NEWS RELEASE I 30 APRIL 2025

MARCH 2025 QUARTERLY REPORT

Sovereign Metals Limited (ASX:SVM, AIM:SVML, OTCQX:SVMLF) (Sovereign or the Company) is pleased to provide its quarterly report for the period ended 31 March 2025.

HIGHLIGHTS DURING AND SUBSEQUENT TO THE QUARTER

Optimised PFS Results Reaffirm Kasiya's Globally Strategic Significance

·    In January 2025, the Optimised Prefeasibility Study (OPFS) was completed with oversight from the Sovereign-Rio Tinto Technical Committee. Results of the OPFS reaffirmed Kasiya's potential to become one of the largest and lowest-cost producer of natural rutile and natural flake graphite while generating exceptional economics

·    Various optimisations have led to superior project delivery, operational flexibility, environmental and social outcomes compared to the 2023 Prefeasibility Study (PFS)

Successful Rehabilitation of Kasiya Test Pit

·    During the quarter, rehabilitation of the land at the test pit site mined during the Pilot Mining and Land Rehabilitation (Pilot Phase) substantially progressed. Site backfill completed and soil remediation work concluded in December 2024, with landowners accessing the site through to January 2025 to plant and cultivate crops without missing a planting season

Kasiya Graphite Suitable for >94% of End-Use Markets

·    Test work completed during the quarter has demonstrated that Kasiya graphite is suitable for use in the three key segments that account for over 94% of the ~1.6Mtpa global demand for natural flake graphite-battery anodes, refractories and expanded/expandables

·    Sovereign intends to produce a 96% graphite concentrate at an incremental cost of US$241/t (FOB)

DFS Geotechnical Programs in Progress

·    Subsequent to the quarter, the Company announced that extensive geotechnical investigations are underway at key project infrastructure locations across Sovereign's Kasiya Project. Results will support layout and engineering design for the Kasiya Definitive Feasibility Study (DFS)which is due Q4 2025

Next Steps

·    Over the course of the quarter ending June 2025, Sovereign will continue to advance the DFS, publish an upgrade to the Mineral Resource Estimate (MRE), continue with further graphite testwork and graphite offtake discussions, and further its community and social development programs in Malawi.

Optimised PFS Results Reaffirm Kasiya's Globally Strategic Significance

During the quarter, the Company announced the results of an OPFS for its Kasiya Rutile-Graphite Project (Kasiya or the Project) which was undertaken following a strategic investment by Rio Tinto Mining and Exploration Limited (Rio Tinto) in 2023. Under the Investment Agreement, a joint Technical Committee was established to oversee the development of Kasiya. The OPFS was conducted with oversight from the Sovereign-Rio Tinto Technical Committee.

Following input from various organisations, including internationally recognised, independent consultancies, the Company's owner's team, and subject matter experts from Rio Tinto, the OPFS has reconfirmed Kasiya as a leading global future supplier of strategic critical minerals outside of China.

The OPFS proposes a large-scale, long-life operation to deliver substantial volumes of natural rutile and graphite while generating significant returns. Table 1 below summarises the key findings from the OPFS and includes a comparison to the PFS results released 16 months ago, in September 2023.

It is important to note that the results for the 2023 PFS in Table 1 have not been updated or adjusted for inflation since their release.

*Annual average graphite produced includes 292kt of graphite processed and sold in two years post cessation of active ore mining. Average graphite produced during the 25-year initial mine life only is 240ktpa; total revenue during the same period is US$15,990 million. All rutile is produced and sold during the 25-year initial mine life. Note: All cashflows and costs are presented in US$ real January 2025 terms unless otherwise stated. Operating costs exclude mineral royalties and community development support costs.

Summary of Optimisations

The OPFS optimises seven key areas compared to the 2023 PFS, as summarised below.

Mining Method

The PFS proposed a 25-year initial LOM based on a hydraulic mining process where slurry material would be screened and pumped overland to the processing plants.

Based on findings from the mining trials undertaken as part of the Pilot Phase, the OPFS proposes a large-scale open-pit dry mining operation using draglines and trucking of material to the processing plants. The change in mining method has not changed the initial mine life of 25 years.

Operating Model

The 2023 PFS envisaged mining would take place on a contractor basis.

During the OPFS, Sovereign undertook a trade-off analysis between the following operating options:

·    Fully owner-operated mine with draglines and trucks purchased by the owner

·    Owner-operated mine with draglines and trucks leased by the owner

·    Mining contractor operation using excavators and trucks

Due to the preference for draglines and benefit of flexibility, an owner-operated mine with leased equipment is selected as the preferred operating model.

