Kasiya Project: Why Sovereign Metals Represents a Compelling Dual-Commodity Investment Opportunity

• Kasiya holds 17.9 Mt of contained rutile (world's largest) and 24.4 Mt of contained graphite (world's second-largest), spanning 201 km² of mineralized area under JORC 2012 classification.
• The Optimised Pre-Feasibility Study delivered NPV8% of US$2.3 billion, 27% IRR, and average annual EBITDA of US$409 million, with first production capex of US$665 million.
• Graphite production cost of US$241/t positions Kasiya below China's average of US$257/t, placing it at the bottom of the global cost curve while rutile operations anchor overall project economics.
• Rio Tinto's A$60 million investment for 19.9% equity stake (diluted to 18.5% post-March 2025 placement) and technical committee participation validates the project's world-class status and de-risks development pathway.
• With DFS due Q4 2025, Sovereign enters financing discussions as critical mineral supply chains diversify away from concentrated sources, targeting both titanium and battery material markets.

Introduction: A Rare Dual-Commodity Opportunity in Critical Minerals

At a time when critical mineral markets oscillate between long-term demand optimism and short-term oversupply realities, Sovereign Metals Limited  has positioned itself uniquely within the investment landscape. The company's Kasiya Project in Malawi represents the only known deposit globally where high-quality flake graphite occurs as a by-product of rutile mining operations, creating a differentiated economic model that addresses two distinct critical mineral supply chains simultaneously.

The March 2025 corporate presentation update emphasizes this strategic positioning as global manufacturers seek alternatives to concentrated supply sources. While battery metal markets face near-term inventory pressures from oversupply, particularly in nickel and lithium, the structural demand thesis for both natural graphite and titanium feedstocks remains intact. Sovereign's approach, focusing purely on mining rather than downstream chemical processing, reduces execution risk and capital intensity compared to vertically integrated peers.

Rio Tinto's strategic investment validates Kasiya's world-class credentials, bringing not only capital but technical expertise and credibility that accelerates the project's pathway from feasibility through financing and construction. For investors seeking exposure to critical minerals with blue-chip endorsement and compelling unit economics, Sovereign warrants detailed examination.

Company Overview: Focused Development Strategy

Sovereign Metals operates as a development-stage mining company with singular focus on advancing the Kasiya Project through feasibility studies toward construction decision. Unlike diversified miners or junior explorers with multiple early-stage assets, this concentrated approach allows management to optimize capital allocation and technical resources toward a single, high-conviction asset. The company maintains dual listings on the Australian Securities Exchange and London's AIM market, providing liquidity across time zones for international investors.

The corporate structure reflects this focused strategy, with executive leadership possessing extensive African mining development experience and technical expertise in saprolite mineral systems. Management's decision to partner with Rio Tinto rather than pursue solo development demonstrates pragmatic capital discipline, leveraging a major's balance sheet and operational capabilities while retaining significant upside for existing shareholders. This de-risking approach contrasts with junior miners that overextend on multiple fronts.

In March 2025, Sovereign raised A$40 million through a placement at A$0.85 per share, bringing total cash reserves to over A$65 million with no debt. This financial positioning provides runway through critical near-term catalysts including DFS completion in Q4 2025 without immediate dilution pressure. The treasury strength allows patient capital deployment focused on maximizing project value rather than rushed development timelines.

Kasiya Project: Geological Advantages & Resource Scale

The Kasiya deposit's geological characteristics fundamentally differentiate it from comparable rutile and graphite projects globally. Hosted in flat-lying saprolite blanket mineralization across 201 km², the ore body's weathered nature eliminates the need for conventional hard-rock mining and crushing infrastructure. This soft, friable material processes through simpler flowsheets with lower energy consumption and reduced capital requirements compared to fresh rock operations that dominate Northern Hemisphere graphite projects.

Critically, Kasiya's mineralogy features exceptionally low sulphur content, a decisive advantage for battery-grade graphite production. High-sulphur graphite deposits, common in fresh rock environments, require additional purification steps that increase operating costs and reduce product purity. Kasiya's processing testwork has demonstrated 96-98% carbon purity in concentrate form, exceeding the industry-typical 94-95% range. This translates to higher-value product specifications and better market positioning, particularly in the expandable graphite and battery anode precursor segments where purity commands premiums.

The flake size distribution further enhances product value, with 57% of production in jumbo and large flake categories that serve premium industrial applications. Combined with contained resources of 17.9 Mt rutile and 24.4 Mt graphite under JORC 2012 classification, Kasiya represents decades of production inventory. This mine life visibility appeals to off-take partners seeking long-term supply security and supports debt financing structures that require extended reserve life ratios. The deposit's scale provides operational flexibility to optimize production profiles against market conditions across both commodity cycles.

Key Development: Optimised PFS Delivers Robust Economics

The January 2025 Optimised Pre-Feasibility Study marked a critical inflection point, validating Kasiya's economic viability under conservative assumptions. Managing Director and CEO Frank Eagar stated:

"The level of accuracy and confidence in the economic and technical fundamentals of Kasiya have taken a massive step forward. The successful completion of large-scale field trials, in particular for dry mining, the high degree of technical rigour by our enhanced owner's team, and Rio Tinto's technical support have all contributed to confirming Kasiya's potential to become a long-life, low-cost, secure source of two genuine critical and globally strategic minerals."

