Translation: Original published in Finnish on 6/24/2026 at 7:40 am EEST.

Yesterday, Betolar published three separate releases in which the company announced that it had signed an exclusive agreement on the utilization of tailings from the Otanmäki mining area in Kajaani, that it would initiate a strategic partnership with the Lithuanian investor Scalewolf, and that it would implement a multifaceted financing arrangement. The plan still has several aspects that require confirmation, but its implementation would provide Betolar with significantly more resources for the commercialization of metal extraction technology. The financing solution also does not pose a significant threat of ownership dilution, which keeps the investment story's return potential alive if the commercialization of the technology delivers on its promises. In the releases, the company outlined its targeted new group structure and a business model based on joint ventures and licensing fees, which enables the commercialization of the technology with smaller own investments. However, this is conditional on external financiers finding the investments attractive, which involves significant uncertainty, especially before a commercial breakthrough. Despite the remaining open questions, we believe the targeted group structure and financing package are a step in the right direction, as acute financing-related uncertainties have diminished. Regarding operational forecast changes, we await the completion of the financing and permitting processes, while we will incorporate the confirmed financing into our forecasts no later than in connection with the H1 preview. If implemented, the change in the business model and group structure would, in our view, require significant changes to our forecasts. Despite this, the core of the investment story remains unchanged: The commercial value of Betolar's technology must live up to the high potential painted by the company in order for the high level of risk borne by shareholders to be rewarded. We believe that external equity investments in accordance with the letters of intent would be a sign of confidence in the realization of the technology's potential.

Agreement on the acquisition of tailings from Kajaani

Betolar signed a long-term supply agreement with Otanmäki Mine Oy, which grants the company exclusive rights to acquire and further process around 10 million tons of titanium-rich tailings from the Otanmäki (Kajaani) mining area for the next 20 years. The company will pay 1.0 MEUR for the exclusive right and commits to purchasing at least 0.5 MEUR of tailings annually. The purchase obligation and further processing will commence once the necessary operational permits have been obtained, so the cash flow effects of the agreement will align with the permit process.

According to analyses by the Geological Survey of Finland (GTK) from 2017–2018, the tailings contain approximately 49.1 kg of titanium per ton (as metal), as well as vanadium and iron. Titanium and vanadium are critical raw materials for the defense industry and security of supply. An advantage for the company is that the tailings are already above ground and pre-ground from previous mining operations. According to the company, this reduces technical and financial risk and accelerates start-up compared to traditional mining operations.

According to the company's calculation, the estimated value of the metals in the tailings would exceed 7 BEUR at full production. This is the company's own estimate, based on GTK's analyses, current market prices, and the recovery rates from the company's small-scale tests. We have significant reservations about this figure. The figure represents the raw material's theoretical total potential in the long term, and even its partial realization requires securing financing and successful industrial-scale production. Betolar's own revenue generation is planned to be based on a model where the company receives license and royalty fees for its technology.

Group structure becoming more complex

In its releases, Betolar described its targeted three-tiered group structure, through which the commercialization of its technology is intended to be implemented in a capital-light manner, utilizing external project financing. A letter of intent has been signed with Scalewolf regarding the structure, and the final binding agreements are expected to be concluded by the end of 2026. Until then, Betolar has granted Scalewolf an exclusive right in the planned cooperation area.

At the top level of the structure, Betolar Plc will continue as a research, development, and technology platform. The company will retain ownership of current and future intellectual property rights and license its technology to companies to be established, from which it would charge license fees and royalties. The second level involves a subsidiary to be established for metal separation technology (MET), into which Scalewolf would invest 3 MEUR for a 21.4% ownership stake, leaving Betolar with 78.6%. MET would act as the main developer for project-level companies (SPVs) and focus on developing individual projects. The third tier consists of project-specific SPV companies, the first of which is the company for the Otanmäki tailings project. Betolar would transfer the assets and liabilities related to the Otanmäki supply agreement to this SPV, in which Scalewolf would invest 5 MEUR. Initially, the founders' ownership would be split with Scalewolf owning 51% and MET 49%. After the planned additional financing, the founders' combined ownership is targeted to be ~91% and other investors' ~9%.

