REG - Sovereign Metals Ltd - Half-year Report
07/03/2025 07:15
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RNS Number : 7975Z Sovereign Metals Limited 07 March 2025
INTERIM FINANCIAL REPORT
FOR THE HALF YEAR ENDED
31 DECEMBER 2024
abn 71 120 833 427
ASX: SVM; aim:SVML; OTCQX: SVMlf
CORPORATE DIRECTORY
Directors Nominated Advisor & Broker
Mr Benjamin Stoikovich Chairman
SP Angel Corporate Finance LLP
Mr Frank Eagar Managing Director
and CEO Prince Frederick House
Mr Ian Middlemas Non-Executive Director 35-39 Maddox Street
Dr Julian Stephens Non-Executive Director London W1S 2PP, United Kingdom
Mr Mark Pearce Non-Executive Brokers
Director
Stifel Nicolaus Europe Limited
Mr Nigel 150 Cheapside
Jones
Non-Executive Director London EC2V 6ET
United Kingdom
CFO and Company Secretary T: +44 20 7710 7600
Mr Dylan Browne
Berenberg, Gossler & Co, KG, London Branch
London Office 60 Threadneedle Street
Unit 3C, 38 Jermyn Street, London
London EC2R 8HP
SW1Y 6DN, United Kingdom
United Kingdom
Telephone: +44 207 478 3900 T: +44 20 3753 3132
Cape Town Office Share Register
Australia
Ground Floor, Block C,
The Terraces, Steenberg Office Park Computershare Investor Services Pty Ltd
Cape Town, South Africa
Level 17
221 St Georges Terrace
Telephone: +27 21 065 1890
Perth WA 6000
Telephone: 1300 850 505
International: +61 8 9323 2000
Facsimile: +61 8 9323 2033
Operations Office
Area 4
United Kingdom
Lilongwe
Computershare Investor Services PLC
Malawi
The Pavilions,
Bridgewater Road,
Bristol BS99 6ZZ
Telephone: +44 370 702 0000
Registered and Principal Office
Level 9, 28 The Esplanade
Perth WA 6000
Telephone: +61 8 9322 6322 Solicitors
Thomson Geer
Stock Exchange Listings
Australia Simmons & Simmons
Australian Securities Exchange
ASX Code: SVM - Ordinary Shares
Auditor
United Kingdom Ernst & Young - Perth
London Stock Exchange (AIM)
AIM Code: SVML - Depository Interests Bankers
Australia - National Australia Bank Limited
Malawi - Standard Bank
Quotations
United States
OTCQX Best Market
OTCQX code: SVMLF
CONTENTS
Directors' Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Competent Person Statement
Auditor's Independence Declaration
Independent Auditor's Review Report
DIRECTORS' REPORT
The Directors of Sovereign Metals Limited present their report on Sovereign
Metals Limited (Sovereign or the Company or Parent) and the entities it
controlled at the end of, or during, the half year ended 31 December 2024
(Consolidated Entity or Group).
REVIEW AND RESULTS OF OPERATIONS
KASIYA RUTILE-GRAPHITE PROJECT
Sovereign is focused on the development of its Kasiya rutile-graphite project
(Kasiya or the Project) in Malawi. The recently completed Optimised
Pre-Feasibility Study (OPFS) confirmed Kasiya as a potentially major critical
minerals project delivering industry-leading economic returns and
sustainability metrics.
The Company's objective is to develop a large-scale, long life rutile-graphite
operation, focusing on developing an environmentally and socially responsible,
sustainable operation.
Figure 1: Kasiya Regional Project Location
HIGHLIGHTS DURING AND SUBSEQUENT TO PERIOD END
Optimised PFS Results Reaffirm Kasiya's Globally Strategic Significance
· In January 2025, the OPFS was completed with oversight
from Sovereign-Rio Tinto Technical Committee
· Results of the OPFS reaffirm Kasiya's potential to
become the largest and lowest-cost producer of natural rutile and natural
flake graphite while generating exceptional economics
· Various optimisations have led to superior project
delivery, operational flexibility, environmental and social outcomes compared
to the 2023 Prefeasibility Study (PFS)
Pilot Phase Advanced to Rehabilitation Stage following Mining Trials and
Backfilling
· In December 2024, material mined and stockpiled during
the Pilot Mining and Land Rehabilitation (Pilot Phase) was placed back in the
test pit, filling it to its original ground level
· On-site soil remediation and land rehabilitation
activities are underway, testing Sovereign's proposed rehabilitation approach
and demonstrating how mined land can support sustainable farming post-closure
Rio Tinto Invests Additional A$19m Increasing Shareholding to 19.9%
· In July 2024, Rio Tinto invested a further A$18.5
million via the exercise of options to increase its shareholding in Sovereign.
