December 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 December 2025 including advances made at its Kasiya Rutile-Graphite Project (Kasiya or the Project) in Malawi.

HIGHLIGHTS DURING AND SUBSEQUENT TO THE QUARTER

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 Definitive Feasibility Study (DFS) and Environmental and Social Impact Assessment (ESIA) will seek to integrate IFC's Performance Standards on Environmental and Social Sustainability
• 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 Quarter

• During the quarter, 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

o 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

Next Steps

Over the quarter ending March 2026, Sovereign will:

• Continue to advance the Kasiya DFS;
• Advance rutile and graphite offtake discussions;
• Undertake further work to characterise the monazite mineralisation at Kasiya including detailed mineralogical characterisation of monazite occurrence and distribution within the Kasiya orebody;
• Evaluate the potential scale of rare earth production as a by-product and associated economics; and
• Continue the Company's community and social development programs in Malawi.

Subsequent to the quarter, the Company announced that it had successfully recovered a monazite product containing high-value heavy rare earth elements (REE) from the tailings stream generated during rutile processing at its upgraded Lilongwe laboratory facilities. The concentrate was recovered from material that would otherwise be discarded, i.e. the non-conductor tailings stream from electrostatic separation of a heavy mineral gravity concentrate of Kasiya ore. Producing a monazite concentrate would therefore require no additional complex processing. Chemical analysis of magnetic concentrates from processed resource drilling samples performed by Scientific Services South Africa confirmed the favourable rare earth oxide distributions produced from the monazite concentrate.

Preliminary analysis has confirmed the monazite concentrate contains exceptional heavy rare earth content averaging 2.9% (and up to 3.9%) combined DyTb and averaging 11.9% (and up to 17.3%) yttrium, and light rare earth content including 21.8% neodymium-praseodymium (NdPr).

This composition sets Kasiya apart from all major global rare earth producers.

Global rare earth production is concentrated in five major operations: three in China (Bayan Obo, Weishan, Maoniuping), one in Australia operated by Lynas Rare Earths Ltd (Mt Weld), and one in the United States operated by MP Materials Corp (Mountain Pass). Together, these mines supply over 70% of the world's rare earth production.

All five are dominated by light rare earths - principally lanthanum and cerium, which are abundant and low-value, and the magnet rare earths Neodymium and Praseodymium (NdPr). The strategically critical heavy rare earths - dysprosium, terbium, and yttrium - that underpin high-performance advanced technology, defence, industrial and renewable energy applications are present in much smaller amounts. Kasiya's heavy rare earth content is approximately 7x higher for both DyTb and yttrium than found in the five largest rare earth producing mines. Mountain Pass - America's only rare earth mine - contains no measurable DyTb or yttrium.

Figure 1: Strategic Rare Earth Composition - Kasiya vs Major Global Producers

(See Appendix 5 for breakdown and sources)

Preliminary analysis vs REE development Projects

China's April 2025 export controls on dysprosium, terbium, and yttrium have created acute supply shortages for Western manufacturers. On 6 January 2026, China announced strengthened export controls on dual-use items to Japan, effective immediately. Despite 15 years of diversification efforts, Japan remains approximately 60% dependent on Chinese rare earth imports. For heavy rare earths, Japan's dependence on China approaches 100%. Meanwhile, the US is 100% reliant on imports for its yttrium requirements.

Preliminary analysis of Kasiya's monazite REE content demonstrates one of the highest combined heavy rare earth profiles while maintaining NdPr levels comparable to many REE development projects that have received government backing.

Table 1: Kasiya vs select REE development projects

• Government involvement includes financial, political, or commercial assistance from any government-related entity; Lindian's partner, Iluka's refinery, is being supported by the Australian Government; Vara Mada is included for comparability as a significant titanium-feedstock and monazite project.

Source: See Appendices 4 and 5.

Rare Earths By-product from Existing Process

Total rare earth oxide was analysed for in magnetic heavy mineral concentrates produced from aircore drilling samples during laboratory analysis for rutile. The magnetic concentrates were composited by depth interval (0-6m and 6-20m) to assess variation in mineralogy with depth associated with weathering units.

Separately, monazite concentrates were produced from bulk samples processed through the standard Kasiya flowsheet. Gravity concentrates were subjected to electrostatic separation, with the non-conductor stream then subjected to further gravity separation, followed by magnetic separation to produce a magnetic monazite concentrate. Duplicate analyses confirmed excellent repeatability. See Appendix 4 for details. Chemical analysis to determine the distribution of rare earth oxides was conducted by the Scientific Services South Africa laboratory.

No additional complex processing was required, so capital requirements will not include a parallel full rare-earth processing circuit, as required by primary REE miners. This represents potential by-product economics at near-zero incremental cost - rare earth recovery as an addition to existing rutile and graphite processing infrastructure.

WORLD BANK GROUP'S IFC TO COLLABORATE WITH SOVEREIGN ON SUSTAINABLE DEVELOPMENT FOR KASIYA

During the quarter, the Company signed a strategic Collaboration Agreement (Agreement) with International Finance Corporation (IFC) to advance the sustainable development of Kasiya. IFC is a member of the World Bank Group (World Bank) and the largest global development institution focused on the private sector in developing countries.

In fiscal year 2025, IFC committed a record US$71.7 billion to private companies and financial institutions in developing countries, with a total portfolio of US$68.5 billion as of 30 June 2025, demonstrating its commitment to financing major projects worldwide.

