REG - Sovereign Metals Ltd - June 2024 Quarterly Report
31/07/2024 07:00
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RNS Number : 5181Y Sovereign Metals Limited 31 July 2024
NEWS RELEASE I 31 JULY 2024
JUNE 2024 QUARTERLY REPORT
Sovereign Metals Limited (Company or Sovereign) (ASX:SVM & AIM:SVML) is
pleased to provide its quarterly report for the period ended 30 June 2024.
HIGHLIGHTS
Rio Tinto Invests Additional A$18.5m via Option Exercise
· In July 2024, Rio Tinto invested a further A$18.5 million via the
exercise of options, to increase its shareholding in Sovereign to 19.76%
· Investment proceeds to be used to continue advancing the
Kasiya Rutile-Graphite Project in Malawi
· Rio Tinto's further investment represents another significant
step towards unlocking a major new supply of low-CO(2)-footprint natural
rutile and flake graphite. Under the Investment Agreement between Sovereign
and Rio Tinto, Rio Tinto continues to provide assistance and advice on
technical and marketing aspects of Kasiya
· Following the additional A$18.5 million invested by Rio
Tinto, Sovereign remains in strong financial position with cash at bank of
approximately A$50.0 million and no debt
Mining Development Agreement signed by the Malawi Government
· In July 2024, Sovereign notes that Mkango Resources Limited
(Mkango) signed a Mining Development Agreement with the Malawi Government on
terms similar to assumptions used in the Company's Pre-Feasibility Study
· Mkango announced that the Malawi Government would receive a
5% royalty of gross revenues and 10% non-diluting equity interest in the
project, while Mkango will be exempt from customs and excise duties and pay a
30% corporate tax rate
Kasiya Optimisation Advances to Pilot Phase
· During the quarter, Sovereign commenced a pilot mining and
land rehabilitation program (Pilot Phase) at Kasiya as part of the ongoing PFS
Optimisation Study
· At the end of July 2024, the dry mining component of the Pilot
Phase was successfully completed, confirming Kasiya can be efficiently mined
using standard mobile excavators and trucks, demonstrating operational
alternatives as part of ongoing PFS Optimisation Study
· Test pit mined as planned and on schedule to a depth of 20
metres, excavating approximately 170,000 bench cubic metres
· Empirical data generated from the Pilot Phase will assist
towards determining optimal excavation, material handling, processing,
backfilling and rehabilitation approaches
· Demonstrates strong support for mining projects in Malawi with
all required approvals and community permissions for the Pilot Phase obtained
within three months
· The test pit will be backfilled, and multiple rehabilitation
strategies will be implemented to demonstrate successful restoration of
agricultural land
· Excavated material will be processed through cyclones on-site
for tailings deposition testwork as well as at Sovereign's laboratory in
Malawi to generate additional bulk samples for graphite product qualification
Downstream Testwork Demonstrates High-Quality Graphite for Lithium-Ion
Batteries
· During the quarter, Spherical Purified Graphite (SPG) with
world-leading specifications successfully produced from Kasiya demonstrating
all required parameters within industry standards with spheronisation yields
of up to 68% with further scope to optimise in future testwork
· Kasiya's spherical purified graphite (SPG) showed
exceptionally low levels of residual impurities achieving a 99.99%
loss-on-ignition (LOI)
· Testwork was undertaken as part of the Company's graphite
strategy to qualify and commercialise graphite concentrate for use in the
lithium-ion battery sector
Testwork Delivers Superior Quality, Low Impurity Graphite for Battery Anodes
· During the quarter, graphite circuit feed prepared at
Sovereign's existing Lilongwe laboratory facility has produced high quality
concentrates in benchtop and pilot-scale flotation and cleaning
· Four independent laboratories all successfully produced
high-grade graphite concentrate averaging over 97% Total Graphite Content
(TGC) with flotation recoveries exceeding 90%
· Flotation results demonstrated 1.44% TGC run-of-mine Kasiya
ore upgrades to more than 55% TGC rougher concentrate without crushing or
milling; process steps typically required for producing graphite concentrates
from hard-rock deposits; contributing to the unique low cost characteristics
of Kasiya's saprolite hosted graphite
· Graphite concentrates show exceptionally low levels of sulphur
compared to typical hard-rock graphite peers - a key metric to qualify as
active anode material for lithium-ion batteries
· Results are part of ongoing testwork being undertaken as part
of the Company's graphite marketing and active anode qualification strategy,
supervised by Dr Surinder Ghag
Commencement of Trading on OTCQX Markets
· Subsequent to the quarter, Sovereign upgraded to the OTCQX
Market, the top tier of the OTC Markets, providing access to a broader
eligible U.S. investor base
· OTCQX quotation follows increased U.S. investor and strategic
interest in Sovereign and its Kasiya Rutile-Graphite Project in Malawi
Partnering with International Development Organisation in Malawi
