TIDMSVML
RNS Number : 8432I
Sovereign Metals Limited
07 December 2022
SOVEREIGN METALS LIMITED
NEWS RELEASE | 7 DECEMBER 2022
SOVEREIGN TO DEMERGE STANDALONE GRAPHITE PROJECTS
-- Sovereign to demerge standalone Graphite Projects (being the
Nanzeka, Malingunde, Duwi and Mabuwa Projects) into a wholly
owned subsidiary, NGX Limited
-- The Demerger seeks to unlock the value of the Graphite Projects
for Sovereign shareholders and separate its Kasiya Rutile Project
and its standalone Graphite Projects into two distinct companies
-- The demerger of the Graphite Projects will be subject to shareholder
approval and will involve an in-specie distribution to Sovereign
shareholders on the basis of one (1) NGX Share for every eleven
(11) Sovereign Shares
-- NGX is proposing to pursue an ASX listing through an initial
public offering of NGX Shares (IPO) pursuant to a prospectus
following the completion of the Demerger
-- Sovereign shareholders to retain further exposure to the value
and upside of the Graphite Projects as the NGX IPO is expected
to comprise a priority offer to existing shareholders on the
basis of one (1) new NGX Share for every one (1) NGX Share received
pursuant to the Demerger to raise approximately $8,600,000 and
a general offer of $1,000,000 to assist with satisfying ASX
spread requirements. This will ensure there is no cash outflow
from Sovereign to NGX as part of the Demerger, other than applicable
Sovereign expenses to affect the Demerger. However, terms of
the NGX IPO are yet to be finalised
-- A Notice of Meeting for the Demerger and Distribution will be
sent to shareholders with the meeting planned to take place
early in 2023
-- The Demerger allows Sovereign and the existing management team
to focus on its flagship Kasiya Rutile Project, the largest
natural rutile deposit in the world
-- Sovereign will retain all graphite co-product from the Kasiya
Rutile Project
-- Kasiya Pre-Feasibility Study currently advancing and on track
for completion in H1 2023
Sovereign Metals Limited (ASX:SVM; AIM:SVML) (the Company or
Sovereign) is pleased to announce that it intends to undertake a
demerger (Demerger) whereby Sovereign's Malawian graphite projects
being the Nanzeka Project, Malingunde Project, Duwi Project and
Mabuwa Project (Graphite Projects) are to be demerged through NGX
Limited (NGX), a wholly owned subsidiary of the Company, allowing
Sovereign to focus on the development of the Kasiya Rutile Project
(Kasiya) while unlocking value in its Graphite Projects for
shareholders.
Sovereign proposes, subject to shareholder approval, to demerge
the Graphite Projects via a spin-out of NGX and in-specie
distribution of NGX fully paid ordinary shares (NGX Shares) to
Sovereign shareholders by issuing one (1) NGX Share for every
eleven (11) Sovereign shares (SVM Shares) held (Distribution),
allowing Sovereign shareholders to retain exposure to the value and
upside of the Graphite Projects.
Upon completion of the Demerger, NGX intends to seek admission
to the official list of the ASX. NGX will undertake a capital
raising to satisfy the ASX admission requirements.
NGX will be the offeror of the NGX Shares under the IPO. A
prospectus will be issued by NGX for the IPO capital raising which
will be made available when the NGX Shares are offered. Anyone
wishing to acquire NGX Shares as part of the IPO offer will need to
complete the application form that will accompany the
prospectus.
ENQUIRIES
Dr Julian Stephens (Perth) Sam Cordin (Perth) Sapan Ghai (London)
Managing Director +61(8) 9322 6322 +44 207 478 3900
+61(8) 9322 6322
Nominated Adviser on AIM
RFC Ambrian
Bhavesh Patel / Andrew Thomson +44 20 3440 6800
Joint Brokers
Berenberg +44 20 3207 7800
Matthew Armitt
Jennifer Lee
Optiva Securities +44 20 3137 1902
Daniel Ingram
Mariela Jaho
Christian Dennis
Demerger and Capital Reduction
Sovereign will seek shareholder approval to enable the Company
to demerge its Graphite Projects to NGX. In consideration for the
Demerger, NGX will issue 42,807,000 NGX Shares at a deemed issue
price of $0.20 per NGX Share. Sovereign will then reduce its
capital by an amount equal to the value of the approximately 42.8
million NGX Shares to be returned to Sovereign shareholders on a
pro rata basis through an equal capital reduction (Capital
Reduction) to be effected through the Distribution. Eligible
Shareholders will receive a pro rata distribution of one (1) NGX
Share for every eleven (11) SVM Shares held at the Record Date.
