REG - Sovereign Metals Ltd - Half Year Accounts
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RNS Number : 6271V Sovereign Metals Limited 06 March 2026
INTERIM FINANCIAL REPORT
FOR THE HALF YEAR ENDED
31 DECEMBER 2025
abn 71 120 833 427
ASX: SVM; aim:SVML; OTCQX: SVMlf
CORPORATE DIRECTORY
Directors Nominated Advisor & Broker
Mr Benjamin Stoikovich Chairman
SP Angel Corporate Finance LLP
Mr Frank Eagar Managing Director
and CEO Prince Frederick House
Mr Ian Middlemas Non-Executive Director 35-39 Maddox Street
Dr Julian Stephens Non-Executive Director London W1S 2PP, United Kingdom
Mr Mark Pearce Non-Executive Broker
Director
Stifel Nicolaus Europe Limited
Mr Nigel Jones Non-Executive Director 150 Cheapside
London EC2V 6ET
CFO and Company Secretary United Kingdom
Mr Dylan Browne
T: +44 20 7710 7600
London Office
Unit 3C, 38 Jermyn Street, London Share Register
SW1Y 6DN, United Kingdom Australia
Telephone: +44 207 478 3900
Computershare Investor Services Pty Ltd
Level 17
221 St Georges Terrace
Cape Town Office
Perth WA 6000
Telephone: 1300 850 505
Ground Floor, Block C,
International: +61 8 9323 2000
The Terraces, Steenberg Office Park
Facsimile: +61 8 9323 2033
Cape Town, South Africa
Telephone: +27 21 065 1890
United Kingdom
Computershare Investor Services PLC
Operations Office
The Pavilions,
Bridgewater Road,
Area 4
Bristol BS99 6ZZ
Telephone: +44 370 702 0003
Lilongwe
Malawi
Solicitors
Thomson Geer
Simmons & Simmons
Registered and Principal Office
Level 9, 28 The Esplanade
Perth WA 6000
Telephone: +61 8 9322 6322 Auditor
Ernst & Young - Perth
Stock Exchange Listings
Australia
Australian Securities Exchange Bankers
ASX Code: SVM - Ordinary Shares Australia - National Australia Bank Limited
Australia - Australia and New Zealand Banking Group Ltd
United Kingdom
Malawi - Standard Bank
London Stock Exchange (AIM)
AIM Code: SVML - Depository Interests
Quotations
United States
OTCQX Best Market
OTCQX code: SVMLF
CONTENTS
Directors' Report
Consolidated Statement of Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors' Declaration
Competent Person Statement
Auditor's Independence Declaration
Independent Auditor's Review Report
The Directors of Sovereign Metals Limited present their report on Sovereign
Metals Limited (Sovereign or the Company or Parent) and the entities it
controlled at the end of, or during, the half year ended 31 December 2025
(Consolidated Entity or Group).
REVIEW AND RESULTS OF OPERATIONS
KASIYA RUTILE-GRAPHITE PROJECT
Sovereign is focused on the development of its Kasiya rutile-graphite project
(Kasiya or the Project) in Malawi to become a leading global supplier to the
titanium and graphite industries. Kasiya is the world's largest natural rutile
deposit - the purest, highest-grade naturally occurring titanium feedstock -
and the world's second-largest flake graphite deposit - a battery mineral
essential for the Energy Transition.
Figure 1: Kasiya Regional Project Location
Sovereign discovered Kasiya in 2019 after identifying the potential of a new
rutile province in Malawi. Today, Kasiya stands out as the world's largest
known natural rutile deposit and second largest known flake graphite deposit
and holds the accolade of one of only 11 Tier 1 mining projects discovered in
the last decade (source MinEx Consulting, "Exploration: Australia vs The
World, October 2023).
An Optimised Pre-Feasibility Study (OPFS), completed last year, reaffirmed
Kasiya's potential to become a large, low-cost producer of strategic minerals.