· During the quarter, Sovereign has entered into an MoU with
The Palladium Group - a US-based international development entity operating in
Malawi
· Palladium implements several development projects, including
the Feed the Future Malawi Growth Poles Project, which invests in local rural
communities to advance sustainable, climate-smart, and inclusive wealth
creation
· Sovereign and Palladium will collaborate around Sovereign's
Kasiya Project to provide key agricultural inputs, training, technologies, and
financing to develop and integrate smallholder farmers into the emerging high
growth agriculture value chains
Classification 2.2: This announcement includes Inside Information
ENQUIRIES
Mr Frank Eagar (South Africa/Malawi) Sam Cordin (Perth) Sapan Ghai (London)
Managing Director and CEO
+61(8) 9322 6322
+44 207 478 3900
+27 21 065 1890
Nominated Adviser on AIM and Joint Broker
SP Angel Corporate Finance LLP +44 20 3470 0470
Ewan Leggat
Charlie Bouverat
Joint Brokers
Stifel +44 20 7710 7600
Varun Talwar
Ashton Clanfield
Berenberg +44 20 3207 7800
Matthew Armitt
Jennifer Lee
Buchanan + 44 20 7466 5000
RIO TINTO INVESTS ADDITIONAL A$18.5M VIA OPTION EXERCISE
Subsequent to the end of the quarter, Rio Tinto Mining and Exploration Limited
(Rio Tinto) exercised 34,549,598 share options to acquire the same number of
new fully paid ordinary shares (Shares) in Sovereign for proceeds of
A$18,484,035.
The Company will use the proceeds from Rio Tinto's additional strategic
investment to continue advancing Sovereign's Tier 1 Kasiya Rutile-Graphite
Project (Kasiya or the Project) in Malawi. This includes progressing the
current optimisation study for Kasiya which is focused on the development of a
world-class mine capable of supplying critical minerals to the titanium
pigment, titanium metal and lithium-ion battery industries. Under the
Investment Agreement between Sovereign and Rio Tinto, Rio Tinto continues to
provide assistance and advice on technical and marketing aspects of Kasiya
In July 2023, Rio Tinto agreed to initially subscribe for and purchase
83,095,592 Shares in Sovereign at a price of A$0.486 per Share for aggregate
proceeds of A$40.4 million. Rio Tinto's initial subscription price reflected a
10% premium to the 45-day volume weighted average price on the ASX as at close
on 14 July 2023 and resulted in Rio Tinto holding approximately 15% of the
ordinary shares of the Company. The July 2023 initial subscription also
involved Rio Tinto being granted options to acquire 34,549,598 further Shares
in Sovereign within 12 months of the initial subscription.
MINING DEVELOPMENT AGREEMENT
Sovereign notes that subsequent to the quarter, Mkango Resources Limited
(AIM/TSX-V: MKA) (Mkango) signed a Mining Development Agreement (MDA) with the
Malawi Government for its Songwe Hill Rare Earths project in Malawi, with key
components of the MDA including the following:
· 5% royalty of gross revenue
· 30% corporate tax rate
· 10% non-diluting equity interest in the project to the Malawi
Government
· Exemption from customs and excise duties - Mkango will be
exempted from export duty, import duty, import excise and import VAT on
imports and exports of capital goods as provided in the applicable law
· 10 years stability period
· 10 years tax loss carry forward
· Community development expenditure is an allowable tax deduction
The terms of the MDA are similar to the assumptions used in the Company's PFS,
released in September 2023. For further details refer to the Company's
announcement dated 28 September 2023.
KASIYA OPTIMISATION ADVANCES TO PILOT PHASE
During the quarter, the Company initiated a Pilot Phase at its Kasiya project
in Malawi with the dry mining trial now complete with a test pit successfully
excavated.
The results will allow Sovereign to determine optimal excavation, backfill and
land rehabilitation approaches. The Pilot Phase will be a demonstration to
local communities of the successful rehabilitation of land for agricultural
use post-mining. Results will also provide critical information for the
upcoming Definitive Feasibility Study (DFS) and once commenced, it will
shorten the time to its completion.
The objectives of the Pilot Phase include:
· Optimisation of mining methods by construction of a pilot-scale
open pit close to the maximum depth of the current reserves at 20m;
· Scale-up of existing in-country processing capability by
installation of commercial scale spirals to produce additional bulk samples
for graphite product qualification;
· Optimising the tailings management and storage designs; and
· Optimising land rehabilitation, soil restoration and selection of
revegetation species.
The commencement of the Pilot Phase follows the receipt within three months of
all relevant approvals and permissions from the Malawi Environment Protection
Authority (MEPA), National Water Resources Authority (NWRA), the Ministry of
Mines, and the local community.
The Pilot Phase is being undertaken on a 9.9-hectare site and will include the
following activities:
1. Test Pit: A test pit of 120m by 110m excavated to a depth of 20m,
allowing optimisation of hydraulic and dry mining excavation methods.