To date Rio Tinto has invested A$60 million for 19.9% of Sovereign
Positive Test Results for Use of Kasiya Graphite
· Very high quality Coated Spherical Purified Graphite
(CSPG) anode material produced from Kasiya graphite concentrate with
performance characteristics comparable to highest quality natural graphite
battery material produced by dominant Chinese anode manufacturers
· In November 2024, Sovereign announced that preliminary
tests confirmed that graphite concentrate produced from Kasiya exhibits
prerequisite characteristics for selling graphite to the refractory materials
sector
· In February 2025, further test work confirmed Kasiya's
graphite also has the key characteristics required for use in expandable (fire
retardant) and expanded (gaskets, seals, and brake lining) applications
Infill Drilling Program Complete
· In October 2024, Sovereign announced the completion of
an infill drilling program designed to upgrade Kasiya's Mineral Resource
Estimate (MRE) and to facilitate conversion of Ore Reserves from Probable to
Proven category, with the upgrade due in the coming months
Next Steps
· Sovereign will continue to advance the Definitive
Feasibility Study (DFS), provide updates on the rehabilitation component of
the Pilot Phase, publish an upgrade to the MRE, continue with further graphite
testwork to support potential offtake discussions and further its community
and social development programs in Malawi
Figure 2: Pilot Phase test pit during mining trials (left) and subsequently
backfilled and rehabilitated (right)
Optimised PFS Results Reaffirm Kasiya's Globally Strategic Significance
Subsequent to the half year, the Company announced the results of an OPFS for
Kasiya which was undertaken following a strategic investment by Rio Tinto
Mining and Exploration Limited (Rio Tinto) in 2023. Under the Investment
Agreement, a joint Technical Committee was established to oversee the
development of Kasiya; the OPFS was conducted with oversight from the
Sovereign-Rio Tinto Technical Committee.
Following input from various organisations, including internationally
recognised, independent consultancies, the Company's owner's team, and subject
matter experts from Rio Tinto, the OPFS has reconfirmed Kasiya as a leading
global future supplier of strategic critical minerals outside of China.
The OPFS proposes a large-scale, long-life operation to deliver substantial
volumes of natural rutile and graphite while generating significant returns.
Table 1 below summarises the key findings from the OPFS and includes a
comparison to the PFS results released 16 months ago, in September 2023. It is
important to note that the results for the 2023 PFS in Table 1 have not been
updated or adjusted for inflation since their release.
TABLE 1: KEY OPFS METRICS
Units OPFS Results 2023 PFS
Jan 25 Sep 23
Production
Initial Mine Life Years 25 25
Plant Throughput (Stage 1: Years 1-4) Mtpa 12 12
Plant Throughput (Stage 2: Years 5-25) Mtpa 24 24
Average Annual Rutile Produced (95%+TiO(2)) ktpa 222 222
Annual Average Graphite Produced (96% TGC)* ktpa 233 244
Operating and Capital Expenditure
Capex to First Production (Stage 1) US$M 665 597
Total LOM Development Capex US$M 1,127 1,250
Total LOM Sustaining Capex US$M 397 470
Operating Costs (FOB Nacala) US$/t product 423 404
Financial Performance
Total Revenue* US$M 16,367 16,121
Annual Revenue (Average LOM) US$M 640 645
Annual EBITDA (Average LOM) US$M 409 415
NPV(8) (real, pre-tax) US$M 2,322 2,419
IRR (pre-tax) % 27% 32%
Revenue to Cost Ratio x 2.8 2.8
*Annual average graphite produced includes 292kt of graphite processed and
sold in two years post cessation of active ore mining. Average graphite
produced during the 25-year initial mine life only is 240ktpa; total revenue
during the same period is US$15,990 million. All rutile is produced and sold
during the 25-year initial mine life. Note: All cashflows and costs are
presented in US$ real January 2025 terms unless otherwise stated. Operating
costs exclude mineral royalties and community development support costs.
Summary of Optimisations
The OPFS optimises seven key areas compared to the 2023 PFS, as summarised
below.
Mining Method
The PFS proposed a 25-year initial LOM based on a hydraulic mining process
where slurry material would be screened and pumped overland to the processing
plants.
Based on findings from the mining trials undertaken as part of the Pilot
Phase, the OPFS proposes a large-scale open-pit dry mining operation using
draglines and trucking of material to the processing plants. The change in
mining method has not changed the initial mine life of 25 years.
Operating Model
The 2023 PFS envisaged mining would take place on a contractor basis.
During the OPFS, Sovereign undertook a trade-off analysis between the
following operating options:
· Fully owner-operated mine with draglines and trucks
purchased by the owner
· Owner-operated mine with draglines and trucks leased by
the owner
· Mining contractor operation using excavators and trucks
Due to the preference for draglines and benefit of flexibility, an
owner-operated mine with leased equipment is selected as the preferred
operating model.
