Sovereign Metals Appoints Graphite Expert to Advance Kasiya Project

• Sovereign Metals appointed Dr. Surinder Ghag as Chief Technology Officer - Graphite to assist in qualifying Kasiya's graphite for lithium-ion battery anodes.
• Kasiya, the world's largest rutile deposit, is also one of the largest flake graphite resources with a mineral resource estimate of 24.4Mt.
• Kasiya's prefeasibility study shows potential to be the world's largest and lowest-cost natural graphite producer at 244kt per annum and $182/t FOB cost.
• Downstream testwork demonstrates Kasiya's graphite has excellent suitability for lithium-ion batteries. Rio Tinto invested to help qualify the graphite.
• Kasiya rutile and graphite reserves stand at 5.5Mt and 8.9Mt respectively. The project has robust economics and is crucial for decarbonization solutions.

The global transition towards clean energy and decarbonization presents a compelling opportunity for investors to gain exposure to critical minerals such as natural graphite and rutile. These materials are essential components in renewable energy technologies and electric vehicles. Sovereign Metals Ltd (ASX:SVM; AIM:SVML), an emerging producer of natural rutile and graphite, exemplifies the strong investment potential in this space through its world-class Kasiya Rutile-Graphite Project in Malawi.

Surging Demand for Critical Minerals

The world is rapidly shifting away from fossil fuels to combat climate change. This green energy transition relies heavily on critical minerals like graphite and titanium dioxide (produced from rutile) to manufacture clean technologies.

In particular, graphite is a vital material for lithium-ion battery anodes used in electric vehicles (EVs) and energy storage. With global EV adoption accelerating, graphite demand is forecast to soar in the coming years. Benchmark Mineral Intelligence projects demand for natural graphite to increase by over 600% by 2035.

Rutile is the highest-grade natural form of titanium dioxide, used in welding, aerospace, and pigments. Rutile demand is expected to grow steadily, driven by increased global infrastructure development and the transition to cleaner, chloride pigment technology.

Despite surging demand, there is a scarcity of new graphite and rutile supply coming online in the near-term. This supply deficit positions companies like Sovereign Metals favorably to fill the gap and capture market share.

Kasiya Project: A World-Class Graphite & Rutile Resource

Sovereign Metals' flagship Kasiya project in Malawi hosts the world's largest natural rutile deposit and one of the largest flake graphite resources globally. The project boasts a JORC-compliant mineral resource estimate of:

• 17.9Mt of rutile at 1.0% grade
• 24.4Mt of graphite at 1.4% grade

A prefeasibility study (PFS) demonstrates Kasiya's potential to become a globally significant producer of both natural graphite and rutile, with extremely competitive costs and ESG credentials:

• Potential production of 244ktpa of graphite concentrate, making it the world's largest natural graphite operation
• Lowest quartile operating costs for graphite of US$182/t (FOB)
• Potential production of 122ktpa of rutile supplying ~5% of global demand
• Second-lowest quartile operating costs for rutile of US$291/t cash operating costs plus sustaining capex
• Powered predominantly by renewable hydroelectricity resulting in an extremely low CO2 footprint

The PFS outlines robust project economics with a post-tax NPV8 of US$1.54 billion and an IRR of 37%. With a 25+ year mine life, the project presents a long-life, low-cost source of critical minerals supply.

Graphite Downstream Potential

Sovereign's graphite is ideally suited to capitalize on burgeoning demand from the lithium-ion battery industry. Initial characterization testwork demonstrates its graphite has excellent crystallinity, expandability, and high purity levels required for lithium-ion battery anodes.

The company is advancing a downstream development strategy, recently appointing graphite processing expert Dr. Surinder Ghag as Chief Technology Officer. Dr. Ghag is a specialist in ore-to-anode graphite strategies and will lead graphite product qualification efforts with potential offtake partners.

Strategic Investor Backing

Sovereign's world-class asset and downstream ambitions have attracted a significant investment from global mining major Rio Tinto (ASX:RIO). In July 2023, Rio Tinto invested A$40.4 million for a 15% stake in Sovereign and a strategic partnership to develop the Kasiya project.