2. Stockpiles: The excavated material will be temporarily stored in four
stockpiles, namely all dry mining material, wet slimes (in a pond) and two
sizes of sand fractions from the hydraulic mining.
3. Backfilling and Grading: The material will be placed back into the
pit, and all areas will be graded.
4. Rehabilitation Demonstration: Sovereign will construct eight small
rehabilitation demonstration pits covering a combined area of 100m by 130m.
These will be used for water storage, excavated material storage, and
demonstration of multiple rehabilitation approaches.
5. Temporary Laydown Areas: Four areas will be used as temporary laydown
areas, offices, and associated infrastructure.
6. Communication: The Pilot Phase will be an educational opportunity for
Project stakeholders. Sovereign will undertake a series of stakeholder visits
and consultations for this purpose.
Kasiya is the world's largest natural rutile deposit and the second-largest
flake graphite deposit. Sovereign aims to develop a low-CO(2) and sustainable
operation to supply highly sought-after natural rutile and graphite to global
markets.
Results of the PFS, released in late 2023, demonstrated Kasiya's potential to
become the world's largest rutile producer at 222kt per annum and one of the
world's largest natural graphite producers (ex-China) at 244kt per annum.
Pilot Phase Program Design
Activities have been designed to establish a 9.9-hectare site over the current
Ore Reserve defined in the Kasiya PFS, covering a mineralised zone with ore
deemed representative of the overall Mineral Resource Estimate (MRE). Over
approximately three months, Sovereign will excavate several test pits and
collect geological and geotechnical samples. The main pit will be backfilled
with dry material, while material from hydraulic mining will be used to fill
the remaining pits as part of the rehabilitation phase.
Land rehabilitation will form an integral component of the DFS. Sovereign's
objective is to restore land after mining to conditions that achieve the same
or better agricultural yields than existing land uses and crop yields. For
this reason, the Company will undertake field-based demonstrations of
rehabilitation showcasing drying times, soil recoveries, soil nutrients,
growth variants, and including different soil inputs and revegetation methods.
Site Construction
Prior to the establishment of site infrastructure, eight boreholes have been
permitted and drilled using a locally appointed drilling contractor. These
boreholes are supplying water to the site, which are being stored in a
temporary water storage pond.
A perimeter fence around the 9.9-hectare pilot site has been erected to
maintain the necessary health and safety standards. Sovereign's strategic
investor, Rio Tinto, assisted with establishing health and safety protocols
and implementation on a day-to-day basis.
Temporary buildings such as offices and stores have been brought to the site
on flatbed lorries and erected. To support the pilot mining, two 1MW mobile
diesel-powered electricity generators have been installed to provide the
electricity required for high-pressure water monitors.
Pilot Mining
At the date of this report, the dry mining trial is now completed with a test
pit successfully excavated. The test pit covers the planned area of 120 metres
by 110 metres and has been excavated to a depth of 20 metres through the
weathered ore at Kasiya. This confirms Kasiya ore can be efficiently mined
using conventional dry-mining techniques and a simple mobile excavator fleet.
The pit is accessible through a 10-metre-wide ramp constructed at appropriate
geotechnical angles.
Figure 1: Kasiya Pilot Phase Test Pit mined to 20 metres depth
For the test pit, the dry mining fleet consisted of four excavators, 20 trucks
and a support fleet including two bulldozers and a motor grader. The
saprolite-hosted mineralisation at Kasiya is largely homogenous and has
relatively consistent physical properties throughout the 1.8 billion tonnes
Mineral Resource Estimate. Data collected from the pilot phase confirmed that
no drilling, blasting, crushing, grinding or milling will be required prior to
stockpiling material for processing into rutile and graphite products; an
indication of potentially lower mining costs and a lower carbon footprint
comparable to hard rock deposits.
Figures 2 & 3: Simple excavator fleet mining the test pit
Figure 4: Kasiya mining and front-end processing vs. hard rock peers
Approximately 170,000 bench cubic metres of material has been mined as part of
the test-pit program. Steady-state operations envisage 24 million tonnes of
material being mined annually. The test pit material will be processed through
cyclones on-site for tailings deposition testwork.
Figure 5: Pilot Phase Site end of July 2024
On-Site Processing Facility
Material mined from the test pit will be processed on-site and at the
Company's laboratory facility in Lilongwe. As part of the Pilot Phase, a
commercial-scale spiral plant will be installed at site in Malawi.
Figure 6: Final stages of assembling the spiral plant at Paterson & Cooke,
South Africa
Rutile and graphite concentrate samples generated from the Pilot Phase will be
shared with potential off-takers and end-users, and used for further testwork
as part of the Company's graphite commercialisation strategy.
