Rio Tinto PLC has snapped up a 15% stake in Sovereign Metals Ltd, the AIM-listed exploration and development company said on Monday.

Rio has invested A$40.4 million, around £21.0 million. FTSE 100-listed Rio acquired 83.1 million Sovereign Metals shares at A$0.486 each. The price paid was a 2.8% discount to the stock’s closing price of A$0.50 in Sydney on Friday, though a 10% premium to its 45-day average price.

Sovereign Metals shares closed 7.1% higher at A$0.53 each in Sydney on Monday. In London, the stock surged 26% to 29.00 pence on Monday morning. Rio Tinto shares were down 1.7% at 5,123.00 pence in London.

In addition, Rio Tinto has the option to increase its stake to just under 20% within 12 months. It has options for 34.5 million more shares at an exercise price of A$0.535 each, around A$18.5 million in total.

Sovereign Metals said the backing from Rio Tinto will be used to advance the Kasiya rutile and graphite project in Malawi.

‘Under the investment agreement, Rio Tinto will provide assistance and advice on technical and marketing aspects of Kasiya including with respect to Sovereign’s graphite co-product, with a primary focus on spherical purified graphite for the lithium-ion battery anode market,’ Sovereign added.

Sovereign Chair Ben Stoikovich said the investment from Rio is a ringing endorsement of the Malawi-based asset and ‘confirmation of Kasiya’s place as one of the most significant critical mineral discoveries in recent times’.

‘The experience and expertise that Rio Tinto brings will truly set Kasiya apart as a potentially globally significant supply of two critical minerals and take us all a step closer to supply chain decarbonisation and achieving net-zero. Furthermore, this is yet another step towards unlocking significant benefits from development of the Kasiya project for Malawi. We welcome Rio Tinto as a major shareholder of Sovereign and look forward to working with Rio Tinto as our strategic partner in the development of Kasiya,’ the chair added.

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