The study delivered pre-tax NPV8% of US$2.3 billion with 27% internal rate of return, demonstrating resilience to commodity price fluctuations and project execution risks. Average annual EBITDA of US$409 million provides substantial cash generation to support debt service, sustain capital expenditure, and return value to shareholders once production commences. Capital intensity remains attractive relative to resource scale, with US$665 million required to first production across mining infrastructure, processing facilities, and supporting logistics.

Operating cost projections of US$423 per tonne for combined production, with graphite incremental costs of just US$241 per tonne, place Kasiya in the bottom quartile globally. This cost position proves critical given current graphite market conditions where Chinese producers averaging US$257 per tonne set the marginal cost floor. Sovereign's ability to profitably produce below this threshold provides downside protection during market corrections while maximizing margins during price recoveries. The dual-commodity revenue model diversifies cash flow streams, reducing exposure to single-commodity volatility that plagues mono-product developers. Steady-state annual production targets of 246,000 tonnes rutile and 265,000 tonnes graphite position Kasiya among the world's largest producers in both commodities, capturing economies of scale that compress unit costs.

Strategic Significance: Market Positioning & Competitive Advantages

Kasiya's unique status as the only graphite-as-by-product-of-rutile operation globally creates distinct competitive moats. Sovereign Metals Limited is focused on developing its Kasiya Rutile-Graphite Project in Malawi to become a leading global supplier to the titanium and graphite industries. Kasiya is the world's largest natural rutile deposit, the purest, highest-grade naturally occurring titanium feedstock, and the world's second-largest flake graphite deposit, a battery mineral essential for the Energy Transition.

While peers face binary commodity exposure and dedicated cost structures, Sovereign benefits from rutile sales anchoring base economics while graphite production delivers margin enhancement with minimal incremental capital. This model insulates the project from graphite market downturns more effectively than dedicated graphite miners whose entire business depends on a single commodity's price trajectory. The decision to focus purely on mining rather than downstream processing contrasts with vertically integrated competitors pursuing spherical graphite or anode material production. While downstream integration captures additional value chain margins, it also multiplies technical complexity, capital requirements, and execution risk.

Geographic positioning in Malawi provides stable jurisdiction advantages despite frontier market perceptions. The country offers competitive fiscal terms, established mining law, and strategic interest in economic development through natural resources. Proximity to Nacala port via existing rail infrastructure reduces logistics costs compared to landlocked competitors. Furthermore, Kasiya provides Western markets and Asian battery manufacturers with critical diversification away from Chinese and Indonesian supply concentration, a strategic consideration increasingly valued in supply chain security assessments that influence off-take pricing and terms.

Current Activities: Pilot Program Success & DFS Preparation

The successful completion of a 10-hectare pilot program encompassing 170,000 cubic metres of ore processing represents more than technical validation. It demonstrates operational capability and reduces construction timeline uncertainty. Pilot operations confirmed processing assumptions, validated environmental management protocols, and provided rehabilitation data that informed closure cost estimates. This real-world operational evidence differentiates Kasiya from projects advancing on laboratory testwork alone, reducing perceived execution risk in financing discussions.

Preparation for the Definitive Feasibility Study now underway targets Q4 2025 completion, representing the critical milestone before final investment decision. The DFS will refine capital and operating cost estimates to ±10-15% accuracy, complete detailed engineering designs, finalize environmental permitting pathways, and establish financing structures. Rio Tinto's technical committee involvement ensures the study meets major mining company standards for development decision-making, providing additional credibility for project financing institutions and potential off-take partners. Several geotechnical drilling programs are currently underway at Kasiya as part of the DFS work, with results supporting infrastructure layout and engineering design.

Following DFS completion, Rio Tinto will have 180 days to exercise its option to assume project operatorship and gain exclusive marketing rights for 40% of Kasiya's output. Parallel work streams include advancing discussions with titanium pigment producers and graphite consumers seeking long-term supply agreements. The dual-commodity nature creates flexibility to structure separate off-take arrangements for rutile and graphite with different counterparties, optimizing pricing mechanisms and payment terms for each product's distinct market structure. Marketing efforts benefit from product quality advantages, as high-purity, low-sulphur concentrates with favorable flake distributions command attention from premium end-users rather than commodity traders.

Graphite Market Context: Navigating Supply-Demand Dynamics

Natural graphite markets currently face the classic critical minerals paradox where long-term structural demand growth driven by battery production contrasts with near-term oversupply from capacity expansions exceeding consumption. Chinese producers dominate global supply at approximately 70% market share, with recent production increases creating inventory accumulation and price pressure through 2024-2025. However, this oversupply primarily affects lower-quality products and higher-cost producers rather than the premium flake segments where Kasiya's output positions.

