Sovereign Metals - Globally Significant Source of Rutile & Graphite, Two Critical Minerals for the Green Energy Transition

• Sovereign Metals is developing the Kasiya rutile and graphite project in Malawi in partnership with Rio Tinto. Kasiya is the world's largest rutile deposit and second largest graphite deposit.
• Sovereign expects to be the world's largest and lowest cost producer of both rutile and graphite. Graphite is a significant byproduct, projected to generate 50% of revenue.
• Recent test work shows Kasiya can produce high-grade 97%+ graphite concentrate at $182/t, well below peer production costs of $300-1500/t. Sovereign aims to be the largest graphite producer outside China.
• Sovereign is engaging with potential offtake partners to qualify its graphite for the battery anode market. Low sulfur content is a key advantage. Annual production is projected at 244,000 tons.
• Exploration drilling continues to expand the already massive Kasiya deposit. A DFS is targeted by year-end. Key upcoming newsflow includes exploration results, graphite test work and offtake agreements.

Sovereign Metals presents a compelling investment case as it advances the world-class Kasiya rutile-graphite project in Malawi. Kasiya is the world's largest rutile deposit and second largest graphite deposit, with Sovereign poised to become the largest and lowest-cost producer globally of both critical minerals. The company's strategic partnership with mining major Rio Tinto and highly promising recent test results further underscore the project's immense potential.

Rutile & Graphite - Critical Minerals in High Demand

Both rutile and graphite are designated critical minerals due to their importance in strategic applications and constrained supply. Rutile is primarily used to produce titanium dioxide pigments for paints, plastics and paper, while graphite is a key anode material in lithium-ion batteries for electric vehicles (EVs).

With the global push towards decarbonization and electrification of transport, graphite demand is poised for substantial growth in the coming years as EV adoption accelerates. Meanwhile, rutile faces an ongoing structural supply deficit, with limited new projects in development.

Kasiya - A Globally Significant Deposit

The Kasiya project in Malawi is truly remarkable in its scale, with a JORC resource establishing it as the world's largest rutile deposit and second largest flake graphite deposit. For Sovereign, rutile is the primary product with graphite a significant byproduct, expected to contribute approximately 50% of revenue. This is highly unusual and means Sovereign's graphite economics are not constrained by the need to develop a standalone graphite mine.

As Sovereign CCO Sapan Ghai explains: "Kasiya is the world's largest rutile deposit but also the world's second-largest graphite deposit. Graphite, we look at it as a byproduct of mining the rutile, but in essence, if you look at our pre-feasibility study that came out last year, it's about 50% of our revenue. So it's a significant byproduct."

Interview with Chief Commecial Officer, Sapan Ghai

Positioned to be the Lowest Cost Producer

The unique nature of the Kasiya deposit and its weathered, clay-hosted mineralization allows for simple, low-cost mining and processing. The recent Pre-Feasibility Study (PFS) positioned Sovereign to be the lowest cost producer of both rutile and graphite globally.

For graphite specifically, Sovereign expects production costs of just $182/ton, a fraction of the $300-1,500/ton cost range for peer projects. This is driven by the "free dig" weathered nature of the deposit, with no need for hard rock mining or crushing and grinding.

"We'd be producing graphite at $182 a ton, so even at today's prices at the lower end for your finest materials and you're getting 450-500 bucks a ton, and people would be making a loss, we'd be making a multiple margin," says Ghai.

High-Quality, High-Margin Graphite Concentrate

Beyond its industry-leading cost profile, Sovereign's graphite also stands out for its quality. Recent test work produced a premium 97%+ purity concentrate via simple flotation processing. This attracts a significant price premium to lower grade concentrates.

Kasiya graphite also has inherently low levels of impurities, especially sulfur, at just 0.02%. This is a key consideration for battery anode applications. As Ghai notes, "Chinese graphite is very low in sulfur. The only player that we know within the graphite space outside of China that has very low sulfur like us is ourselves."