Sovereign is now advancing the Definitive Feasibility Study (DFS).
OPERATIONS
Project Vault Participant Traxys Signs Offtake MOU For Kasiya Graphite
· Subsequent to the period end, non-binding Memorandum of
Understanding (MOU) signed with Traxys North America for the marketing of
graphite from Kasiya
· Traxys is one of only three trading houses appointed to
procure critical minerals for the US Government's US$12 billion Project Vault
- the newly launched US Strategic Critical Minerals Reserve
· Graphite is designated a US Critical Mineral by the US
Geological Survey and is among the 60 minerals targeted under the stockpiling
initiative
· MOU targets 40,000 tonnes per annum of graphite
concentrate for Stage 1 (Years 1-5) and up to 80,000 tonnes per annum
thereafter
· Initial focus to be on high-value flake graphite for the
refractory market, with potential to include flake graphite to serve battery
anode supply chains
Strategic Rare Earths Recovered at Kasiya
· Sovereign recovers heavy rare earth monazite
concentrate from Kasiya rutile tailings stream
· Preliminary analysis confirms Kasiya monazite to contain
exceptionally elevated levels of heavy rare earth elements Dysprosium -
Terbium (DyTb) and Yttrium, materially exceeding those of the five largest
producers globally, which account for 70% of the world's rare earth production
· DyTb and Yttrium are of paramount importance to nations
seeking to secure and protect rare earth supply chains
o DyTb: heavy magnet rare earths essential for high-temperature
permanent magnets used in advanced technology, including defence systems and
precision weapons
o Yttrium: high-impact rare earth element critical for aerospace,
thermal barrier coatings, radar and laser systems, alloy strengthening and
semiconductor manufacturing
· Monazite by-product has potential to add third revenue
stream to Kasiya for near-zero incremental cost, with basic monazite
concentrate currently selling for over US$8,500/t delivered to China
World Bank Group's IFC to Collaborate with Sovereign on Sustainable
Development for Kasiya
· Collaboration Agreement signed with International Finance
Corporation (IFC), a member of the World Bank Group, to support the
sustainable development of Kasiya
· Collaboration with IFC - world's largest global
development institution - is expected to lay the foundation for international
project financing for Kasiya
· IFC to provide Environmental & Social expertise,
supplementing Rio Tinto's significant input. The Kasiya DFS and Environmental
and Social Impact Assessment (ESIA) will seek to integrate IFC's Performance
Standards on Environmental and Social Sustainability
(https://www.ifc.org/en/insights-reports/2012/ifc-performance-standards)
· IFC secures financing rights to fund Kasiya: right to
act as lender, mandated co-lead arranger, and/or investor in securities for
project financing. IFC's financing rights are subject to Rio Tinto's rights
under the Investment Agreement
Kasiya's Growing Strategic Importance Emphasised During and Subsequent to
Period
· During the period, the US State Department's Deputy Assistant
Secretary Nick Checker visited Sovereign's facilities in Malawi as part of a
broader engagement with strategically significant critical minerals projects
in Africa
· The U.S. Government remains committed to partnering with
Malawi to promote trade and investment for shared prosperity
· In January 2026, China announced strengthened export controls on
dual-use items to Japan, effective immediately. Beijing is tightening export
licensing for heavy rare earths including dysprosium, terbium, and yttrium
· Monazite by-product complements Kasiya's rutile and graphite -
three critical minerals serving Western defence and clean energy supply chains
from a single operation
Various Critical Components of DFS now complete
· Geotechnical investigations successfully completed across
all critical infrastructure locations with oversight from the Sovereign-Rio
Tinto Technical Committee confirming favourable subsurface conditions aligned
with regional geology
o Over 400 individual tests conducted covering mining infrastructure,
tailings storage facility and raw water dam
o Consistent stratigraphy and suitable subsurface conditions to enable
more standardised foundation designs and construction approaches across
infrastructure areas
· Mining fleet specifically engineered for large-scale
dry mining operations following the results of the successful Pilot Mining and
Land Rehabilitation (Pilot Phase).
