights will also immediately vest if a change of control event
or financing event occurs in respect of the shares and/or assets of the
Company.
Details of the value of unlisted securities granted, lapsed or converted for
each KMP of the Company or Group during the financial year are as follows:
Value of Options and Rights Granted During the Year Value of Options and Rights Exercised During the Year((i)) Value of Options and Rights Value Options and Percentage of Remuneration
$ $ Lapsed During the Year Rights for the Period that Consists of Options and Rights
$
%
included in Remuneration for the Period
$
2023 No. of options No. of options
& rights granted # & rights vested # No. of options
& rights cancelled/ lapsed
#
Directors
Benjamin Stoikovich 360,000 - - 165,600 - - 184,988 47
Julian Stephens - - - - - - 216,135 51
Mark Pearce - - - - - - 111,705 83
Nigel Jones - - - - - - 105,836 53
Other KMP
Frank Eagar 1,200,000 - - 528,000 - - 214,674 50
Paul Marcos - - - - - - 214,237 47
Sam Cordin 210,000 - - 86,100 - - 120,432 42
Notes:
(i) Determined at the time of exercise or conversion at the intrinsic
value.
Loans to/from KMP
No loans were provided to or received from KMP during the year ended 30 June
2023 (2022: Nil).
Ordinary Shareholdings of KMP
2023 Held at 1 July 2022 Granted as compensation On Exercise of Options/ Rights Purchases/Sell Net Other Change Held at 30 June 2023
(#)
(#)
(#)
(#)
(#)
(#)
Directors
Benjamin Stoikovich 3,590,000 - - - - 3,590,000
Julian Stephens 15,657,518 - - - - 15,657,518
Ian Middlemas 16,100,000 - - - - 16,100,000
Mark Pearce 4,295,842 - - - - 4,295,842
Nigel Jones - - - - - -
Other KMP
Frank Eagar -((i)) - - - - -
Paul Marcos 300,000 - - - - 300,000
Sam Cordin 4,079,413 - - - - 4,079,413
Notes:
(i) As at date of appointment.
Other Transactions with KMP
Selwyn Capital Limited ("Selwyn"), a company associated with Mr Stoikovich is
engaged under an agreement to provide consulting services to the Company, on a
rolling 12-month term that either party may terminate with one month written
notice. Selwyn receives a daily rate of £1,000 under the consulting
agreement. These services provided during the financial year amounted to
$117,254 (2022: $124,703).
Apollo Group Pty Ltd, a company of which Mr Mark Pearce is a Director and
beneficial shareholder, was paid, or is payable, $348,000 (2022: $300,000) for
the provision of serviced office facilities, administration services and
additional consulting services provided during the year. Effective 1 July
2023, the monthly fee has been increased to $31,000. The amount is based on a
monthly retainer due and payable in advance and able to be terminated by
either party with one month's notice.
Employment Contracts with KMP
Dr Julian Stephens, Managing Director, has a letter of appointment confirming
the terms and conditions of his appointment as Managing Director of the
Company dated 27 June 2016. The contract specifies the duties and obligations
to be fulfilled by the Managing Director. The contract has a rolling annual
term and may be terminated by the Company by giving 3 months' notice. No
amount is payable in the event of termination for neglect or incompetence in
regards to the performance of duties. As agreed by the Board, Dr Stephens'
annual salary was increased to $350,000 plus superannuation with an annual
bonus of up to $120,000 payable in two equal instalments upon successful
completion of KPIs as determined by the Board.
Mr Frank Eagar, General Manager - Africa, has a letter of employment
confirming the terms and conditions of his appointment dated 9 September 2022.
The contract specifies the duties and obligations to be fulfilled by the
General Manager - Africa. The letter of employment has no fixed term and can
be terminated by either party by giving 3 months' notice. No amount is payable
in the event of termination for neglect or incompetence in regards to the
performance of duties. Mr Eagar receives a salary of US$252,000.
Mr Paul Marcos, Head of Project Development, has a letter of employment
confirming the terms and conditions of his appointment dated 14 May 2021. The
contract specifies the duties and obligations to be fulfilled by the Head of
Project Development. The letter of employment has no fixed term and can be
terminated by either party by giving 3 months' notice. No amount is payable in
the event of termination for neglect or incompetence in regards to the
performance of duties. Mr Marcos receives a salary of $270,000 plus
superannuation with an annual bonus of $50,000 payable upon successful
completion of KPIs as determined by the Board.
