REG - Sovereign Metals Ltd - Half-year Report
14/03/2023 07:15
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RNS Number : 8771S Sovereign Metals Limited 14 March 2023
SOVEREIGN METALS LIMITED
ABN 71 120 833 427
INTERIM FINANCIAL REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2022
CORPORATE DIRECTORY
Directors Brokers
Mr Benjamin Stoikovich Chairman
Berenberg, Gossler & Co, KG, London Branch
Dr Julian Stephens Managing Director 60 Threadneedle Street
Mr Ian Middlemas Non-Executive Director
London EC2R 8HP
United Kingdom
Mr Mark Pearce Non-Executive T: +44 20 3753 3132
Director
Optiva Securities Limited
Mr Nigel
49 Berkeley Square
Jones
Mayfair
Non-Executive Director
London W1J 5AZ
United Kingdom
Company Secretary
Mr Dylan Browne Share Register
Australia
Computershare Investor Services Pty Ltd
London Office
Level 5
Unit 3C, 38 Jermyn Street, London
191 St Georges Terrace
SW1Y 6DN, United Kingdom
Perth WA 6000
Telephone: +44 207 478 3900
Telephone: 1300 850 505
International: +61 8 9323 2000
Facsimile: +61 8 9323 2033
Registered and Principal Office
Level 9, 28 The Esplanade
Perth WA 6000
Telephone: +61 8 9322 6322 United Kingdom
Facsimile: +61 8 9322 6558
Computershare Investor Services PLC
The Pavilions,
Bridgewater Road,
Operations Office
Bristol BS99 6ZZ
Telephone: +44 370 702 0000
Area 9
Lilongwe
Solicitors
Malawi Thomson Geer
Stock Exchange Listings Auditor
Australia Ernst & Young
Australian Securities Exchange
ASX Code: SVM - Ordinary Shares
Bankers
United Kingdom National Australia Bank
London Stock Exchange (AIM) Standard Bank - Malawi
AIM Code: SVML - Depository Interests
Nominated Advisor
RFC Ambrian Limited
Octagon Point
5 Cheapside
London EC2V 6AA
United Kingdom
CONTENTS
Directors' Report
Condensed Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Condensed Consolidated Statement of Financial Position
Condensed Consolidated Statement of Changes in Equity
Condensed Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Competent Person Statement
To view the following sections plus all figures and illustrations, please
refer to the full version of the Interim Financial Report on our website at
www.sovereignmetals.com.au
Auditor's Independence Declaration
Independent Auditor's Review 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 2022
(Consolidated Entity or Group).
DIRECTORS
The names of Directors in office at any time during the financial period or
since the end of the financial period 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
All Directors were in office from 1 July 2022 until the date of this report,
unless otherwise noted.
REVIEW AND RESULTS OF OPERATIONS
Highlights during and subsequent to period end
Kasiya Rutile Project PFS continues to progress on schedule
· Sovereign is well advanced with the Pre-Feasibility Study (PFS)
for the Kasiya Rutile Project (Kasiya), an industry-leading major source of
critical raw materials from Malawi.
· The PFS will build on the Expanded Scoping Study (ESS) which
confirmed Kasiya as potentially one of the world's largest and potentially
lowest cost producers of natural rutile and natural graphite with a
carbon-footprint substantially lower than other current and planned producers.
· The PFS is on track to be completed in H1 2023 with all
major works packages well progressed.
Resource infill drilling completed
· The Company completed a 4,660 metre, 191-hole deeper air-core
(AC) and 2,206 metre, 247-hole push tube (PT) mineral resource infill drilling
program to upgrade the Kasiya Mineral Resource Estimate (MRE), with the update
targeted for late Q1 2023.
· The drilling program confirmed consistency of high-grade
rutile and graphite mineralisation laterally and at depth.
· Infill core PT drilling of numerous Inferred category
pits and potential pit extensions is expected to add new blocks of Indicated
material.
Offtake MoU and Market Alliance with major Japanese trader
· In July 2022, Memorandum of Understanding (MoU)
(non-binding) was signed with Mitsui & Co Ltd (Mitsui), one of the largest
global trading and investment companies in Japan.