o No drilling, blasting, crushing or milling required at Kasiya
resulting in low capital outlays and operating costs
o Equipment selection and supplier identification completed for all
operational requirements across the proposed initial 25-year mine life
· Rehabilitation of land at Pilot Phase test pit site
successfully completed during the period, further de-risking DFS
o Exceptional first-year results from its rehabilitation trials at the
Kasiya, delivering critical data that will inform the progressive
rehabilitation strategy for the ongoing DFS
o Rehabilitation trials achieved 5x crop yield improvement -
demonstrating superior post-mining land productivity versus traditional
farming
Next Steps
During the period, various new workstreams were incorporated into the DFS with
completion of the DFS expected in the coming months. These included an
enhanced focus on plant design and configuration, as well as environmental and
social impact workstreams, including the integration of IFC's Performance
Standards to support delivery of a DFS that is bankable. These workstreams
have been included in the DFS work program to ensure it meets many of the
requirements of potential future lenders, including development finance
institutions, export credit agencies and potential future offtakers.
Over the coming months, the Company will also continue to update stakeholders
regarding progress at Kasiya, including:
· Mineral Resource Estimate update;
· Active discussions with US-based and "allied-nation"
offtakers of rutile and graphite;
· Detailed mineralogical characterisation of monazite
occurrence and distribution within the Kasiya orebody;
· Assessment of heavy rare earth concentrate recovery
rates through the proposed Kasiya processing flowsheet;
· Evaluation of potential scale of rare earth production
as a by-product and associated economics;
· Environmental and social impact assessments including
the integration of IFC's Performance Standards; and
· Infrastructure and logistics planning.
DIRECTORS
The names of Directors in office at any time during the financial period or
since the end of the financial period are:
Mr Benjamin Stoikovich Chairman
Mr Frank Eagar Managing Director and
CEO
Mr Ian Middlemas Non-Executive Director
Dr Julian Stephens Non-Executive Director
Mr Mark Pearce Non-Executive Director
Mr Nigel Jones Non-Executive Director
All Directors were in office from 1 July 2025 until the date of this report,
unless otherwise noted.
OPERATING RESULTS
The net operating loss after tax for the half year ended 31 December 2025 was
$8,986,797 (2024: $19,546,116) which is attributable to:
(i) Interest income of $902,176 (2024: $1,025,751) earned on
cash term deposits held by the Group;
(ii) Exploration and evaluation expenditure of $16,098,372
(2024: $16,495,513) in relation to the Kasiya Project. 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;
(iii) Non-cash share based payment benefit of $7,750,775 (2024:
expense $1,904,852) relating to performance rights. The fair value of
incentive options and rights is measured at grant date and recognised over the
period during which the performance rights holders become unconditionally
entitled to the incentive securities. During the period it was determined that
4,992,500 and 6,190,000 performance rights that expire on 31 March 2026 and on
30 June 2026 respectively will lapse unvested on the relevant expiry date as
the milestones have been determined to be unachievable prior to their expiry
date which has resulted in the share based payment benefit being recognised
in the period; and
(iv) Business development expenses of $815,461 (2024: $1,004,695)
which includes the Group's investor and shareholder relations activities
including but not limited to public relations costs, marketing and digital
marketing, broker and advisor fees, business development consultant fees and
costs of the Group's ASX and AIM listings.
FINANCIAL POSITION
At 31 December 2025, the Company had cash and cash equivalents of $33,937,352
(30 June 2025: $54,538,435) and no debt (30 June 2025: nil). The Company had
net assets of $38,704,181 (30 June 2025: $55,387,701), a decrease of
$16,683,520 or approximately 30% compared with the prior period. This is
largely attributable to the decrease in cash reserves relating to exploration
and evaluation spend on the Project to complete the DFS.
