Rio Tinto Backing Sovereign Metals to Deliver World-Class Rutile & Graphite Deposit

• Sovereign Metals has discovered the world's largest rutile deposit and second-largest graphite resource in Malawi
• The company is focused on becoming the largest global producer of rutile and graphite
• Sovereign has appointed an experienced management team to drive the project towards production
• There is strong support and fast-tracking from the Malawi government due to the scale of the project
• The company is targeting an investment decision by the end of 2025 based on continuing to derisk and optimize the project

About Sovereign Metals

Sovereign Metals is an Australian mineral exploration company focused on developing the world-class rutile and graphite deposit discovered at the Kasiya Project in Malawi. As the largest rutile deposit globally, and second largest graphite resource, Sovereign Metals is positioned to become a major producer of these critical minerals which are crucial for industries such as electric vehicles, clean energy, and more.

With the backing of a 15% strategic investment from Rio Tinto in mid-2023, Sovereign Metals is now focused on optimization and derisking initiatives at Kasiya under the leadership of newly appointed MD and CEO Frank Eagar. To drive the US$597m CapEx project towards a 2025 investment decision, Sovereign has built an experienced on-ground owner’s team over the last few months. This includes experts spanning technical, ESG, social performance, and funding.

Interview with Managing Director, Frank Eagar & Chief Commerical Officer, Sapan Ghai

Path to Production

A key focus for Sovereign Metals is demonstrating to investors and partners that it can develop the world-class Kasiay project. With Rio Tinto’s expertise and balance sheet strength supplementing Sovereign’s efforts, alongside Malawi government fast-tracking and endorsements, the company believes it is on the right track.

As Frank Eagar outlined, Sovereign Metals is now full steam ahead with permitting activities like environmental assessments and mining approvals. Concurrently, the 50-person technical team is working closely with Rio Tinto on optimizing and derisking elements of the Pre-Feasibility Study. This includes focusing on sustainable water usage as well as storage solutions for the graphite tailings byproduct. Learning outcomes will feed into the Definitive Feasibility Study targeted for completion in 2024.

Additionally, Sovereign Metals will be conducting land rehabilitation trials in the coming months. By showcasing best practice remediation, the company aims to further assure communities and government stakeholders that operations will minimize long-term impacts. The trials will also facilitate essential hydraulic mining data collection and slime separation testing for the technical team.

Confidence in the Economics

The Kasiya deposit offers Sovereign Metals the unique advantage of having two Tier 1 revenue streams – rutile and graphite. As highlighted by CCO Sapan Ghai, while market cycles may impact demand for rutile from sectors like construction, its ubiquitous applications across paints, metal alloys and welding ensure broad resilience. Similarly, graphite has wide uses from batteries to steelmaking. This dual diversification de-risks cash flows.

Importantly, Sovereign will be the lowest-cost producer for both rutile (US$494/t) and graphite (US$178/t). So whether commodity prices are high or low, Kaisya will likely remain profitable when peers with costs exceeding US$1,000/t struggle. These class-leading margins create a substantial buffer during any market volatility.

Furthermore, Sovereign is not relying solely on the rapid electric vehicle uptake that is driving graphite projections. It maintains flexibility to supply graphite across grades and flake sizes to meet customer requirements.

Engaging Global Leaders

On the back of strong project fundamentals and economics, Sovereign Metals has garnered significant interest from globally leading institutions seeking offtake agreements.

Over 50 meetings were held during the Mining Indaba conference in Cape Town, spanning project financiers, technical partners and potential graphite buyers. Notably, these included US and Asian “blue chip companies and countries” – indicating Tier 1 parties. Conversations focused particularly on securing reliable long-term graphite supply chains.

While unable to disclose details presently, Management reports that multiple site visits and initial financing discussions are now underway as well. Achieving these milestones over the next 12 months will further validate that Sovereign Metals has the necessary technical and funding capacity to develop Kasiya.

ESG Credentials Attract a Premium

As the world pivots decisively towards sustainable operations, Sovereign Metals holds an additional competitive strength. With 1% of the CO2 emissions of synthetic graphite, using Kasiya graphite allows battery producers to position their EV supply chains as responsibly sourced.

With EU regulations now mandating carbon accounting across product lifecycles, opting for Sovereign’s graphite over alternatives can thus greatly reduce compliance costs. As Ghai notes, this makes incorporating Kasiya graphite a “very quick win” for lithium-ion battery leaders like Tesla seeking to decrease the emissions intensity of their vehicles. Demonstrating these ESG performance advantages to customers should translate to higher prices.

Investment View

Sovereign Metals maintains a compelling investment case for shareholders. Sitting presently at a modest ~A$250M market capitalization, the company offers exposure to not one but two Tier 1 scale assets primed to capitalize on the unstoppable themes of decarbonization and electrification.

With globally scarce rutile and graphite resources, best-in-class unit economics, strong government backing, and an experienced leadership team now in place, Sovereign Metals is positioned to create substantial long-term value.

As upcoming de-risking activities underscore the execution capabilities here, the share price should rerate materially higher to appropriately reflect the world-class investment opportunity that Kasiya represents. Reaching construction in 2025 remains an ambitious but achievable goal that would unlock this value inflection point.