Strong Quarter for Sovereign Metals as Kasiya Project Progresses with Rio Tinto Backing

• Sovereign Metals ended the quarter with strong financial position of A$50 million cash and no debts as of June 30, 2024.
• Rio Tinto invests additional A$18.5 million, increasing stake shareholding in Sovereign to 19.76%.
• Pilot Phase mining was successfully completed demonstrating operational viability and strong support for mining projects in Malawi, with all required approvals and community permissions were obtained within just three months.
• Kasiya showed high-quality graphite suitable achieving a 99.99% LOI for lithium-ion battery anodes which are crucial for battery applications, thus positioning Sovereign's product favorably in the market.
• SVM is partnering with Palladium Group for community development initiatives and scale up the availability of commercial agriculture across Malawi.

Sovereign Metals Limited (ASX:SVM) is an Australian-based mining exploration company focused on developing the Kasiya Rutile-Graphite Project in Malawi. The company aims to become the world's largest, lowest-cost, and lowest-emissions producer of natural rutile and graphite, two critical minerals essential for various industries including titanium production and lithium-ion batteries.

Sovereign Metals' 2024 Second Quarter Highlights

Rio Tinto Strengthens Strategic Partnership with Additional Investment

In a significant vote of confidence, mining giant Rio Tinto has further solidified its strategic partnership with Sovereign Metals by investing an additional A$18.5 million through the exercise of share options. This move has increased Rio Tinto's shareholding in Sovereign to 19.76%, underlining the potential of the Kasiya Project.

The investment proceeds will be utilized to continue advancing the Kasiya Rutile-Graphite Project, which is poised to become a major new supply source of low-CO2-footprint natural rutile and flake graphite. Under the existing Investment Agreement, Rio Tinto continues to provide valuable assistance and advice on technical and marketing aspects of the project.

This strategic backing from one of the world's largest mining companies not only provides Sovereign with additional financial resources but also lends credibility to the project's potential and execution capabilities.

Strong Financial Position

Following Rio Tinto's additional investment, Sovereign Metals finds itself in a robust financial position. The company reports approximately A$50.0 million in cash reserves with no debt, providing a solid foundation for ongoing project development and optimization studies.

This financial strength allows Sovereign to pursue its ambitious plans for Kasiya without immediate funding concerns, a significant advantage in the capital-intensive mining sector.

Successful Completion of Pilot Phase Mining

One of the most critical developments in the recent quarter was the successful completion of the dry mining component of the Pilot Phase at Kasiya. This milestone is crucial as it confirms that Kasiya can be efficiently mined using standard mobile excavators and trucks, validating key operational assumptions.

The test pit was mined as planned and on schedule to a depth of 20 meters, excavating approximately 170,000 bench cubic meters. This achievement provides empirical data that will assist in determining optimal excavation, material handling, processing, backfilling, and rehabilitation approaches.

The success of this phase demonstrates strong support for mining projects in Malawi, with all required approvals and community permissions obtained within just three months. This efficient regulatory process bodes well for the future development of the project.

High-Quality Graphite Production Showcases Product Potential

Sovereign Metals has made significant strides in demonstrating the quality of its graphite product, a critical component for lithium-ion batteries. The company successfully produced Spherical Purified Graphite (SPG) with world-leading specifications, achieving all required parameters within industry standards.

Notably, Kasiya's SPG showed exceptionally low levels of residual impurities, achieving a 99.99% loss-on-ignition (LOI). This high purity level is crucial for battery applications and positions Sovereign's product favorably in the market.

The company also reported successful production of high-grade graphite concentrate averaging over 97% Total Graphite Content (TGC) with flotation recoveries exceeding 90%. These results were consistently achieved across four independent laboratories, underscoring the reproducibility and reliability of the process.

One of the standout features of Kasiya's graphite is its exceptionally low levels of sulphur compared to typical hard-rock graphite peers. This characteristic is particularly important for qualifying as active anode material for lithium-ion batteries, potentially giving Sovereign a competitive edge in this rapidly growing market.

Community Development Initiatives Strengthen Social License

Recognizing the importance of community support for long-term project success, Sovereign has entered into a Memorandum of Understanding (MoU) with The Palladium Group, a US-based international development entity. This partnership aims to support community engagement activities and scale up the availability of commercial agriculture across Malawi, particularly focusing on environmentally and economically vulnerable groups.

A central pillar of this partnership is Sovereign's existing Conservation Farming Program, which promotes improved small-scale agricultural practices. The program's objective is to substantially improve crop yields for farming communities within and around the project area, enhancing food security and economic growth.

This proactive approach to community development not only strengthens Sovereign's social license to operate but also aligns the company's success with the broader economic development of the region.

Optimizing Project Economics Through Ongoing Studies

Sovereign is currently conducting an optimization study, including the Pilot Phase, prior to advancing to the Definitive Feasibility Study (DFS). The company aims to further refine its plans to become the world's largest, lowest-cost, and lowest-emissions producer of rutile and graphite.

Key focus areas for the coming months include:

• Progressing the Pilot Phase, including hydraulic mining trials and preparation of additional bulk samples for product qualification
• Further graphite testwork to advance the qualification of its product for the lithium-ion battery sector
• Ongoing optimization work streams in collaboration with Rio Tinto via the project Technical Committee
• Expansion of community and social development programs

Conclusion for Investors

Sovereign Metals presents a compelling investment opportunity in the critical minerals sector. The company's Kasiya Project is positioned to become a significant source of natural rutile and graphite, two materials essential for the global transition to clean energy and advanced technologies.

Key investment considerations include:

• Strategic Partnership: Rio Tinto's increased investment provides both financial backing and industry validation of the project's potential.
• Financial Strength: With A$50 million in cash and no debt, Sovereign is well-funded to advance project development.
• Operational Viability: The successful completion of the Pilot Phase mining demonstrates the project's technical feasibility.
• Product Quality: High-quality graphite production suitable for lithium-ion batteries positions Sovereign favorably in a growing market.
• ESG Focus: Community development initiatives and low-CO2 footprint production align with growing investor emphasis on sustainable mining practices.
• Market Access: Listing on OTCQX enhances visibility to U.S. investors, potentially broadening the shareholder base.

However, investors should be aware that mining projects, especially those in the development stage, carry inherent risks including potential delays, cost overruns, and commodity price fluctuations. The success of the Kasiya Project will depend on Sovereign's ability to execute its development plans effectively and navigate the regulatory environment in Malawi.

Overall, Sovereign Metals represents an opportunity to invest in a well-funded, strategically-backed company developing a world-class asset in the critical minerals sector. As the global demand for rutile and battery-grade graphite continues to grow, Sovereign appears well-positioned to capitalize on these market trends, offering potential long-term value for investors willing to accept the risks associated with pre-production mining companies.