TIDMSVML
RNS Number : 1033O
Sovereign Metals Limited
29 September 2023
Sovereign Metals Limited
ANNUAL REPORT FOR THE FINANCIAL YEARED - 30 JUNE 2023
Sovereign Metals Limited ("Sovereign" or the "Company")
(ASX:SVM, AIM:SVML) advises that its 2023 Annual Report, has been
published today at https://sovereignmetals.com.au/company-reports/
and as below.
The Company also advises that an Appendix 4G (Key to
Disclosures: Corporate Governance Council Principles and
Recommendations) and 2023 Corporate Governance Statement have been
released today and are also available on the Company's website at
https://sovereignmetals.com.au/corporate-governance/.
CORPORATE DIRECTORY
abn 71 120 833 427
Directors Brokers
Mr Benjamin Stoikovich Chairman Berenberg, Gossler & Co, KG, London
Dr Julian Stephens Managing Branch
Director 60 Threadneedle Street
Mr Ian Middlemas Non-Executive London EC2R 8HP
Director United Kingdom
Mr Mark Pearce Non-Executive T: +44 20 3753 3132
Director
Mr Nigel Jones Non-Executive Share Register
Director Australia
Computershare Investor Services
Company Secretary Pty Ltd
Mr Dylan Browne Level 17
221 St Georges Terrace
Registered and Principal Office Perth WA 6000
Level 9,
28 The Esplanade Telephone: 1300 850 505
Perth WA 6000 International: +61 8 9323 2000
Facsimile: +61 8 9323 2033
Telephone: +61 8 9322 6322
Facsimile: +61 8 9322 6558 United Kingdom
Computershare Investor Services
Operations Office PLC
Area 4 The Pavilions,
Lilongwe Bridgewater Road,
Malawi Bristol BS99 6ZZ
Telephone: +44 370 702 0000
Stock Exchange Listings
Australia Solicitors
Australian Securities Exchange Thomson Geer
ASX Code: SVM - Ordinary Shares
Auditor
Ernst and Young
United Kingdom
London Stock Exchange (AIM) Bankers
AIM Code: SVML - Depository Australia - National Australia
Interests Bank Limited, Australia and New
Zealand Banking Group Limited
Nominated Advisor and Broker Malawi - Standard Bank
SP Angel Corporate Finance
LLP
Prince Frederick House
35-39 Maddox Street
London W1S 2PP
United Kingdom
Website
www.sovereignmetals.com.au
Email
info@sovereignmetals.com.au
CONTENTS
Directors' Report
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
To view the following sections, please refer to the full
version of the Annual Report on our website at www.sovereignmetals.com.au
Notes to the Financial Statements
Directors' Declaration
Auditor's Independence Declaration
Independent Audit Report
ASX Additional Information
DIRECTORS' REPORT
30 June 2023
The Directors of Sovereign Metals Limited present their report
on the Group consisting of Sovereign Metals Limited ("the Company"
or "Sovereign" or "Parent") and the entities it controlled at the
end of, or during, the year ended 30 June 2023 ("Group").
HIGHLIGHTS
Pre-Feasibility Study Confirms Kasiya as a Major Critical
Minerals Project
-- "Market Leader" Position in Two Critical Minerals:
- Positioned to become the world's largest rutile producer at
222kt per annum and potentially one of the world's largest natural
graphite producers outside of China at 244kt per annum for an
initial 25 year life-of-mine ("LOM")
- Extremely low CO(2) -footprint operation incorporating
climate-smart attributes including hydro-mining with renewables
power solution
- Initial Probable Ore Reserves declared of 538Mt, representing
conversion of only 30% of the total Mineral Resource
- Substantial production rate and mine life upside exists as the
PFS modelling was limited to only 25 years
-- The PFS demonstrated compelling economic outcomes including:
- Post-tax NPV(8) of US$1,605m and post-tax IRR of 28%
- Average EBITDA of US$415m per annum
- Cash operating costs of US$404/t of product will position
Kasiya as the lowest cost producer of rutile and graphite
globally
-- Optimisation with Strategic Investor Rio Tinto to Commence:
- Advancing into an optimisation phase prior to moving to the
Definitive Feasibility Study (DFS) and formal establishment of the
Technical Committee with the Company's strategic investor, Rio
Tinto
Rio Tinto invests $40.6m to become a 15% Strategic Investor
-- Subsequent to the end of the period, Rio Tinto made an
investment of A$40.6 million in Sovereign resulting in an initial
15% shareholding plus options to increase their position to
potentially 19.99% within 12 months
-- Investment proceeds will be used to advance the Kasiya
rutile-graphite project (Kasiya or Project) in Malawi
-- Rio Tinto's investment represents a significant step towards
unlocking a major new supply of low-CO(2) -footprint natural rutile
and flake graphite
-- Under the Investment Agreement, Rio Tinto will provide
assistance and advice on technical and marketing aspects of Kasiya
including with respect to Sovereign's graphite co-product, with a
primary focus on spherical purified graphite for the lithium-ion
battery anode market
Strong Support from the Government of Malawi
-- The Government applauded the timely investment by Rio Tinto
and marked it as a milestone towards realising the country's
aspirations of growing the mining sector as a priority industry
-- The Government's public statement confirms its commitment to
ensuring the growth of the mining sector through deliberate
initiatives aiming at establishing a conducive investment
environment in the sector
-- With mining being one of the key pillars for growth under
Malawi's economic development strategy (Agriculture, Tourism,
Mining - ATM Policy) and the potential for Kasiya to be a project
of national significance, the Government has constituted an
Inter-ministerial Project Development Committee to work alongside
the Company
Indicated Resource Increased by over 80%
-- Kasiya's Indicated Resource now stands at 1.2 Billion tonnes
at 1.0% rutile and 1.5% graphite with over 66% of tonnes now in the
Indicated category.
-- Updated MRE moves over 0.5 Billion tonnes from Inferred to
Indicated - an increase of 81% to the Indicated category.
Downstream Testwork on Kasiya's Graphite shows Excellent
Suitability for use in Lithium-Ion Batteries
-- Downstream testwork on Kasiya's graphite co-product
demonstrated it to have superior qualities showing excellent
suitability for use in lithium-ion batteries. Key outcomes
include:
o Near perfect crystallinity - an indicator of battery anode performance
o Above benchmark >99.95% carbon purity achieved
o No critical impurities or deleterious elements commonly found in other natural graphite sources
OPERATING AND FINANCIAL REVIEW
Sovereign is focused on the development of its Kasiya project in
Malawi. The recently announced Pre-Feasibility Study ("PFS")
confirms Kasiya 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: Sovereign's Kasiya project displaying its position in
South-East Africa.
Kasiya is the largest rutile deposit in the world with more than
double the contained rutile as its nearest rutile peer, Sierra
Rutile. The Kasiya Mineral Resource Estimate ("MRE") is 1.8 Billion
tonnes ("Bt") at 1.0% rutile resulting in 17.9 Million tonnes
("Mt") tonnes of contained natural rutile and 24.4Mt of contained
graphite. The MRE has broad zones of very high-grade rutile which
occurs contiguously across a very large area of over 200km(2) .
Rutile mineralisation lies in laterally extensive, near surface,
flat "blanket" style bodies in areas where the weathering profile
is preserved and not significantly eroded. Kasiya's graphite
by-product MRE is 1.8Bt at 1.4% graphite, containing over 24.4Mt of
graphite.
PFS CONFIRMS KASIYA AS A MAJOR CRITICAL MINERALS PROJECT
DELIVERING INDUSTRY-LEADING ECONOMIC RETURNS AND SUSTAINABILITY
METRICS
The PFS confirmed Kasiya as potentially a major critical
minerals project with an extremely low CO(2) -footprint delivering
major volumes of natural rutile and graphite while generating
significant economic returns.
The PFS is an Association for the Advancement of Cost
Engineering International ("AACEI") Class 3 estimate with an
accuracy of -20% and +25%.