Rehabilitation Phase
This phase will consist of establishing a strong soils baseline, backfilling
of the test pit with different soil compositions, rehabilitation tests,
revegetation with plants, and the improvement of soil conditions post-mining.
Regular monitoring and evaluation of the rehabilitation activities will be
undertaken to assess the progress of vegetation growth and soil stabilisation.
Following the conclusion of the rehabilitation, the proposed project site will
be returned to farmland.
Figure 7: Pilot Phase Site Layout
Permitting
Permissions for the Pilot Phase were received following the successful
submission of an Environmental and Social Management Plan to MEPA. Sovereign
is committed to the responsible development of Kasiya. The Pilot Phase will be
undertaken in accordance with Malawian Law and IFC Performance Standards,
which will include protecting local communities and the natural environment.
TESTWORK DELIVERS LOW IMPURITY GRAPHITE FOR BATTERY ANODES
During the quarter, the Company announced results of graphite testwork
completed at multiple independent laboratories in Australia, Canada and South
Africa.
Graphite flotation and cleaning testwork was conducted on graphite circuit
feed from Kasiya at four different laboratories, which all successfully
produced high-grade graphite concentrate (94.9%-97.8% TGC) at high flotation
recoveries (91.2%-97.2%).
The testwork demonstrated excellent results using a conventional flowsheet
that was consistent across all laboratories, thus confirming Sovereign's
ability to produce a high quality graphite concentrate.
The graphite circuit feed provided to the various laboratories was produced at
the Company's existing laboratory facility in Lilongwe, Malawi, where it was
screened and separated over a wet shaking table.
Figure 8: Holman Wilfley 2000 wet shaking table in action demonstrating clear
separation between Rutile HM, waste and Graphite
The graphite feed grades of 3.5%-4.0% TGC to the graphite circuit are
significantly higher than the Mineral Resource Grade of 1.44%, highlighting
the ~2.4-2.8-fold upgrading of graphite grades when ROM ore passes through the
front-end rutile gravity separation circuit.
This demonstrates the ease of separating the rutile heavy mineral and graphite
streams from the front end of the Kasiya Pre-feasibility Study process
flowsheet. Subsequently, the two product streams pass into distinct,
industry-standard, final product flowsheets. This further highlights the
commercial benefits of having both rutile and graphite mineralisation
co-existent in the same soft saprolite-hosted orebody.
The first stage of upgrading the graphite feed, rougher flotation, achieved
very high rejection (>90%) of waste materials to rougher tails, producing a
rougher concentrate with more than 55% TGC and very high recoveries (94%-98%)
in laboratory scale testing consistently across all four laboratories.
Upgrading the graphite feed at very high recoveries and rejection of
non-graphitic minerals without run-of-mine milling is another of Kasiya's
significant advantages, supporting the lowest cost graphite production.
The rougher concentrate was further upgraded through laboratory scale
flotation, cleaning and polishing stages, producing high-grade concentrates at
high graphite circuit recoveries.
Figure 9: High-level process flowsheet for rutile and graphite production at
Kasiya
Pilot-scale testwork confirmed the laboratory-scale results with >90% TGC
recovery to high-grade graphite concentrates (<180-micron concentrate at
96.9% TGC and >180-micron concentrate at 97.2% TGC).
Figure 10: Graphite flotation test work at Australia-based ALS Global
HIGHLY FAVOURABLE IMPURITY PROFILE
Kasiya concentrates have very low levels of sulphur. Sulphur can be difficult
to remove in the purification processes required to produce anode materials.
Other major impurities important for anode material purification processes are
iron (Fe), silicon (Si) and aluminium (Al). The Kasiya material has
exceptionally low levels of all of these impurities. Benchmarked against the
Chinese Standard (China dominates the supply of graphite for battery anodes)
this could potentially lead to significant commercial advantages during
purification and Kasiya's potential as a long term secure source of graphite
ex-China.
Table 1: Kasiya Concentrate Purity Profile
Kasiya Benchmarks
Concentrate Concentrate Combined China Example Chinese Product (2)
<180 µm
>180 µm
Standard (1)
Graphite (TGC%) 96.9% 97.2% 97.0% >94% 96.0%
Sulphur (S) (%) <0.02% <0.02% <0.02% <0.5% 0.23%
Iron (Fe) (%) 0.48% 0.46% 0.47% <1.00% 0.55%
Silicon (Si) (%) 0.60% 0.80% 0.68% n/d 1.25%
Aluminium (Al) (%) 0.24% 0.28% 0.26% n/d 0.38%
1. National Standard of China - Flake Graphite (GB/T 3518-2023)
2. Asbury Carbons - A Study Comparing the Performance of Natural
Flake Graphite from Two Different Geographical Regions
(https://asbury.com/media/1170/a-study-comparing-the-performance-of-natural-flake-graphite.pdf)
Downstream Testwork Demonstrates High-Quality Graphite
During the quarter, Sovereign announced results of downstream testwork
conducted at leading, independent consultancy ProGraphite GmbH (ProGraphite)
in Germany.