SIGNIFICANT POST BALANCE DATE EVENTS
(i) On 21 January 2026, Sovereign announced that it had
recovered heavy rare earth monazite concentrate from Kasiya rutile tailings
stream. Preliminary analysis confirmed Kasiya monazite to contain
exceptionally elevated levels of heavy rare earth elements DyTb and Yttrium,
materially exceeding those of the five largest producers globally, which
account for 70% of the world's rare earth production;
(ii) On 17 February 2026, Sovereign announced that it had signed
non-binding MOU with Traxys North America for the marketing of graphite from
Kasiya which targeted 40,000 tonnes per annum of graphite concentrate for
Stage 1 (Years 1-5) and up to 80,000 tonnes per annum thereafter; and
(iii) Issue of 9,022,500 Bankable DFS Milestone Performance
Rights, expiring on 30 June 2026, and 13,326,500 Finance Milestone Performance
Rights, expiring on 30 June 2028, to directors, key employees and contractors.
Other than as disclosed above, there are no other matters or circumstances
which have arisen since 31 December 2025 that have significantly affected or
may significantly affect:
· the operations, in periods subsequent to 31 December 2025, of
the Group;
· the results of those operations, in periods subsequent to 31
December 2025, of the Group; or
· the state of affairs, in periods subsequent to 31 December 2025, of
the Group.
AUDITOR'S INDEPENDENCE DECLARATION
Section 307C of the Corporations Act 2001 requires our auditors, Ernst &
Young, to provide the directors of Sovereign Metals Limited with an
Independence Declaration in relation to the review of the half year financial
report. This Independence Declaration is on page 15 and forms part of this
Directors' Report.
This report is made in accordance with a resolution of the directors made
pursuant to section 306(3) of the Corporations Act 2001.
For and on behalf of the Directors
Frank Eagar
Managing Director and CEO
5 March 2026
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE HALF YEAR ENDED 31 DECEMBER 2025
Notes Half Year Ended Half Year Ended
31 December 2025
31 December 2024
$
$
Interest income 902,176 1,025,751
Other income/(expenses) 3 22,841 (386,877)
Exploration and evaluation expenses (16,098,372) (16,495,513)
Corporate and administrative expenses (748,756) (779,930)
Business development expenses (815,461) (1,004,695)
Share based payment benefit/(expense) 9(a) 7,750,775 (1,904,852)
Loss before income tax (8,986,797) (19,546,116)
Income tax expense - -
Loss for the period (8,986,797) (19,546,116)
Other comprehensive income, net of income tax:
Items that may be reclassified subsequently to profit or loss
Exchange differences on foreign entities 54,052 80,624
Other comprehensive income for the period, net of income tax 54,052 80,624
Total comprehensive loss for the period (8,932,745) (19,465,492)
Loss attributable to members of Sovereign Metals Limited (8,932,745) (19,465,492)
Total comprehensive loss attributable to members of Sovereign Metals Limited (8,932,745) (19,465,492)
Basic and diluted loss per share from continuing operations (cents per share) (1.4) (3.3)
The above Consolidated Statement of Profit or Loss and Other Comprehensive
Income should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2025
Notes 31 December 2025 30 June 2025
$
$
ASSETS
Current Assets
Cash and cash equivalents 33,937,352 54,538,435
Other receivables 4 2,247,387 1,771,002
Other financial assets 140,000 105,000
Total Current Assets 36,324,739 56,414,437
Non-current Assets
Property, plant and equipment 5 1,754,235 1,852,383
Exploration and evaluation assets 6 5,086,129 5,086,129
Total Non-current Assets 6,840,364 6,938,512
TOTAL ASSETS 43,165,103 63,352,949
LIABILITIES
Current Liabilities
Trade and other payables 7 4,221,203 7,749,922
Provisions 168,041 125,582
Other financial liabilities 8(a) 55,566 46,621
Total Current Liabilities 4,444,810 7,922,125