ECONOMIC HIGHLIGHTS
US$1,605M 28% US$415M
================ ============= ===========
After Tax NPV(8) After Tax IRR Ave. Annual
EBITDA
------------- -----------
US$16Bn US$404/t US$597M
===================== ====================== ==============
Total Revenue Operating Cost Capex to 1(st)
(initial modelled 25 (FOB Nacala per tonne Production
years LOM) of product)
---------------------- --------------
-- "Market Leader" Position in Two Critical Minerals:
- Positioned to potentially become the world's largest rutile
producer at 222kt per annum for an initial 25 year LOM
- Potentially one of the world's largest natural graphite
producers outside of China at 244kt per annum
- Natural rutile facing extreme global supply deficit estimated
to widen a further 40% over the next 5 years
- Natural graphite market moving into deficit as demand rapidly
grows in the lithium-ion battery and electric vehicle ("EV")
sectors
- Initial Probable Ore Reserves declared of 538Mt, representing
conversion of only 30% of the total Mineral Resource
- Substantial production rate and mine life upside exists as the
PFS modelling was limited to only 25 years
-- Highly Compelling Cost Profile:
- Cash operating costs of US$404/t of product will position
Kasiya as the lowest cost producer of rutile and graphite
globally
- Increased capital to first production is primarily due to
bringing forward capital items previously planned for Stage 2
including a rail spur, full-scale water dam, integrated power and
optimised graphite production, as well as generally enhanced
engineering and global cost inflation
-- Industry-Redefining Environmental and Social Advantages:
- Extremely low CO(2) -footprint operation incorporating
climate-smart attributes including hydro-mining with renewables
power solution
- CO(2) emissions expected to be lowest in class versus existing
and planned operations and versus alternative synthetic
products
- Low-impact operation with mineralisation at surface,
zero-strip ratio, low reagent usage, simple process flowsheet and
progressive land rehabilitation
Table 1: Key PFS Outcomes
Outcome Unit Kasiya
------------------------------------- --------------------- --------------- ------------
NPV(8) (real post-tax) US$ $1,605M
---------------------------------------------------- ---------------------- ------------
NPV(10) (real post-tax) US$ $1,205M
---------------------------------------------------- ---------------------- ------------
IRR (post-tax) % 28%
---------------------------------------------------- ---------------------- ------------
Capital Costs to First Production (Stage 1) US$ $597M
---------------------------------------------------- ---------------------- ------------
Expansion Capital (Stage 2) US$ $287M
---------------------------------------------------- ---------------------- ------------
Plant relocation US$ $366M
---------------------------------------------------- ---------------------- ------------
Operating Costs US$/t mined $8.74
---------------------------------------------------- ---------------------- ------------
Operating Costs US$/t product $404
---------------------------------------------------- ---------------------- ------------
Revenue to Cost Ratio X 2.8
---------------------------------------------------- ---------------------- ------------
NPV(8) / Capital Costs to First Production X 2.7
---------------------------------------------------- ---------------------- ------------
Throughput (Average LOM) Mtpa 21.5
---------------------------------------------------- ---------------------- ------------
Modelled Life years 25
---------------------------------------------------- ---------------------- ------------
Annual Production (Average LOM) - rutile ktpa 222
---------------------------------------------------- ---------------------- ------------
Annual Production (Average LOM) - graphite ktpa 244
---------------------------------------------------- ---------------------- ------------
Total Revenue (LOM) US$ $16,121M
---------------------------------------------------- ---------------------- ------------
Annual Revenue (Average LOM) US$ $645M
---------------------------------------------------- ---------------------- ------------
Annual EBITDA (Average LOM) US$/year $415M
---------------------------------------------------- ---------------------- ------------
Payback - from start of production years 4.3 years
---------------------------------------------------- ---------------------- ------------
RIO TINTO INVESTS $40.6M TO BECOME A 15% STRATEGIC INVESTOR
Subsequent to the end of the year, Sovereign completed a A$40.6
million strategic investment by Rio Tinto Mining and Exploration
Limited (Rio Tinto) to advance Sovereign's world-class Kasiya
Rutile-Graphite Project in Malawi.
Rio Tinto subscribed for 83.3 million new fully paid ordinary
shares (Shares) in Sovereign at a price of A$0.486 per Share for
aggregate proceeds of A$40.6 million resulting in Rio Tinto holding
approximately 15% of the ordinary shares of the Company.
The subscription also involved Rio Tinto being granted A$0.535
options to acquire 34.5 million further Shares in Sovereign on or
before 21 July 2024 which could potentially result in Rio Tinto's
shareholding in the Company increasing up to 19.99% (based on the
number of shares in issue in the Company as at the date of this
report).
The Company will use the proceeds from Rio Tinto's strategic
investment to fund the advancement of Kasiya, including advancing
into an optimisation phase prior to moving to the Definitive
Feasibility Study ("DFS").
GOVERNMENT OF MALAWI APPLAUDS RIO TINTO'S INVESTMENT
In a Press Release issued on 20 July 2023, the Government of
Malawi has publicly applauded the timely investment by Rio Tinto
and marked it as a milestone towards realising the country's
aspirations of growing the mining industry as promoted in the
Malawi Vision 2063, which identifies mining as a priority
industry.
The Government's statement confirms its commitment to ensuring
the growth of the mining sector through deliberate initiatives
aiming at establishing a conducive investment environment in the
sector.
With mining being one of the key pillars for growth under
Malawi's economic development strategy (Agriculture, Tourism,
Mining - ATM Policy) and the potential for Kasiya to be a project
of national significance, the Government has constituted an
Inter-ministerial Project Development Committee to work alongside
the Company.
INDICATED RESOURCE UPGRADE
In April 2023, Sovereign announced the updated MRE for its
world-class Kasiya rutile-graphite deposit in Malawi. The updated
MRE resulted in over 0.5 Billion tonnes converting from Inferred to
Indicated, an 81% increase in the Indicated category. Kasiya now
contains 1.2Bt @ 1.0% rutile and 1.5% graphite in the Indicated
category and a total MRE of 1.8Bt @ 1.0% rutile and 1.4%
graphite.
Kasiya remains the world's largest natural rutile deposit and
one of the largest flake graphite deposits.
Table 2: 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
================ ========= ============= ================= ========================= ===================
The updated MRE has further defined broad and contiguous zones
of high-grade rutile and graphite which occur across a very large
area of over 201km(2) . Rutile mineralisation is concentrated in
laterally extensive, near surface, flat "blanket" style bodies in
areas where the weathering profile is preserved and not
significantly eroded. Graphite is depleted near surface with grades
improving at depths generally >4m to the base of the saprolite
zone which averages about 22m.
Sovereign's 2022 drill program at Kasiya used push tube ("PT")
core holes to in-fill and convert Inferred mineralisation into the
Indicated category. The consistency and robustness of the geology
allowed for an efficient conversion of this previously Inferred
material on a near-identical one-for-one basis to the Indicated
category.
A total of 66% of the MRE now reports to the Indicated category
@ 1.0% rutile and 1.5% TGC - up from 33% previously. Overall, the
new Indicated components show coherent, broad bodies of
mineralisation that have coalesced well, particularly in the
southern parts of the MRE.
Further advancement in this MRE update was the application of
air-core ("AC") drilling to define the depth of mineralisation in a
number of selected higher-grade areas. As expected, this drilling
shows that high-grade rutile and graphite mineralisation extends to
the base of the soft saprolite unit terminating on the saprock
basement averaging about 22m depth. This deeper AC drilling
targeted early-scheduled mining pits mainly in the southern areas
of the MRE footprint.
A number of higher-grade graphite zones at depth were identified
which are generally associated with higher grade rutile at surface.
Some of these zones have graphite grades at depths >6m in the 4%
to 8% TGC range and represent significant contained coarse flake
graphite tonnages.
ESG FRAMEWORK ADVANCES SOCIAL INITIATIVES IN MALAWI
Sovereign has established an Environmental, Social and
Governance ("ESG") framework to advance Sovereign's Corporate
Social Responsibility in Malawi which continues to undertake
several initiatives to assist in the development of Malawi and its
local communities, including:
-- Promoting education in Malawi through a Schools Upgrade
Program and creation of a Scholarship Program for high school
learners
-- Advancing local community infrastructure including
construction of a new Community Centre and commissioning of water
bores across the Company's licence area to provide local
communities with drinking water
-- Establishing international standard mining industry
facilities with the construction of an extensive rutile sample
laboratory in Lilongwe
-- Employment of a diverse workforce and developing key
exploration and mining-applicable skills through training
programs
Continuing engagement with key stakeholders from local
communities through to Government level
Corporate
Subsequent to 30 June 2023, the Group completed a A$40.6 million
strategic investment by Rio Tinto to advance Kasiya. Rio Tinto
subscribed for 83.3 million Shares in Sovereign at a price of
A$0.486 per Share for aggregate proceeds of A$40.6 million
resulting in Rio Tinto holding approximately 15% of the ordinary
shares of the Company. The subscription also involved Rio Tinto
being granted unlisted options, exercisable at $0.535 each on or
before 21 July 2024, to acquire 34.5 million further Shares in
Sovereign which could result in Rio Tinto's shareholding in the
Company potentially increasing up to 19.99% (based on the number of
shares on issue in the Company as at the date of this report).