Mr Sam Cordin, Business Development Manager, has a letter of employment
confirming the terms and conditions of his appointment dated 9 August 2018.
The contract specifies the duties and obligations to be fulfilled by the
Business Development Manager. The letter of employment has no fixed term and
can be terminated by either party by giving 3 months' notice. No amount is
payable in the event of termination for neglect or incompetence in regards to
the performance of duties. Mr Cordin receives an annual salary of $205,000
plus superannuation with an annual bonus of up to $50,000 payable in two equal
instalments upon successful completion of KPIs as determined by the Board.
All Directors have a letter of appointment confirming the terms and conditions
of their appointment as a Director.
End of Remuneration Report
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of court to bring proceedings on behalf of the
Company or intervene in any proceedings to which the Company is a part for the
purpose of taking responsibility on behalf of the Company for all or any part
of those proceedings. The Company was not a party to any such proceedings
during the year.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group's operations are subject to various environmental laws and
regulations under the relevant government's legislation. Full compliance with
these laws and regulations is regarded as a minimum standard for all
operations to achieve. Instances of environmental non-compliance by an
operation are identified either by external compliance audits or inspections
by relevant government authorities.
There have been no significant known breaches by the Group during the
financial year.
INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
The Company has entered into Deeds of Indemnity with the Directors
indemnifying them against certain liabilities and costs to the extent
permitted by law.
The Group has paid, or agreed to pay, a premium in respect of Directors' and
Officers' Liability Insurance and Company Reimbursement policies for the 12
months ended 30 June 2023 and 2022, which cover all Directors and officers of
the Group against liabilities to the extent permitted by the Corporations Act
2001. The policy conditions preclude the Group from any detailed disclosures
including the premium amount paid.
To the extent permitted by law, the Company has agreed to indemnify its
auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit (for an
unspecified amount). No payment has been made to indemnify Ernst & Young
during or since the financial year.
NON-AUDIT SERVICES
During the financial year, the Company's current auditor, Ernst & Young
(or by another person or firm on the auditor's behalf) provided non-audit
services relating to income tax preparation and advice, totalling $64,141
(2022: $14,214). The Directors are satisfied that the provision of non-audit
services is compatible with the general standard of independence for auditors
imposed by the Corporations Act. The nature and scope of the non-audit
services provided means that auditor independence was not compromised.
AUDITOR'S INDEPENDENCE DECLARATION
The lead auditor's independence declaration for the year ended 30 June 2023
has been received and can be found on page 20 of the Directors' Report.
This report is made in accordance with a resolution of the Directors made
pursuant to section 298(2) of the Corporations Act 2001.
For and on behalf of the Directors
JULIAN STEPHENS
Managing Director
Perth, 29 September 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
2023 2022
$
$
Continuing Operations
Interest Income 268,967 33,117
Other income/(expenses) 97,412 (65,992)
Exploration and evaluation expenses (10,627,458) (8,072,133)
Corporate and administrative expenses (859,360) (708,278)
Share-based payment expenses (2,083,592) (2,941,985)
Business development expenses (2,096,822) (1,964,460)
Gain on demerger of NGX Limited 9,480,980 -
Loss before income tax (5,819,873) (13,719,731)
Income tax expense - -
Loss for the year (5,819,873) (13,719,731)
Loss attributable to members of the parent (5,819,873) (13,719,731)
Other Comprehensive loss, net of income tax:
Items that may be reclassified subsequently to profit or loss
Exchange differences on foreign entities (51,803) (63,362)
Other comprehensive loss for the year, net of income tax (51,803) (63,362)
Total comprehensive loss for the year (5,871,676) (13,783,093)
Total comprehensive loss attributable to members of Sovereign Metals Limited (5,871,676) (13,783,093)
Basic and diluted loss per share from continuing operations (cents per share) (1.24) (3.17)
The above Consolidated Statement of Profit or Loss and Other Comprehensive
Income should be read in conjunction with the accompanying notes in the full
version of the Annual Report available at www.sovereignmetals.com.au
(http://www.sovereignmetals.com.au) .
