Sovereign Metals (ASX:SVM) to demerge Malawian graphite projects

• Sovereign Metals (SVM) looks to demerge its Malawian graphite projects into a new subsidiary dubbed NGX
• Subject to shareholder approval, Sovereign plans to separate its Nanzeka, Malingunde, Duwi and Mabuwa projects from its Kasiya rutile project
• In doing so, Sovereign believes it will be able to “better focus” its efforts and resources on Kasiya and other primary rutile discoveries
• If the demerger is approved, NGX will be a public, unlisted company, though it will look to list on the ASX through an initial public offering
• Shares in SVM are down 2.27 per cent to trade at 43 cents at 3:37 pm AEDT

Sovereign Metals (SVM) is looking to demerge Malawian graphite projects into a new subsidiary dubbed NGX.

Subject to shareholder approval, Sovereign plans to separate its Nanzeka, Malingunde, Duwi and Mabuwa projects from its Kasiya rutile project.

In doing so, Sovereign believes it will be able to “better focus” its efforts and resources on Kasiya and other primary rutile discoveries.

If shareholders approve the demerger, it will involve an in-specie distribution to current shareholders on the basis of one NGX share for every 11 SVM shares held.

This would see 42.8 million NGX shares issued at 20 cents each, reducing Sovereign’s capital by around $8.56 million.

Sovereign Metals maintained that if the capital reduction was implemented, the value of its shares may be less, but given it would be an equal reduction, the company would still have positive net assets.

Following the demerger, NGX will be a public, unlisted company.

However, NGX has proposed to list on the ASX through an initial public offering. In this instance, the company would need to raise capital at the minimum issue price of 20 cents per share.

While details of the IPO are yet to be finalised, it is due to include a priority offer to existing shareholders on the basis of one new NGX share for every NGX share received following the demerger to raise $8.6 million, plus a general offer of $1 million to satisfy ASX spread requirements.

Shareholder approval will be sought at a meeting planned to take place early next year.

If given the green light, the NGX board and management team would comprise a combination of existing Sovereign directors and new appointments.

Initially, Matthew Syme — who was a Director of SVM between 2014 and 2016 — will be appointed as the new company’s Executive Director.

Additionally, Chartered Accountant Elizabeth Matthews will become the NGX Secretary.

Shares in SVM were down 2.27 per cent to trade at 43 cents at 3:37 pm AEDT.