· The MoU establishes a marketing alliance and offtake
for 30,000 tonnes of natural rutile per annum. The alliance will allow
Sovereign to leverage Mitsui's extensive network and their market-leading
understanding of the titanium industry and global logistics.
Offtake MoU with Chemours, one of the world's largest' s producers of
high-quality titanium dioxide pigment
· In November 2022, a MoU (non-binding) was signed for
supply of 20,000 tonnes of natural rutile per annum from Kasiya to the
US-based Chemours Company (Chemours), one of the world's largest producers of
high-quality titanium dioxide pigments.
Sovereign to Demerge Standalone Graphite Projects
· Sovereign to demerge its standalone Graphite Projects
(being the Nanzeka, Malingunde, Duwi and Mabuwa Projects) into a 100%-owned
subsidiary, NGX Limited, via an in-specie distribution.
· The Demerger seeks to unlock the value of the Graphite
Projects for Sovereign shareholders and separate Kasiya and its standalone
Graphite Projects into two distinct companies.
· General Meeting for Demerger to take place on 17 March
2023.
Sovereign Metals Limited (ASX: SVM & AIM: SVML) is an ASX and AIM-listed
company focussed on the development of its Kasiya rutile project (Kasiya) in
Malawi.
Kasiya, located in central Malawi, is the largest natural rutile deposit and
one of the largest flake graphite deposits in the world. Sovereign is aiming
to develop an environmentally and sustainable operation to supply highly
sought-after natural rutile and graphite to global markets.
Sovereign is completing a PFS which will build on the ESS, released in June
2022, with targeted completion in H1 2023.
The ESS confirmed Kasiya as potentially one of the world's largest and lowest
cost producers of natural rutile and natural graphite with a carbon-footprint
substantially lower than current alternatives. The ESS showed outstanding
results including:
· a two-stage development (stage 2 self-funded) with full
production at 24Mtpa throughput producing 265kt rutile and 170kt graphite per
annum over a 25 year mine life
· exceptional economics including a post-tax NPV(8) of
US$1,537m and post-tax IRR of 36%
· a large-scale operation with a low-cost profile resulting from the
deposit's near surface nature, high-grade, conventional processing flowsheet,
and excellent existing infrastructure
PRE-FEASIBILITY STUDY
The Company commenced a PFS which will build on the ESS which confirmed Kasiya
as one of the world's largest and potentially lowest cost producers of natural
rutile and natural graphite with a carbon-footprint substantially lower than
other current and planned producers.
The PFS is advancing well under the guidance of globally recognised
consultants and is on schedule to be completed by its target date of H1 2023.
KASIYA RESOURCE INFILL DRILLING
During the period, the Company completed a 4,660 metre, 191-hole AC and 2,206
metre, 247-hole PT drilling program at Kasiya. Drilling was conducted on a
nominal 200m x 200m grid spacing targeting upgrading of mineralisation into
the Indicated category which could convert to Probable Reserves as part of the
forthcoming PFS. The AC results confirmed that rutile mineralisation is
continuous in many pit areas from surface down to the top of saprock, normally
between 20m and 30m from surface.
PRODUCT MARKETING & OFF-TAKE
Mitsui
In July 2022, Sovereign entered into a non-binding MoU with Mitsui, one of the
largest global trading and investment companies in Japan. The MoU establishes
a marketing alliance and offtake for 30,000 tonnes of natural rutile per annum
from the Company's world-class Kasiya project.
This MoU creates a marketing alliance between the two parties to jointly
market Sovereign's rutile across Asia and other markets. The alliance will
allow Sovereign to leverage off Mitsui's extensive network and their
market-leading understanding of the titanium industry and global logistics.
Mitsui has shared samples of rutile product from Kasiya with Asian end-users
that have confirmed its premium chemical specifications should be suitable for
use in their titanium sponge and pigment processes, as a precursor for
high-grade, high-specification titanium metal and pigment production.
Chemours
In November 2022, Sovereign entered into a non-binding MOU with Chemours for
the potential supply of 20,000 tonnes per annum of natural rutile from Kasiya.
The MOU covers the potential supply of 20,000 tonnes per annum of natural
rutile at Stage 1 nameplate capacity and an option to take additional product
(tonnage to be agreed) when Kasiya reaches Stage 2 nameplate capacity.
Further, volumes may be varied up or down by mutual agreement and pricing will
reference market prices of the day (both to be included in the definitive
agreement).
