Update re Project Funding

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED.  ON PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.

14 May 2024

Capital Metals PLC

("Capital Metals" or the "Company")

Update re Project Funding

Co-exclusivity period ending; decision to proceed with Sheffield Resources

Capital Metals (AIM: CMET), a mineral sands company approaching mine development stage at the high-grade Eastern Minerals Project in Sri Lanka (the "Project"), is pleased to provide an update on the status of the co-exclusivity period for either Sheffield Resources Limited (ASX: SFX) ("Sheffield") or LB Group (002601:SHENZHEN) to acquire up to a 50% interest in the Project in consideration for contributing development capital by way of joint venture project equity ("Project Funding").

Following a period of constructive engagement, the board has determined that the preferred joint venture partner will be Sheffield. The co-exclusivity period will end on 15 May 2024 and Sheffield will be provided with exclusivity to conclude discussions and finalise the already-advanced legal documentation by the end of May 2024. The board of Capital Metals' decision to proceed with Sheffield was taken independently of Bruce Griffin, Sheffield's Executive Chair who represents Sheffield on the board of Capital Metals as a Non-Executive Director. 

The Company will remain in discussions with LB Group regarding potential offtake arrangements.

Capital Metals and Sheffield are well advanced in the legal documentation and due diligence; however, the parties require a short period of time to finalise the agreements ("Agreements"), which the parties are targeting for completion at the end of May 2024.  It is currently envisaged that Sheffield's funding would comprise two stages:

(i)            an amount of funding to be provided at the Project level to fund the work programme to reach a Final Investment Decision ("FID") to enable the commencement of construction; and

(ii)           the balance of funding to be contributed at the Project level in stages to be agreed between the parties to fund the capital cost of each agreed stage of production and processing capacity.  Further work will be undertaken with Sheffield on the approach to the staging of the Project and therefore the final capex requirements, which will be finalised prior to the FID.

The effective disposal of up to 50% of the Company's interest in the Project will be deemed to be a disposal resulting in a fundamental change of business under the AIM Rules for Companies ("AIM Rules") and, as such, will be conditional on the approval of the Company's shareholders in general meeting. Following signing of conditional Agreements, a circular will be sent to Capital Metals' shareholders together with a notice of general meeting.

Sheffield, as a substantial shareholder holding 10.00% of the issued share capital of Capital Metals following the subscription announced on 15 March 2024, is deemed to be a "related party" under the AIM Rules. Therefore, under AIM Rule 13, the independent directors of Capital Metals, having consulted with its nominated adviser, would have to confirm that the terms of the Agreements are fair and reasonable insofar as all shareholders are concerned before they are entered into.

The Agreements will also include other customary conditions to completion, including in respect of Sheffield's requirements under ASX Listing Rule 11.1 (if applicable), as well as confirmations being received from authorities in Sri Lanka in relation to the proposals.

Greg Martyr, Executive Chairman of Capital Metals, commented:

"We are delighted to be moving ahead with Sheffield and expect to conclude a funding deal that would make them a 50% partner in one of the world's highest grade mineral sands deposits. Sheffield is already our largest shareholder following its investment in March 2024 and would represent a well-respected and experienced mineral sands group as a partner. Notably, Sheffield played a key role in bringing Thunderbird, one of the largest and highest-grade mineral sands discoveries in the last 30 years, in which it also holds a 50% interest, into production in Western Australia earlier this year. We will naturally remain in discussions with LB Group for potential offtake arrangements and I would like to thank them for their involvement in this funding process."

Updated Corporate Presentation

Ahead of the Company's participation in the 121 Mining Investment event in London this week, where Executive Chairman Greg Martyr will be speaking, Capital Metals has published an updated Corporate Presentation to its website, available here: www.capitalmetals.com/our-investor-relations/presentations/.

 For further information, please visit www.capitalmetals.com or contact:

About Capital Metals

Capital Metals is a UK company listed on the London Stock Exchange (AIM: CMET). We are developing the Eastern Minerals Project in Sri Lanka, approximately 220km east of Colombo, containing industrial minerals including ilmenite, rutile, zircon, and garnet. The Project is one of the highest-grade mineral sands projects globally, with potential for further grade and resource expansion. In 2022, a third-party Preliminary Economic Assessment provided a Project NPV of US$155-235m based on existing resources, with further identified optimisation potential. We are committed to applying modern mining practices and bringing significant positive benefits to Sri Lanka and the local community. We expect over 300 direct new jobs to be created and over US$130m in direct government royalties and taxes to be paid.

Visit our website:

www.capitalmetals.com

Follow us on social media:

X (formerly Twitter): @MetalsCapital

LinkedIn: @Capital Metals plc

About Sheffield Resources

Sheffield Resources is listed on the Australian Securities Exchange with a market capitalisation of approximately A$218 million. Sheffield recently commissioned its flagship A$484 million Thunderbird Mineral Sands Project. Thunderbird is a 50/50 joint venture between Sheffield and Yansteel and is one of the largest and highest-grade mineral sands discoveries in the last 30 years. Thunderbird has recently achieved practical completion and made its maiden shipment of product in January 2024.

In February 2023, Sheffield executed a binding agreement with an option to acquire up to 20% of Rio Grande Mineração S/A, which owns and operates the South Atlantic Project in Southeast Brazil.

For more information on Sheffield Resources, visit www.sheffieldresources.com.au.