Planned ownership structure

The model is intended to be replicated later. The company is preparing a second SPV in the United States, which would focus on the recovery of titanium and rare earth metals. Discussions are underway regarding a similar structure for the Critical Infrastructure Protection (CIP) business. Initially, Betolar would grant Scalewolf's partner, Outpost Ventures Checkmate, an exclusive license to prepare the planned US project.

The logic of the structure is that project-level capital is raised into SPV companies from their external investors and partners, keeping Betolar's own investment needs moderate, and the company derives its value from technology licensing and royalty fees. The downside is that this structure dilutes Betolar's share in the projects themselves and moves control beyond the reach of Betolar's management, as the Group's look-through ownership in the Otanmäki project would fall significantly below 50% through MET's 49% stake. However, key questions remain unanswered. The arrangement is currently at the letter of intent stage, and the final ownership structure of the SPV still depends on additional funding to be raised. The revenue distribution is also affected by the details of the agreements between the companies, for which there is currently limited visibility.

The total financing package is 17 MEUR

Of the planned financing, ~9 MEUR will be directed to Betolar Oyj, 3 MEUR to a subsidiary specializing in metal separation (MET company), and 5 MEUR to a project company focused on the Otanmäki mine. The financing for Betolar consists of three 3 MEUR tranches, the first of which has been confirmed based on yesterday's releases. The confirmed 3 MEUR convertible note was subscribed by current main owners Ajanta Innovaatiot 2, Ilmarinen, and Nidoco, each for one million euro. The second 3 MEUR tranche is an additional convertible bond issuance directed at Scalewolf, conditional on approval by an extraordinary general meeting (estimated August 2026). The third 3 MEUR is a term loan under negotiation with Danske Bank, which would mature in November 2028 and for which the European Investment Fund (EIF) and Virala would provide guarantees. The remaining 8 MEUR consists of Scalewolf's letter of intent-level investments in the MET company (3 MEUR) and the Otanmäki SPV (5 MEUR). Thus, a total of 12 MEUR in funding is allocated to companies controlled by Betolar (9 MEUR to the parent company and 3 MEUR to MET), and 5 MEUR to Scalewolf's majority-owned SPV. By financier, Scalewolf's share of the entire package is a maximum of 11 MEUR, current main owners' 3 MEUR, and Danske Bank's 3 MEUR.

Sources of funding

The terms of the convertible bonds are relatively expensive for the company. The interest rate is initially 10.0% and will increase to 15.0% starting June 30, 2031. It will be capitalized into the loan principal unless the company pays the interest in cash. The loan is perpetual with no maturity date, and the company has the right of redemption no earlier than June 30, 2031. The conversion price is EUR 2.10 per share, which is clearly above the current share price. The company announced that the entire arrangement would dilute current owners by 11.7% at the listed company level if the conversion rights are exercised.

Regarding the use of funds, the company stated that the financing will be allocated to the exclusive right payment for Otanmäki and purchases of tailings, the development of metal separation technology, critical infrastructure protection solutions, and strengthening the balance sheet and working capital.

The need for additional financing, originally scheduled for next year, will be significantly postponed due to this arrangement. The sufficiency of funds depends on how aggressively Betolar plans to invest in scaling up metal separation technology to an industrial scale, which, in our view, will require a larger total investment than the current funding round. Vibeke Krohn, the new CEO who will start on August 1, 2026, will also likely have her own views on the pace of investments. We await further information on the progress of the arrangement before making operational forecast changes. Several parts of the arrangement are still conditional, while the operational launch will occur according to the permit process. The already confirmed 3 MEUR convertible bond strengthens Betolar's balance sheet but increases our financing cost estimates by approximately 0.3 MEUR per year, which we will add to our forecasts no later than in connection with our H1 preview.