Capital Metals Regulatory News (CMET)

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.

15 March 2024

Capital Metals PLC

("Capital Metals" or the "Company")

Strategic Investment by Mineral Sands Producer

&

Project Funding Updates

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 announce the strategic acquisition of 10% of the Company by Sheffield Resources Limited (ASX: SFX) ("Sheffield"), the 50% owner of the Thunderbird mineral sands mine in Western Australia ("Sheffield Investment").

Pursuant to the Sheffield Investment, Capital Metals has granted Sheffield co-exclusivity with LB Group (002601:SHENZHEN) for either party to conclude a transaction within 60 days to provide funding to support the development of the Project into production in exchange for up to a 50% interest in the Project.

Highlights

· Sheffield Investment of £1.25 million for 10% of the Company's issued share capital at 3.623p per share

· 12-month option for Sheffield to invest a further £0.844 million at 4.891p per share

· Outline terms agreed with Sheffield to contribute funding to support the Project into production in exchange for up to a 50% interest in the Project subject to, inter alia, due diligence over a 60-day period

· Continued positive engagement with LB Group in parallel with Sheffield - either party may individually conclude a funding transaction with the Company within 60 days

Sheffield Investment

Sheffield has entered into an agreement with the Company to subscribe for 34,500,000 new ordinary shares at an issue price of 3.623p per ordinary share, representing a premium of approximately 25% to the 30-day volume-weighted average price ("VWAP") and approximately 11.5% to the closing price on 14 March 2024), raising £1.25 million ("Subscription").

Following the Subscription, Sheffield will own approximately 10% of the issued share capital of the Company (as enlarged by the Subscription). In addition, the Company and Sheffield have entered into an Option Deed under which Sheffield has been granted a 12-month option to subscribe for a further 17,250,000 ordinary shares at 4.891p per share, representing a premium of approximately 69% to the 30-day VWAP ("Subscription Option").

The Company has also agreed outline terms with Sheffield to contribute funding to support the Project into production in exchange for up to a 50% interest in the Project subject to conditions outlined under 'Project Funding' below.

The Subscription and the Subscription Option are not dependent on the outcome of the Project funding decision.

Pursuant to the Sheffield Investment, Sheffield may, for so long as it holds an interest of at least 10% of the issued shares of the Company, appoint one nominee director to the board of the Company, subject to satisfactory completion of customary due diligence and nominated adviser checks. Additionally, for so long as Sheffield holds an interest of at least 10% of the issued shares of the Company, it shall have a right to participate in any share issuance of the Company on the same terms as other investors subscribing for shares in order to maintain its percentage shareholding in the Company. This right shall apply in respect of all share issuances other than existing options and warrants and the issue of securities pursuant to any management incentivisation arrangements and shall not be impacted by any disapplication of pre-emption rights approved by shareholders from time to time.

Sheffield is listed on the Australian Securities Exchange and recently commissioned into production its A$484 million Thunderbird mineral sands mine in Western Australia ("Thunderbird"), one of the largest and highest-grade mineral sands discoveries in the last 30 years. Product sales from Thunderbird commenced in January 2024.

Project Funding

Capital Metals has conditionally granted Sheffield the right to acquire up to a 50% interest in the Project in consideration for Sheffield contributing development capital by way of joint venture equity ("Project Funding"). The maximum final Project Funding amount will be negotiated during the due diligence period based on the agreed forecast to production, and will comprise two stages:

(i) an amount of funding to be provided at the Project level which is sufficient to reach a Final Investment Decision; and

(ii) the balance of funding to be contributed at the project level to support the Project into production.

The final terms and structure, and the relevant funding mechanisms, will be subject to further tax and financial due diligence being undertaken by Sheffield over the next 60-days to ensure the optimal outcome. The conditions to the Project Funding include, inter alia, completion of satisfactory technical, tax, commercial and legal due diligence over a 60-day period during which time either Sheffield or LB Group may conclude a funding transaction with the Company. Other conditions include Sheffield satisfying any UK or Sri Lankan foreign investment or other regulatory requirements that might be triggered by the investment generally, satisfactory fulsome documents being agreed, and approval of the Company's shareholders as may be required pursuant to the AIM Rules for Companies ("AIM Rules"). It is expected that such a transaction would also be conditional upon approval by the Company's shareholders at a general meeting pursuant to the AIM Rules. Such a transaction with Sheffield would also fall to be treated under AIM Rule 13 (Related Party Transactions) of the AIM Rules, as Sheffield will be treated as a "related party" following completion of the Subscription.

LB Group

Discussions have continued positively with LB Group in parallel with Sheffield, albeit more slowly than the Company would have liked. The Board considered it was in the best interests of all stakeholders to entertain an alternative offer of funding which could either be complementary to a transaction with LB Group or stand on its own. LB Group has therefore been offered co-exclusivity with Sheffield for 60 days to conclude a funding transaction with the Company substantially on the same terms as the Memorandum of Understanding announced on 9 May 2023 ("MoU"). Further announcements will be made as required and until such time as a definitive agreement is entered into there can be no guarantee or certainty that a transaction with either Sheffield or LB Group with respect to the Project will be completed.

Greg Martyr, Executive Chairman of Capital Metals, commented:

"I am delighted to welcome Sheffield as a material and strategic investor in the Company. In addition to injecting capital, they bring world-class industry expertise in the development of mineral sands projects as evidenced at Thunderbird in Western Australia. Their acquisition of a 10% stake in the Company and interest in potentially earning 50% at the project level by contributing Project Funding to support the operations into production and cashflow is a reflection of the quality of the Project.

At the same time, we remain in regular and constructive dialogue with LB Group which has continued to express its interest in partnering in the Project as per the terms of the MoU.

Today's announcement with Sheffield is significant as we now have two well capitalised and specialist industrial groups expressing an interest in supporting the Project into production. The Project has highly attractive economics with post tax NPVs based on the 2022 Preliminary Economic Assessment* ranging from US$155-235 million, capex of US$81 million and Base Case total revenues of US$645 million over an initial 10-year Project life (with clear optimisation potential and further resource growth).

In the context of our current market capitalisation (being approximately £10 million), with a post-Subscription cash balance of approximately £2.5 million, we are now both well-funded and in the best position to unlock material shareholder value by closing Project funding with either Sheffield or LB Group. I look forward to providing further updates as appropriate."

Bruce Griffin, CEO of Sheffield, commented:

"Our decision to make an initial strategic investment in Capital Metals, potentially ahead of a larger project level investment to support the Project into production, is in keeping with Sheffield's stated objectives of building a portfolio of mineral sands production and development assets. I have followed the Project for some time, including site visits, and consider the Eastern Minerals Project to be one of best high grade mineral sands deposits globally."

Admission and Total Voting Rights

Application will be made to the London Stock Exchange for admission of the Subscription shares to trading on AIM ("Admission"). It is expected that Admission will become effective and dealings in the Subscription Shares will commence at 8.00 a.m. on or around 21 March 2024.

The Subscription shares will be issued fully paid and will rank pari passu in all respects with the Company's existing Ordinary Shares.

Following Admission, the total number of Ordinary Shares in the capital of the Company in issue will be 344,806,209 with voting rights. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company's share capital pursuant to (i) the Company's Articles, (ii) the Financial Conduct Authority's Disclosure Guidance and Transparency Rules and/or (iii) the AIM Rules for Companies issued by the London Stock Exchange plc as amended from time to time.

*RNS - 12 May 2022 - Results of Development Study and Project Economics

For further information, please 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