The MOU is non-exclusive and non-binding and remains subject to negotiation
and execution of the definitive agreement. The MOU will expire two years from
the execution date but can be extended by agreement by both parties should a
definitive agreement not have been reached by that time.
Chemours is a leading provider of performance chemicals that are key inputs in
end-products and processes across a variety of industries. Chemours operates
29 manufacturing sites serving approximately 3,200 customers in approximately
120 countries.
Its Titanium Technologies segment is one of the world's largest producers of
high-quality titanium dioxide (TiO(2)) pigment and aspires to be the most
sustainable TiO(2) enterprise in the world. Using its proprietary chloride
technology-pioneered in 1931 and improving ever since-Chemours provides
innovative TiO(2) solutions for coatings, plastics, and laminates.
It operates four TiO(2) pigment production facilities: two in the United
States, one in Mexico, and one in Taiwan totalling TiO2 pigment nameplate
capacity of 1.25 million tonnes per year. In the year ended 31 December 2021,
Chemours' Titanium Technologies segment reported net sales of US$3.4 Billion.
The Company is continuing product marketing with further offtake MOUs expected
to be executed in the near-term.
DEMERGER OF STANDALONE GRAPHITE PROJECTS
In December 2022, Sovereign announced that it intends to undertake a demerger
(Demerger) whereby Sovereign's Malawian graphite projects, being the Nanzeka
Project, Malingunde Project, Duwi Project and Mabuwa Project (Graphite
Projects), are to be demerged through NGX Limited (NGX), a wholly owned
subsidiary of the Company. This will allow Sovereign to focus on the
development of the Kasiya while unlocking value in its Graphite Projects for
shareholders.
The Demerger allows Sovereign and the existing management team to focus on its
flagship Kasiya Rutile Project, the largest natural rutile deposit in the
world, with Sovereign retaining all graphite co-product from Kasiya.
Sovereign proposes, subject to shareholder approval, to demerge the Graphite
Projects via a spin-out of NGX and in-specie distribution of NGX fully paid
ordinary shares (NGX Shares) to Sovereign shareholders by issuing one (1) NGX
Share for every eleven (11) Sovereign shares (SVM Shares) held (Distribution),
allowing Sovereign shareholders to retain exposure to the value and upside of
the Graphite Projects.
Upon completion of the Demerger, NGX intends to seek admission to the official
list of the ASX. NGX will undertake a capital raising to satisfy the ASX
admission requirements.
Sovereign shareholders will have the opportunity to retain further exposure to
the value and upside of the Graphite Projects as the NGX IPO is expected to
comprise a priority offer to existing shareholders on the basis of one (1) new
NGX Share for every one (1) NGX Share received pursuant to the Demerger to
raise approximately $8,600,000 and a general offer of $1,000,000 to assist
with satisfying ASX spread requirements. This will ensure there is no cash
outflow from Sovereign to NGX as part of the Demerger, other than applicable
Sovereign expenses to effect the Demerger. The terms of the NGX IPO are yet to
be finalised however.
The General Meeting for the Demerger is to take place on 17 March 2023.
OPERATING RESULTS
The net operating loss after tax for the half year ended 31 December 2022 was
$8,486,503 (2021: $7,716,384) which is attributable to:
(i) exploration and evaluation expenditure of $5,792,042 (2021:
$4,188,770), which is attributable to the Group's accounting policy of
expensing exploration and evaluation expenditure (other than expenditures
incurred in the acquisition of the rights to explore) incurred by the Group in
the period subsequent to the acquisition of the rights to explore up to the
successful completion of definitive feasibility studies for each separate area
of interest. The exploration and evaluation expenditure in the current period
predominately relates to the Group's on-going PFS at its Kasiya in Malawi and
associated MRE drilling;
(ii) business development expenses of $1,130,083 (2021: $894,214)
which are attributable to the Group's costs in relation to its listing on the
AIM Market of the London Stock Exchange and investor and shareholder relations
including public relations, marketing and digital marketing, conference fees
and travel costs;
(iii) one off upfront costs in relation to the demerger of NGX of
$121,839 (2021: nil); and
(iv) non-cash share based payments expenses of $1,061,657 (2021:
$2,210,324) which is attributable to the Group's accounting policy of
expensing the value of shares, incentive options and rights (estimated using
an appropriate pricing model) granted to key employees, consultants and
advisors. The 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.
