Capital Metals: High-grade Mineral Sands Developer Earns Strategic investor, PFS by 2025

• High-grade, undeveloped mineral sands project on the east coast of Sri Lanka with potential to significantly expand the current 17Mt resource.
• Sheffield Resources has taken a 10% stake with an option to go to 14%, and is in discussions to potentially fund 50% of the project to earn a 50% stake.
• Capital Metals aims to start production at 650ktpa, concentrating on the high-grade areas near surface
• Logistics are a key consideration, with plans to utilise the nearby Oluvil Port, which requires dredging or potentially trucking to larger ports. Off-take discussions are underway.
• Targeting a Pre-Feasibility Study and Final Investment Decision in H1 2025, with the potential for an accelerated development plan with Sheffield's involvement.

Capital Metals, an AIM-listed company, presents a compelling investment opportunity in the mineral sands sector with its Eastern Minerals Project (EMP) in Sri Lanka. As demand for titanium dioxide pigment and other mineral sands products continues to rise, projects like EMP are attracting increased investor attention. Capital Metals' high-grade resource, expansion potential, and development progress make it a company to watch.

High-Grade Resource with Expansion Potential

Capital Metals' key attraction is the Eastern Minerals Project, which Executive Chairman Gregory Martry describes as "probably the highest grade undeveloped mineral sands project in the world." The current JORC resource stands at 17 million tonnes at a high grade, outcropping at surface along a 60km zone of mineralisation. However, this resource only covers 10-20% of the company's total tenement area, pointing to immense expansion potential.

Martyr comments, "This could easily multiply three times... It's not going to be a 200 million ton resource, but it could easily be between 50 and 100."

Resource expansion is a key focus for Capital Metals in the near term. The company has a sonic rig and a rented air core rig ready to commence drilling, with the dual aims of expanding the resource and upgrading confidence to underpin the first years of mining. Visual indicators of mineralisation are positive, with Martyr stating: "We're very confident that even this current drill program that we've got... by the end of the year, we will have a very good handle."

Interview with Executive Chairman Gregory Martyr

Development Plans and Timeline

Capital Metals is targeting first production at a rate of 650,000 tons per annum, initially focusing on a high-grade area of the deposit. Over time, production will be expanded, and the product mix will be diversified, moving into magnetic separation of ilmenite, rutile and zircon products and potentially downstream processing through electrostatic separation.

The company is aiming to complete a Pre-Feasibility Study (PFS) and reach a Final Investment Decision (FID) in the first half of 2025, an ambitious but achievable timeline, according to Martyr:

"Sheffield can't report an NPV without a PFS... Ultimately, [we] want to classify it as a reserve and increase our confidence level in our assumptions so that we're assuming that we could certainly get to FID in the first half of next year. I'm targeting by the end of the first quarter."

Strategic Partnership with Sheffield Resources

A key recent development for Capital Metals is a strategic partnership with ASX-listed Sheffield Resources. Sheffield has taken a 10% stake in Capital Metals for £1.4 million, with an option to go to 14%, and is in discussions to potentially fund 50% of the project capex to earn a 50% stake. This deal brings significant benefits to Capital Metals, as Executive Chairman Greg Martyr explains:

"Sheffield [brings] funding and expertise. Bruce Griffin brings expertise in spades to the Sheffield team... It's unlocking the value, which we could do [on our own], but I think this is a better way to do it."

Sheffield's involvement allows for an accelerated development timeline and expanded production, given Sheffield's larger balance sheet and development capabilities. The company recently brought the large Thunderbird mineral sands project into production in a joint venture with Yansteel.

Logistics and Off-take

As with any bulk commodity project, logistics are a key consideration for Capital Metals when developing EMP. The project is located near the Oluvil Port, which requires dredging to accommodate Handymax vessels, but offers a low-cost logistics solution. Capital Metals is also investigating other potential logistics options, including trucking to larger ports or using rail siding. Discussions are advancing with potential off-take partners, supported by the high quality of EMP concentrates. Martyr notes, "There's plenty of parties out there, and the mix of products - it's mostly ilmenite, apparently very clean on a relative basis."

Conclusion

Capital Metals presents a highly attractive entry point at its current £18.8m market capitalisation for investors looking for exposure to the mineral sands thematic. Upcoming news flow from drilling and development studies provides the potential for rapid re-rate as the company advances EMP towards production. The involvement of Sheffield Resources provides strong validation and the potential for an accelerated development scenario. Capital Metals is a company that should be on every mineral sands investor's watchlist with a high-grade resource, enormous expansion potential and a clear development pathway.

Investment Thesis for Capital Metals

• High-grade, at-surface mineral sands deposit in Sri Lanka with compelling economics even at a small initial scale
• Huge exploration upside, with defined resource only covering 10-20% of the tenement and multiple visual indications of mineralisation along strike and at depth
• Strategic investment and partnership with larger mineral sands developer Sheffield Resources, with potential for accelerated timeline and expanded production scenario
• Near-term catalysts of resource expansion drilling and PFS, targeting FID in H1 2025
• Located in a proven mineral sands mining district, with a low cost logistics pathway via the Oluvil port

The mineral sands sector is experiencing strong tailwinds, driven by rising demand for titanium dioxide pigment, zircon and high-grade titanium feedstocks. Pigment is the largest end-use, with demand closely tied to global GDP growth and urbanisation. Zircon demand benefits from increasing use in ceramics and chemicals, while high-grade titanium feedstocks are sought after for use in metal and speciality alloys. At the same time, supply is constrained, with limited new projects in development globally. This puts mineral sands explorers and developers like Capital Metals in a strong position.

As Martyr notes: "We're never selective in this industry, but I might have mentioned a few [high-grade hits] though... We've got a few that are 14m, 12m that are above the resource grade, they're not in the resource."

Projects like Capital Metals' Eastern Minerals Project, with high grades and strong expansion potential, will be crucial in meeting the supply shortfall in the coming years. Located in Sri Lanka's proven mineral sand mining jurisdiction, EMP is well-positioned to benefit from the sector's macro tailwinds.

Capital Metals presents a compelling investment opportunity in the mineral sands sector. The company's high-grade Eastern Minerals Project in Sri Lanka has a clear development pathway to first production, with enormous expansion potential from current drilling. Sheffield Resources' recent strategic investment provides validation, expertise, and the potential for an accelerated growth scenario. With a PFS expected by early 2025 and visual indications of mineralisation in current drilling, Capital Metals is a company that should be on every mineral sands investor's watchlist.