Results of Operations
The net loss of the Group for the year ended 30 June 2023 was
$5,819,873 (2022: $ 13,719,731 ). Significant items contributing to
the year end loss include the following:
-- Exploration and evaluation expenses of $10,627,458 (2022:
$8,072,133) in relation to the Group's projects in Malawi. 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;
-- Non-cash share-based payments expenses totalling $2,083,592
(2022: $2,941,985) relating to performance rights. The fair value
of performance rights are recognised over the vesting period of the
incentive security;
-- Business development expenses of $2,096,822 (2022:
$1,964,460) which includes the Group's investor relations
activities including but not limited to public relations costs,
marketing and digital marketing, broker fees, travel costs,
conference fees, business development consultant fees and costs of
the Group's AIM listing; and
-- A one-off gain of $9,480,980 (2022: nil) from the demerger of
NGX Limited (NGX) relating to the difference between the fair value
of the in-specie distribution of NGX shares to existing Sovereign
shareholders and the carrying value of the net assets demerged,
less costs.
Financial Position
As at 30 June 2023, the Group had cash and cash equivalents of
$5,564,376 as at 30 June 2023 (2022: $18,892,741) and borrowings of
nil (2022: nil). The Group had net assets of $9,672,569 at 30 June
2023 (2022: $25,161,138), a decrease of $15,488,569 or
approximately 62% compared with the previous year. The decrease is
largely driven by the reduction in cash due to expenditure
activities and the impact of the demerger of NGX Limited during the
financial year.
At the date of this report, the Company had cash and cash
equivalents of approximately $43 million and no debt.
Business Strategies and Prospects for Future Financial Years
The objective of the Group is to create long-term shareholder
value through the discovery, development and acquisition of
technically and economically viable mineral deposits.
To date, the Group has not commenced production of any minerals
. To achieve its objective, the Group currently has the following
business strategies and prospects over the medium to long term:
-- Following completion of the PFS at Kasiya, the Company will
advance into an optimisation phase prior to moving to the DFS with
support from the Company's strategic investor, Rio Tinto;
-- Conduct further exploration programs across rutile targets
identified on the Group's tenements; and
All of these activities are inherently risky and the Board is
unable to provide certainty that any or all of these developments
will be able to be achieved. T he material business risks faced by
the Group that are likely to have an effect on the Group's future
prospects , and how the Group manages these risks, include:
-- The Group's exploration properties may never be brought into
production - The exploration for, and development of, mineral
deposits involves a high degree of risk. Few properties which are
explored are ultimately developed into producing mines. To mitigate
this risk, the Group will undertake systematic and staged
exploration and testing programs on its mineral properties and,
subject to the results of these exploration programs, the Group
will then progressively undertake a number of technical and
economic studies with respect to its projects prior to making a
decision to mine. However there can be no guarantee that the
studies will confirm the technical and economic viability of the
Group's mineral properties or that the properties will be
successfully brought into production;
-- The Group's activities will require further capital - The
exploration and any development of the Group's exploration
properties will require substantial additional financing. Failure
to obtain sufficient financing may result in delaying or indefinite
postponement of exploration and any development of the Group's
properties or even a loss of property interest. There can be no
assurance that additional capital or other types of financing will
be available if needed or that, if available, the terms of such
financing will be favourable to the Group;
-- The Group is subject to sovereign risk of the Republic of
Malawi - The Group's operations in the Republic of Malawi are
exposed to various levels of political, economic and other risks
and uncertainties. The Republic of Malawi is a developing country
and there can be no assurances that the risks of operating in the
Republic of Malawi will not directly impact the Group's operations.
During the period, the Government of Malawi proposed a new Mines
and Minerals Bill (2023) ("New Bill") which was passed by the
Malawian Parliament and awaits Malawian Presidential Assent and
publication in the Malawi Gazette before coming into force. If
approved, the New Bill will replace the Mines and Minerals Act
(2019) ("Mines Act"). The New Bill introduces amendments to improve
transparency and governance of the mining industry in Malawi.
Sovereign notes the following updates in the New Bill which may
affect the Company in the future: (i) Exploration Licenses ("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 Bill proposes
to remove 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 Bill;
-- The Group may be adversely affected by fluctuations in
commodity prices and/or foreign exchange - The price of rutile,
graphite and other commodities fluctuates widely and is affected by
numerous factors beyond the control of the Group. Future
production, if any, from the Group's mineral properties will be
dependent upon the price of rutile and graphite and other
commodities being adequate to make these properties economic.
Current and planned development activities are predominantly
denominated in US dollars and the Group's ability to fund these
activities may be adversely affected if the Australian dollar
continues to fall against the US Dollar. The Group currently does
not engage in any hedging or derivative transactions to manage
commodity price or foreign exchange risk. As the Group's operations
change, this policy will be reviewed periodically going forward;
and
-- Global financial conditions may adversely affect the Group's
growth and profitability - Many industries, including the mineral
resource industry, are impacted by these market conditions. Some of
the key impacts include contraction in credit markets resulting in
a widening of credit risk, devaluations and high volatility in
global equity, commodity, foreign exchange and precious metal
markets, and a lack of market liquidity. Due to the current nature
of the Group's activities, a slowdown in the financial markets or
other economic conditions may adversely affect the Group's growth
and ability to finance its activities.
DIRECTORS
The names of Directors in office at any time during or since the
end of the financial year are:
Current Directors
Mr Benjamin Stoikovich Chairman
Dr Julian Stephens Managing Director
Mr Ian Middlemas Non-Executive Director
Mr Mark Pearce Non-Executive Director
Mr Nigel Jones Non-Executive Director
Unless otherwise disclosed, Directors held their office from 1
July 2022 until the date of this report.
CURRENT DIRECTORS AND OFFICERS
Benjamin Stoikovich
Chairman
Qualifications - B.Eng, M.Eng, M.Sc, CEng, CEnv
Mr Stoikovich is an experienced mining executive and corporate
finance professional residing in London. Mr Stoikovich is currently
the Chief Executive Officer of GreenX Metals Limited (ASX: GRX) and
was formerly a Director of the Mining and Metals Corporate Finance
Division of Standard Chartered Bank in London, with extensive
experience in financing the development of African mining projects
and exposure to the mineral sands sector.
Mr Stoikovich started his career as a mining engineer with BHP
Billiton in Australia, gaining broad experience across mine
operations management and qualifying as a mine manager. He holds a
post graduate degree in Environmental Engineering and UK
professional designation as a Chartered Environmentalist (CEnv)
with wide ranging experience of managing the environmental, social
and sustainability aspects of mining projects across the life-cycle
and the ESG requirements of the investment community. Mr Stoikovich
was appointed a Director of the Company on 13 October 2020. During
the three year period to the end of the financial year, Mr
Stoikovich held a directorship in GreenX Metals Limited (June 2013
- present).
Julian Stephens
Managing Director
Qualifications - B.Sc (Hons), PhD, MAIG
Dr Stephens originally identified and secured the Malawi
properties acquired by Sovereign in 2012. He has since been closely
involved with the subsequent exploration and development of these
projects, including the discovery of the Kasiya rutile deposit.
Dr Stephens has extensive experience in the resources sector
having spent in excess of 25 years in board, executive management,
senior operational and economic geology research roles for a number
of companies. He has spent over a decade working on African
projects, particularly projects in Malawi. Dr Stephens holds a PhD
from James Cook University, Queensland and is a member of the
Australian Institute of Geoscientists.
Dr Stephens was appointed a Director of Sovereign Metals Limited
on 22 January 2016 and subsequently appointed Managing Director on
27 June 2016. During the three year period to the end of the
financial year, Dr Stephens did not hold any other directorships in
publicly listed companies.
Ian Middlemas
Non-Executive Director
Qualifications - B.Com, CA
Mr Middlemas is a Chartered Accountant and holds a Bachelor of
Commerce degree. He worked for a large international Chartered
Accounting firm before joining the Normandy Mining Group where he
was a senior group executive for approximately 10 years. He has had
extensive corporate and management experience, and is currently a
director of a number of publicly listed companies in the resources
sector.
