Sovereign Metals (SVM) - World's Largest Rutile Deposit

We spoke recently with Julian Stephens, managing director at Sovereign Metals Limited. The company has discovered what may indeed be one of the world's largest rutile deposits in Malawi, southeast Africa. Rutile (TiO2) is one of the principal sources for titanium, a much-needed product in pigment making and in the welding industry.

Company Overview

Sovereign Metals Limited is engaged in the exploration, development, and appraisal of mineral resource projects in Malawi. The company controls a globally significant, strategic rutile province in that country. Its flagship asset is the Kasiya Project, a saprolite-hosted rutile deposit. The company was incorporated in 2006 and is based in Perth, Australia.

Prior to making the big rutile find, Sovereign was hunting for graphite. They had limited success with that. They discovered their major titanium ore deposit at Kasiya early in 2020. 

The company trades on the ASX and it has over 394,000,000 outstanding shares. 

The Management Team at Sovereign

Sam Cordin, Development Manager, and Dylan Browne, Company Secretary join Stephens at the management level. The Board of Directors includes Ian Middlemas, Chairman of the board; Mark Pearce; and Ben Stoikovich, in addition to Stephens. 

Stephens earned his Ph.D. in geology in 2003. His main interest is in minerals and ores. Stoikovich brings needed mining engineering expertise to the company table. 

From Graphite to Rutile

Stephens told us that the rutile find was a significant turning point for Sovereign. When graphite was their main objective, the market was difficult for that product. Rutile, however, is in short supply and is a significant industrial mineral, so that’s the company’s primary focus now. They still look to do something with their legacy graphite projects.

Kasiya: A Big Rutile Deposit

Kasiya is currently the second-largest rutile deposit known on the face of the Earth. Sovereign has defined rutile mineralization over an area of 114 sq. km. To date, they’ve only done focused drilling over about 43% of that area.  They've conducted their inferred mineral resource estimate over that smaller area only. 

The maiden resource estimate (MRE) is 644 Mt at 1.01% rutile, including a high-grade component of 137 Mt at 1.41% rutile. Further near-future resource growth could have Kasiya becoming the largest rutile deposit in the world.

Stephen shared that a really interesting aspect about Kasiya is that all of the highest-grade mineralization, which contains up to 2% titanium, is at the surface or within the top 5m. So, they will be able to target that high-grade ore early in the mine life, which will assist capital recovery as quickly as possible. 

So far, Sovereign has drilled some 500 holes in the resource area. These holes were laid out in a 400 by 400 m grid and penetrate to a depth of 12 m. That’s actually a high spacing, but the mineralization is so consistent that they will be able to deliver a Australian Joint Ore Reserves Committee Code (JORC) resource with these shallow drill holes. 

Institutional Support

Sovereign is starting to attract significant institutional investors. Sprott is involved and they hold about 12% of the equity. There is support from German institutions as well, comprising about 30% of the registry, and they tend to be long-term holders. 

The Titanium Market

Titanium comes from two main mineral sources, rutile and ilmenite. Rutile is much more enriched in titanium than ilmenite. Therefore, rutile fetches a much higher price than ilmenite, Stephens told us. The Kasiya Project is all rutile, he was pleased to add. 

Fifty to sixty percent of the global titanium production is used in the pigment industry and an additional thirty percent in the welding industry. There are also applications in the aerospace and medical industries as well.

The total size of the titanium feedstock market is around $15 Bn and rutile goes into the high-grade portion of that market, which is between $4 Bn and $5 Bn billion, Stephens told us. That is the component of the market that they will sell into. He believes that “titanium sells itself” because of a global titanium deficit at the moment. He maintains that there's no way that that gap in the market is going to be completely filled in the near- to medium-term going forward. 

Advancing the Kasiya Project Forward

With a big rutile deposit on their hands, how will they go about advancing this resource? 

They've got about AUD $8M in the bank today, Stephens indicated, which will enable them to get to a pre-feasibility study (PFS) and even further into the commercial evaluation. At present, the volume of ore is described in the JORC inferred resource category. Sovereign needs to get that up to indicated so that it can form the basis of the input for the scoping study, he told us. 

After the PFS, they intend to start looking for off-take agreements, do a scoping study, and then go to a definitive feasibility study (DFS). After that, they envision moving on to funding, construction, and production. 

The company intends to increase its headcount and add a couple of key positions. They're bringing in a new country manager for Malawi because things have gotten much bigger now and the current country manager will be moving to a technical manager position. They're starting to build an owner's team in Perth and they’ve employed experienced metallurgists. 

They have already had significant contact with potential off-takers, Stephens admitted. While working on the PFS they’ll start crafting potential MOUs that they intend to convert to actual contracts. 

Who Are the Titanium Customers?

The majority of their potential customer base hails from North America, Europe and Japan. Interestingly, China doesn't use a lot of rutile in general. They use the cheaper ilmenite in their pigment businesses.  

His potential customers are on the phone with him regularly, he reported. He envisions that the total rutile off-take will be about 60% to 80% as contracts, the rest as spot. The contracts will probably be from 2 to 5 years in duration. They haven’t got to the contract-negotiation stage yet.

Sovereign’s main competitors in the titanium market are companies like Iluka, Tronox and some mineral sand miners. Sovereign’s product is the highest-grade stuff, so he doesn’t expect much competition from them. Stephens believes that Sovereign can actually take market share from some of them.

Stephens also told us that the company intends to ramp up its marketing over the next year. They are not only going to promote the quality of their product over other sources of titanium, but also pitch that their mining process is going to be done in an environmentally conscious manner, perhaps better than some of their competitors. 

Working in Malawi

Malawi, endowed with numerous mineral deposits, is a stable and transparent jurisdiction with great infrastructure. It boasts an established, hard-working labour pool. The Malawian government identifies mining as one of the sectors that could potentially generate the best economic growth for the country.

Stephens himself has been working in Malawi for 16 years; ten for Sovereign and for other concerns before that. It’s a former British colony and English is the official language, he told us. The country’s economy is mainly agriculture oriented, but the government is seriously supporting the mining sector, he continued. 

The Next 12 Months

Stephens closed out the conversation with a reminder to investors about three upcoming happenings over the next year or so: 

·         A revision to the resource estimate

·         A scoping study towards targeted for the end of 2021, and

·         A PFS within the first half of 2022. 

To find out more, go to the Sovereign Metals Website