Rio Tinto takes a big stake in Australia’s Sovereign Metals

on Jul 17, 2023
  • Rio Tinto plc agrees to build a 15% stake in Sovereign Metals Ltd.
  • Berenberg analysts see a more than 200% upside in "SVM".
  • Rio Tinto stock is down roughly 20% versus its year-to-date high.

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Rio Tinto plc (LON: RIO) agreed to invest $27.6 million in Sovereign Metals Ltd on Monday. It will get a 15% stake in the Australian mining company in return.

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Here’s what we know so far

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Sovereign Metals plans on using the funds to further its Kasiya rutile-graphite project in Malawi.

Rio Tinto will also assist and advice the miner in marketing and technical affairs related to Kasiya. Ben Stoikovich – Chair of Sovereign Metals said in a press release today:

Expertise that Rio Tinto brings will set Kasiya apart as a potentially globally significantly supply of two critical minerals and take us a step closer to supply chain decarbonisation and achieving net-zero.

The stock market news arrives a day before Rio Tinto is scheduled to release its production update for the second quarter. Its shares are currently down roughly 20% versus their year-to-date high.

Could Rio Tinto get more involved?

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Note that Rio Tinto has the option to further boost its stake in Sovereign Metals by 4.99% within twelve months.

Analysts at Berenberg are already convinced that the world’s second largest miner will invest more in the future. In their research note today, they said:

We consider Rio to be a logical long-term owner of Kasiya and view the announcement as a positive.

At writing, Berenberg has a “buy” rating on Sovereign Metals Ltd. The European bank sees upside in it to 90 pence that suggests the mining stock could more than triple from here.  

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