The deal includes a technical collaboration agreement focused on qualifying Kasiya's graphite for the lithium-ion battery anode market. Rio Tinto's graphite expertise and industry relationships will be highly valuable in positioning Sovereign as a key player in the battery supply chain.

Attractive Valuation Upside

Despite Kasiya's world-class scale and advanced stage of development, Sovereign Metals trades at an attractive valuation with significant re-rating potential as it advances towards production.

The company's current market capitalization of ~A$300 million represents just 0.15x net asset value (NAV), well below the average for African mineral sands developers at 0.4-0.6x NAV. On a peer comparison basis, Sovereign trades at EV/resource multiples of US$0.74/t for rutile and US$0.36/t for graphite, a steep discount to African peers.

As Sovereign continues to de-risk Kasiya through key milestones including the definitive feasibility study, regulatory approvals, offtake agreements, and project financing, we see potential for significant share price appreciation towards its NAV.

The Investment Thesis for Sovereign Metals

• Exposure to soaring demand for natural graphite and rutile driven by decarbonization and the global energy transition
• World-class, long-life asset with top-tier scale and margins in the bottom quartile of the cost curve
• Significant share price upside potential with further project de-risking towards its net asset value
• Strong institutional backing and validation from Rio Tinto's strategic investment
• Proven leadership team with the expertise to develop and operate a project of Kasiya's scale
• Graphite product customization strategy to capture higher-value markets like battery anodes
• Extremely low CO2 footprint aligning with the increasing focus on sustainable mineral supply chains

Sovereign Metals provides investors with a unique opportunity to gain exposure to two of the most critical minerals underpinning the clean energy transition - natural graphite and rutile. The company's Kasiya project in Malawi is a globally significant resource with the potential to become the world's largest graphite producer and a major rutile supplier. With a long mine life, bottom-quartile costs, and a high-quality product, Kasiya is a tier-one critical minerals asset. Sovereign's strategic partnership with Rio Tinto and downstream development plans provide a clear pathway to maximizing the value of Kasiya's graphite in the premium battery anode market. Trading well below its net asset value, Sovereign offers investors significant share price upside potential as it advances Kasiya towards development.

Macro Thematic Analysis

The decarbonization of the global economy is a defining megatrend of our time, presenting multi-decade growth opportunities for critical minerals like graphite and titanium. As the world electrifies and shifts away from fossil fuels to address climate change, we are witnessing an unprecedented increase in demand for the metals that enable clean energy technologies.

Graphite is the largest raw material input for lithium-ion battery anodes, which are essential for electric vehicles and renewable energy storage. The International Energy Agency forecasts that graphite demand from clean energy technologies could increase by nearly 25 times by 2040 in a net-zero emissions scenario. Meanwhile, titanium dioxide pigment, produced from natural rutile, is seeing growing demand driven by increasing global urbanization and the shift to safer, more environmentally friendly pigments.

Despite this exponential demand growth, there is an alarming lack of new graphite and rutile supply in the pipeline. Existing production is highly concentrated, with China dominating the graphite market and rutile supply largely controlled by Rio Tinto and Iluka Resources. This oligopolistic market structure, coupled with declining grades and depleting reserves at existing operations, has created an urgent need for new sources of responsible supply.

Sovereign Metals is exceptionally well-placed to fill this supply gap through its Kasiya project in Malawi. With the world's largest rutile resource and a globally significant graphite deposit, Kasiya is a rare critical minerals development of significant scale. Importantly, Kasiya also benefits from access to low-cost, renewable hydroelectric power, allowing it to produce graphite and rutile with an extremely low carbon footprint.

As governments and corporations increasingly prioritize sustainable, transparent supply chains, Sovereign's unique combination of scale, low costs, and strong ESG credentials positions it to become a supplier of choice for responsibly sourced critical minerals. This is evidenced by Rio Tinto's strategic investment into the company, which provides a strong endorsement of Sovereign's assets and business strategy.