Non-Current Liabilities
Other financial liabilities 8(b) 16,112 43,123
Total Non-Current Liabilities 16,112 43,123
TOTAL LIABILITIES 4,460,922 7,965,248
NET ASSETS 38,704,181 55,387,701
EQUITY
Issued capital 174,800,846 174,800,846
Reserves 9 (6,552,942) 1,143,781
Accumulated losses (129,543,723) (120,556,926)
TOTAL EQUITY 38,704,181 55,387,701
The above Consolidated Statement of Financial Position should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF YEAR ENDED 31 DECEMBER 2025
Issued Capital Share Based Payment Reserve Demerger Reserve Foreign Currency Translation Reserve Accumulated Losses Total Equity
$
$
$
$
$ $
Balance at 1 July 2025 174,800,846 7,915,683 (7,336,678) 564,776 (120,556,926) 55,387,701
Net loss for the period - - - - (8,986,797) (8,986,797)
Other comprehensive income - - - 54,052 - 54,052
Total comprehensive income/(loss) for the period - - - 54,052 (8,986,797) (8,932,745)
Transactions with owners, recorded directly in equity
Expiry of unvested performance rights - (4,676,816) - - - (4,676,816)
Lapse of unvested performance rights - (3,238,864) - - - (3,238,864)
Share based payment expense - 164,905 - - - 164,905
Balance at 31 December 2025 174,800,846 164,908 (7,336,678) 618,828 (129,543,723) 38,704,181
Balance at 1 July 2024 117,835,631 3,605,751 (7,336,678) 370,657 (80,116,587) 34,358,774
Net loss for the period - - - - (19,546,116) (19,546,116)
Other comprehensive income - - - 80,624 - 80,624
Total comprehensive income/(loss) for the period - - - 80,624 (19,546,116) (19,465,492)
Transactions with owners, recorded directly in equity
Issue of placement shares 19,174,395 - - - - 19,174,395
Cancelation of unvested performance rights (22,754) (22,754)
Share based payment expense - 1,927,606 - - - 1,927,606
Share issue costs (44,535) - - - - (44,535)
Balance at 31 December 2024 136,965,491 5,510,603 (7,336,678) 451,281 (99,662,703) 35,927,994
The above Consolidated Statement of Changes in Equity should be read in
conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 31 DECEMBER 2025
Half Year Ended Half Year Ended
31 December 2025
31 December 2024
$
$
Cash flows from operating activities
Payments to suppliers and employees - exploration and evaluation (19,168,252) (15,479,030)
Payments to suppliers and employees - other (2,568,103) (1,764,767)
Interest received 1,324,422 1,031,209
Net cash used in operating activities (20,411,933) (16,212,588)
Cash flows from investing activities
Payments for purchase of plant and equipment (110,796) (916,061)
Net cash used in investing activities (110,796) (916,061)
Cash flows from financing activities
Proceeds from issue of shares - 19,174,395
Payments for share issue costs - (44,535)
Payments for finance lease (66,195) (31,777)
Net cash (used in)/from financing activities (66,195) 19,098,083
Net (decrease)/increase in cash and cash equivalents (20,588,924) 1,969,434
Net foreign exchange differences (12,159) (1,875)
Cash and cash equivalents at the beginning of the period 54,538,435 31,564,130
Cash and cash equivalents at the end of the period 33,937,352 33,531,689
The above Consolidated Statement of Cash Flows should be read in conjunction
with the accompanying notes.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF YEAR ENDED 31 DECEMBER 2025
1. MATERIAL ACCOUNTING POLICY INFORMATION
Sovereign Metals Limited (the "Company") is a for profit company limited by
shares and incorporated in Australia, whose shares are publicly traded on the
Australian Securities Exchange, the AIM Market of the London Stock Exchange
and a Quotation on OTCQX in the U.S. The consolidated interim financial
statements of the Company as at and for the period from 1 July 2025 to 31
December 2025 comprise the Company and its subsidiaries (together referred to
as the "Group"). The nature of the operations and principal activities of the
Group are as described in the Directors' Report.