Plant Configuration
Dry mining Kasiya means the material received at the plant is not pre-wet and
pre-scrubbed. Therefore, the OPFS proposes a process plant front end
consisting of two scrubbers and two oversize screens per 12Mt plant. No
further changes are proposed to the processing plant flowsheet.
Plant Location
Per the 2023 PFS, mining would commence in the southern area of the Kasiya
deposit, ramping up to 12Mt per annum (Mtpa) and then scaling up to 24Mtpa in
Year 5 by constructing a second plant module in the same area, reaching
nameplate capacity by the end of that year.
In Year 10 of production, another new 12Mtpa plant module would be built and
commissioned in the northern area of Kasiya, supported by the relocation to
the north of one of the southern plants to maintain a steady state of 24Mtpa.
However, the OPFS has determined the most efficient plant locations to be an
initial 12Mtpa South Kasiya plant followed by the construction of another
12Mtpa North Kasiya plant in year 5 of production, negating any relocation
requirements in later years.
The OPFS maintains the ROM schedule with operations commencing with 12Mtpa of
throughput during the first four years of production (Stage 1) and expanding
to 24Mtpa in year 5, with full capacity reached by end of year 5 (Stage 2).
Tailings Management
Per the PFS, a conventional process would be used to produce rutile and
graphite concentrate with tailings in separate sand and fines streams being
pumped to a conventional TSF. Mined out pit areas would be backfilled as part
of a rehabilitation process.
The OPFS proposes maximising backfilling of pits as undertaken during the
Pilot Phase and the introduction of mud farming on the TSF to accelerate
dewatering. This approach has reduced tailings volumes in the TSF by 44% from
187 Mm³ to 105 Mm³.
Mud farming is a technique used by Rio Tinto at operations such as its
100%-owned Weipa bauxite operations in Queensland, Australia, which has been
in production since 1963 and produced 35.1Mt of bauxite in 2023.
Water Management
The PFS proposed that the primary water supply for the Kasiya mining complex
would be created by building a water storage dam and collecting run-off water
from the greater catchment area. Following the introduction of dry mining and
mud farming, the size of the water storage dam proposed in the PFS has been
significantly reduced, with less process water required and more process water
recovered.
The OPFS mining trials and material deposition tests indicated a water demand
of 10.2 Mm³ per annum, almost a 40% decrease in water requirement from the
PFS (16.7 Mm³). The effect on the water storage dam wall could be a
reduction in volume from 0.79 Mm³ to 0.57 Mm³ and a reduction in dam wall
height from 20 metres to 17 metres.
Power
The 2023 PFS envisaged a hybrid hydro-generated grid power plus solar power
system solution.
The Malawi grid reliability has improved since completion of the PFS and is
expected to further improve considerably with the commissioning of the
country's first HV transmission interconnector to Mozambique in Q2 2025.
This will provide the Project with sufficient power and therefore the OPFS
proposes to connect the Project's power system to the hydro-sourced grid
network only. This mitigates any risks associated with commissioning a new
solar power project and reducing the overall power tariff by eliminating the
need for an Independent Power Producer as per the 2023 PFS.
Pilot Phase Advanced to Rehabilitation Stage Following Mining Trials and
Backfilling
In December 2024, the Company announced that the test pit mined during the
Pilot Phase at the Kasiya Project had been successfully backfilled. This
allowed Sovereign to commence on-site soil remediation and land rehabilitation
activities, testing our proposed rehabilitation approach and demonstrating
that the mined land can support sustainable farming post-closure.
During the Pilot Phase mining trials, 170,000m(3) was mined using a
conventional excavator fleet. The fleet was used to place mined material back
into the pit, filling the pit to the original ground level in less than two
months and ahead of schedule.
In March 2025, the Company announced the success of the rehabilitation program
with landowners given immediate access to land to start maize crop farming
without missing a planting season.
Positive Test Results for Use of Kasiya Graphite in Refractory and Expandable
Markets
The Company has announced that downstream testwork targeting the traditional
graphite market, conducted at leading independent consultancies ProGraphite
GmbH (ProGraphite) and Dorfner Anzaplan (DorfnerA) in Germany, have delivered
very positive test results, which will be used for customer engagement and
potential offtake discussions.
Preliminary tests confirmed that graphite concentrate produced from Kasiya in
Malawi exhibits prerequisite characteristics required for graphite sales into
the refractory materials sector and for use in expandable (fire retardant) and
expanded (gaskets, seals, and brake lining) applications.
