Diversified miner Rio Tinto has notified Aim- and ASX-listed Sovereign Metals that it will not exercise its option to elect to become operator of the Kasiya rutile/graphite project, in Malawi, pursuant to the terms of an investment agreement between the companies.

Therefore, Sovereign will continue as operator and will advance Kasiya directly.

In its notice to Sovereign, Rio Tinto advised that its decision not to elect operatorship reflects its change in corporate strategy and the strategic review of its iron and titanium business.

This is consistent with Rio Tinto’s publicly outlined strategy under which it is narrowing its portfolio focus to iron-ore, copper, aluminium and lithium.

Accordingly, the decision does not reflect any change in the fundamentals, economics or strategic importance of the Kasiya project.

As a result of Rio Tinto's decision not to elect operatorship, certain rights conferred on Rio Tinto under the investment agreement, including its operatorship, product marketing rights, consent and pre-emption rights in respect of the project, cease, and Rio Tinto continues to hold a shareholding of about 18.2% in Sovereign.

Rio Tinto will continue to hold a right to appoint a nominee director to the board of Sovereign for as long as Rio Tinto holds at least a 15% shareholding in the company and a right to be notified of future equity issues for as long as Rio Tinto holds at least a 10% shareholding in the company.

Sovereign can now advance its commercial workstreams directly and the company intends to prioritise a US-focused strategy for Kasiya.

The project is positioned to supply natural rutile and natural graphite into supply chains serving the US and allied economies, addressing acute gaps in secure, non-Chinese sources of critical minerals feedstock, Sovereign says.

It intends to deepen its engagement with the US government and industry stakeholders and focus its offtake and partnership efforts where Kasiya’s strategic value is deemed to be greatest.

Sovereign aims to advance its existing rutile and graphite offtake memoranda of understanding, including those with its established counterparties, Mitsui & Co and Traxys North America, from non-binding arrangements to binding agreements, subject to negotiation.

Sovereign’s existing collaboration agreement with the International Finance Corporation (IFC), a member of the World Bank Group – of which the US government is the single largest shareholder – positions the company to advance a development financing strategy for Kasiya alongside a globally recognised development-finance partner, it posits.

With the investment agreement having fallen away, Sovereign is now able to progress its financing workstreams directly and on its own terms.

The company intends to pursue partnerships and financing arrangements for Kasiya, drawing on its engagement with the IFC and with development finance and export credit institutions across the US and allied economies.

“As the Sovereign-Rio Tinto collaboration concludes, we would like to acknowledge and thank Rio Tinto for its significant contribution to the advancement of Kasiya.

“Since 2023, Rio Tinto has invested over A$60-million in the project and has provided valuable technical input through its participation on the Sovereign-Rio Tinto Technical Committee. This expertise has contributed to the successful delivery of the unique pilot mining and rehabilitation programme, which generated real-world operating and mining data that was incorporated into the tier-1 definitive feasibility study completed earlier this year,” Sovereign chairperson Ben Stoikovich says.

“Sovereign looks forward to Rio Tinto continuing as a supportive shareholder as it builds on this important period of technical and operational progress, with the company now well positioned to prioritise a US-focused critical minerals strategy, positioning Kasiya as a secure, non-Chinese source of titanium feedstock and natural graphite for the US and allied supply chains,” he posits.