This interim financial report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this report is
to be read in conjunction with the audited annual report of Sovereign for the
year ended 30 June 2025 (where comparative amounts have been extracted from)
and any public announcements made by the Group during the interim reporting
period in accordance with the continuous disclosure requirements of the
Corporations Act 2001.
(a) Basis of Preparation of Half Year Financial Report
The consolidated financial statements have been prepared on the basis of
historical cost, except for the revaluation of certain financial instruments.
Cost is based on the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars, unless otherwise
stated. There have been no changes in the critical accounting judgements or
key sources of estimation since 30 June 2025.
(b) Statement of Compliance
The consolidated interim financial report complies with Australian Accounting
Standards, including AASB 134 which ensures compliance with International
Financial Reporting Standard ("IFRS") IAS 34 "Interim Financial Reporting" as
issued by the International Accounting Standards Board. The accounting
policies adopted in the preparation of the half-year financial report are
consistent with those applied in the preparation of the Group's annual
financial report for the year ended 30 June 2025 and the comparative
half-year, except for new standards, amendments to standards and
interpretations effective 1 July 2025. In the current half year, the Group has
adopted all of the new and revised Standards and Interpretations issued by the
AASB that are relevant to its operations and effective for the current annual
reporting period. The adoption resulted in no material impact.
(c) Issued standards and interpretations not early adopted
Australian Accounting Standards and Interpretations that have recently been
issued or amended but are not yet effective have not been adopted by the Group
for the reporting period ended 31 December 2025. Those which may be relevant
to the Group are set out in the table below. The impact of these standards are
still being assessed.
Standard/Interpretation Application Date of Standard Application Date for Group
AASB 2024-2 Amendments to AASs - Classification and Measurement of Financial 1 January 2026 1 July 2026
Instruments
AASB 2024-3 Amendments to AASs - Annual Improvements Volume II. Amendments to 1 January 2026 1 July 2026
AASB 1, AASB 7, AASB 9, AASB 10 and AASB 107
AASB 2025-2 Amendments to AASs - Classification and Measurement of Financial 1 January 2026 1 July 2026
Instruments: Tier 2 Disclosures
AASB 18 Presentation and Disclosure in Financial Statements 1 January 2027 1 July 2027
2. SEGMENT INFORMATION
AASB 8 requires operating segments to be identified on the basis of internal
reports about components of the Consolidated Entity that are regularly
reviewed by the chief operating decision maker in order to allocate resources
to the segment and to assess its performance. The Consolidated Entity has one
operating segment, being exploration in Malawi.
3. OTHER INCOME/(EXPENSES)
31 December 2025 31 December 2024
$
$
Foreign exchange loss (12,159) (1,877)
Fair value movements in other financial assets 35,000 (385,000)
22,841 (386,877)
4. CURRENT ASSETS - OTHER RECEIVABLES
31 December 2025 30 June 2025
$
$
Accrued interest 52,311 474,557
GST and VAT receivable 1,885,346 1,229,632
Prepayments 288,884 47,085
Other 20,846 19,728
2,247,387 1,771,002
5. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT
Office Furniture and Equipment Computer Equipment Plant & Equipment Right-of-use assets Assets under construction Total
$ $ $ $ $ $
Carrying amount at 1 July 2025 167,091 88,010 1,476,380 76,944 43,958 1,852,383
Additions 13,822 4,864 101,368 - (9,258) 110,796
Depreciation charge (19,683) (20,784) (130,983) (22,565) - (194,015)
Foreign exchange differences (1,185) 55 (16,886) 3,693 (606) (14,929)
Carrying amount at 31 December 2025 160,045 72,145 1,429,879 1,754,235
58,072 34,094
At cost 255,392 188,995 2,297,400 134,091 34,700 2,910,578
Accumulated depreciation, amortisation and impairment (95,347) (116,850) (867,521) (76,019) (606) (1,156,343)
6. EXPLORATION AND EVALUATION ASSETS
31 December 2025 30 June 2025
$
$
(a) Movement in Exploration and Evaluation Assets
Kasiya Rutile-Graphite Project:
Carrying amount as at 1 July 5,086,129 5,086,129
Carrying amount ((i)) 5,086,129 5,086,129
Note:
(i) The ultimate recoupment of costs carried
forward for exploration and evaluation is dependent on the successful
development and commercial exploitation or sale of the respective areas of
interest.
7. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
31 December 2025 30 June 2025
$
$
Trade creditors 3,440,470 7,207,700
Accrued expenses 780,733 542,222
4,221,203 7,749,922
8. OTHER FINANCIAL LIABILITIES
31 December 2025 30 June 2025
$
$
(a) Current liabilities
Lease Liability((i)) 55,566 46,621
(b) Non-Current liabilities
Lease Liability((i)) 16,112 43,123
Note:
(i) The Company has a lease agreement for the
rental of a property. Refer to Note 5 for the carrying amount of the right of
use asset relating to the lease. The following are amounts recognised in the
Statement of Profit and Loss: (i) amortisation expense of right of use asset
$22,565 (30 June 2025: $43,684); (ii) interest expense on lease liabilities of
$10,093 (30 June 2025: $26,667); and (iii) rent expense of $2,476 (30 June
2025: $1,997).
9. RESERVES
31 December 2025 30 June 2025
$
$
Share-based Payments Reserve (Note 9(a)) 164,908 7,915,683
Foreign Currency Translation Reserve - exchange differences 618,828 564,776
Demerger Reserve (7,336,678) (7,336,678)
(6,552,942) 1,143,781
(a) Movements in Performance Rights were as follows:
Date Details Number of Unlisted Performance Rights $((i))
1 Jul 2025 Opening balance 22,160,000 7,915,683
31 Oct 2025 Expiry of unvested performance rights (10,977,500) (4,676,816)
31 Dec 2025 Lapse of unvested performance rights((ii)) - (3,238,864)
31 Dec 2025 Share based payment expense - 164,905
31 Dec 2025 Closing balance 11,182,500 164,908
Notes
(i) The value of performance rights granted during the period is
estimated as at the grant date based on the underlying share price with the
expense recognised over the vesting period in accordance with Australian
Accounting Standards.
(ii) During the period, it was determined that 4,992,500 and
6,190,000 performance rights that expire on 31 March 2026 and on 30 June 2026
respectively will lapse unvested on the relevant expiry date as the milestones
have been determined to be unachievable prior to their expiry date.
10. COMMITMENTS AND CONTINGENCIES
At the last annual reporting date, the Consolidated Entity did not have any
material commitments and contingent liabilities.
11. DIVIDENDS PAID OR PROVIDED FOR
No dividend has been paid or provided for during the half year (2024: nil).
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The net fair value of financial assets and financial liabilities approximates
their carrying value.
13. SUBSEQUENT EVENTS AFTER BALANCE DATE
(i) On 21 January 2026, Sovereign announced that it had
recovered heavy rare earth monazite concentrate from Kasiya rutile tailings
stream. Preliminary analysis confirmed Kasiya monazite to contain
exceptionally elevated levels of heavy rare earth elements DyTb and Yttrium,
materially exceeding those of the five largest producers globally, which
account for 70% of the world's rare earth production;
(ii) On 17 February 2026, Sovereign announced that it had signed
non-binding MOU with Traxys North America for the marketing of graphite from
Kasiya which targeted 40,000 tonnes per annum of graphite concentrate for
Stage 1 (Years 1-5) and up to 80,000 tonnes per annum thereafter; and
(iii) Issue of 9,022,500 Bankable DFS Milestone Performance
Rights, expiring on 30 June 2026, and 13,326,500 Finance Milestone Performance
Rights, expiring on 30 June 2028, to directors, key employees and contractors.