Sovereign provided Kasiya graphite concentrate to ProGraphite to produce and
characterise coated spherical purified graphite (CSPG) active anode material
for lithium-ion batteries. The overall program includes shaping and
purification to produce SPG, coating of the material to produce CSPG and
evaluation of the electrochemical performance of Kasiya CSPG in a battery. The
initial steps of shaping and purification to produce SPG have now been
completed with the results showing Kasiya SPG has world-leading
specifications.
This SPG material is now undergoing coating and electrochemical testing to
characterise CSPG active anode material for lithium-ion batteries.
Table 2: Spherical Graphite Purification Results
SVM Spherical graphite SVM Spherical graphite Chinese
Standard (1)
<180 µm concentrate >180 µm concentrate
LOI Purity (%) 99.99% 99.99% >99.95%
Fe 4.4 ppm 3.3 ppm <30 ppm
Na <1.0 ppm <1.1 ppm <10 ppm
Cr 1.1 ppm 0.4 ppm <10 ppm
Cu 0.7 ppm 0.2 ppm <10 ppm
Ni <0.3 ppm <0.4 ppm <10 ppm
Al 6.6 ppm 8.8 ppm <10 ppm
Mo <0.3 ppm <0.3 ppm <10 ppm
Si 7 ppm 10 ppm <30 ppm
Ca 4.3 ppm 8.4 ppm <10 ppm
1. National Standard of China - Spherical Graphite (GB/T 38887-2020)
The micronisation and spheronisation of Kasiya graphite concentrates achieved
excellent yields to spherical graphite for the coarse concentrate and typical
yields to spherical graphite for the fines concentrate, with room for further
optimisation. The spherical graphite from the fine graphite concentrate in
particular exhibited a narrow particle size distribution (D90/D10) ratio and
both spherical graphite have reasonable Tap Density and typical BET for
uncoated graphite. Coating of the graphite is expected to improve (increase)
the tap density and improve (lower) the BET specific surface area.
Table 3: Concentrate Shaping into Spherical Graphite Results
Kasiya Concentrate Kasiya Concentrate
(<180 µm)
(>180 µm)
D50 (microns) 16.53 17.74
D90/D10 Ratio 2.29 2.96
Yield to Spherical Graphite 40% 68%
Tap Density (g/cm(3)) 0.93 0.93
BET Specific Surface Area (m(2)/g) 7.73 6.72
The spherical graphite products were purified with commercially proven acids
purification and achieved excellent results with an exceptionally high LOI
purity of 99.99%. Assays on key trace elements (Fe, Na, Cr, Cu, Al, Mo) show
very low levels.
Further, the low Si and Ca results highlight that high quality Kasiya graphite
is well-suited to single stage acids purification. Aggressive dosing in acids
purification can result in elevated Ca levels due to precipitation of CaF(2),
necessitating multiple stages of purification to reduce both Si and Ca
impurities. These initial purification results indicate that a single
purification stage is sufficient for Kasiya graphite concentrate.
The SPG samples will undergo coating and electrochemical tests to provide
baseline data for offtake discussions. The results of these tests are expected
in the coming weeks.
Commencement of Trading on OTCQX Markets
On 5 July 2024, Sovereign shares commenced trading on the OTCQX® Best Market
(OTCQX) under the ticker symbol SVMLF.
The OTCQX is the highest market tier of OTC Markets on which over 12,000 U.S.
and global securities trade. Sovereign previously traded on the OTC Pink
Market and has been upgraded to the OTCQX as it meets high financial
standards, follows best-practice corporate governance and has demonstrated
compliance with applicable securities laws. Trading on OTCQX will enhance the
visibility and accessibility of Sovereign to U.S. investors.
PARTNERING WITH INTERNATIONAL DEVELOPMENT ORGANISATION
During the quarter, the Company signed a Memorandum of Understanding (MoU)
with The Palladium Group (Palladium) - a US-based development entity
implementing several development projects in Malawi including the Feed the
Future Malawi Growth Poles Project (Growth Poles). Growth Poles is a US$50
million project that will run from 2023 to 2028.
Palladium is a global impact firm that works to link social progress and
commercial growth. For nearly six decades, Palladium has been working with
corporations, governments, investors, communities, and civil society to
formulate strategies, build partnerships, mobilise capital, and implement
programs that have a lasting social and financial impact. With a workforce of
over 2,500 global leaders, Palladium has positively impacted the lives and
livelihoods of more than 76 million people across 90 countries; broadening
access to health, water, power, and infrastructure; building enduring,
sustainable, and transformative institutions and market systems to address
global challenges; and conserving the natural world.
Sovereign has launched several social development initiatives focused on
improved health (provision of clean water), education (scholarships and school
support), and conservation farming practices in communities located near and
within Sovereign's Kasiya Project area.