Under the Agreement:

• IFC will use its expertise to support aligning Kasiya with IFC's environmental, social, and governance standards. IFC will complement Sovereign's owner's team and supplement Rio Tinto's input for the development of the ESIA aligned with global best practice sustainability standards.
• IFC will have rights to finance Kasiya following the collaboration in accordance with the Agreement and subject to Rio Tinto's rights under the Investment Agreement. IFC may act as:

o Primary lender and/or mandated co-lead arranger for debt financing of the Project;

o Lead investor in debt or equity securities financing; and

o The term of the Agreement is 36 months (see ASX Announcement "World Bank Group's IFC to Collaborate with Sovereign on Sustainable Development for Kasiya" dated 16 December 2025 for Agreement Particulars).

IFC's track record demonstrates its commitment to partnering with leading miners, including Sovereign's strategic investor, Rio Tinto, on tier-one projects.

IFC's Extensive Track Record with World-Class Mining Assets

IFC (www.ifc.org) has decades of experience in the metals and mining sector, financing some of the world's largest and globally strategic mining projects across all stages, including construction, production, and expansion. As both a long-term equity partner and debt provider to major mining companies, including Sovereign's strategic investor, Rio Tinto, IFC has supported large-scale mine developments and expansions across multiple continents.

World Bank's Strategic Presence in Malawi

The World Bank Group has a significant presence in Malawi through a Country Partnership Framework that supports the government's Malawi 2063 Vision. Its activities include financing major enabling infrastructure like the Mpatamanga Hydropower Project, which is Malawi's largest energy infrastructure project to date. IFC also previously played a role in mobilizing financing for the Nacala transport corridor, which extends through Malawi. The Kasiya Project is expected to directly benefit from these strategic infrastructure assets.

KASIYA'S GROWING STRATEGIC IMPORTANCE EMPHASISED DURING AND SUBSEQUENT TO QUARTER

US Strategic Interest and Supply Chain Security

The discovery of rare earth-bearing concentrate at Kasiya comes amid unprecedented US Government focus on securing critical mineral supply chains independent of China, which currently dominates approximately 70% of global rare earth mining and over 90% of rare earth processing.

In April 2025, China added seven rare earth elements, including dysprosium, terbium, and yttrium, to its export control list, requiring export licenses and creating further uncertainty for non-Chinese manufacturers. The US Department of War has responded by agreeing to guarantee minimum prices for domestic rare earth production, signalling the strategic importance of alternative supply sources.

The US State Department recently visited Sovereign's operations in Malawi as part of a broader engagement with strategically significant critical minerals projects in the region. This visit underscores the growing importance the US Government places on developing reliable, Western-aligned sources of critical minerals supply in Africa.

Japan: Renewed Vulnerability to Chinese Supply Restrictions

On 6 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 - the same elements under broader export controls since April 2025.

Japan remains approximately 60% dependent on Chinese rare earth imports. For heavy rare earths, Japan's dependence on China approaches 100%. Nomura Research Institute estimates that a three-month disruption to rare earth supply could cost Japanese industry over US$4 billion.

Complementary Defence and Critical Applications

The identification of rare earth elements at Kasiya creates a unique multi-commodity critical minerals project where all three products serve complementary strategic end uses:

• Rutile → Aerospace-grade titanium metal - Kasiya's premium +95% TiO₂ rutile is direct feedstock for titanium sponge production for aerospace and defence applications, including aircraft structures, jet engines, and military hardware.
• Graphite → Battery anodes and defence applications - High-quality flake graphite is critical for lithium-ion batteries powering defence systems, as well as traditional applications in refractories and lubricants for aerospace and industrial uses.
• Rare earths → Permanent magnets for defence systems - Heavy rare earths are irreplaceable in high-temperature permanent magnets used in precision-guided munitions, missile systems, fighter jet actuators, and advanced weapons platforms.

This alignment of complementary strategic end uses positions Kasiya as a uniquely diversified source of critical minerals essential to Western defence and energy security.

Figure 2: US State Department's Deputy Assistant Secretary Nick Checker visiting Sovereign's facilities in Lilongwe, Malawi

NEXT STEPS

During the quarter, various new workstreams were adopted into the DFS. These include enhanced focus on plant design and configuration, and environmental and social impact workstreams. 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.

The Company will continue to update stakeholders regarding progress, 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; and
• Infrastructure and logistics planning.

APPENDIX 1: SUMMARY OF MINING TENEMENTS

As at 31 December 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 Mines and Minerals Act (2023) (2023 Mines Act) is granted an initial period of five (5) years with the ability to extend by three (3) years on two occasions (a total term of 11 years). 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 not exceeding five (5) years subject to meeting certain criteria or any conditions imposed on the RL.

2 The Company has submitted two EL applications, APL0739 (16.2km2) and APL0740 (71.5km2), which remain pending as at 31 December 2025.

3 Licence surrender letters submitted for non-core ELs.

APPENDIX 2: RELATED PARTY PAYMENTS

During the quarter ended 31 December 2025, the Company made payments of A$312,000 to related parties and their associates. These payments relate to existing remuneration arrangements (executive salaries, director fees, superannuation and bonuses (A$214,000)) and provision of serviced office facilities, company secretarial services and administration services (A$98,000).

APPENDIX 3: MINING EXPLORATION EXPENDITURES

APPENDIX 4: PRELIMINARY ANALYSIS OF REE DISTRIBUTION IN KASIYA MONAZITE

Appendix 5B

Mining exploration entity or oil and gas exploration entity

quarterly cash flow report

Name of entity

Sovereign Metals Limited

Answer: Not applicable

Answer: Not applicable

Answer: Not applicable

Compliance statement

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

Date: 30 January 2026

Authorised by: Company Secretary

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

Notes