World's Highest-Grade Mineral Sands Project Moves Toward Production with Strategic Local Investment

• Capital Metals secured a 14% investment from Sri Lankan partners Ambeon Capital, bringing local expertise and government connections to their Taprobane Mineral Sands project
• The project features 17% grade mineral sands on Sri Lanka's east coast, among the world's highest grades, with recent drilling showing potential for 60% grades at depth
• Plans to start with a $20.9 million concentrate operation using gravity spirals, producing 125,000 tons annually with 100% markup potential
• Raising $20 million through Sri Lankan exchange listing, with Ambeon arranging $10 million equity (15% stake) and $10 million debt
• Working through government approvals for raw concentrate exports initially, with requirement to build separation plant within two years for value-added processing

Capital Metals (LSE:CMET), an AIM-listed mineral sands developer, has taken significant steps forward with its Taprobane project in Sri Lanka through a strategic partnership that addresses both funding requirements and regulatory challenges. Executive Chairman Greg Martyr recently outlined the company's progress in securing local partners and advancing toward production at what he describes as one of the world's highest-grade mineral sands deposits.

Strategic Partnership with Local Investors

The company has formed a partnership with Ambeon Capital, a Sri Lankan investment group founded by Australian-educated principals. This partnership involves a 14% investment in Capital Metals, marking the end of a long search for suitable local partners. The significance of this partnership extends beyond mere capital injection, as Martyr explains: 

"In these developing countries you always want to try and get somebody there who is well-connected, can open doors for you, have proper conversations, can read the tea leaves, but that they should also make a financial investment."

The Ambeon group brings particular value through its principals' backgrounds. Founded by three individuals - two Sri Lankans and one Indian who were educated and worked in Australia - they combine local market knowledge with international business experience.

Project Economics & Resource Quality

The Taprobane project stands out in the mineral sands sector due to its exceptional grade quality. Current resource calculations show 17% grade mineral sands, though Martyr indicates this figure may increase with additional drilling. Recent aircore drilling has revealed even higher potential, with visual inspections showing grades exceeding 60% in some areas. The project's Resource is calculated to an average depth of 1.6 meters, so the upside from additional depth is compelling.

The initial development plan focuses on concentrate production with a capital expenditure of $20.9 million, though this figure is trending lower. The operation will utilize 48 spirals in a gravity concentration process, producing approximately 125,000 tons of concentrate annually. Martyr describes the economics: 

"It cost us $20 a ton to mine and we're getting $40 a ton mined back in revenue. So that's roughly where I get my 100% markup."

Regulatory Framework & Value Addition Requirements

Sri Lankan government policy is being revised and Capital Metals are seeking a two-stage development approach that initially allows concentrate exports for two years, followed by further value-added processing through separation plants, though Martyr acknowledges some definitional challenges: 

"Value addition is a widely thrown around term. It's often a political term because people think higher revenues, more jobs, but it's often thrown around without understanding what it means."

The company is working through the regulatory approval process, with two key requirements outstanding: clarification of value-addition definitions and securing an additional mining license for the government-owned area where operations will commence. The Ambeon partnership provides strategic advantage here, as the chairman of Ambeon sits on Sri Lanka's Board of Investment, the body driving value-addition discussions.

Interview with Executive Chairman, Greg Martyr

Funding Strategy & Capital Requirements

Capital Metals has structured a comprehensive funding strategy combining equity and debt financing. The company recently raised $2.8 million, with Ambeon having an option for an additional $2 million investment within 45 days. For the main development phase, the company plans to raise $20 million through a listing on the Sri Lankan exchange.

The funding arrangement with Ambeon includes an MoU for $10 million in equity for a 15% stake in the holding company, Redgate Lanka, and $10 million in corporate debt. Notably, Ambeon's principals hold more than 10% stakes in three Sri Lankan banks, providing advantageous access to local debt markets. Martyr emphasizes the flexibility this provides: 

"We're just talking to the offtakers on pure offtake terms, not looking for a pre-payment and therefore not discounting. Not locking ourselves in. It just gives us more flexibility on who we talk to."