The MoU identifies Sovereign as a potential anchor firm in Malawi and Kasiya
as an anchor client or "Partner Growth Pole". The MoU sets out a long-term
vision for multi-partner investment and co-development aimed at supporting
community engagement activities and scaling up the availability of commercial
agriculture across Malawi, in particular in environmentally and economically
vulnerable groups and households, to improve livelihoods for communities
around the Kasiya Project.
A central pillar of the MoU and partnership is Sovereign's existing
Conservation Farming Program (refer to Company ASX announcements dated 26
February 2024 and 15 April 2024), which aims to promote tried and tested
improved small-scale agricultural practices, and the creation of community
support and mentorship networks. The Conservation Farming Program's objective
is to substantially improve crop yields of the farming communities within and
around the Project area, thus improving food security and economic growth.
Sovereign and Palladium are already collaborating to provide Purdue Improved
Crop Storage (PICS) bags to beneficiaries of Sovereign's Conservation Farming
Program. PICS are non-chemical, hermetically sealable bags that reduce
post-harvest losses by 20-30% caused by poor storage of grains.
The MoU also establishes the foundation for the potential long-term
development of partnerships with multiple private sector firms and development
agencies, with the aim of catalysing diverse and inclusive development across
a wide area, through mechanisms such as input financing, extension support,
offtake arrangements, and complementary investments in value chain
infrastructure. The MoU expires on 18 April 2028 and can be extended by mutual
agreement.
Figure 11: Sovereign and Palladium Staff Standing Together with Sovereign's
Conservation Farming Beneficiaries
Sovereign recognises that the Kasiya Project presents an opportunity to assist
Malawi in realising its stated Sustainable Development Goals and can directly
benefit local communities. The positive impact of the Kasiya project will be
further enabled through the development of partnerships with the Government of
Malawi, international development organizations, and the private sector.
NEXT STEPS
Sovereign is currently conducting an optimisation study, including the Pilot
Phase, prior to advancing to the DFS. The Company aims to become the world's
largest, lowest cost and lowest-emissions producer of two critical minerals -
titanium (rutile) and graphite. The Company plans to update the market on the
progress of the following in coming months:
· Progressing the Pilot Phase, including:
o hydraulic mining trials;
o preparation of additional bulk samples for product qualification; and
o backfilling of test pits and soil rehabilitation.
· Further graphite testwork results as the Company continues to
advance the qualification of its graphite product for the lithium-ion battery
sector;
· Progress on the optimisation work streams alongside Rio Tinto via
the project Technical Committee; and
· Further community and social development programs.
Competent Person Statement
The information in this announcement that relates to the Exploration Results
is extracted from announcements dated 15 May 2024 entitled 'Downstream
Testwork Demonstrates High Quality Graphite For Lithium-Ion Batteries and 8
May 2024 entitled 'Testwork Delivers Superior Quality, Low Impurity Graphite
For Battery Anodes which is available to view at 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 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 an announcement dated 5 April 2023 entitled 'Kasiya
Indicated Resource Increased by over 80%' which is available to view at
www.sovereignmetals.com.au (http://www.sovereignmetals.com.au) 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
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 announcement have not been materially changed from the
original announcement.
The information in this announcement that relates to Production Targets, Ore
Reserves, Processing, Infrastructure and Capital Operating Costs, Metallurgy
(rutile and graphite) is extracted from an announcement dated 28 September
2023 entitled 'Kasiya Pre-Feasibility Study Results' which is available to
view at 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 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 Announcement.
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
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.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.
APPENDIX 1: SUMMARY OF MINING TENEMENTS
As at 30 June 2024, the Company had an interest in the following tenements:
Licence Holding Entity Interest Type Licence Renewal Date Expiry Term Date(1) Licence Area (km(2)) Status
EL0609 MML 100% Exploration 25/09/2024(2) 25/09/2028 219.5 Granted
EL0582 SSL 100% Exploration 15/09/2023(2) 15/09/2027 285.0 Granted
EL0492 SSL 100% Exploration 29/01/2025 29/01/2025 935.4 Granted
EL0528 SSL 100% Exploration 27/11/2023 27/11/2025 16.2 Granted
EL0545 SSL 100% Exploration 12/05/2024 12/05/2026 53.2 Granted
EL0561 SSL 100% Exploration 15/09/2023(2) 15/09/2027 124.0 Granted
EL0657 SSL 100% Exploration 3/10/2025 3/10/2029 2.3 Granted
EL0710 SSL 100% Exploration 1/02/2027 1/02/2031 38.4 Granted
Notes:
SSL: Sovereign Services Limited, MML: McCourt Mining Limited
(1) An exploration licence (EL) covering a preliminary period in accordance
with the Malawi Mines and Minerals Act (No 8. Of 2019) (2019 Mines Act) is
granted for a period not exceeding three (3) years. Thereafter two successive
periods of renewal may be granted, but each must not exceed two (2) years.