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
2023 2022
$
$
Current Assets
Cash and cash equivalents 5,564,376 18,892,741
Other receivables 286,484 302,424
Other financial assets 420,000 200,000
Total Current Assets 6,270,860 19,395,165
Non-current Assets
Property, plant and equipment 532,039 537,238
Exploration and evaluation assets 5,086,129 7,170,282
Total Non-current Assets 5,618,168 7,707,520
TOTAL ASSETS 11,889,028 27,102,685
Current Liabilities
Trade and other payables 2,063,838 1,845,954
Provisions 152,621 95,593
Total Current Liabilities 2,216,459 1,941,547
TOTAL LIABILITIES 2,216,459 1,941,547
NET ASSETS 9,672,569 25,161,138
EQUITY
Contributed equity 74,508,488 78,860,187
Reserves (3,320,226) 1,996,771
Accumulated losses (61,515,693) (55,695,820)
TOTAL EQUITY 9,672,569 25,161,138
The above Consolidated Statement of Financial Position should be read in
conjunction with the
accompanying notes in the full version of the Annual Report available at
www.sovereignmetals.com.au (http://www.sovereignmetals.com.au) .
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
2023 2022
$
$
Cash flows from operating activities
Interest received 281,287 20,416
Payments to suppliers and employees (13,096,569) (10,036,070)
Net cash used in operating activities (12,815,282) (10,015,654)
Cash flows from investing activities
Payments for purchase of plant and equipment (80,528) (313,405)
Repayment of loan receivable from NGX Limited 271,509 -
Movement in cash on deconsolidation of subsidiary (131,255) -
Net cash from/(used) in investing activities 59,726 (313,405)
Cash flows from financing activities
Proceeds from issue of shares - 21,811,772
Share issue costs (600,221) (498,640)
Funds received in advance for exercise of options - 27,000
Net cash (used)/from financing activities (600,221) 21,340,132
Net (decrease)/increase in cash and cash equivalents (13,355,776) 11,011,073
Net foreign exchange differences 27,411 (75,992)
Cash and cash equivalents at the beginning of the financial year 18,892,741 7,957,660
Cash and cash equivalents at the end of the financial year 5,564,376 18,892,741
The above Consolidated Statement of Cash Flows should be read in conjunction
with the accompanying notes in the full version of the Annual Report available
at www.sovereignmetals.com.au (http://www.sovereignmetals.com.au) .
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
Balance at 1 July 2022 78,860,187 2,084,466 - (87,695) (55,695,820) 25,161,138
Net loss for the year - - - - (5,819,873) (5,819,873)
Other comprehensive loss
Foreign currency translation - - - (38,079) - (38,079)
Reclassification of foreign currency translation - - - (13,724) - (13,724)
Total comprehensive loss for the year - - - (51,803) (5,819,873) (5,871,676)
Transactions with owners recorded directly in equity
Issue of Ordinary Shares upon exercise of options 27,000 - - - - 27,000
Share issue costs (212,693) - - - - (212,693)
Transfer from SBP Reserve 12,108 (12,108) - - - -
In-specie distribution on demerger of NGX Limited (4,178,114) - (7,336,678) - - (11,514,792)
Share-based payments expense - 2,083,592 - - - 2,083,592
Balance at 30 June 2023 74,508,488 4,155,950 (7,336,678) (139,498) (61,515,693) 9,672,569
Balance at 1 July 2021 55,276,410 1,800,267 - (24,333) (41,976,089) 15,076,255
Net loss for the year - - - - (13,719,731) (13,719,731)
Other comprehensive loss
Foreign currency translation - - - (63,362) - (63,362)
Total comprehensive loss for the year - - - (63,362) (13,719,731) (13,783,093)
Transactions with owners recorded directly in equity
Placement of Ordinary Shares 16,738,022 - - - - 16,738,022
Issue of Ordinary Shares upon exercise of options 5,193,750 - - - - 5,193,750
Share issue costs (1,005,781) - - - - (1,005,781)
Transfer from SBP Reserve 2,657,786 (2,657,786) - - - -
Share-based payments expense - 2,941,985 - - - 2,941,985
Balance at 30 June 2022 78,860,187 2,084,466 - (87,695) (55,695,820) 25,161,138
The above Consolidated Statement of Changes in Equity should be read in
conjunction with the
accompanying notes in the full version of the Annual Report available at
www.sovereignmetals.com.au (http://www.sovereignmetals.com.au) .
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAFNNASKDEEARecent news on Sovereign Metals
See all newsREG - Sovereign Metals Ltd - March 2025 Quarterly Report
AnnouncementREG - Sovereign Metals Ltd - DFS Geotechnical Programs in Progress
AnnouncementREG - Sovereign Metals Ltd - Holding(s) in Company
AnnouncementREG - Sovereign Metals Ltd - Sovereign Completes A$40 Million Placement
AnnouncementREG - Sovereign Metals Ltd - Response to Media Speculation
Announcement