Scale to be a Major Graphite Supplier

At a projected 240,000 tons per year, Sovereign is set to become the largest natural graphite producer outside China, addressing the need for diversified, ex-China supply. The company is now engaging with potential offtake partners to qualify its graphite concentrate for the battery anode supply chain.

While natural graphite is unlikely to fully displace synthetic graphite in anodes, the growing EV market still provides ample room for both sources, especially as cell makers look to secure critical minerals supply. Ghai believes "there'll be some replacement of the synthetics, but obviously the market's increasing... we're still growing, and that market's still growing."

DFS on Track as Exploration Upside Continues

Sovereign is progressing Kasiya rapidly, targeting a Definitive Feasibility Study (DFS) by the end of 2024. In parallel, exploration drilling continues both to the north and south of the deposit, with the potential to boost the already large resource. Other key work streams include mining and rehabilitation method optimization and selection of a plant site.

Key upcoming catalysts for the stock include exploration results, further metallurgical test work, and binding offtake agreements for graphite and rutile. With Rio Tinto now involved at the project level, Sovereign is well positioned to secure rutile offtake and optimize the development path.

Conclusion

Sovereign Metals offers investors exposure to two critical minerals – rutile and graphite – poised to see robust demand growth in the coming years. The company's flagship Kasiya project in Malawi is a globally significant deposit with the potential to support a multi-decade, low-cost operation.

Recent test work has confirmed the high quality of Kasiya's graphite, paving the way for qualification with battery anode customers. With Rio Tinto's involvement and the security of the rutile business, Sovereign is well funded to advance the project through the definitive feasibility stage and towards production. As the company delivers on its upcoming catalysts, the stock appears significantly undervalued based on the project's immense strategic potential.

The Investment Thesis for Sovereign Metals

Sovereign Metals is an undervalued way to gain exposure to two battery metals in rutile and graphite as the world transitions to EVs. The Kasiya deposit in Malawi is truly world-class in its scale, quality, and low-cost potential, reinforced by key investment highlights:

• Exposure to two critical minerals, rutile and graphite, with robust demand outlooks driven by the shift to cleaner technologies
• World-class, long-life Kasiya deposit in Malawi with potential to be the largest and lowest-cost producer globally of both rutile and graphite
• Strategic partnership with Rio Tinto significantly de-risks project and provides funding optionality
• Graphite test work confirms ability to produce premium 97%+ battery-grade concentrate at just $182/t, a fraction of peer production costs
• Upcoming catalysts include exploration results to expand resource, DFS completion, and binding offtake agreements
• Stock trading at a steep discount to project NPV based on PFS metrics, with ample re-rate potential as Sovereign advances Kasiya towards production

Macro Thematic Analysis

The green energy transition is reshaping commodity markets as the world looks to decarbonize transport and energy systems. Two minerals poised to benefit from this megatrend are natural graphite and rutile.

Graphite is a key component in lithium-ion battery anodes, with each EV containing up to 70kg of graphite. As EV sales grow exponentially in the coming years, graphite demand is set to soar. Benchmark Mineral Intelligence forecasts demand to rise from 1.0Mt in 2022 to 5.9Mt by 2035, a 494% increase.

The battery industry currently relies on synthetic graphite produced from petroleum coke, a high-emission process. To reduce battery carbon footprints, a shift towards natural graphite is underway. Natural graphite also offers cost and performance advantages, but supply is constrained, with China accounting for over 60% of production.

Rutile is a high-grade titanium feedstock used to produce pigments for paints, plastics and other applications. Prices have surged to record highs above $1,500/t reflecting a structural supply deficit, with very few new projects in development globally.

Sovereign Metals' Kasiya deposit in Malawi is the world's largest source of rutile and 2nd largest flake graphite reserve, with scope to produce both minerals over a multi-decade mine life. In this context, CCO Sapan Ghai highlights Kasiya's strategic potential:

"The easiest way to secure supply is to ensure that you have the largest producer of a specific material as part of your supply chain. So the fact that we'd be the largest and lowest cost puts us at the lowest risk end of inserting ourselves within that supply chain. All we're doing now is showing that our graphite works in a specific way so that the battery makers can fix their chemistry set for our graphite..."