Traditional demand for natural graphite is primarily tied to the steel
industry where it is used as a component in bricks that line both blast and
electric arc furnaces ("refractories") and as a liner for ladles and
crucibles. It is used in brake linings, gaskets and clutch materials in the
automotive industry. Graphite has many other industrial uses in lubricants,
carbon brushes for electric motors, fire retardants, and insulation and
reinforcement products.
Graphite's key properties for use in refractory applications are its
resistance to oxidation, chemical inertness and good thermal conductivity.
A key use for expandable graphite is as a flame retardant. Growth for
expandable graphite flame retardants, is driven by concerns over halogen-based
flame retardants, which include brominated and chlorinated flame retardants.
Many of these chemicals are now recognised as global contaminants and are
associated with adverse health effects in animals and humans, including
endocrine and thyroid disruption, immunotoxicity, reproductive toxicity, and
cancer (National Institute of Health).
Expanded graphite is used in gaskets, seals, brake linings, bi-polar plates
for fuel cells, and thermal management in electronic devices, where the
inherent properties of graphite are combined with the flexibility of expanded
graphite.
Figure 3: Natural graphite market per application (Benchmark Minerals
Intelligence, 2025)
Infill Drilling Program Complete
In October 2024, the Company announced the completion of an infill drilling
program at Kasiya to support an upgrade of the MRE.
Aircore drilling, supported by hand auger, push tube and diamond core
drilling, was completed in the southern part of Kasiya. The drilling was
focused on the designated pits proposed to provide ore feed in the first eight
years of the Project's production schedule. Ore Reserves in these areas are
expected to convert from the Probable to Proven category with an upgrade of
the current MRE from Indicated to the Measured category under the JORC (2012)
Code.
Offsite laboratories in South Africa and Australia will assay all samples for
rutile and graphite. The drilling program's results and subsequent Resource
upgrade are expected in early 2025.
Kasiya is already the world's largest rutile deposit and second-largest flake
graphite deposit, with over 66% of the current MRE in the Indicated category.
Corporate Update
Sovereign remains in a strong financial position with cash at bank of
approximately A$34 million and no debt.
Next Steps
The Company plans to update the market on the following progress in the coming
months:
· Planned MRE upgrade
· Further graphite test work results as the Company
continues to advance the qualification of its graphite product for the
lithium-ion battery and traditional graphite sectors
· Progress in discussions with future potential end-users
of rutile and graphite
· Updates on community and social development programs
· Further rehabilitation aspects of the Pilot Phase
· Progress of the DFS, which is targeted for completion
in Q4, 2025
DIRECTORS
The names of Directors in office at any time during the financial period or
since the end of the financial period are:
Mr Benjamin Stoikovich Chairman
Mr Frank Eagar Managing Director and
CEO
Mr Ian Middlemas Non-Executive Director
Dr Julian Stephens Non-Executive Director
Mr Mark Pearce Non-Executive Director
Mr Nigel Jones Non-Executive Director
All Directors were in office from 1 July 2024 until the date of this report,
unless otherwise noted.
OPERATING RESULTS
The net operating loss after tax for the half year ended 31 December 2024 was
$19,546,116 (2023: $6,976,503) which is attributable to:
(i) Interest income of $1,025,751 (2023: $938,402) earned on
cash term deposits held by the Group;
(ii) exploration and evaluation expenditure of $16,495,513
(2023: $5,027,397) in relation to the Kasiya Project. This is attributable to
the Group's accounting policy of expensing exploration and evaluation
expenditure incurred by the Group subsequent to acquisition of the rights to
explore and up to the completion of feasibility studies; and
(iii) non-cash share based payment expenses of $1,904,852 (2023:
$1,089,974) relating to performance rights. The fair value of incentive
options and rights is measured at grant date and recognised over the period
during which the performance rights holders become unconditionally entitled to
the incentive securities.
FINANCIAL POSITION
At 31 December 2024, the Company had cash and cash equivalents of $33,531,689
(30 June 2024: $31,564,130) and no debt (30 June 2024: nil). The Company had
net assets of $35,927,994 (30 June 2024: $34,358,774), an increase of
$1,569,220 or approximately 4% compared with the prior period. This is largely
attributable to the increase in cash reserves following the investment made by
Rio Tinto in the period offset by exploration and evaluation spend on the
project to complete the Pilot Phase and OPFS.
SIGNIFICANT POST BALANCE DATE EVENTS
On 22 January 2025, the Company announced the results of an OPFS for Kasiya
which reaffirm Kasiya's potential to become the largest and lowest-cost
producer of natural rutile and natural flake graphite while generating
exceptional economics.
Other than the above, there are no matters or circumstances which have arisen
since 31 December 2024 that have significantly affected or may significantly
affect:
· the operations, in periods subsequent to 31 December 2024, of
the Group;
· the results of those operations, in periods subsequent to 31
December 2024, of the Group; or
· the state of affairs, in periods subsequent to 31 December
2024, of the Group.