The battery anode market, representing the fastest-growing graphite demand segment, requires spherical purified graphite derived from large flake natural graphite or synthetic alternatives. Kasiya's testwork demonstrating 99.99% carbon purity, excellent tap density, and low BET surface area confirms suitability for this application. With electric vehicle production forecasts projecting 25-30 million annual sales by 2030, anode material demand provides structural underpinning despite current automotive inventory adjustments.

Test work completed during the quarter has demonstrated that Kasiya graphite is suitable for use in the three key segments that account for over 94% of the approximately 1.6Mtpa global demand for natural flake graphite: battery anodes, refractories and expanded/expandables. These applications demonstrate stable demand less subject to electrification uncertainties, providing downside revenue support. Traditional graphite markets in refractories, expandable graphite for fire retardants, and lubricants represent substantial current consumption where Kasiya's high-purity, large-flake product commands premium positioning. The strategic imperative for Western manufacturers to diversify supply chains away from Chinese concentration creates willingness to pay modest premiums for alternative sources, particularly when combined with superior product specifications.

Rutile Market Dynamics: Titanium's Role as Economic Anchor

Rutile serves as the premium feedstock for titanium dioxide pigment production, commanding 35-45% price premiums over alternative ilmenite concentrates due to higher titanium content and lower processing costs. Global rutile production concentrates in Australia and Sierra Leone, with limited new supply additions projected through 2030 despite steady 2-3% annual demand growth from paints, plastics, and paper industries. This supply-demand balance supports stable pricing and provides the economic foundation upon which Kasiya's graphite by-product economics layer.

Kasiya's 246,000 tonne annual rutile production would represent approximately 25-30% of current global rutile supply, positioning Sovereign as a major market participant with meaningful pricing influence. Kasiya is the world's largest known rutile deposit, and the first rutile-dominant deposit discovered in over 70 years.  Unlike graphite's current oversupply challenges, rutile markets demonstrate tighter supply-demand fundamentals with limited development pipelines capable of matching Kasiya's scale and cost profile.

Major pigment producers in China, Europe, and North America require long-term feedstock security, creating favorable conditions for off-take negotiations that provide revenue certainty supporting project financing. The project's operating cost structure benefits from allocating shared infrastructure, mining, and processing costs primarily against rutile revenue, treating graphite as a margin-enhancing by-product. This accounting approach ensures project economics remain robust even if graphite prices decline significantly from current levels, a critical consideration given battery metal market volatility. The rutile-graphite combination essentially provides investors with free option value on graphite price appreciation while limiting downside exposure through the titanium feedstock revenue stream.

Investment Thesis for Kasiya Project

• Position ahead of Q4 2025 Definitive Feasibility Study completion, which historically triggers 20-40% re-ratings for projects demonstrating robust economics and clear financing pathways.
• Gain simultaneous exposure to titanium and graphite markets with uncorrelated demand drivers, reducing single-commodity volatility risk while capturing energy transition tailwinds.
• Accumulate positions in lowest-cost assets like Kasiya (US$241/t graphite) that remain profitable through market corrections, positioned to capture full upside during recoveries.
• Utilize major miner endorsement as quality filter, recognizing that strategic investments from Tier-1 companies historically correlate with superior project execution and eventual acquisition interest.
• Establish positions before material off-take agreements with major industrial consumers, which typically compress discount-to-NAV as financing de-risks.
• Increase allocation as Q4 2025 DFS nears, recognizing that final feasibility catalysts historically generate strongest near-term returns for pre-development miners with validated economics.

Sovereign Metals presents a differentiated investment opportunity within the critical minerals sector, combining world-class resource scale across two commodities with bottom-quartile cost positioning and blue-chip strategic partnership validation. The Kasiya Project's unique geology enables a by-product economic model that provides downside protection through rutile revenue while offering graphite price leverage, an asymmetric risk-reward profile rare among junior developers. With DFS completion targeted for Q4 2025, the company approaches catalysts that historically compress valuation discounts as projects de-risk toward construction decisions.

The dual-commodity nature deserves particular emphasis. While peers face binary exposure to single markets experiencing volatility, Kasiya's economics benefit from rutile stability combined with graphite optionality. This diversification within a single asset reduces portfolio-level commodity risk while maintaining leverage to energy transition themes through the battery materials exposure. For investors constructing critical minerals allocations, Sovereign offers distinct positioning that complements rather than duplicates exposure to lithium, nickel, or rare earth developers dominating the sector. The combination of scale, cost competitiveness, strategic partnership, and near-term catalysts creates a compelling case for allocation consideration within diversified portfolios targeting critical minerals exposure.

TL;DR

Sovereign Metals' Kasiya Project combines the world's largest rutile resource with the second-largest graphite deposit, delivering NPV8% of US$2.3B and 27% IRR through a unique by-product economic model. With Rio Tinto's 18.5% strategic stake validating world-class status, graphite production costs of US$241/t position Kasiya at the bottom of the global cost curve. The Q4 2025 DFS completion represents a critical catalyst for this dual-commodity exposure targeting both titanium feedstock and battery materials markets.

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