If the Capital Reduction is approved, the share capital of the
Company will be reduced by approximately $8,561,400.
The terms of the Capital Reduction are the same for each
Eligible Shareholder. At the date of this announcement, the Company
has 470,875,023 Shares on issue. No additional Shares will be
issued as a result of the Capital Reduction. On the basis that no
further Shares are issued, no Options are exercised and no
Performance Rights are converted, the Company will have 470,875,023
Shares on issue at the Record Date.
The number of SVM Shares held by Shareholders will not change,
and Shareholders will retain their SVM Shares in the Company
following the Capital Reduction. However, if the Capital Reduction
is implemented, the value of the SVM Shares may be less than the
value of the SVM Shares held prior to the Capital Reduction
because, after the Capital Reduction, the Company will not retain
an interest in NGX and the Graphite Projects. The rights attaching
to SVM Shares will not be altered by the Capital Reduction.
Given the Capital Reduction is an equal reduction and the
Company will still have positive net assets following the Capital
Reduction, the Directors consider the Capital Reduction is fair and
reasonable to Sovereign shareholders as a whole.
Fractional entitlements will be rounded down to the nearest
whole number. Based on there being 470,825,023 SVM Shares on issue
on the record date, approximately 42,807,000 NGX Shares would be
distributed to Eligible Shareholders.
Each Eligible Shareholder's name will be entered on the register
of members of NGX with each Eligible Shareholder being deemed to
have consented to becoming a NGX shareholder and being bound by its
constitution. Eligible Shareholders will not be required to pay any
consideration for the NGX Shares distributed to them under the
Distribution.
An Eligible Shareholder's entitlement to NGX Shares will be
based on the number of SVM Shares held at the record date. Eligible
Shareholders will thereby retain direct ownership of the Company
and will also receive direct ownership of NGX. NGX will demerge
from Sovereign and seek a listing on ASX.
Depositary Interest holders on the in-specie distribution Record
Date with a registered address in an Eligible Country (being
Eligible Depositary Interest Holders) will be distributed NGX
Shares on the basis of one (1) NGX Share for every eleven (11) SVM
Shares held. Depositary Interest holders should be aware that the
NGX Shares will not be issued in CREST as Depositary Interests and
will only be issued in registered form on the Company's share
register. A holding statement representing title to the NGX Shares
will be issued to the registered address of the Depositary Interest
holder on completion of the Distribution.
The Distribution will only proceed if the Company obtains
shareholder approval under the Corporations Act for the Capital
Reduction.
No cash outflow from Sovereign to NGX is expected as part of the
Demerger, other than applicable Sovereign expenses to affect the
Demerger.
Notes:
(1) An "Eligible Shareholder" for the purposes of the Capital
Reduction will be a Sovereign shareholder that, as at the record
date, has a registered address in Australia, New Zealand, Germany,
the United Kingdom, the United States of America, Singapore,
Canada, Hong Kong, Luxembourg and any jurisdiction determined by
the Company which is not prohibited and unduly onerous or
impractical to distribute Distribution Shares.
Rationale for Demerger
-- The Demerger allows the Company to better focus its efforts and
resources on Kasiya and other primary rutile discoveries.
-- The Demerger will provide shareholders with an interest in two
companies - Sovereign and NGX. The Board believes a separate entity
with a separate management team focused on the Graphite Projects
presents a better prospect of delivering value to Sovereign shareholders.
-- Shareholders may elect to retain exposure to either one or both
companies as dictated by their investment preferences and objectives:
- Shareholders will retain an interest in NGX through the Distribution
and thereby have an opportunity to benefit from the potential
development of the Graphite Projects; and
- all Shareholders will retain their interest in the capital
of Sovereign and exposure to Kasiya.
-- The Board sees considerable potential in the Graphite Projects
that is not recognised by the market and, therefore, a dedicated,
separately funded vehicle may realise appropriate value for shareholders.
-- Future capital raisings are expected to be more readily achieved
by each individual entity as the focus of the funding will be
on their specific projects. In addition, it is expected to provide
greater flexibility to both Sovereign and NGX to attract strategic
investors.
-- NGX will have a dedicated board and management team to focus on
the development of the Graphite Projects.
-- After a full and proper assessment of all available information,
the Directors believe that the Demerger is in the best interests
of Sovereign shareholders.