SIGNIFICANT POST BALANCE DATE EVENTS
Other than the above, there are no matters or circumstances which have arisen
since 31 December 2022 that have significantly affected or may significantly
affect:
· the operations, in periods subsequent to 31 December 2022, of
the Group;
· the results of those operations, in periods subsequent to 31
December 2022, of the Group; or
· the state of affairs, in periods subsequent to 31 December
2022, 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 15 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
Julian Stephens
Managing Director
13 March 2023
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE HALF YEAR ENDED 31 DECEMBER 2022
Note Half Year Ended Half Year Ended
31 December 2022
31 December 2021
$
$
Interest income 138,366 10,187
Other income/(expenses) (45,234) 30,000
Exploration and evaluation expenses (5,792,042) (4,188,770)
Corporate and administrative expenses (474,014) (463,263)
Business development expenses (1,130,083) (894,214)
Share based payments expense 4(d) (1,061,657) (2,210,324)
Upfront demerger expenses (121,839) -
Loss before income tax (8,486,503) (7,716,384)
Income tax expense - -
Loss for the period (8,486,503) (7,716,384)
Other comprehensive income, net of income tax:
Items that may be reclassified subsequently to profit or loss
Exchange differences on foreign entities (38,018) (7,096)
Other comprehensive income for the period, net of income tax (38,018) (7,096)
Total comprehensive loss for the period (8,524,521) (7,723,480)
Loss attributable to members of Sovereign Metals Limited (8,524,521) (7,723,480)
Total comprehensive loss attributable to members of Sovereign Metals Limited (8,524,521) (7,723,480)
Loss per share
Basic and Diluted loss per share (cents per share) 5 (1.8) (1.8)
The above Condensed Consolidated Statement of Profit or Loss and Other
Comprehensive Income should be read in conjunction with the accompanying
notes.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Note 31 December 2022 30 June 2022
$
$
ASSETS
Current Assets
Cash and cash equivalents 11,109,198 18,892,741
Other receivables 395,423 302,424
Other financial assets 150,000 200,000
Total Current Assets 11,654,621 19,395,165
Non-current Assets
Property, plant and equipment 541,457 537,238
Exploration and evaluation assets 3 7,170,282 7,170,282
Total Non-current Assets 7,711,739 7,707,520
TOTAL ASSETS 19,366,360 27,102,685
LIABILITIES
Current Liabilities
Trade and other payables 1,589,812 1,845,954
Provisions 139,704 95,593
Total Current Liabilities 1,729,516 1,941,547
TOTAL LIABILITIES 1,729,516 1,941,547
NET ASSETS 17,636,844 25,161,138
EQUITY
Issued capital 4(a) 78,810,865 78,860,187
Reserves 4(b) 3,008,302 1,996,771
Accumulated losses (64,182,323) (55,695,820)
TOTAL EQUITY 17,636,844 25,161,138
The above Condensed Consolidated Statement of Financial Position should be
read in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 31 DECEMBER 2022
Issued Capital Share Based Foreign Currency Translation Reserve Accumulated Losses Total Equity
$
$
$
Payments Reserve $
$
Balance at 1 July 2022 78,860,187 2,084,466 (87,695) (55,695,820) 25,161,138
Net loss for the period - - - (8,486,503) (8,486,503)
Other comprehensive income - - (38,018) - (38,018)
Total comprehensive income/(loss) for the period - - (38,018) (8,486,503) (8,524,521)
Transactions with owners, recorded directly in equity
Issue of shares upon exercise of options 27,000 - - - 27,000
Transfer from SBP reserve upon exercise of options 12,108 (12,108) - - -
Share based payments expense - 1,061,657 - - 1,061,657
Share issue costs (88,430) - - - (88,430)
Total transactions with owners recorded directly in equity (49,322) 1,049,549 - - 1,000,227
Balance at 31 December 2022 78,810,865 3,134,015 (125,713) (64,182,323) 17,636,844
Balance at 1 July 2021 55,276,410 1,800,267 (24,333) (41,976,089) 15,076,255
Net loss for the period - - - (7,716,384) (7,716,384)
Other comprehensive income - - (7,096) - (7,096)
Total comprehensive income/(loss) for the period - - (7,096) (7,716,384) (7,723,480)
Transactions with owners, recorded directly in equity
Issue of shares upon exercise of options 840,250 - - - 840,250
Transfer from SBP reserve upon exercise of options 2,169,763 (2,169,763) - - -
