LONDON, UK: Rio Tinto (ASX: RIO) has agreed to invest A$40.4 million in Sovereign Metals Limited (ASX: SVM) to acquire an initial 15% stake in the company and support the development of its Kasiya Rutile-Graphite Project in Malawi.
The investment will enable Sovereign to advance the Kasiya project, which hosts a large-scale, high-grade, low-cost and low-CO2-footprint natural rutile deposit, as well as a significant flake graphite resource. Rutile is a premium titanium feedstock used in the production of pigments, titanium metal and welding electrodes. Graphite is a key component of lithium-ion batteries for electric vehicles and energy storage.
Under the Investment Agreement, Rio Tinto will provide assistance and advice on technical and marketing aspects of Kasiya, with a primary focus on spherical purified graphite for the lithium-ion battery anode market. Rio Tinto will also have the right to appoint one director to Sovereign’s board and participate in future equity raisings to maintain its shareholding.
Sovereign will issue 83,095,592 new shares to Rio Tinto at a price of A$0.486 per share, representing a 10% premium to the 45-day volume weighted average price on the ASX as at close 14th July 2023. Rio Tinto will also receive 34,549,598 options to increase its shareholding by an additional 4.99% to potentially 19.99% of Sovereign within 12 months. The options have an exercise price of A$0.535 per share, representing a 21% premium to the 45-day volume weighted average price on the ASX as at close 14th July 2023, for additional proceeds of up to $18.5 million (if all options are exercised).
Sovereign’s Chairman Ben Stoikovich commented: “This landmark agreement with Rio Tinto, one of the world’s largest and most accomplished global mining companies, is confirmation of Kasiya’s place as one of the most significant critical mineral discoveries in recent times. The experience and expertise that Rio Tinto brings will truly set Kasiya apart as a potentially globally significant supply of two critical minerals and take us all a step closer to supply chain decarbonisation and achieving net-zero. Furthermore, this is yet another step towards unlocking significant benefits from development of the Kasiya project for Malawi. We welcome Rio Tinto as a major shareholder of Sovereign and look forward to working with Rio Tinto as our strategic partner in the development of Kasiya.”