This means that an EL has a potential life span of seven (7) years. ELs that
have come to the end of their term can be converted by the EL holder into a
retention licence (RL) for a term of up to 5 years subject to meeting certain
criteria. On 28 June 2024, the Mines and Minerals Act (2023) (New Act) was
gazetted and came into force. As previously disclosed, The New Act introduces
amendments to improve transparency and governance of the mining industry in
Malawi. Sovereign notes the following updates in the New Act which may affect
the Company going forward: (i) 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 Act has removed 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 Act.
(2) The Company submitted extension applications for EL0609, EL0582 and
EL0561 prior to their renewal dates in accordance with the 2019 Mines Act.
APPENDIX 2: RELATED PARTY PAYMENTS
During the quarter ended 30 June 2024, the Company made payments of $362,000
to related parties and their associates. These payments relate to existing
remuneration arrangements (executive salaries, director fees, superannuation
and bonuses ($269,000)) and provision of serviced office facilities, company
secretarial services and administration services ($93,000).
APPENDIX 3: MINING EXPLORATION EXPENDITURES
During the quarter, the Company made the following payments in relation to
mining exploration activities:
Activity A$'000
Drilling related 125
Assaying and Metallurgical Test-work 871
Studies, Pilot Phase, Reserve/Resource Estimation, Programs 1,229
ESG related 438
Malawi Operations - Site Office, Personnel, Field Supplies, Equipment, 1,143
Vehicles and Travel
Total as reported in Appendix 5B 3,806
There were no mining or production activities and expenses incurred during the
quarter ended 30 June 2024.
Appendix 5B
Mining exploration entity or oil and gas exploration entity
quarterly cash flow report
Name of entity
Sovereign Metals Limited
ABN Quarter ended ("current quarter")
71 120 833 427 30 June 2024
Consolidated statement of cash flows Current quarter Year to date
$A'000
(12 months)
$A'000
1. Cash flows from operating activities - -
1.1 Receipts from customers
1.2 Payments for (3,806) (10,616)
(a) exploration & evaluation
(b) development - -
(c) production - -
(d) staff costs (436) (1,804)
(e) administration and corporate costs (518) (1,692)
1.3 Dividends received (see note 3) - -
1.4 Interest received 443 1,675
1.5 Interest and other costs of finance paid - -
1.6 Income taxes paid - -
1.7 Government grants and tax incentives - -
1.8.1 Other - Demerger Costs - (73)
1.8 Other - Business Development (424) (1,354)
1.9 Net cash from / (used in) operating activities (4,741) (13,684)
2. Cash flows from investing activities - -
2.1 Payments to acquire or for:
(a) entities
(b) tenements - -
(c) property, plant and equipment (341) (710)
(d) exploration & evaluation - -
(e) investments - -
(f) other non-current assets - -
2.2 Proceeds from the disposal of: - -
(a) entities
(b) tenements - -
(c) property, plant and equipment - -
(d) investments - -
(e) other non-current assets - -
2.3 Cash flows from loans to other entities - 34
2.4 Dividends received (see note 3) - -
2.5 Other (provide details if material) - -
2.6 Net cash from / (used in) investing activities (341) (676)
3. Cash flows from financing activities - 40,598
3.1 Proceeds from issues of equity securities (excluding convertible debt
securities)
3.2 Proceeds from issue of convertible debt securities - -
3.3 Proceeds from exercise of options - -
3.4 Transaction costs related to issues of equity securities or convertible debt - (252)
securities
3.5 Proceeds from borrowings - -
3.6 Repayment of borrowings - -
3.7 Transaction costs related to loans and borrowings - -
3.8 Dividends paid - -
3.9 Other (provide details if material) - -
3.10 Net cash from / (used in) financing activities - 40,346
4. Net increase / (decrease) in cash and cash equivalents for the period
4.1 Cash and cash equivalents at beginning of period 36,635 5,564
4.2 Net cash from / (used in) operating activities (item 1.9 above) (4,741) (13,684)
4.3 Net cash from / (used in) investing activities (item 2.6 above) (341) (676)
4.4 Net cash from / (used in) financing activities (item 3.10 above) - 40,346
4.5 Effect of movement in exchange rates on cash held 9 12
4.6 Cash and cash equivalents at end of period 31,562 31,562
5. Reconciliation of cash and cash equivalents Current quarter Previous quarter
at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts
$A'000
$A'000
5.1 Bank balances 253 118
5.2 Call deposits 31,309 36,517
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above) 31,562 36,635
6. Payments to related parties of the entity and their associates Current quarter
$A'000
6.1 Aggregate amount of payments to related parties and their associates included (362)
in item 1
6.2 Aggregate amount of payments to related parties and their associates included -
in item 2
Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity
report must include a description of, and an explanation for, such payments.