Share based payments expense - 2,210,324 - - 2,210,324
Total transactions with owners recorded directly in equity 3,010,013 40,561 - - 3,050,574
Balance at 31 December 2021 58,286,423 1,840,828 (31,429) (49,692,473) 10,403,349
The above Condensed Consolidated Statement of Changes in Equity should be read
in conjunction with the accompanying notes.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 31 DECEMBER 2022
Half Year Ended Half Year Ended
31 December 2022
31 December 2021
$
$
Cash flows from operating activities
Payments to suppliers and employees (7,314,907) (4,849,726)
Interest received 150,791 10,187
Net cash used in operating activities (7,164,116) (4,839,539)
Cash flows from investing activities
Payments for purchase of plant and equipment (23,970) (211,804)
Net cash used in investing activities (23,970) (211,804)
Cash flows from financing activities
Proceeds from issue of shares upon exercise of options - 840,250
Payments for share issue costs (600,221) -
Net cash (used in)/from financing activities (600,221) 840,250
Net decrease in cash and cash equivalents (7,788,307) (4,211,093)
Net foreign exchange differences 4,764 -
Cash and cash equivalents at the beginning of the period 18,892,741 7,957,660
Cash and cash equivalents at the end of the period 11,109,198 3,746,567
The above Condensed 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 2022
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 and the AIM Market of the London Stock
Exchange. The consolidated interim financial statements of the Company as at
and for the period from 1 July 2022 to 31 December 2022 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. The interim consolidated financial statements of the Group
were authorised for issue in accordance with the resolution of the directors
on 8 March 2023. 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 2022 (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. There have been no
changes in the critical accounting judgements or key sources of estimation
since 30 June 2022.
(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 2022, except for new standards,
amendments to standards and interpretations effective 1 July 2022. 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.
(d) Issued standards and interpretations not early adopted
Standard/Interpretation Application Date of Standard Application Date for Group
AASB 2020-1 Amendments to Australian Accounting Standards - Classification of 1 January 2024 1 July 2024
Liabilities as Current or Non-Current
AASB 2022-6 Amendments to Australian Accounting Standards - Classification 1 January 2024 1 July 2024
of Liabilities as Current or Non-Current - Deferral of Effective Date
AASB 2021-2 Amendments to Australian Accounting Standards - Disclosure of 1 January 2024 1 July 2024
Accounting Policies and Definition of Accounting Estimates
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 2022. Those which may be relevant
to the Group are set out in the table below, but these are not expected to
have any significant impact on the Group's financial statements:
(e) Going Concern
The Group has no sources of operating cash inflows other than interest income
and funds sourced through capital raising activities. At 31 December 2022, the
Group has cash and cash equivalents totalling $11,109,198 (30 June 2022:
$18,892,741) and net working capital of $9,925,105 (30 June 2022:
$17,453,618). The Directors believe that the Group has sufficient cash
resources to continue its activities to advance the Group's Kasiya project,
allow it to meet its minimum expenditure commitments on existing tenements and
operate corporately for at least the next 12 months from the date of approval
of these interim consolidated financial statements. For this reason these
interim consolidated financial statements have been prepared on a going
concern basis.
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. EXPLORATION AND EVALUATION ASSETS
31 December 2022 30 June 2022
$
$
(a) Movement in Exploration and Evaluation Assets
Malawi Project:
Carrying amount as at 1 July 7,170,282 7,170,282
Closing balance((i)) 7,170,282 7,170,282
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.