Other than as disclosed above, there are no matters or circumstances which
have arisen since 31 December 2025 that have significantly affected or may
significantly affect:
· the operations, in periods subsequent to 31 December 2025, of
the Group;
· the results of those operations, in periods subsequent to 31
December 2025, of the Group; or
· the state of affairs, in periods subsequent to 31 December
2025, of the Group.
DIRECTORS' DECLARATION
In accordance with a resolution of the Directors of Sovereign Metals Limited,
I state that:
In the opinion of the Directors:
(a) the financial statements and notes thereto are in accordance
with the Corporations Act 2001, including:
(i) complying with Accounting Standard AASB 134: Interim
Financial Reporting and the Corporations Regulations 2001; and
(ii) giving a true and fair view of the consolidated entity's
financial position as at 31 December 2025 and of its performance for the half
year ended on that date.
(b) there are reasonable grounds to believe that the Company will
be able to pay its debts as and when they become due and payable.
This declaration is signed in accordance with a resolution of the Board of
Directors made pursuant to section 303(5) of the Corporations Act 2001.
On behalf of the Board
Frank Eagar
Managing Director and CEO
5 March 2026
COMPETENT PERSON STATEMENT
The information in this announcement that relates to the exploration results
(metallurgy - monazite) is extracted from an announcement dated 21 January
2026, which is available to view at www.sovereignmetals.com.au. Sovereign
confirms that a) it is not aware of any new information or data that
materially affects the information included in the original announcement; b)
all material assumptions included in the original announcement continue to
apply and have not materially changed; and c) the form and context in which
the relevant Competent Persons' findings are presented in this announcement
have not been materially changed from the original announcement.
The information in this announcement that relates to Production Targets, Ore
Reserves, Processing, Infrastructure and Capital and Operating Costs is
extracted from an announcement dated 22 January 2025, which is available to
view at www.sovereignmetals.com.au. Sovereign confirms that: a) it is not
aware of any new information or data that materially affects the information
included in the original announcement; b) all material assumptions included in
the original announcement continue to apply and have not materially changed;
and c) the form and context in which the relevant Competent Persons' findings
are presented in this announcement have not been materially modified from the
original announcement.
The information in this announcement that relates to the Mineral Resource
Estimate is extracted from Sovereign's 2025 Annual Report and is based on, and
fairly represents information compiled by Mr Richard Stockwell, a Competent
Person, who is a fellow of the Australian Institute of Geoscientists (AIG). Mr
Stockwell is a principal of Placer Consulting Pty Ltd, an independent
consulting company. Sovereign confirms that a) it is not aware of any new
information or data that materially affects the information included in the
original announcement; b) all material assumptions included in the 2025 Annual
Report continue to apply and have not materially changed; and c) the form and
context in which the relevant Competent Persons' findings are presented in
2024 Annual Report have not been materially changed from the disclosure in the
2025 Annual Report
Ore Reserve for the Kasiya Deposit
Classification Tonnes Rutile Grade Contained Rutile Graphite Grade (TGC) (%) Contained Graphite RutEq. Grade*
(Mt)
(%)
(Mt)
(Mt)
(%)
Proved - - - - - -
Probable 538 1.03% 5.5 1.66% 8.9 2.00%
Total 538 1.03% 5.5 1.66% 8.9 2.00%
* RutEq. Formula: Rutile Grade x Recovery (100%) x Rutile Price (US$1,484/t) +
Graphite Grade x Recovery (67.5%) x Graphite Price (US$1,290/t) / Rutile Price
(US$1,484/t). Any minor summation inconsistencies are due to rounding.
Kasiya Total Indicated + Inferred Mineral Resource Estimate at 0.7% rutile
cut-off grade (inclusive of Ore Reserves)
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
All figures are rounded to reflect appropriate level of confidences with any
apparent differences a result of rounding.
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.
AUDITOR'S INDEPENDENCE DECLARATION
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