Capital Structure
Th e i nd icative ca p ital str uctu re of NGX p ost-comp l
etion of the Demerger will be:
NGX Shares
Existing securities at the date of this announcement(1) 2
========================================================= ===========
NGX Shares transferred to Shareholders(2) 42,807,000
========================================================= ===========
Total 42,807,002
========================================================= ===========
Notes:
(1.) Held by Sovereign.
(2.) Transfer to be made pursuant to the terms of the
Distribution.
Initial Public Offering
NGX will be a public unlisted company immediately following the
Demerger and will not be listed on ASX. However, NGX is proposing
to pursue an ASX listing through an initial public offering of NGX
Shares (IPO) pursuant to a prospectus following the completion of
the Demerger.
To satisfy ASX listing requirements, NGX will need to raise
capital at the minimum issue price of $0.20 per NGX Share. The
terms of the IPO are yet to be finalised. However, it is expected
that the NGX IPO will comprise a priority offer to existing
Eligible Shareholders on the basis of one (1) new NGX Share for
every one (1) NGX Share received pursuant to the Distribution to
raise approximately $8,600,000 and a general offer of $1,000,000 to
assist with satisfying ASX spread requirements to raise in total up
to approximately $9,600,000 (before costs).
NGX will be the offeror of fully paid ordinary shares under the
IPO. A prospectus will be issued by NGX for the IPO capital raising
which will be made available when the NGX Shares are offered.
Anyone wishing to acquire NGX Shares as part of the IPO offer will
need to complete the application form that will accompany the
prospectus.
NGX Board and Management
The Board will be comprised of a combination of existing
Sovereign directors and new appointments, including a non-executive
director with suitable technical expertise. Initially NGX will be
led by Mr Matthew Syme who will be appointed as an Executive
Director of NGX:
Mr Matthew Syme - Executive Director
B.Com, CA
Mr Syme is a Chartered Accountant and an accomplished mining
executive with over 30 years' experience in senior management roles
in Australia and overseas. He was a Manager in a major
international Chartered Accounting firm before spending three years
as an equities analyst in a large stockbroking firm. Mr Syme then
continued a successful career as CFO, CEO or a director of a number
of listed mining and exploration companies operating in a wide
range of commodities and jurisdictions.
Mr Syme was a previous Director of Sovereign (2014-2016) and is
familiar with the Graphite Projects.
Other Key Management Personnel
Ms Elizabeth (Lib) Matthews - Company Secretary
B.Com, CA, GIACD, GIA(Affiliated)
Ms Matthews is a Chartered Accountant and graduate of the
Australian Institute of Directors Director Course who commenced her
career at a large international accounting firm and has since been
involved with exploration and development companies operating in
the resources sector, including serving as Company Secretary of ASX
listed Peregrine Gold Limited.
The Graphite Projects
The Nanzeka Project
The Nanzeka Project is located approximately 60km north of
Malawi's capital Lilongwe. Mapping, rock chip sampling, trenching
and limited drilling in 2013 identified high-grade flake graphite
mineralisation over a strike length of 3.0km with a true width of
about 10m, though some surface exposures show up to 150m of
graphite mineralisation widths. NGX Exploration Limited (a wholly
owned Malawian subsidiary of NGX) is the holder of Retention
Licence RL 0012/21, granted on 27 July 2021, which comprises the
Nanzeka Project (RL 0012/21).
The Duwi Project
The Duwi Project is located approximately 15km east of Malawi's
capital, Lilongwe, which has a Mineral Resource estimate of 85.9Mt
at 7.1% total graphitic carbon (TGC) for contained graphite of
6.13Mt. Sovereign Services Limited (SSL), a wholly owned subsidiary
of the Company, is the holder under the retention licence RTL
0032/22 which was granted on 4 October 2022. On 18 October 2022,
SSL applied for the transfer of the Duwi Project to NGX Exploration
Limited. The transfer is pending approval.
The Malingunde Project
The Malingunde Project is located in the Central Region of the
Lilongwe District of Malawi, approximately 20km southwest of
Malawi's capital, Lilongwe.
The Malingunde Project has a Mineral Resource estimate of 65Mt
at 7.2% TGC for contained graphite of 4.68Mt. In November 2018, the
Company completed a pre-feasibility study ( PFS ) for the
Malingunde Project which was updated in November 2021. The PFS has
confirmed the low operating costs, low technical risk, high-quality
concentrates and substantial upside of the Malingunde Project.
In February 2022, the Company applied for the grant of a mining
licence (ML) at the Malingunde Project which covers 5.7km(2) .
Conditional approval for the ML was provided in April 2022 with
conditions to be addressed including submission of an environmental
and social impact assessment approval certificate under the
Malawian environmental management law.