Plant Configuration

Dry mining Kasiya means the material received at the plant is not pre-wet and pre-scrubbed. Therefore, the OPFS proposes a process plant front end consisting of two scrubbers and two oversize screens per 12Mt plant. No further changes are proposed to the processing plant flowsheet.

Plant Location

Per the 2023 PFS, mining would commence in the southern area of the Kasiya deposit, ramping up to 12Mt per annum (Mtpa) and then scaling up to 24Mtpa in Year 5 by constructing a second plant module in the same area, reaching nameplate capacity by the end of that year.

In Year 10 of production, another new 12Mtpa plant module would be built and commissioned in the northern area of Kasiya, supported by the relocation to the north of one of the southern plants to maintain a steady state of 24Mtpa.

However, the OPFS has determined the most efficient plant locations to be an initial 12Mtpa South Kasiya plant followed by the construction of another 12Mtpa North Kasiya plant in year 5 of production, negating any relocation requirements in later years.

The OPFS maintains the ROM schedule with operations commencing with 12Mtpa of throughput during the first four years of production (Stage 1) and expanding to 24Mtpa in year 5, with full capacity reached by end of year 5 (Stage 2).

Tailings Management

Per the PFS, a conventional process would be used to produce rutile and graphite concentrate with tailings in separate sand and fines streams being pumped to a conventional TSF. Mined out pit areas would be backfilled as part of a rehabilitation process. 

The OPFS proposes maximising backfilling of pits as undertaken during the Pilot Phase and the introduction of mud farming on the TSF to accelerate dewatering. This approach has reduced tailings volumes in the TSF by 44% from 187 Mm³ to 105 Mm³.

Mud farming is a technique used by Rio Tinto at operations such as its 100%-owned Weipa bauxite operations in Queensland, Australia, which has been in production since 1963 and produced 35.1Mt of bauxite in 2023.

Water Management

The PFS proposed that the primary water supply for the Kasiya mining complex would be created by building a water storage dam and collecting run-off water from the greater catchment area. Following the introduction of dry mining and mud farming, the size of the water storage dam proposed in the PFS has been significantly reduced, with less process water required and more process water recovered.

The OPFS mining trials and material deposition tests indicated a water demand of 10.2 Mm³ per annum, almost a 40% decrease in water requirement from the PFS (16.7 Mm³). The effect on the  water storage dam wall could be a reduction in volume from 0.79 Mm³ to 0.57 Mm³ and a reduction in dam wall height from 20 metres to 17 metres.

Power

The 2023 PFS envisaged a hybrid hydro-generated grid power plus solar power system solution.

The Malawi grid reliability has improved since completion of the PFS and is expected to further improve considerably with the commissioning of the country's first HV transmission interconnector to Mozambique in Q2 2025.

This will provide the Project with sufficient power and therefore the OPFS proposes to connect the Project's power system to the hydro-sourced grid network only. This mitigates any risks associated with commissioning a new solar power project and reducing the overall power tariff by eliminating the need for an Independent Power Producer as per the 2023 PFS.

Successful Rehabilitation of Kasiya Test Pit

In March 2025, the Company announced that the  rehabilitation of the land at the test pit mined during the Pilot Phase has been substantially progressed. Soils remediation work was concluded in December 2024 with landowners accessing the site between December 2024 and January 2025 to plant and cultivate crops without missing a planting season.

All soil remediation works as well as planting was done by hand with the use of a grader and tractor to prepare the soils. Sovereign employed the local landowners to work with us in both the soil remediation and planting work, so they were able to directly experience and learn about our rehabilitation work on their land.

Sovereign is working closely with the landowners to ensure that the crops provide a good yield in 2025, while simultaneously testing a variety of rehabilitation crops. This includes the intercropping of giant bamboo with maize, which will be retained by the landowners.

Sovereign is committed to ensuring that all mined-out land is appropriately rehabilitated to support sustainable farming practices after closure. The soil remediation methods aim to revitalise the soils within a two-to-three-year timeframe and to ensure that soils can be sustainably farmed in the long term. The remediation of soil to a depth of 1 metre from surface, will ensure the land can support small-scale or full-commercial farming operations.

Kasiya Graphite Suitable for >94% of End-Use Markets

In February 2025, the Company announced that downstream testwork completed on graphite from Kasiya confirmed that Kasiya's graphite has the key characteristics required for use in refractory applications.