4. EQUITY SECURITIES ISSUED
31 December 2022 30 June 2022
$
$
(a) Issued Capital
470,875,023 (30 June 2022: 470,725,023) fully paid ordinary shares 78,810,865 78,860,187
(Note 4(c))
(b) Reserves
Share Based Payment Reserve
Nil (30 June 2022: 2,500,000) unlisted $0.18 options - 12,108
5,360,000 (30 June 2022: 5,120,000) tranche 2 performance rights 1,758,515 1,101,931
7,440,000 (30 June 2022: 7,320,000) tranche 3 performance rights 1,375,500 970,427
Total Share Based Payments Reserve (Note 4(d)) 3,134,015 2,084,466
Foreign Currency Translation Reserve (FCTR)
Exchange differences (125,713) (87,695)
Total Foreign Currency Translation Reserve (FCTR) (125,713) (87,695)
Total Reserves 3,008,302 1,996,771
(c) Movements in Ordinary Share Capital were as follows:
Date Details No. of Shares Issue Price $
$
1 Jul 2022 Opening balance 470,725,023 - 78,860,187
7 Jul 2022 Issue of shares upon exercise of options 150,000 $0.14 27,000
7 Jul 2022 Transfer from SBP reserve upon exercise of options - - 12,108
31 Dec 2022 Share issue costs - - (88,430)
31 Dec 2022 Closing balance 470,875,023 - 78,810,865
1 Jul 2021 Opening Balance 421,196,827 55,276,410
30 July 2021 Issue of shares upon exercise of options 2,000,000 0.15 300,000
Various Issue of shares upon exercise of options 9,717,500 0.50 4,858,750
23 Dec 2021 Issue of shares upon conversion of performance rights 4,585,000 - -
19 Jan 2022 Share placement 3,571,428 0.52 1,857,142
13 May 2022 Share placement 22,210,268 0.67 14,880,880
23 Jun 2022 Exercise of $0.14 incentive options 250,000 0.14 35,000
23 Jun 2022 Exercise of $0.14 incentive options (cashless) 4,410,000 - -
23 Jun 2022 Exercise of $0.18 incentive options (cashless) 1,184,000 - -
23 Jun 2022 Exercise of $0.18 incentive options (cashless) 1,600,000 - -
30 Jun 2022 Transfer from SBP reserve upon exercise of options and conversion of - - 2,657,786
performance rights
30 Jun 2022 Share issue costs - - (1,005,781)
30 Jun 2022 Closing Balance 470,725,023 78,860,187
(d) Movements in Options and Performance Rights were as follows:
Date Details Number of Unlisted No. of Performance Rights $((i))
Incentive Options
1 Jul 2022 Opening balance - 12,440,000 2,084,466
7 Jul 2022 Transfer from SBP reserve upon exercise of options - - (12,108)
23 Nov 2022 Issue of performance rights - 360,000 -
31 Dec 2022 Share based payment expense - - 1,061,657
31 Dec 2022 Closing balance - 12,800,000 3,134,015
1 Jul 2021 Opening Balance 12,875,000 14,100,000 1,800,267
30 July 2021 Exercise of $0.15 options (2,000,000) - (78,764)
Various Issue of performance rights - 3,975,000 808,774
23 Dec 2021 Conversion of performance rights - (4,585,000) (2,091,000)
1 Apr 2022 Lapse of performance rights - (1,050,000) -
23 Jun 2022 Exercise of $0.14 incentive options (4,350,000) - (281,735)
23 Jun 2022 Exercise of $0.18 incentive options (6,525,000) - (206,287)
30 Jun 2022 Share-based payment expense - - 2,133,211
30 Jun 2022 Closing Balance - 12,440,000 2,084,466
Notes
(i) The value of performance rights granted during the period is estimated as at the date of grant based on the underlying share price (recognised over the vesting period (if applicable) in accordance with Australian Accounting Standards.
During the period, 240,000 "Pre-Feasibility Study Milestone" and 120,000
"Definitive Feasibility Study Milestone" performance rights were issued, the
terms of which are consistent with what is disclosed in the Group's Annual
Report for 30 June 2022. Since 31 December 2022, a further 740,000
"Pre-Feasibility Study Milestone" and 820,000 "Definitive Feasibility Study
Milestone" performance rights were issued. In accordance with AASB 2, these
performance rights were deemed to be granted prior to 31 December 2022 and as
such, have been partially expensed to 31 December 2022.