Mr Middlemas was appointed a Director of Sovereign Metals
Limited on 20 July 2006. During the three year period to the end of
the financial year, Mr Middlemas has held directorships in
Constellation Resources Limited (November 2017 - present), Apollo
Minerals Limited (July 2016 - present), GCX Metals Limited (October
2013 - present), Berkeley Energia Limited (April 2012 - present),
GreenX Metals Limited (August 2011 - present), NGX Limited (April
2021 - present), Salt Lake Potash Limited (Receivers and Managers
Appointed) (January 2010 - present), Equatorial Resources Limited
(November 2009 - present), Odyssey Gold Limited (September 2005 -
present), Piedmont Lithium Limited (September 2009 - December 2020)
and Peregrine Gold Limited (September 2020 - February 2022).
Mark Pearce
Non-Executive Director
Qualifications - B.Bus, CA, FCIS, FFin
Mr Pearce is a Chartered Accountant and is currently a director
of several listed companies that operate in the resources sector.
He has had considerable experience in the formation and development
of listed resource companies. Mr Pearce is also a Fellow of the
Institute of Chartered Secretaries and a member of the Financial
Services Institute of Australasia.
Mr Pearce was appointed a Director of Sovereign Metals Limited
on 20 July 2006. During the three year period to the end of the
financial year, Mr Pearce has held directorships in Constellation
Resources Limited (July 2016 - present), GreenX Metals Limited
(August 2011 - present), Equatorial Resources Limited (November
2009 - present), GCX Metals Limited (June 2022 - present), NGX
Limited (April 2021 - present), Peregrine Gold Limited (September
2020 - February 2022), Odyssey Gold Limited (September 2005 -
August 2020), Salt Lake Potash Limited (Receivers and Managers
Appointed) (August 2014 - October 2020) and Apollo Minerals Limited
(July 2016 - February 2021).
Nigel Jones
Non-Executive Director
Qualifications - MA
Mr Jones has over 30 years of mining industry experience with 22
years in a number of senior roles at Rio Tinto Group, where most
recently, Mr Jones was Managing Director of Rio Tinto's Simandou
iron ore project, one of the world's largest proposed mining
developments.
In this role, he was accountable for all aspects of the
project's development, including its complex ESG strategy. Such
aspects included impacts on natural ecosystems, biodiversity, and
community and government relations.
Mr Jones was also a member of the senior leadership team of the
Energy and Minerals product group, which incorporated Rio Tinto's
titanium dioxide feedstock businesses in Canada and southern
Africa. Prior roles in Rio Tinto included Head of Business
Development, Head of Business Evaluation and Managing Director of
the group's Marine operations.
Mr Jones was appointed a Director of Sovereign Metals Limited on
10 February 2022. During the three year period to the end of the
financial year, Mr Jones held a directorship in Berkeley Energia
Limited (June 2017 - November 2020).
Mr Dylan Browne
Company Secretary
Qualifications - B.Com, CA, AGIA ACG
Mr Browne is a Chartered Accountant and Associate Member of the
Governance Institute of Australia (Chartered Secretary) who is
currently Company Secretary for a number of ASX and European listed
companies that operate in the resources sector. He commenced his
career at a large international accounting firm and has since been
involved with a number of exploration and development companies
operating in the resources sector, based in London and Perth,
including Berkeley Energia Limited, Apollo Minerals Limited, GreenX
Metals Limited and Papillon Resources Limited. Mr Browne
successfully listed Prairie Mining Limited on the Main Board of the
London Stock Exchange ("LSE") and the Warsaw Stock Exchange and
oversaw Berkeley's listings on the Main Board LSE and the Madrid,
Barcelona, Bilboa and Valencia Stock Exchanges. Mr Browne was
appointed Company Secretary of the Company on 29 April 2021.
PRINCIPAL ACTIVITIES
The principal activities of the Group during the year consisted
of development of Kasiya. No significant change in the nature of
these activities occurred during the year.
DIVIDS
No dividends have been declared, provided for or paid in respect
of the financial year ended 30 June 2023 (30 June 2022: nil).
LOSS PER SHARE
2023 2022
Cents Cents
---------------------------------- ------- -------
Basic and diluted loss per share (1.24) (3.17)
---------------------------------- ------- -------
CORPORATE STRUCTURE
Sovereign Metals Limited is a company limited by shares that is
incorporated and domiciled in Australia. The Company has prepared a
consolidated financial report including the entities it
incorporated and controlled during the financial year.
CONSOLIDATED RESULTS
2023 2022
$ $
--------------------------------------------- ------------ -------------
( 5,819,873
Loss of the Group before income tax expense ) (13,719,731)
Income tax expense - -
--------------------------------------------- ------------ -------------
( 5,819,873
Net loss ) (13,719,731)
============================================= ============ =============
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
In March 2023, Sovereign successfully demerged its standalone
graphite projects; Nanzeka Project, Malingunde Project, Duwi
Project and Mabuwa Project into NGX Limited. The demerger has
allowed Sovereign and the existing management team to focus on
Kasiya, while retaining extensive graphite exposure via Kasiya's
graphite co-product.
There are no significant changes in the state of affairs of the
Group during the year not otherwise disclosed in this report.
SIGNIFICANT POST BALANCE DATE EVENTS
Subsequent to 30 June 2023, the Group completed a A$40.6 million
strategic investment by Rio Tinto to advance Kasiya. Rio Tinto
subscribed for 83.3 million Shares in Sovereign at a price of
A$0.486 per Share for aggregate proceeds of A$40.6 million
resulting in Rio Tinto holding approximately 15% of the ordinary
shares of the Company. The subscription also involved Rio Tinto
being granted unlisted options, exercisable at $0.535 each on or
before 21 July 2024, to acquire 34.5 million further Shares in
Sovereign which could result in Rio Tinto's shareholding in the
Company potentially increasing up to 19.99% (based on the number of
shares on issue in the Company as at the date of subscription).
On 25 August 2023, the Company issued 2.5 million Shares to SCP
Resource Finance as a 3% advisory fee on the amount of Rio Tinto's
initial investment.
There are no other matters or circumstances which have arisen
since 30 June 2023 that have significantly affected or may
significantly affect:
-- the operations, in financial years subsequent to 30 June 2023 of the Group;
-- the results of those operations, in financial years
subsequent to 30 June 2023 of the Group; or
-- the state of affairs, in financial years subsequent to 30 June 2023 of the Group.
INFORMATION ON DIRECTORS' INTERESTS IN SECURITIES OF
SOVEREIGN
As at the date of this report, the Directors' interests in the
securities of the Company are as follows:
Interest in Securities at the Date of this Report
----------------------------------------------------------------------------------------------------------------------
Ordinary Shares(i) Performance Rights - Performance Rights - Definitive
Current Directors Pre-Feasibility Study Milestone(ii) Feasibility Study Milestone (iii)
--------------------- ------------------- ------------------------------------ ------------------------------------
Benjamin Stoikovich 3,590,000 600,000 600,000
Julian Stephens 15,657,518 900,000 1,200,000
Ian Middlemas 16,100,000 - -
Mark Pearce 4,295,842 225,000 300,000
Nigel Jones - 225,000 300,000
--------------------- ------------------- ------------------------------------ ------------------------------------
Notes:
(i) "Ordinary Shares" means fully paid ordinary shares in the capital of the Company;
(ii) "Performance Rights - "Pre-Feasibility Study Milestone"
means an unlisted performance right that converts to one Share in
the capital of the Company upon satisfaction of the relevant
milestone; and
(iii) "Performance Rights - "Definitive Feasibility Study
Milestone" means an unlisted performance right that converts to one
Share in the capital of the Company upon satisfaction of the
relevant milestone.
SHARE OPTIONS AND PERFORMANCE RIGHTS
At the date of this report the following options and rights have
been issued by the Company over unissued capital:
-- 34,549,598 Unlisted Options exercisable at $0.535 each on or before 21 July 2024;
-- 6,100,000 Performance Rights subject to the Pre-Feasibility
Study Milestone that expire on 30 September 2023; and
-- 7,810,000 Performance Rights subject to the Definitive
Feasibility Study Milestone that expire on 31 October 2025.
During the year ended 30 June 2023 and up to the date of this
report, 150,000 ordinary shares have been issued as a result of the
exercise of options and/or conversion of performance rights.
MEETINGS OF DIRECTORS
The following table sets out the number of meetings of the
Company's Directors held during the year ended 30 June 2023, and
the number of meetings attended by each Director.