The Mabuwa Project
The Mabuwa project is located approximately 60km south of
Malawi's major commercial city of Blantyre. The project covers a
mafic-ultramafic intrusive body potentially favourable for nickel
and PGE sulphide mineralisation. No previous exploration work is
known. However, historical reconnaissance drilling has been
undertaken on nearby targets hosted in similar rock types with low
grade nickel and PGE sulphide mineralisation having been
discovered. An application for an exploration licence over 9km(2)
was lodged by NGX Exploration Limited in March 2022 .
Demerger
It is expected that the terms of the Demerger will be documented
in a Demerger Deed (Demerger Deed) between Sovereign, SSL, NGX and
NGX Mining Limited and NGX Exploration Limited (entities owned by
NGX).
The effect of the Demerger Deed will be that NGX acquires the
Graphite Projects from the Sovereign Group and in return NGX will
issue 42,807,000 NGX Shares at a deemed issue price of $0.20 per
NGX Share to Sovereign, for the Distribution to Shareholders.
Indicative Timetable
Demerger
The indicative timetable for the Demerger is provided below.
Event Indicative Date
General Meeting January 2023
====================================== ====================
Effective date of Distribution February 2023
====================================== ====================
Record Date TBA - February 2023
====================================== ====================
Date for Distribution to Shareholders TBA - February 2023
====================================== ====================
Note : The dates shown in the table above are indicative only
and may vary subject to the Corporations Act, the ASX Listing
Rules, and other applicable laws.
TBA : To be announced
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.
Competent Persons Statement
The information in this announcement that relates to the Mineral
Resource Estimate is extracted from the announcement dated 30
September 2022. The announcement is available to view on
www.sovereignmetals.com.au . Sovereign confirms that a) it is not
aware of any new information or data that materially affects the
information included in the announcement; b) all material
assumptions included in the announcement continue to apply and have
not materially changed; and c) the form and context in which the
relevant Competent Persons' findings are presented in this report
have not been materially changed from the announcement.
To view this announcement in full, including all illustrations
and figures, please refer to
http://sovereignmetals.com.au/announcements/
APPIX 1 - TABLE OF TENEMENTS
Details of the Graphite Projects licences are set out in the
table below:
Tenement Type Status Expiry Area (km(2)
)
RL0012/21 (Nanzeka) Retention Licence Granted 26-07-2026 6
======================= =========================== ========= ============ ============
Application - Exploration
APL0329 (Mabuwa) Licence Pending N/A 9
======================= =========================== ========= ============ ============
RL0032/22 (Duwi) Retention Licence Granted 4-10-2027 24
======================= =========================== ========= ============ ============
Application - Mining
AML0088 (Malingunde) Licence Pending N/A 6
======================= =========================== ========= ============ ============
Total 45
============================================================================= ============
APPENDIX 2 - MINERAL RESOURCES
Malingunde Project Mineral Resource Estimate(1)
Mineral Resource Tonnes Grade Contained Graphite
Category (Mt) (% TGC) (MT)
Measured 4.8 8.5% 0.41
================== ======= ========= ===================
Indicated 32.3 7.2% 2.32
================== ======= ========= ===================
Inferred 27.9 7.0% 1.95
================== ======= ========= ===================
Total(2) 65.0 7.2% 4.68
================== ======= ========= ===================
Notes:
1. Malingunde Project Mineral Resource estimate is reported at a
6.75% TGC lower cut-off grade for saprolite and between 9.5% and
11.0% for saprock.
2. Any minor summation inconsistencies are due to rounding.
Duwi Project Mineral Resource Estimate
Deposit (1) Mineral Resource Tonnes Grade Contained
Category (Mt) (% TGC) Graphite
(MT)
============== ================== ======= ========= ==========
Duwi Main Indicated 35.2 7.2% 2.52
==============
Inferred 34.3 7.3% 2.49
Total(2) 69.5 7.2% 5.01
================================= ======= ========= ==========
Duwi Bend Inferred 7.8 7.2% 0.56
============== ================== ======= ========= ==========
Nyama Inferred 8.6 6.5% 0.56
============== ================== ======= ========= ==========
Duwi Project Indicated(2) 35.2 7.2% 2.52
==============
Inferred(2) 50.7 7.1% 3.61
Total(2) 85.9 7.1% 6.13
================================= ======= ========= ==========
Notes:
1. Duwi Project Mineral Resource estimate is reported at a 5% TGC lower cut-off grade.
2. Any minor summation inconsistencies are due to rounding.
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