Sovereign Metals (SVM) - Critical Minerals Expansion into Europe

Sovereign Metals Ltd. is an Australian exploration and development company focused on the advancement of its high-grade rutile project in Malawi, namely the Kasiya rutile project. The company aims to develop the project into an environmentally and socially sustainable operation with the ability to be a major supplier of critical raw materials. The company believes that the Kasiya rutile project holds the potential to be the largest rutile deposit in the world and will aid in the global endeavour to address climate change.

Sovereign Metals Ltd. recently released an updated and expanded scoping study for the project. The study shows that the project hosts both Rutile (Titanium Dioxide) and Graphite in its laterally extensive flat blanket style mineralisation. The mineralisation occurs in a single and large coherent deposit, with the majority of the mineralisation occurring at a depth of 5m below the surface of the project.  The mineral resource estimate (MRE) of the project shows 662 million tons of mineralisation at a grade of 1.76% Rutile equivalent (RutEq) in the indicated category and 1,113 million tons at a grade of 1.61% RutEq in the inferred category.

The study demonstrates a phased approach with the project processing 12 million tons of ore per annum in years 1 to 5 and 24 million tons per annum from there onward. The annual production of Rutile is set to be 265 kt and of Graphite 170 kt.  The highlights of the scoping study further include a life of mine (LOM) of 25 years, an NPV8% of USD$ 1,537 million, an initial capital cost (CAPEX) of USD$ 372 million and an after-tax internal rate of return of 36%. The project’s average operating cost is set to be USD$ 320 per ton of product.

Updated Scoping Study

Sovereign Metals Ltd. on the 16th of June 2022, released the results of the expanded scoping study conducted for the Kasiya Rutile and Graphite project, located in Malawi. The Kasiya project of the company is one of the largest Rutile and Graphite deposits in the world and is envisioned to consist of an open-pit mining operation as well as a Rutile and Graphite processing plant constructed on-site. The scoping study has been prepared to an accuracy level of approximately 30% and will be used to decide the viability of any further studies for the project. The Scoping Study has been based on the JORC Mineral Resource Estimate (MRE) the company published in April 2022 for the project. The MRE confirms that the Kasiya project will be one of the largest Rutile and Graphite deposits in the world, Sapan Ghai, the Chief Commercial Officer of Sovereign Metals Ltd, explains the impact of the MRE as follows:

“That resource number had tripled what we had before. We can quite comfortably say Kasiya is now the largest Rutile deposit ever discovered. But because it also includes a by-product of Graphite, it's one of the largest Graphite deposits ever discovered.”

The scoping study shows an increase of 79% in the project’s NPV8% to USD$ 1,537 million from its initial scoping study. The after-tax internal rate of return (IRR) is at 36% with the life of mine (LOM) revenue of the project being USD$ 12,038 million. The project’s earnings before interest, taxes, depreciation and amortisation (EBITDA) is USD$ 323 million with its average operating cost being USD$ 320 per ton. The capital cost (CAPEX) of the project is USD$ 372 million.

The Kasiya project is set to produce 265,000 tons of rutile and 170,000 tons of graphite over a 25-year life of mine. The project also boasts a low operating cost and high-profit margins, due to the size of the deposit, the strip ratio of the mineralisation, the project’s amenability to hydro mining and low transport costs.

Targeted markets

Sovereign Metals Ltd. will aim to enter various global markets for both Rutile as well as Graphite. Ghai explains that the project will be able to meet various market demands, as well as be favourable to end-users due to current geopolitical concerns and factors.

“…the simple answer to that question on the Rutile front is that everyone needs Titanium and Titanium dioxide. We've talked about the end uses of paints, pigments, all that kind of good stuff. Good anecdotal evidence of what we're trying to do here is, for example, when Ukraine got invaded, the likes of Rolls Royce, Airbus, and Boeing, they were getting their titanium out of Russia. And all of a sudden, they obviously had to self-sanction those supply routes and their supply chains. Russia provides about 50% of Titanium metal to the world.”

The greatest criteria for the company regarding its offtake agreements will be the offtake period. The nature of global production and the largest consumers of both rutile and graphite leads the company to be focused primarily on the European, US and ex-China markets, with Ghai stating that there is more value to be obtained from these markets.