Graphite's key properties for use in refractory applications are its resistance to oxidation, chemical inertness and good thermal conductivity.

Graphite products for refractory applications typically require larger flake sizes than the smaller graphite flake products used to produce battery anode materials. Larger flake size graphite products tend to attract significantly higher prices than smaller flake products.

During the same month, Sovereign announced that further testwork confirmed that Kasiya graphite has the key characteristics required for use in expandable (fire retardant) and expanded (gaskets, seal, and brake lining) applications.

Sovereign had previously announced in 2024 that Kasiya graphite had produced outstanding battery anode material. Together with the refractories and expanded/expandables market, Kasiya's graphite is suitable for over 94% of end-use markets.

In Q4 2024, Syrah Resources Limited (the world's largest, publicly listed natural graphite producer outside of China) reported a price for smaller flake graphite concentrate to be used for battery anode production of US$564 per tonne (CIF) based on third-party sales. In December 2024, large flake graphite used in the refractory sector achieved prices of up to US$1,193/t (based on data from Benchmark Mineral Intelligence).

The incremental cost of producing a tonne of graphite from Kasiya under Sovereign's recently announced Optimised Prefeasibility Study is US$241/t (see announcement "Kasiya - Optimised PFS Results" dated 22 January 2025) making Kasiya the only advanced graphite project capable of competing with current Chinese graphite production costs.

Figure 5: Natural Graphite Cost Curve including China

(Sources: See Appendix 4)

DFS Geotechnical Programs in Progress

In April 2025 and subsequent to the quarter, the Company announced that several geotechnical drilling programs are underway at Kasiya as part of the DFS. The results of the programs will be used to support the infrastructure layout and engineering design.

Selected locations are based on the findings of the OPFS announced in January 2025. The OPFS proposes a large-scale, long-life operation to deliver substantial volumes of natural rutile and graphite while generating significant returns. The Project layout was determined by evaluating technical, environmental and social factors.

Infrastructure covered by the geotechnical programs includes the processing plant areas, the tailings storage facility (TSF) area, the raw water storage dam, the Kasiya substation, and other mining infrastructure. Various geotechnical and geophysics methods are being used across the project site area.

Placement and Corporate Update

In March 2025, Sovereign completed a placement of 47,058,824 new fully paid ordinary shares at an issue price of A$0.85 to raise gross proceeds of A$40 million (Placement). Following the Placement, Sovereign has over A$65 million in cash and no debt.

To date, Rio Tinto has invested A$60 million into Sovereign to fund completion of the DFS. The DFS is expected to be completed in Q4 2025, thereby providing Rio Tinto with up to 180 days to exercise its option to become operator of the Kasiya Project. Rio Tinto did not participate in the Placement as they believe the Company has sufficient funds to complete the Kasiya DFS.

Accordingly, Rio Tinto's shareholding in Sovereign remains at approximately 119.4 million shares. Due to the issuance of new shares under the Placement, Rio Tinto's relative shareholding has decreased from 19.9% to 18.5% (refer to change in substantial holding notice dated 4 April 2025).

Rio Tinto, via the joint Sovereign-Rio Tinto Technical Committee, continues to be supportive of the Project and, as a strategic investor, continues to play an integral part in the Kasiya DFS process, including site visits, project environmental and social workstreams, with their subject matter experts involved in numerous aspects of the Project.

As discussed above, the Kasiya DFS remains on track for completion in Q4 2025. Upon announcement of the DFS results and under the July 2023 Investment Agreement, Rio Tinto will have up to 180 days to exercise its option to become the operator of the Kasiya Project and be granted exclusive marketing rights for 40% of Kasiya's annual production.

Next Steps

The Company plans to update the market on the following progress in the coming months:

·    Rehabilitation component of the Pilot Phase

·    MRE upgrade following 2024 infill drilling program

·    Further graphite test work results as the Company continues to advance the qualification of its graphite product for the lithium-ion battery and traditional graphite sectors

·    Progress in discussions with future potential end-users of rutile and graphite

·    Updates on community and social development programs

·    Progress of the DFS, which is targeted for completion by Q4, 2025

Competent Person Statement

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 and technical parameters underpinning the Production Target, and related forecast financial information derived from the Production Target 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 presentation have not been materially modified from the original announcement.

The information in this announcement that relates to the Exploration Results (metallurgy - rutile and graphite) is extracted from announcements dated 8 May 2024, 15 May 2024, 4 September 2024 and 21 November 2024, which are 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 report have not been materially changed from the announcement.