AUDITOR'S INDEPENDENCE DECLARATION
Section 307C of the Corporations Act 2001 requires our auditors, Ernst &
Young, to provide the directors of Sovereign Metals Limited with an
Independence Declaration in relation to the review of the half year financial
report. This Independence Declaration is on page 17 and forms part of this
Directors' Report.
This report is made in accordance with a resolution of the directors made
pursuant to section 306(3) of the Corporations Act 2001.
For and on behalf of the Directors
Frank Eagar
Managing Director and CEO
7 March 2025
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE HALF YEAR ENDED 31 DECEMBER 2024
Notes Half Year Ended Half Year Ended
31 December 2024
31 December 2023
$
$
Interest income 1,025,751 938,402
Exploration and evaluation expenses (16,495,513) (5,027,397)
Corporate and administrative expenses (779,930) (572,119)
Business development expenses (1,004,695) (996,548)
Share based payment expense 9(a) (1,904,852) (1,089,974)
Other expenses 3 (386,877) (173,386)
Demerger expenses - (55,481)
Loss before income tax (19,546,116) (6,976,503)
Income tax expense - -
Loss for the period (19,546,116) (6,976,503)
Other comprehensive income, net of income tax:
Items that may be reclassified subsequently to profit or loss
Exchange differences on foreign entities 80,624 3,530
Other comprehensive income for the period, net of income tax 80,624 3,530
Total comprehensive loss for the period (19,465,492) (6,972,973)
Loss attributable to members of Sovereign Metals Limited (19,465,492) (6,972,973)
Total comprehensive loss attributable to members of Sovereign Metals Limited (19,465,492) (6,972,973)
Basic and diluted loss per share from continuing operations (cents per share) (3.3) (1.1)
The above Consolidated Statement of Profit or Loss and Other Comprehensive
Income should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
Notes 31 December 2024 30 June 2024
$
$
ASSETS
Current Assets
Cash and cash equivalents 33,531,689 31,564,130
Other receivables 4 506,258 315,597
Other financial assets 175,000 560,000
Total Current Assets 34,212,947 32,439,727
Non-current Assets
Property, plant and equipment 5 2,009,700 1,149,771
Exploration and evaluation assets 6 5,086,129 5,086,129
Total Non-current Assets 7,095,829 6,235,900
TOTAL ASSETS 41,308,776 38,675,627
LIABILITIES
Current Liabilities
Trade and other payables 5,184,642 4,138,353
Provisions 86,849 56,782
Other financial liabilities 7(a) 41,378 35,288
Total Current Liabilities 5,312,869 4,230,423
Non-Current Liabilities
Other financial liabilities 7(b) 67,913 86,430
Total Non-Current Liabilities 67,913 86,430
TOTAL LIABILITIES 5,380,782 4,316,853
NET ASSETS 35,927,994 34,358,774
EQUITY
Issued capital 8 136,965,491 117,835,631
Reserves 9 (1,374,794) (3,360,270)
Accumulated losses (99,662,703) (80,116,587)
TOTAL EQUITY 35,927,994 34,358,774
The above Consolidated Statement of Financial Position should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 31 DECEMBER 2024
Issued Capital Share Based Payment Reserve Demerger Reserve Foreign Currency Translation Reserve Accumulated Losses Total Equity
$
$
$
$
$ $
Balance at 1 July 2024 117,835,631 3,605,751 (7,336,678) 370,657 (80,116,587) 34,358,774
Net loss for the period - - - - (19,546,116) (19,546,116)
Other comprehensive income - - - 80,624 - 80,624
Total comprehensive income/(loss) for the period - - - 80,624 (19,546,116) (19,465,492)
Transactions with owners, recorded directly in equity
Issue of placement shares 19,174,395 - - - - 19,174,395
Cancelation of unvested performance rights - (22,754) - - - (22,754)
Share based payment expense - 1,927,606 - - - 1,927,606
Share issue costs (44,535) - - - - (44,535)
Balance at 31 December 2024 136,965,491 5,510,603 (7,336,678) 451,281 (99,662,703) 35,927,994
Balance at 1 July 2023 74,508,488 4,155,950 (7,336,678) (139,498) (61,515,693) 9,672,569
Net loss for the period - - - - (6,976,503) (6,976,503)
Other comprehensive income - - - 3,530 - 3,530
Total comprehensive income/(loss) for the period - - - 3,530 (6,976,503) (6,972,973)
Transactions with owners, recorded directly in equity
Issue of placement shares 40,598,258 - - - - 40,598,258
Transfer from SBP reserve upon conversion of performance rights 2,853,400 (2,853,400) - - - -
Share based payment expense - 1,089,974 - - - 1,089,974
Share issue costs (124,515) - - - - (124,515)
Balance at 31 December 2023 117,835,631 2,392,524 (7,336,678) (135,968) (68,492,196) 44,263,313
The above Consolidated Statement of Changes in Equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 31 DECEMBER 2024
Half Year Ended Half Year Ended
31 December 2024