“…there is much more value in supplying into the European, US and ex-China markets. “

Titanium Dioxide is primarily produced from either Ilmenite or Rutile. Ilmenite is the mineral form of titanium dioxide that is most commonly found and mined globally and consists of approximately 40% to 60% titanium dioxide, whilst Rutile consists of up to 95% titanium dioxide.

Titanium Dioxide is primarily used in the production of Titanium metal, approximately 11% of the global titanium dioxide consumption, 31% of the global consumption is accredited to welding associated materials and activities and 58% is allocated toward the production of pigments for the paint and textile industries. The processing of Ilmenite is energy and carbon-intensive and creates various waste products. The processing of Rutile on the other hand saves up to 2.8 tons of CO2 per ton of ore processed. Ghai explains:

“Once our Titanium dioxide ends up in a tin of paint versus synthetic rutile, for example, you're saving about 35% of the CO2 emissions. I mean, on average, and I was calculating this in the cab the other day. But if you look at a 5-litre tin of pain that get from your DIY shop, that's about 7.5 kg, so let's call it 7 kg in weight, and for those 7 kgs, you're putting about, basically putting 2 extra CO kilos up a chimney stack right now versus what you could do with Kasiya.”

Global tendency to sustainability

The global political and individual tendency to support sustainable products, will be a driving factor to the company’s success in the future, according to Ghai, he states:

“…how many times nowadays do we go into the shop and do we see more sustainably produced or packaged goods? How often do we see everything from low CO2 beer, I had one of those a few days ago, right? And it may be 20p extra a can but people are paying that to ensure that they're moving in a sustainable way.”

The political tendency seen throughout the globe will be beneficial to the company due to new carbon policies aimed at reducing carbon-intensive operations and the inherent low carbon intensity of the Kasiya project.

“…governments have started moving towards sustainability. It means, of course, you get those carbon permits. You have to pay for it in the EU, you get taxed on your pollutive effects as a corporation. But also, there are billions of dollars of grants available to companies that are moving against the world in the right direction.”

The move to implement more electric vehicles (EVs) globally will also positively contribute to the company’s future. The graphite industry, required for the creation of batteries for the EV market, is set to grow exponentially in the following years as the electric vehicle sector is forecast to grow 12-fold by the year 2040, Ghai states:

“…the Graphite side, as I said multiple times, Graphite doesn't just end up with pencils, right? It makes about half the weight of a Lithium-ion battery. I'd like anyone who hasn't quite kind of got that to go search for Elon Musk on YouTube and his battery day back in 2016, where he said, our batteries shouldn't be called Lithium-ion, they should be called Nickel Graphite batteries”

Ghai states that Sovereign Metals Ltd. is positioning itself to be able to supply a percentage of the projected demand for graphite but explains that the forecast demand is so high, that the project will not be able to meet a fraction of the demand.

“Our Scoping Study only envisages about 150,000 tons of Graphite coming out as a by-product. So it's not like we are going to be the biggest player in the market. Yes, we have one of the largest Graphite deposits in the world. Yes, we consider it's going to be the lowest-cost graphite in the world. But we're not breaking the supply-demand system here by producing what we're looking to produce.”

Future plans and factors affecting them

Ghai believes that the future of Sovereign Metals Ltd. will be driven by the implementation of electrical vehicles and the global move to graphite. He explains that as the EV industry grows, it will require more graphite, which will only add to the economic viability of the Kasiya project, he states:

“There's no doubt there'll be more electric vehicles on the streets. So, whether that's government or consumer-driven, I think we're all aligned, that that is coming, that is going to happen. In order for that to happen, the world needs Graphite.”

Ghai further states that the demand for the rutile of the Kasiya project will be driven by the global intent to implement more renewable energy, he states:

“We know that we are going to move to renewable energy at some point. There are only so many finite fossil fuels in the world. And we're going to get to a point where wind and solar are important. Therefore, the rutile plays a major part in the clean tech space. “

Ghai further explains that adding to the company’s future is its ability to supply the critical raw materials sector at a less Carbon-intensive rate than traditional operations. Ghai believes that the ability of the Kasiya project to contribute to less CO2 emissions will be a driving force behind the undertaking of offtake agreements, he explains:

“And those are the numbers that I'm giving you and telling you that our Graphite would be a 99% lower global warming potential, than the alternatives that are coming out of China. You put that in front of a car manufacturer and say, I can say pretty much all the CO2 emissions going into your car battery anode, which is what the Graphite essentially is, that's a big sell.”

To find out more, go to the Sovereign Metals website