Board Meetings ESG Committee
--------------------- ----------------------- -----------------------
Eligible Number Eligible Number
Current Directors to Attend Attended to Attend Attended
--------------------- ----------- ---------- ----------- ----------
Benjamin Stoikovich 4 4 2 2
Julian Stephens 4 4 - -
Ian Middlemas 4 4 - -
Mark Pearce 4 4 - -
Nigel Jones 4 4 2 2
--------------------- ----------- ---------- ----------- ----------
The Board as a whole currently performs the functions of an
Audit Committee, Risk Committee, Nomination Committee and
Remuneration Committee. However this will be reviewed should the
size and nature of the Company's activities change.
The ESG Committee was established to support the Company's
ongoing commitment to environmental, health and safety, corporate
social responsibility, corporate governance, sustainability and
other public policy matters relevant to the Company. Please refer
to the Corporate Governance section on page 57 for further
discussion on the Company's Corporate Governance Statement and
policies.
REMUNERATION REPORT (AUDITED)
This Remuneration Report, which forms part of the Directors'
Report, sets out information about the remuneration of Key
Management Personnel ("KMP") of the Group.
Details of KMP
The KMP of the Group during or since the end of the financial
year is as follows:
Directors
Mr Benjamin Stoikovich Chairman
Dr Julian Stephens Managing Director
Mr Ian Middlemas Non-Executive Director
Mr Mark Pearce Non-Executive Director
Mr Nigel Jones Non-Executive Director
Other KMP
Mr Frank Eagar General Manager - Africa (appointed 30 November 2022)
Mr Paul Marcos Head of Project Development
Mr Sam Cordin Business Development Manager
Unless otherwise disclosed, the KMP held their position from 1
July 2022 until the date of this report.
Remuneration Policy
The Group's remuneration policy for its KMP has been developed
by the Board taking into account the size of the Group, the size of
the management team for the Group, the nature and stage of
development of the Group's current operations, and market
conditions and comparable salary levels for companies of a similar
size and operating in similar sectors.
In addition to considering the above general factors, the Board
has also placed emphasis on the following specific issues in
determining the remuneration policy for KMP:
-- the Group is currently focused on undertaking exploration,
appraisal and development activities;
-- risks associated with small cap resource companies whilst
exploring and developing projects; and
-- other than profit which may be generated from asset sales,
the Company does not expect to be undertaking profitable operations
until sometime after the commencement of commercial production on
any of its projects.
Executive Remuneration
The Group's remuneration policy is to provide a fixed
remuneration component and a performance based component (options,
performance rights and a cash bonus, see below). The Board believes
that this remuneration policy is appropriate given the
considerations discussed in the section above and is appropriate in
aligning executives' objectives with shareholder and business
objectives.
Fixed Remuneration
Fixed remuneration consists of base salaries, as well as
employer contributions to superannuation funds and other non-cash
benefits. Fixed remuneration is reviewed annually by the Board. The
process consists of a review of company and individual performance,
relevant comparative remuneration externally and internally and,
where appropriate, external advice on policies and practices.
Performance Based Remuneration - Short Term Incentive
Some executives are entitled to an annual cash bonus upon
achieving various key performance indicators ("KPI's"), as set by
the Board. Having regard to the current size, nature and
opportunities of the Company, the Board has determined that these
KPI's will include measures such as the successful completion of
business development activities (e.g. project acquisition and
capital raisings) and exploration activities (e.g. completion of
exploration programs within budgeted timeframes and costs). The
Board assesses performance against these criteria annually.
During the 2023 financial year, a total bonus sum of $270,000
(2022: $230,000), representing 100% of KMP entitlement, was accrued
to executives after achievement of KPIs set by the Board. For the
2023 year, the KPI areas of focus included: (a) announcement of
upgraded resources at Kasiya in April 2023 (b) progression with the
Pre-Feasibility study (PFS) at the Kasiya Rutile Project (Kasiya);
(c) announcement of downstream testwork for the Kasiya graphite
co-product; (d) completion of the NGX Demerger; (e) completion of
successful drilling programs at Kasiya; (f) announcement of rutile
offtake and a marketing alliance with Mitsui & Co Ltd; and (g)
announcement of rutile offtake with The Chemours Company. Specific
KPIs are set and weighted individually for each KMP and are
designed to drive successful business outcomes. No cash bonuses
were forfeited during the financial year.
Performance Based Remuneration - Long Term Incentive
The Group has a long-term equity incentive plan ("Incentive
Plan") comprising the grant of Performance Rights and/or Incentive
Options to reward KMP and key employees and contractors for
long-term performance. To achieve its corporate objectives, the
Group needs to attract, incentivise, and retain its key employees
and contractors. The Board believes that grants of Performance
Rights and/or Incentive Options to KMP will provide a useful tool
to underpin the Group's employment and engagement strategy.
(i) Performance Rights
The Group has an Incentive Plan that provides for the issuance
of unlisted performance share rights ("Performance Rights") which,
upon satisfaction of the relevant performance conditions attached
to the Performance Rights, will result in the issue of an Ordinary
Share for each Performance Right. Performance Rights are issued for
no consideration and no amount is payable upon conversion thereof.
The Incentive Plan enables the Group to: (a) recruit, incentivise
and retain KMP and other key employees and contractors needed to
achieve the Group's business objectives; (b) link the reward of key
staff with the achievement of strategic goals and the long-term
performance of the Group; (c) align the financial interest of
participants of the Plan with those of Shareholders; and (d)
provide incentives to participants of the Incentive Plan to focus
on superior performance that creates Shareholder value.
Performance Rights granted under the Incentive Plan to eligible
participants will be linked to the achievement by the Group of
certain performance conditions as determined by the Board from time
to time. These performance conditions must be satisfied in order
for the Performance Rights to vest. Upon Performance Rights
vesting, Ordinary Shares are automatically issued for no
consideration. If a performance condition of a Performance Right is
not achieved by the expiry date then the Performance Right will
lapse.
During the financial year, 1,410,000 Performance Rights were
granted to KMP under the Plan and a further 360,000 separate to the
Plan . No Performance Rights held by KMP lapsed during the
financial year.
The vesting conditions of the Performance Rights are performance
conditions as follows:
a. Pre-Feasibility Study Milestone means announcement on or
before 30 September 2023, of a positive Pre-Feasibility Study for
the Malawi Rutile Project in accordance with the provisions of the
JORC Code which demonstrates the following:
i. A minimum net present value of US$1,000M (using a minimum
discount rate of 8%);
ii. A minimum life of mine of 20 years; and
iii. A minimum internal rate of return of 25%.
b. Definitive Feasibility Study Milestone means announcement on
or before 31 October 2025, of a positive Definitive Feasibility
Study for the Malawi Rutile Project in accordance with the
provisions of the JORC Code which demonstrates the following:
i. A minimum net present value of US$1,000M (using a minimum
discount rate of 8%);
ii. A minimum life of mine of 20 years; and
iii. A minimum internal rate of return of 25%.
(ii) Incentive Options
The Incentive Plan also that provides for the issuance of
unlisted incentive options ("Incentive Options") as part of
remuneration and incentive arrangements in order to attract and
retain services and to provide an incentive linked to the
performance of the Group. The Board's policy is to grant Incentive
Options to KMP with exercise prices at or above market share price
(at the time of agreement). As such, the Incentive Options granted
to KMP are generally only of benefit if the KMP performs to the
level whereby the value of the Group increases sufficiently to
warrant exercising the Incentive Options granted. Other than
service-based vesting conditions (if any) and the exercise price
required to exercise the Incentive Options, there are no additional
performance criteria on the Incentive Options granted to KMP, as
given the speculative nature of the Group's activities and the
small management team responsible for its running, it is considered
that the performance of the KMP and the performance and value of
the Group are closely related. The Group prohibits executives from
entering into arrangements to limit their exposure to Incentive
Options granted as part of their remuneration package.
During the financial year, no Incentive Options were granted,
exercised or lapsed to KMP .
Remuneration Policy for Non-Executive Directors
The Board policy is to remunerate Non-Executive Directors at
market rates for comparable companies for time, commitment and
responsibilities. Given the current size, nature and risks of the
Company, incentive options and performance rights have been used to
attract and retain Non-Executive Directors. The Board determines
payments to the Non-Executive Directors and reviews their
remuneration annually, based on market practice, duties and
accountability. Independent external advice is sought when
required.