31 December 2023
$
$
Cash flows from operating activities
Payments to suppliers and employees - exploration and evaluation (15,479,030) (5,433,663)
Payments to suppliers and employees - other (1,764,767) (1,616,960)
Interest received 1,031,209 744,942
Net cash used in operating activities (16,212,588) (6,305,681)
Cash flows from investing activities
Payments for purchase of plant and equipment (916,061) (205,902)
Repayment of loan receivable from NGX Limited - 34,434
Net cash used in investing activities (916,061) (171,468)
Cash flows from financing activities
Proceeds from issue of shares 19,174,395 40,598,258
Payments for share issue costs (44,535) (248,778)
Payments for finance lease (31,777) -
Net cash from financing activities 19,098,083 40,349,480
Net increase in cash and cash equivalents 1,969,434 33,872,331
Net foreign exchange differences (1,875) -
Cash and cash equivalents at the beginning of the period 31,564,130 5,564,376
Cash and cash equivalents at the end of the period 33,531,689 39,436,707
The above Consolidated Statement of Cash Flows should be read in conjunction
with the accompanying notes.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2024
1. MATERIAL ACCOUNTING POLICY INFORMATION
Sovereign Metals Limited (the "Company") is a for profit company limited by
shares and incorporated in Australia, whose shares are publicly traded on the
Australian Securities Exchange, the AIM Market of the London Stock Exchange
and a Quotation on OTCQX in the U.S. The consolidated interim financial
statements of the Company as at and for the period from 1 July 2024 to 31
December 2024 comprise the Company and its subsidiaries (together referred to
as the "Group"). The nature of the operations and principal activities of the
Group are as described in the Directors' Report.
This interim financial report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this report is
to be read in conjunction with the audited annual report of Sovereign for the
year ended 30 June 2024 (where comparative amounts have been extracted from)
and any public announcements made by the Group during the interim reporting
period in accordance with the continuous disclosure requirements of the
Corporations Act 2001.
(a) Basis of Preparation of Half Year Financial Report
The consolidated financial statements have been prepared on the basis of
historical cost, except for the revaluation of certain financial instruments.
Cost is based on the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars, unless otherwise
stated. There have been no changes in the critical accounting judgements or
key sources of estimation since 30 June 2024.
(b) Statement of Compliance
The consolidated interim financial report complies with Australian Accounting
Standards, including AASB 134 which ensures compliance with International
Financial Reporting Standard ("IFRS") IAS 34 "Interim Financial Reporting" as
issued by the International Accounting Standards Board. The accounting
policies adopted in the preparation of the half-year financial report are
consistent with those applied in the preparation of the Group's annual
financial report for the year ended 30 June 2024, except for new standards,
amendments to standards and interpretations effective 1 July 2024. In the
current half year, the Group has adopted all of the new and revised Standards
and Interpretations issued by the AASB that are relevant to its operations and
effective for the current annual reporting period. The adoption resulted in no
material impact.
(c) Issued standards and interpretations not early adopted
Australian Accounting Standards and Interpretations that have recently been
issued or amended but are not yet effective have not been adopted by the Group
for the reporting period ended 31 December 2024. Those which may be relevant
to the Group are set out in the table below. The impact of these standards are
still being assessed.
Standard/Interpretation Application Date of Standard Application Date for Group
AASB 2014-10 Amendments to Australian Accounting Standards - Sale or 1 January 2025 1 July 2025
Contribution of Assets between an Investor and its Associate or Joint Venture
AASB 18 Presentation and Disclosure in Financial Statements 1 January 2027 1 July 2027
2. SEGMENT INFORMATION
AASB 8 requires operating segments to be identified on the basis of internal
reports about components of the Consolidated Entity that are regularly
reviewed by the chief operating decision maker in order to allocate resources
to the segment and to assess its performance. The Consolidated Entity has one
operating segment, being exploration in Malawi.