7. Financing facilities Total facility amount at quarter end Amount drawn at quarter end
Note: the term "facility' includes all forms of financing arrangements available to the entity.
$A'000
$A'000
Add notes as necessary for an understanding of the sources of finance available to the entity.
7.1 Loan facilities - -
7.2 Credit standby arrangements - -
7.3 Other (please specify) 18,484(1) -
7.4 Total financing facilities - -
7.5 Unused financing facilities available at quarter end 18,484(1)
7.6 Include in the box below a description of each facility above, including the
lender, interest rate, maturity date and whether it is secured or unsecured.
If any additional financing facilities have been entered into or are proposed
to be entered into after quarter end, include a note providing details of
those facilities as well.
(1)
In
Jul
y
202
4,
Rio
Tin
to
Min
ing
and
Exp
lor
ati
on
Lim
ite
d
exe
rci
sed
34,
549
,59
8
sha
re
opt
ion
s
to
acq
uir
e
the
sam
e
num
ber
of
new
ful
ly
pai
d
ord
ina
ry
sha
res
in
Sov
ere
ign
for
pro
cee
ds
of
A$1
8,4
84,
035
8. Estimated cash available for future operating activities $A'000
8.1 Net cash from / (used in) operating activities (item 1.9) (4,741)
8.2 (Payments for exploration & evaluation classified as investing activities) -
(item 2.1(d))
8.3 Total relevant outgoings (item 8.1 + item 8.2) (4,741)
8.4 Cash and cash equivalents at quarter end (item 4.6) 31,562
8.5 Unused finance facilities available at quarter end (item 7.5) 18,484
8.6 Total available funding (item 8.4 + item 8.5) 50,046
8.7 Estimated quarters of funding available (item 8.6 divided by item 8.3) >10
No
te
:
if
th
e
en
ti
ty
ha
s
re
po
rt
ed
po
si
ti
ve
re
le
va
nt
ou
tg
oi
ng
s
(i
e
a
ne
t
ca
sh
in
fl
ow
)
in
it
em
8
.3
,
an
sw
er
it
em
8
.7
as
"N
/A
".
Ot
he
rw
is
e,
a
fi
gu
re
fo
r
th
e
es
ti
ma
te
d
qu
ar
te
rs
of
fu
nd
in
g
av
ai
la
bl
e
mu
st
be
in
cl
ud
ed
in
it
em
8.
7.
8.8 If item 8.7 is less than 2 quarters, please provide answers to the following
questions:
8.8.1 Does the entity expect that it will continue to have the current
level of net operating cash flows for the time being and, if not, why not?
Answer: Not applicable
8.8.2 Has the entity taken any steps, or does it propose to take any
steps, to raise further cash to fund its operations and, if so, what are those
steps and how likely does it believe that they will be successful?
Answer: Not applicable
8.8.3 Does the entity expect to be able to continue its operations and
to meet its business objectives and, if so, on what basis?
Answer: Not applicable
Note: where item 8.7 is less than 2 quarters, all of questions 8.8.1, 8.8.2
and 8.8.3 above must be answered.
Compliance statement
1 This statement has been prepared in accordance with accounting
standards and policies which comply with Listing Rule 19.11A.
2 This statement gives a true and fair view of the matters
disclosed.
Date: 31 July 2024
Authorised by: Company Secretary
(Name of body or officer authorising release - see note 4)
Notes
1. This quarterly cash flow report and the accompanying
activity report provide a basis for informing the market about the entity's
activities for the past quarter, how they have been financed and the effect
this has had on its cash position. An entity that wishes to disclose
additional information over and above the minimum required under the Listing
Rules is encouraged to do so.
2. If this quarterly cash flow report has been prepared in
accordance with Australian Accounting Standards, the definitions in, and
provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and
AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash
flow report has been prepared in accordance with other accounting standards
agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent
standards apply to this report.
3. Dividends received may be classified either as cash flows
from operating activities or cash flows from investing activities, depending
on the accounting policy of the entity.
4. If this report has been authorised for release to the
market by your board of directors, you can insert here: "By the board". If it
has been authorised for release to the market by a committee of your board of
directors, you can insert here: "By the [name of board committee - eg Audit
and Risk Committee]". If it has been authorised for release to the market by a
disclosure committee, you can insert here: "By the Disclosure Committee".
5. If this report has been authorised for release to the
market by your board of directors and you wish to hold yourself out as
complying with recommendation 4.2 of the ASX Corporate Governance Council's
Corporate Governance Principles and Recommendations, the board should have
received a declaration from its CEO and CFO that, in their opinion, the
financial records of the entity have been properly maintained, that this
report complies with the appropriate accounting standards and gives a true and
fair view of the cash flows of the entity, and that their opinion has been
formed on the basis of a sound system of risk management and internal control
which is operating effectively.
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