The information in this announcement that relates to the Mineral Resource Estimate is extracted from Sovereign's 2024 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 2024 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 2024 Annual Report.

* 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). All assumptions are from the Kasiya PFS ** Any minor summation inconsistencies are due to 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.

The information contained within this announcement is deemed by Sovereign to constitute inside information as stipulated under the Regulation 2014/596/EU which is part of domestic law pursuant to the Market Abuse (Amendment) (EU Exit) Regulations (SI 2019/310) ("UK MAR"). By the publication of this announcement via a Regulatory Information Service, this inside information (as defined in UK MAR) is now considered to be in the public domain.

To view all figures and illustration, please refer to the announcement here: https://api.investi.com.au/api/announcements/svm/39a3e3b4-818.pdf

APPENDIX 1: SUMMARY OF MINING TENEMENTS

As at 31 March 2025, the Company had an interest in the following tenements:

Notes:

SSL: Sovereign Services Limited, MML: McCourt Mining Limited

¹  An exploration licence (EL) covering a preliminary period in accordance with the Malawi Mines and Minerals Act (No 8. Of 2019) (2019 Mines Act) is granted for a period not exceeding three (3) years. Thereafter two successive periods of renewal may be granted, but each must not exceed two (2) years. This means that an EL has a potential life span of seven (7) years under the 2019 Mines Act. ELs that have come to the end of their term can be converted by the EL holder into a retention licence (RL) for a term of up to 5 years subject to meeting certain criteria. All of Sovereign's ELs were originally granted under the 2019 Mines Act. On 28 June 2024, the Mines and Minerals Act (2023) (2023 Mines Act) was gazetted and came into force. As previously disclosed, the New Act introduces amendments to improve transparency and governance of the mining industry in Malawi. Sovereign notes the following updates in the New Act which may affect the Company going forward: (i) ELs granted under the 2023 Mines Act will 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 Act has removed 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 Act.

²  SSL has applied for RLs in relation to EL0492 in accordance with the 2023 Mines Act.

APPENDIX 2: RELATED PARTY PAYMENTS

During the quarter ended 31 March 2025, the Company made payments of A$318,000 to related parties and their associates. These payments relate to existing remuneration arrangements (executive salaries, director fees, superannuation and bonuses (A$221,000)) and provision of serviced office facilities, company secretarial services and administration services (A$97,000).

APPENDIX 3: MINING EXPLORATION EXPENDITURES

During the quarter, the Company made the following payments in relation to mining exploration activities:

There were no mining or production activities and expenses incurred during the quarter ended 31 March 2025.

APPENDIX 4: FLAKE GRPAHITE OPERATING COST INFORMATION

1.   China weighted average C1 cash cost source: Benchmark Mineral Intelligence

2.   Cumulative Demand & China graphite production source: S&P Global Market Intelligence

3.   Company specific disclosure sources as follows:

Notes:

1.     Blencowe Resources C1 cash costs calculated as US$499/t operating costs (FOB) less US$17/t royalties as disclosed in the source above

2.     South Star Battery Metals Corp.'s Santa Cruz mine not included as FOB costs not disclosed. For reference, operating costs are disclosed as US4396/t from source: Technical Report: Updated Resources and Reserves Assessment and Pre-feasibility Study (18 March 2020)

3.     Magnis not included while shares are suspended by the ASX in December 2023

4.     Walkabout's Lindi Project not included following appointment of voluntary administrators and Receivers in November 2024

5.     Leading Edge Materials Woxna Graphite not included as it is currently under care and maintenance

6.     Northern Graphite's Lac des Iles not included due to recent maintenance

7.     Talga Group not shown as latest technical study based on integrated anode plant strategy

8.     Tirupati Graphite not included due to lack of relevant disclosure

Appendix 5B

Mining exploration entity or oil and gas exploration entity
quarterly cash flow report

Compliance statement

1        This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

2        This statement gives a true and fair view of the matters disclosed.

Date:                30 April 2025

Authorised by:  Company Secretary

(Name of body or officer authorising release - see note 4)

Notes

1.          This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity's activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2.          If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3.          Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4.          If this report has been authorised for release to the market by your board of directors, you can insert here: "By the board". If it has been authorised for release to the market by a committee of your board of directors, you can insert here: "By the [name of board committee - eg Audit and Risk Committee]". If it has been authorised for release to the market by a disclosure committee, you can insert here: "By the Disclosure Committee".

5.          If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.