3. OTHER EXPENSES
31 December 2024 31 December 2023
$
$
Foreign exchange (loss)/gain (1,877) 1,614
Fair value movements in other financial assets (385,000) (175,000)
(386,877) (173,386)
4. CURRENT ASSETS - OTHER RECEIVABLES
31 December 2024 30 June 2024
$
$
Accrued interest 140,454 145,913
GST receivable 95,664 81,051
Prepayments 203,559 52,655
Other 66,581 35,978
506,258 315,597
5. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT
Office Furniture and Equipment Computer Equipment Plant & Equipment Right of use Assets under construction Total
$ $ $ $ $ $
Carrying amount at 152,163 68,566 496,953 1,149,771
1 July 2024
116,447 315,642
Additions 31,758 30,516 768,298 - 73,062 903,634
Depreciation charge (15,546) (17,761) (64,801) (21,663) - (119,771)
Foreign exchange differences 10,217 3,557 33,604 4,257 24,431 76,066
Carrying amount at 178,592 84,878 1,234,054 2,009,700
31 December 2024
99,041 413,135
At cost 227,879 153,292 1,803,664 134,091 388,704 2,707,630
Accumulated depreciation, amortisation and impairment (49,287) (68,414) (569,610) (35,050) 24,431 (697,930)
6. EXPLORATION AND EVALUATION ASSETS
31 December 2024
$
(a) Movement in Exploration and Evaluation Assets
Kasiya Rutile-Graphite Project:
Carrying amount as at 1 July 2024 5,086,129
Carrying amount at 31 December 2024((i)) 5,086,129
Note:
(i) The ultimate recoupment of costs carried
forward for exploration and evaluation is dependent on the successful
development and commercial exploitation or sale of the respective areas of
interest.
7. OTHER FINANCIAL LIABILITIES
31 December 2024 30 June 2024
$
$
(a) Current liabilities
Lease Liability((i)) 41,378 35,288
(b) Non-Current liabilities
Lease Liability((i)) 67,913 86,430
Note:
(i) The Company has a lease agreement for the
rental of a property. Refer to Note 5 for the carrying amount of the right of
use asset relating to the lease. The following are amounts recognised in the
Statement of Profit and Loss: (i) amortisation expense of right of use asset
$21,663 (30 June 2024: $17,454); (ii) interest expense on lease liabilities of
$14,311 (30 June 2024: $12,961); and (iii) rent expense of $5,660 (30 June
2024: $7,922).
8. CONTRIBUTED EQUITY
31 December 2024 30 June 2024
$
$
(a) Issued and Paid Up Capital
599,879,879 (30 June 2024: 563,003,401) fully paid ordinary shares (Note 8(b)) 136,965,491 117,835,631
(b) Movements in Ordinary Share Capital were as follows:
Date Details Number of Shares $
1 Jul 24 Opening balance 563,003,401 117,835,631
4 Jul 24 Issue of ordinary shares on exercise of Rio Tinto Options 34,549,598 18,484,035
13 Sep 24 Issue of ordinary shares to Rio Tinto 1,290,392 690,360
13 Sep 24 Issue of advisory fee shares 1,036,488 -
31 Dec 24 Share issue costs - (44,535)
31 Dec 24 Closing balance 599,879,879 136,965,491
9. RESERVES
31 December 2024 30 June 2024
$
$
Share-based Payments Reserve (Note 9(a)) 5,510,603 3,605,751
Foreign Currency Translation Reserve - exchange differences 451,281 370,657
Demerger Reserve (7,336,678) (7,336,678)
(1,374,794) (3,360,270)
(a) Movements in Options and Performance Rights were as follows:
Date Details Number of Unlisted Performance Rights $((i))
1 Jul 2024 Opening balance 17,860,000 3,605,751
Various Issue of performance rights 4,725,000 -
31 Dec 2024 Cancelation of unvested performance rights (425,000) (22,754)
31 Dec 2024 Share based payment expense - 1,927,606
31 Dec 2024 Closing balance 22,160,000 5,510,603
Note
(i) The value of performance rights granted during
the period is estimated as at the grant date based on the underlying share
price with the expense recognised over the vesting period in accordance with
Australian Accounting Standards.
10. COMMITMENTS AND CONTINGENCIES
(a) Commitments
31 December 2024 30 June 2024
$
$
Exploration Commitments - Kasiya Rutile-Graphite Project:
Within one year 201,477 107,155
After one year but not more than five years 82,043 46,705
283,520 153,860
As a condition of retaining the current rights to tenure to exploration
tenements, the Group is required to pay an annual rental charge and meet
minimum expenditure requirements for each tenement. These obligations are not
provided for in the financial statements and are at the sole discretion of the
Group. The majority of the remaining exploration commitments relate to
licences with a term greater than one year. For the purposes of disclosure,
the Group has apportioned the remaining commitments on an equal monthly basis
over the remaining term of the exploration licences.
(b) Contingencies
At the last annual reporting date, the Consolidated Entity did not have any
material contingent liabilities. There has been no material change in
contingent assets and liabilities of the Consolidated Entity during the half
year.
11. DIVIDENDS PAID OR PROVIDED FOR
No dividend has been paid or provided for during the half year (2023: nil).
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The net fair value of financial assets and financial liabilities approximates
their carrying value.