The maximum aggregate amount of fees that can be paid to
Non-Executive Directors is subject to approval by shareholders at a
General Meeting and is currently $500,000. Director's fees paid to
Non-Executive Directors accrue on a daily basis. Fees for
Non-Executive Directors are not linked to the performance of the
economic entity. However, to align Directors' interests with
shareholder interests, the Directors are encouraged to hold shares
in the Company and Non-Executive Directors have received incentive
options and performance rights in order to secure their services
and as a key component of their remuneration.
Fees for the Chairman are $95,000 (GBP50,000) per annum (2022:
$36,000) and fees for Non-Executive Directors' are $76,000
(GBP40,000) to $20,000 per annum (2022: $73,000 (GBP40,000) to
$20,000 per annum). Non-Executive Directors may receive additional
remuneration for other services provided to the Company, including
but not limited to, membership of committees including the ESG
Committee. The Chair of the ESG Committee currently receives
GBP10,000 (2022: GBP10,000) for chairing the ESG Committee.
Relationship between Remuneration of KMP and Shareholder
Wealth
During the Company's exploration and development phases of its
business, the Board anticipates that the Company will retain
earnings (if any) and other cash resources for the exploration and
development of its resource projects. Accordingly the Company does
not currently have a policy with respect to the payment of
dividends and returns of capital. Therefore there was no
relationship between the Board's policy for determining, or in
relation to, the nature and amount of remuneration of KMP and
dividends paid and returns of capital by the Company during the
current and previous four financial years.
The Board did not determine, and in relation to, the nature and
amount of remuneration of the KMP by reference to changes in the
price at which shares in the Company traded between the beginning
and end of the current and the previous four financial years.
However, as noted above, a number of KMP have received incentive
options which generally will only be of value should the value of
the Company's shares increase sufficiently to warrant exercising
the incentive options, and performance rights which are linked to
the achievement of certain performance conditions.
Relationship between Remuneration of KMP and Earnings
As discussed above, the Company is currently undertaking
exploration and development activities, and does not expect to be
undertaking profitable operations (other than by way of material
asset sales, none of which is currently planned) until sometime
after the successful commercialisation, production and sales of
commodities from one or more of its projects. Accordingly the Board
does not consider earnings during the current and previous four
financial years when determining, and in relation to, the nature
and amount of remuneration of KMP.
General
In addition to a focus on operating activities, the Board is
also focused on finding and completing new business and other
corporate opportunities. The Board considers that the prospects of
the Company and resulting impact on shareholder wealth will be
enhanced by this approach. Accordingly, the Board may pay a bonus
or issue securities to KMP (executive or non-executive) based on
their success in generating suitable new business or other
corporate opportunities. A bonus may be paid or an issue of
securities may also be made upon the successful completion of a new
business or corporate transaction.
Where required, KMP receive superannuation contributions, equal
to 10.5% of their salary, and do not receive any other retirement
benefit. From time to time, some individuals have chosen to
sacrifice part of their salary to increase payments towards
superannuation. Effective 1 July 2023, the superannuation
contribution rate is 11%.
All remuneration paid to KMP is valued at cost to the Company
and expensed. Incentive options are valued using the Black Scholes
option valuation methodology. The value of these incentive options
is expensed over the vesting period. The fair value of performance
rights granted is estimated as at the date of grant using the share
price at the grant date. The value of the performance right is
expensed over the vesting period.
Remuneration of KMP
Details of the nature and amount of each element of the
remuneration of each KMP of the Company for the year ended 30 June
2023 and 30 June 2022 are as follows:
Short-Term
Benefits
--------------------- -------------------- ------------- ---------- ---------- ---------- -------------
Post Non-Cash
Employ-ment Equity Other Percentage
Salary Cash Superann- Options/ Non-Cash Performance
& Fees Bonus uation Rights Benefits Total Related
2023 $ $ $ $ $ $ %
--------------------- ---------- -------- ------------- ---------- ---------- ---------- -------------
Directors
Benjamin Stoikovich
(i) 207,059 - - 184,988 - 392,047 47
Julian Stephens 350,000 170,000 27,500 216,135 - 763,635 51
Ian Middlemas 36,000 - 3,780 - - 39,780 -
Mark Pearce 20,000 - 2,100 111,705 - 133,805 83
Nigel Jones 93,932 - - 105,836 - 199,768 53
Other KMP
Frank Eagar
(ii) 217,710 - - 214,674 432,384 50
Paul Marcos 270,000 50,000 27,500 214,237 561,737 47
Sam Cordin 205,000 50,000 26,775 120,432 - 402,207 42
--------------------- ---------- -------- ------------- ---------- ---------- ---------- -------------
1,399,701 270,000 87,655 1,168,007 - 2,925,363
--------------------- ---------- -------- ------------- ---------- ---------- ---------- -------------
Short-Term
Benefits
--------------------- ------------------ ------------- ---------- ---------- ---------- -------------
Post Non-Cash
Employ-ment Equity Other Percentage
Salary Cash Superann- Options/ Non-Cash Performance
& Fees Bonus uation Rights Benefits Total Related
2022 $ $ $ $ $ $ %
--------------------- -------- -------- ------------- ---------- ---------- ---------- -------------
Directors
Benjamin Stoikovich
(i) 153,450 - - 136,313 - 289,763 47
Julian Stephens 300,000 100,000 27,500 340,782 - 768,282 57
Ian Middlemas 36,000 - 3,600 - - 39,600 -
Mark Pearce 20,000 - 2,000 215,680 - 237,680 91
Nigel Jones
(iii) 33,693 - - 36,013 - 69,706 52
Other KMP
Paul Marcos 250,000 50,000 27,292 355,267 682,559 59
Sam Cordin 180,000 80,000 26,000 136,313 - 422,313 51
--------------------- -------- -------- ------------- ---------- ---------- ---------- -------------
973,143 230,000 86,392 1,220,368 - 2,509,903
--------------------- -------- -------- ------------- ---------- ---------- ---------- -------------
Notes:
(i) In addition to Non-Executive Directors fees, Selwyn Capital
Limited, an entity associated with Mr Stoikovich, was paid, or is
payable, A$117,254 (2022: $124,703) for additional services
provided in respect of corporate and business development
activities which is included in Mr Stoikovich's salary and fee
amount.
(ii) Appointed 30 November 2022.
(iii) Appointed 10 February 2022.
Performance Rights Holdings of KMP
Held at
Held at 1 July 2022 Granted as Compen-sation Options/ Rights Exercised Options/ Rights Expired Net Change Other 30 June 2023 Vested and Exercisable at 30 June 2023 (ii)
2023 (#) (#) (#) (#) (#) (#) (#)
------------ --------------------- -------------------------- --------------------------- ------------------------- ------------------ --------------- ---------------------------------------------
Directors
Benjamin
Stoikovich 840,000 360,000 - - - 1,200,000 -
Julian
Stephens 2,100,000 - - - - 2,100,000 -
Mark Pearce 525,000 - - - - 525,000 -
Nigel Jones 525,000 - - - - 525,000 -
Other KMP
Frank Eagar - (i) 1,200,000 - - - 1,200,000 -
Paul Marcos 1,200,000 - - - - 1,200,000 -
Sam Cordin 840,000 210,000 - - - 1,050,000 -
------------ --------------------- -------------------------- --------------------------- ------------------------- ------------------ --------------- ---------------------------------------------
Notes:
(i) As at date of appointment.
(ii) There are no performance rights that are vested but not yet exercisable.
