PERTH (miningweekly.com) – Dual-listed Sovereign Metals has announced plans to demerge its Malawian graphite projects into a wholly-owned subsidiary company called NGX.

Subject to shareholder approval, Sovereign will spin out the Nanzeka, Malingunde, Duwi and Mabuwe projects and undertake an in-specie distribution of NGX’s fully paid ordinary shares to Sovereign shareholders on a 1-for-11 basis.

The Malingunde project is the most advanced of the graphite projects under the Sovereign umbrella, hosting a resource of 65-million tonnes at 7.2% total graphitic carbon, for 4.68-million tonnes of contained graphite.

The company in 2018 completed a prefeasibility study on the project which estimated a capital cost of $49-million to produce 52 000 t/y of concentrate over a mine life of 16 years. The study was updated in November last year and confirmed low operating costs, low technical risks and high-quality concentrates, as well as substantial upside potential.

The Duwi project also has a mineral resource estimate of 85.9-million tonnes grading 7.1% total graphitic carbon, for 6.13-million tonnes of contained graphite.

On completion of the demerger, NGX will seek admission to the ASX and will undertake a capital raise of A$9.6-million as part of its initial public offering.

Sovereign told shareholders on Wednesday that the demerger would allow the company to better focus its efforts on its Kasiya rutile project and would provide shareholders with an interest in two companies. The Sovereign board also believed that a separate graphite entity would have a better prospect of delivering shareholder value.

NGX will have a dedicated board and management team to focus on the development of the graphite projects, with the board to be comprised of a combination of existing Sovereign directors and new appointments including a nonexecutive director with suitable technical expertise.

Sovereign shareholders are expected to meet in January to vote on the demerger.