13. SUBSEQUENT EVENTS AFTER BALANCE DATE
On 22 January 2025, the Company announced the results of an OPFS for Kasiya
which reaffirm Kasiya potential to become the largest and lowest-cost producer
of natural rutile and natural flake graphite while generating exceptional
economics.
Other than the above, there are no matters or circumstances which have arisen
since 31 December 2024 that have significantly affected or may significantly
affect:
· the operations, in periods subsequent to 31 December 2024, of
the Group;
· the results of those operations, in periods subsequent to 31
December 2024, of the Group; or
· the state of affairs, in periods subsequent to 31 December
2024, of the Group.
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of Sovereign Metals Limited,
I state that:
In the opinion of the Directors:
(a) the financial statements and notes thereto are in accordance
with the Corporations Act 2001, including:
(i) complying with Accounting Standard AASB 134: Interim
Financial Reporting and the Corporations Regulations 2001; and
(ii) giving a true and fair view of the consolidated entity's
financial position as at 31 December 2024 and of its performance for the half
year ended on that date.
(b) there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they become due and payable.
This declaration is signed in accordance with a resolution of the Board of
Directors made pursuant to section 303(5) of the Corporations Act 2001.
On behalf of the Board
Frank Eagar
Managing Director and CEO
7 March 2025
Competent Person Statement
The information in this announcement that relates to Production Targets, Ore
Reserves, Processing, Infrastructure and Capital and Operating Costs is
extracted from an announcement dated 22 January 2025, which is available to
view at www.sovereignmetals.com.au. Sovereign confirms that: a) it is not
aware of any new information or data that materially affects the information
included in the original announcement; b) all material assumptions and
technical parameters underpinning the Production Target, and related forecast
financial information derived from the Production Target included in the
original announcement continue to apply and have not materially changed; and
c) the form and context in which the relevant Competent Persons' findings are
presented in this presentation have not been materially modified from the
original announcement.
The information in this announcement that relates to the Exploration Results
(metallurgy - rutile and graphite) is extracted from announcements dated 8 May
2024, 15 May 2024, 4 September 2024, 21 November 2024, 19 February 2025 and 26
February 2025 which are available to view at www.sovereignmetals.com.au.
Sovereign confirms that a) it is not aware of any new information or data that
materially affects the information included in the original announcement; b)
all material assumptions included in the original announcement continue to
apply and have not materially changed; and c) the form and context in which
the relevant Competent Persons' findings are presented in this report have not
been materially changed from the announcement.
The information in this announcement that relates to the Mineral Resource
Estimate is extracted from Sovereign's 2024 Annual Report and is based on, and
fairly represents information compiled by Mr Richard Stockwell, a Competent
Person, who is a fellow of the Australian Institute of Geoscientists (AIG). Mr
Stockwell is a principal of Placer Consulting Pty Ltd, an independent
consulting company. Sovereign confirms that a) it is not aware of any new
information or data that materially affects the information included in the
original announcement; b) all material assumptions included in the 2024 Annual
Report continue to apply and have not materially changed; and c) the form and
context in which the relevant Competent Persons' findings are presented in
2024 Annual Report have not been materially changed from the disclosure in the
2024 Annual Report.
Ore Reserve for the Kasiya Deposit
Classification Tonnes Rutile Grade Contained Rutile Graphite Grade (TGC) (%) Contained Graphite RutEq. Grade*
(Mt)
(%)
(Mt)
(Mt)
(%)
Proved - - - - - -
Probable 538 1.03% 5.5 1.66% 8.9 2.00%
Total 538 1.03% 5.5 1.66% 8.9 2.00%
* RutEq. Formula: Rutile Grade x Recovery (100%) x Rutile Price (US$1,484/t) +
Graphite Grade x Recovery (67.5%) x Graphite Price (US$1,290/t) / Rutile Price
(US$1,484/t). All assumptions are from the Kasiya PFS ** Any minor summation
inconsistencies are due to rounding
Kasiya Total Indicated + Inferred Mineral Resource Estimate at 0.7% rutile
cut-off grade (inclusive of Ore Reserves)
Classification Resource 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
Forward Looking Statement
This release may include forward-looking statements, which may be identified
by words such as "expects", "anticipates", "believes", "projects", "plans",
and similar expressions. These forward-looking statements are based on
Sovereign's expectations and beliefs concerning future events. Forward looking
statements are necessarily subject to risks, uncertainties and other factors,
many of which are outside the control of Sovereign, which could cause actual
results to differ materially from such statements. There can be no assurance
that forward-looking statements will prove to be correct. Sovereign makes no
undertaking to subsequently update or revise the forward-looking statements
made in this release, to reflect the circumstances or events after the date of
that release.
AUDITOR'S INDEPENDENCE DECLARATION
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