Incentive Securities Granted to KMP
Details of unlisted incentive securities granted by the Company
to KMP of the Group during the past two financial years are as
follows:
Grant Expiry Exercise Price Grant Date Fair Value(i) Total Value of Options/ Rights Granted
No. Granted $ No. Vested at 30 June 2023(
Options/ Rights Date Date $ $ (ii) iii)
------------ ------------------ ----------- --------- ----------------- -------------------------- ------------- ---------------------------------------- -----------------------------
Director
------------ ------------------ ----------- --------- ----------------- -------------------------- ------------- ---------------------------------------- -----------------------------
Benjamin 30 Sep
Stoikovich Rights 18-Nov-22 23 - 0.460 240,000 110,400 -
31 Oct
Rights 18-Nov-22 25 - 0.460 120,000 55,200 -
30 Sep
Mark Pearce Rights 25-Nov-21 23 - 0.650 225,000 146,250 -
31 Oct
Rights 25-Nov-21 25 - 0.650 300,000 195,000 -
------------------ ----------- --------- ------------------------------ -------------------------- ------------- ---------------------------------------- -----------------------------
30 Sep
Nigel Jones Rights 9-Feb-22 23 - 0.470 225,000 105,750 -
31 Oct
Rights 9-Feb-22 25 - 0.470 300,000 141,000 -
------------------ ----------- --------- ------------------------------ -------------------------- ------------- ---------------------------------------- -----------------------------
Other KMP
------------ ------------------ ----------- --------- ----------------- -------------------------- ------------- ---------------------------------------- -----------------------------
30 Sep
Frank Eagar Rights 9-Sep-22 23 - 0.440 500,000 220,000 -
31 Oct
Rights 9-Sep-22 25 - 0.440 700,000 308,000 -
30 Sep
Paul Marcos Rights 6-Sep-21 23 - 0.545 450,000 245,250 -
31 Oct
Rights 6-Sep-21 25 - 0.545 750,000 408,750 -
------------------ ----------- --------- ------------------------------ -------------------------- ------------- ---------------------------------------- -----------------------------
30 Sep
Sam Cordin Rights 20-Dec-22 23 - 0.410 90,000 36,900 -
31 Oct
Rights 20-Dec-22 25 - 0.410 120,000 49,200 -
------------------ ----------- --------- ------------------------------ -------------------------- ------------- ---------------------------------------- -----------------------------
Notes:
(i) The fair value of the unlisted performance rights as at
grant date is consistent with the closing share price of the
Company as at that date.
(ii) Each unlisted performance right converts into one ordinary
share of Sovereign Metals Limited subject to the performance
conditions being met;
(iii) The vesting conditions are performance conditions as follows:
a. Pre-Feasibility Study Milestone means announcement on or
before 30 September 2023, of a positive Pre-Feasibility Study for
the Malawi Rutile Project in accordance with the provisions of the
JORC Code which demonstrates, a) a minimum net present value of
US$1,000M (using a minimum discount rate of 8%), b) a minimum life
of mine of years; and c) a minimum internal rate of return of
25%.
b. Definitive Feasibility Milestone means announcement on or
before 31 October 2025, of a positive Definitive Feasibility Study
for the Malawi Rutile Project in accordance with the provisions of
the JORC Code which demonstrates, a) a minimum net present value of
US$1,000M (using a minimum discount rate of 8%), b) a minimum life
of mine of years; and c) a minimum internal rate of return of
25%.
The performance rights will also immediately vest if a change of
control event or financing event occurs in respect of the shares
and/or assets of the Company.
Details of the value of unlisted securities granted, lapsed or
converted for each KMP of the Company or Group during the financial
year are as follows:
Value of Percentage
Value of Options Value of Value of
Options and Options Options and Remuneration
No. of and Rights and Rights for the
options Rights Exercised Rights included in Period that
No. of No. of & rights Granted During Lapsed Remuneration Consists of
options options cancelled/ During the During for the Options and
& rights & rights lapsed the Year Year(i) the Year Period Rights
2023 granted # vested # # $ $ $ $ %
------------ ----------- ----------- ------------ ---------- ---------- ---------- ------------- -------------
Directors
Benjamin
Stoikovich 360,000 - - 165,600 - - 184,988 47
Julian
Stephens - - - - - - 216,135 51
Mark Pearce - - - - - - 111,705 83
Nigel Jones - - - - - - 105,836 53
Other KMP
Frank Eagar 1,200,000 - - 528,000 - - 214,674 50
Paul Marcos - - - - - - 214,237 47
Sam Cordin 210,000 - - 86,100 - - 120,432 42
------------ ----------- ----------- ------------ ---------- ---------- ---------- ------------- -------------
Notes:
(i) Determined at the time of exercise or conversion at the intrinsic value.
Loans to/from KMP
No loans were provided to or received from KMP during the year
ended 30 June 2023 (2022: Nil).
Ordinary Shareholdings of KMP
Purchases/Sell Net Other Change Held at 30 June 2023
Held at 1 July 2022 Granted as compensation On Exercise of Options/ Rights (#) (#)
2023 (#) (#) (#) (#)
------------ --------------------- ------------------------- -------------------------------- ---------------- ------------------ ----------------------
Directors
Benjamin
Stoikovich 3,590,000 - - - - 3,590,000
Julian
Stephens 15,657,518 - - - - 15,657,518
Ian
Middlemas 16,100,000 - - - - 16,100,000
Mark Pearce 4,295,842 - - - - 4,295,842
Nigel Jones - - - - - -
Other KMP
Frank Eagar - (i) - - - - -
Paul Marcos 300,000 - - - - 300,000
Sam Cordin 4,079,413 - - - - 4,079,413
------------ --------------------- ------------------------- -------------------------------- ---------------- ------------------ ----------------------
Notes:
(i) As at date of appointment.
Other Transactions with KMP
Selwyn Capital Limited ("Selwyn"), a company associated with Mr
Stoikovich is engaged under an agreement to provide consulting
services to the Company, on a rolling 12-month term that either
party may terminate with one month written notice. Selwyn receives
a daily rate of GBP1,000 under the consulting agreement. These
services provided during the financial year amounted to $117,254
(2022: $124,703).
Apollo Group Pty Ltd, a company of which Mr Mark Pearce is a
Director and beneficial shareholder, was paid, or is payable,
$348,000 (2022: $300,000) for the provision of serviced office
facilities, administration services and additional consulting
services provided during the year. Effective 1 July 2023, the
monthly fee has been increased to $31,000. The amount is based on a
monthly retainer due and payable in advance and able to be
terminated by either party with one month's notice.
Employment Contracts with KMP
Dr Julian Stephens, Managing Director, has a letter of
appointment confirming the terms and conditions of his appointment
as Managing Director of the Company dated 27 June 2016. The
contract specifies the duties and obligations to be fulfilled by
the Managing Director. The contract has a rolling annual term and
may be terminated by the Company by giving 3 months' notice. No
amount is payable in the event of termination for neglect or
incompetence in regards to the performance of duties. As agreed by
the Board, Dr Stephens' annual salary was increased to $350,000
plus superannuation with an annual bonus of up to $120,000 payable
in two equal instalments upon successful completion of KPIs as
determined by the Board.
Mr Frank Eagar, General Manager - Africa, has a letter of
employment confirming the terms and conditions of his appointment
dated 9 September 2022. The contract specifies the duties and
obligations to be fulfilled by the General Manager - Africa. The
letter of employment has no fixed term and can be terminated by
either party by giving 3 months' notice. No amount is payable in
the event of termination for neglect or incompetence in regards to
the performance of duties. Mr Eagar receives a salary of
US$252,000.
Mr Paul Marcos, Head of Project Development, has a letter of
employment confirming the terms and conditions of his appointment
dated 14 May 2021. The contract specifies the duties and
obligations to be fulfilled by the Head of Project Development. The
letter of employment has no fixed term and can be terminated by
either party by giving 3 months' notice. No amount is payable in
the event of termination for neglect or incompetence in regards to
the performance of duties. Mr Marcos receives a salary of $270,000
plus superannuation with an annual bonus of $50,000 payable upon
successful completion of KPIs as determined by the Board.
Mr Sam Cordin, Business Development Manager, has a letter of
employment confirming the terms and conditions of his appointment
dated 9 August 2018. The contract specifies the duties and
obligations to be fulfilled by the Business Development Manager.
The letter of employment has no fixed term and can be terminated by
either party by giving 3 months' notice. No amount is payable in
the event of termination for neglect or incompetence in regards to
the performance of duties. Mr Cordin receives an annual salary of
$205,000 plus superannuation with an annual bonus of up to $50,000
payable in two equal instalments upon successful completion of KPIs
as determined by the Board.
All Directors have a letter of appointment confirming the terms
and conditions of their appointment as a Director.
End of Remuneration Report
PROCEEDINGS ON BEHALF OF COMPANY
No person has applied for leave of court to bring proceedings on
behalf of the Company or intervene in any proceedings to which the
Company is a part for the purpose of taking responsibility on
behalf of the Company for all or any part of those proceedings. The
Company was not a party to any such proceedings during the
year.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The Group's operations are subject to various environmental laws
and regulations under the relevant government's legislation. Full
compliance with these laws and regulations is regarded as a minimum
standard for all operations to achieve. Instances of environmental
non-compliance by an operation are identified either by external
compliance audits or inspections by relevant government
authorities.
There have been no significant known breaches by the Group
during the financial year.
INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS
The Company has entered into Deeds of Indemnity with the
Directors indemnifying them against certain liabilities and costs
to the extent permitted by law.
The Group has paid, or agreed to pay, a premium in respect of
Directors' and Officers' Liability Insurance and Company
Reimbursement policies for the 12 months ended 30 June 2023 and
2022, which cover all Directors and officers of the Group against
liabilities to the extent permitted by the Corporations Act 2001.
The policy conditions preclude the Group from any detailed
disclosures including the premium amount paid.
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young, as part of the terms of
its audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount). No payment has
been made to indemnify Ernst & Young during or since the
financial year.
NON-AUDIT SERVICES
During the financial year, the Company's current auditor, Ernst
& Young (or by another person or firm on the auditor's behalf)
provided non-audit services relating to income tax preparation and
advice, totalling $64,141 (2022: $14,214). The Directors are
satisfied that the provision of non-audit services is compatible
with the general standard of independence for auditors imposed by
the Corporations Act. The nature and scope of the non-audit
services provided means that auditor independence was not
compromised.
AUDITOR'S INDEPENCE DECLARATION
The lead auditor's independence declaration for the year ended
30 June 2023 has been received and can be found on page 20 of the
Directors' Report.
This report is made in accordance with a resolution of the
Directors made pursuant to section 298(2) of the Corporations Act
2001.
For and on behalf of the Directors
JULIAN STEPHENS
Managing Director
Perth, 29 September 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE YEARED 30 JUNE 2023
2023 2022
$ $
-------------------------------------- --- ------------ ------------
Continuing Operations
Interest Income 268,967 33,117
Other income/(expenses) 97,412 (65,992)
Exploration and evaluation expenses (10,627,458) (8,072,133)
Corporate and administrative
expenses (859,360) (708,278)
Share-based payment expenses (2,083,592) (2,941,985)
Business development expenses (2,096,822) (1,964,460)
Gain on demerger of NGX Limited 9,480,980 -
Loss before income tax (5,819,873) (13,719,731)
Income tax expense - -
Loss for the year (5,819,873) (13,719,731)
=========================================== ============ ============
Loss attributable to members
of the parent (5,819,873) (13,719,731)
=========================================== ============ ============
Other Comprehensive loss, net
of income tax:
Items that may be reclassified
subsequently to profit or loss
Exchange differences on foreign
entities (51,803) (63,362)
Other comprehensive loss for
the year, net of income tax (51,803) (63,362)
------------------------------------------- ------------ ------------
Total comprehensive loss for
the year (5,871,676) (13,783,093)
=========================================== ============ ============
Total comprehensive loss attributable
to members of Sovereign Metals
Limited (5,871,676) (13,783,093)
=========================================== ============ ============
Basic and diluted loss per share
from continuing operations (cents
per share) (1.24) (3.17)
------------------------------------------- ------------ ------------
The above Consolidated Statement of Profit or Loss and Other
Comprehensive Income should be read in conjunction with the
accompanying notes in the full version of the Annual Report
available at www.sovereignmetals.com.au .
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
2023 2022
$ $
----------------------------------- --- ------------ ------------
Current Assets
Cash and cash equivalents 5,564,376 18,892,741
Other receivables 286,484 302,424
Other financial assets 420,000 200,000
Total Current Assets 6,270,860 19,395,165
---------------------------------------- ------------ ------------
Non-current Assets
Property, plant and equipment 532,039 537,238
Exploration and evaluation assets 5,086,129 7,170,282
Total Non-current Assets 5,618,168 7,707,520
---------------------------------------- ------------ ------------
TOTAL ASSETS 11,889,028 27,102,685
---------------------------------------- ------------ ------------
Current Liabilities
Trade and other payables 2,063,838 1,845,954
Provisions 152,621 95,593
Total Current Liabilities 2,216,459 1,941,547
---------------------------------------- ------------ ------------
TOTAL LIABILITIES 2,216,459 1,941,547
---------------------------------------- ------------ ------------
NET ASSETS 9,672,569 25,161,138
======================================== ============ ============
EQUITY
Contributed equity 74,508,488 78,860,187
Reserves (3,320,226) 1,996,771
Accumulated losses (61,515,693) (55,695,820)
---------------------------------------- ------------ ------------
TOTAL EQUITY 9,672,569 25,161,138
======================================== ============ ============
The above Consolidated Statement of Financial Position should be
read in conjunction with the
accompanying notes in the full version of the Annual Report
available at www.sovereignmetals.com.au .
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
2023 2022
$ $
---------------------------------------------- --- ------------ ------------
Cash flows from operating activities
Interest received 281,287 20,416
Payments to suppliers and employees (13,096,569) (10,036,070)
Net cash used in operating activities (12,815,282) (10,015,654)
--------------------------------------------------- ------------ ------------
Cash flows from investing activities
Payments for purchase of plant and equipment (80,528) (313,405)
Repayment of loan receivable from NGX
Limited 271,509 -
Movement in cash on deconsolidation of
subsidiary (131,255) -
Net cash from/(used) in investing activities 59,726 (313,405)
--------------------------------------------------- ------------ ------------
Cash flows from financing activities
Proceeds from issue of shares - 21,811,772
Share issue costs (600,221) (498,640)
Funds received in advance for exercise
of options - 27,000
--------------------------------------------------- ------------ ------------
Net cash (used)/from financing activities (600,221) 21,340,132
--------------------------------------------------- ------------ ------------
Net (decrease)/increase in cash and cash
equivalents (13,355,776) 11,011,073
Net foreign exchange differences 27,411 (75,992)
Cash and cash equivalents at the beginning
of the financial year 18,892,741 7,957,660
--------------------------------------------------- ------------ ------------
Cash and cash equivalents at the end
of the financial year 5,564,376 18,892,741
=================================================== ============ ============
The above Consolidated Statement of Cash Flows should be read in
conjunction with the accompanying notes in the full version of the
Annual Report available at www.sovereignmetals.com.au .
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
Balance at 1
July 2022 78,860,187 2,084,466 - (87,695) (55,695,820) 25,161,138
Net loss for the
year - - - - (5,819,873) (5,819,873)
Other comprehensive
loss
Foreign currency
translation - - - (38,079) - (38,079)
Reclassification
of foreign currency
translation - - - (13,724) - (13,724)
------------------------ ------------ ------------ ------------ ---------- ------------- -------------
Total comprehensive
loss for the year - - - (51,803) (5,819,873) (5,871,676)
------------------------ ------------ ------------ ------------ ---------- ------------- -------------
Transactions
with owners recorded
directly in equity
Issue of Ordinary
Shares upon exercise
of options 27,000 - - - - 27,000
Share issue costs (212,693) - - - - (212,693)
Transfer from
SBP Reserve 12,108 (12,108) - - - -
In-specie distribution
on demerger of
NGX Limited (4,178,114) - (7,336,678) - - (11,514,792)
Share-based payments
expense - 2,083,592 - - - 2,083,592
Balance at 30
June 2023 74,508,488 4,155,950 (7,336,678) (139,498) (61,515,693) 9,672,569
------------------------ ------------ ------------ ------------ ---------- ------------- -------------
Balance at 1
July 2021 55,276,410 1,800,267 - (24,333) (41,976,089) 15,076,255
Net loss for the
year - - - - (13,719,731) (13,719,731)
Other comprehensive
loss
Foreign currency
translation - - - (63,362) - (63,362)
------------------------ ------------ ------------ ------------ ---------- ------------- -------------
Total comprehensive
loss for the year - - - (63,362) (13,719,731) (13,783,093)
------------------------ ------------ ------------ ------------ ---------- ------------- -------------
Transactions
with owners recorded
directly in equity
Placement of Ordinary
Shares 16,738,022 - - - - 16,738,022
Issue of Ordinary
Shares upon exercise
of options 5,193,750 - - - - 5,193,750
Share issue costs (1,005,781) - - - - (1,005,781)
Transfer from
SBP Reserve 2,657,786 (2,657,786) - - - -
Share-based payments
expense - 2,941,985 - - - 2,941,985
Balance at 30
June 2022 78,860,187 2,084,466 - (87,695) (55,695,820) 25,161,138
------------------------ ------------ ------------ ------------ ---------- ------------- -------------
The above Consolidated Statement of Changes in Equity should be
read in conjunction with the
accompanying notes in the full version of the Annual Report
available at www.sovereignmetals.com.au .
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END
FR EAFNNASKDEEA
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