5. LOSS PER SHARE
Half Year Ended Half Year Ended
31 December 2022
31 December 2021
Cents per Share
Cents per Share
Basic and diluted loss per share
From continuing operations (1.8) (1.8)
Total basic and diluted loss per share (1.8) (1.8)
The following reflects the loss and share data used in the calculations of
basic and diluted loss per share:
Half Year Ended Half Year Ended
31 December 2022
31 December 2021
$
$
Net loss used in calculating basic and diluted earnings per share (8,486,503) (7,716,384)
Half Year Ended Half Year Ended
31 December 2022
31 December 2021
No. of Shares
No. of Shares
Weighted average number of ordinary shares used in calculating basic earnings 470,870,105 423,284,871
per share
Adjusted weighted average number of ordinary shares and potential ordinary 470,870,105 423,284,871
shares used in calculating basic and diluted earnings per share
Non-dilutive securities
As at 31 December 2022, 11,105,125 unlisted Options and 12,800,000 unlisted
Performance Rights (which represent 23,905,125 potential Ordinary Shares) were
non-dilutive as they would decrease the loss per share. As at 31 December
2021, 10,875,000 unlisted Incentive Options and 12,965,000 unlisted
Performance Rights (which represent 23,840,000 potential Ordinary Shares) were
non-dilutive as they would decrease the loss per share.
Conversions, calls, subscriptions or issues after 31 December 2022
Since 31 December 2022, 1,560,000 Performance Rights were issued. Other than
the above, there have been no conversions to, calls of, or subscriptions for
ordinary shares or issues of potential ordinary shares since the reporting
date and before the completion of this financial report.
6. COMMITMENTS AND CONTINGENCIES
(a) Commitments
31 December 2022 30 June 2022
$
$
Exploration Commitments - Malawi Project:
Within one year 153,593 92,151
After one year but not more than five years 402,653 135,053
556,246 277,204
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.
7. DIVIDENDS PAID OR PROVIDED FOR
No dividend has been paid or provided for during the half year (2021: nil).
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The net fair value of financial assets and financial liabilities approximates
their carrying value.
9. SUBSEQUENT EVENTS AFTER BALANCE DATE
Other than the above, there are no matters or circumstances which have arisen
since 31 December 2022 that have significantly affected or may significantly
affect:
· the operations, in periods subsequent to 31 December 2022, of
the Group;
· the results of those operations, in periods subsequent to 31
December 2022, of the Group; or
· the state of affairs, in periods subsequent to 31 December
2022, 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 2022 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
Julian Stephens
Managing Director
13 March 2023
COMPETENT PERSON STATEMENT
Competent Person Statement
The information in this report that relates to the Mineral Resource Estimate
is extracted from the announcement dated 5 April 2022. The announcement is
available to view on www.sovereignmetals.com.au
(http://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 announcement; b) all material assumptions included in the
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.
Table 1: Kasiya Mineral Resource Estimate at 0.7% Rutile Cut-off
Mineral Resource Category Material Tonnes (millions) Rutile Rutile Tonnes (millions) Total Contained Graphite (TGC) TGC Tonnes (millions) RutEq. Grade*
(%)
(%)
(%)
Indicated 662 1.05% 6.9 1.43% 9.5 1.76%
Inferred 1,113 0.99% 11.0 1.26% 14.0 1.61%
Total 1,775 1.01% 18.0 1.32% 23.4 1.67%
* RutEq. Formula: Rutile Grade x Recovery (98%) x Rutile Price (US$1,308/t) +
Graphite Grade x Recovery (62%) x Graphite Price (US$1,085/t) / Rutile Price
(US$1,308/t). All assumptions are taken from this Study ** Any minor summation
inconsistencies are due to rounding
The information in this report that relates to Production Targets, Processing,
Infrastructure and Capital and Operating Costs, is extracted from the
announcement dated 16 June 2022 entitled 'Kasiya Expanded Scoping Study
Results'. Sovereign confirms that: a) it is not aware of any new information
or data that materially affects the information included in the 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 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 Announcement.
The information in this report that relates to the Metallurgy is extracted
from the announcement dated 7 December 2021. The announcement is available to
view on www.sovereignmetals.com.au (http://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 announcement; b) all
material assumptions included in the 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 report that relates to the Exploration Results is
extracted from the announcement dated 8 September 2022, 26 October 2022 and 30
January 2023. The announcements are available to view on
www.sovereignmetals.com.au (http://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 announcements; b) all
material assumptions included in the announcements 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 announcements.
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.
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