Market Conditions & Product Applications

The mineral sands market has experienced softness over the past 12 months, with expectations for continued weak conditions for another year, which Capital Metals had already factored in. Chinese capacity expansion in both chloride and sulfate pigment plants has contributed to market pressure, with Capital Metals' product primarily serving the sulfate pigment market, where pricing remains more stable.

The primary application for the company's products is pigment production for paints and papers, though higher-value applications include titanium metals for aerospace applications. The company has engaged TZMI, an industry-standard forecasting service used by major banks, to validate its economic projections. The base case net present value for the original 10-year mine life was calculated at $155 million, with an upside case of $235 million.

Resource Expansion Potential

Recent drilling campaigns suggest significant resource expansion potential beyond the current 10-year mine life projection. The company has completed approximately 2,000 meters of drilling that has not yet been incorporated into resource calculations, while the existing resource is based on 2,600 meters of drilling. Martyr suggests the potential for doubling mine life: 

"We have about 2,000 meters of drilling that's not in the resource. Our resource is based on 2,600 meters, so you can see how easily I can double the mine life."

The drilling program has shifted from hand auger methods limited by the water table to aircore drilling capable of reaching 15 meters depth. Initial visual inspections from the first 170-hole campaign covering 1,500 meters have shown encouraging results, with some holes displaying over 60% grade and good continuity.

Operational Leadership & Social License

The company has strengthened its operational capabilities through the appointment of Stuart Forrester as Chief Operating Officer. Forrester brings substantial experience from Iluka Resources, a major Australian mineral sands producer, plus project development experience in the United States. His background includes building and operating projects, with particular relevance to Capital Metals' scale - he previously managed operations producing similar tonnages to Capital Metals' planned output.

Community engagement has shown marked improvement following focused efforts by the operational team. The company maintains three community officers and has supported local initiatives, including sponsoring a regional sporting carnival that had been dormant for 20 years.

Technical Simplicity & Execution Risk

The mineral sands processing technology represents established, low-risk methodology. The operation requires no blasting or chemicals, with the deposit free from clays that complicate many mineral sands projects. The gravity spiral technology has remained largely unchanged for decades, utilizing the density differential between heavy minerals and lighter materials.

Martyr emphasizes the operational simplicity: 

"There's no blasting. There's no chemicals. We don't have any slimes which are like clays in our deposit. There hasn't been any major changes in the processing technology for a long time." 

The subsequent magnetic separation and potential electrostatic separation stages utilize well-established, off-the-shelf technology.

The Investment Thesis for Capital Metals

• Exceptional Resource Quality: 17% grade mineral sands among world's highest, with drilling indicating potential for 60%+ grades at depth and possible doubling of 10-year mine life
• Strategic Local Partnership: Ambeon group provides government connections, local expertise, and funding access
• Simple, Low-Risk Operations: Gravity-based processing requiring no blasting or chemicals, utilizing proven spiral technology with 100% gross margin potential on $20/ton mining costs
• Attractive Economics: $155 million NPV base case with $20.9 million capex, producing stage 1 production of 125,000 tons concentrate annually (still assumed from the shallow 1.6-meter average depth Resource)
• Structured Funding Path: MoU for $20 million funding strategy through Sri Lankan listing, with $10 million equity and $10 million debt arranged by local partners
• Market Access Flexibility: Two-year concentrate export window followed by value-added processing, avoiding offtake prepayment discounting while maintaining buyer optionality
• Experienced Operations Team: COO with Iluka background managing similar-scale operations, supported by strong community engagement and local government relations
• Resource Expansion Upside: Significant drilling inventory not yet incorporated in resource calculations, with potential to substantially extend mine life beyond current projections

Macro Thematic Analysis

The mineral sands sector represents a critical component of the global pigments and titanium supply chain, with applications spanning paint, paper, and aerospace industries. Sri Lanka's emergence as a mineral sands jurisdiction reflects the ongoing geographic diversification of supply sources as traditional producers face resource depletion and environmental constraints.

The sector benefits from structural demand growth tied to global GDP expansion, particularly in emerging markets driving paint and construction material consumption. However, recent Chinese capacity additions in pigment processing have created near-term pricing pressure, though this potentially creates opportunities for high-grade, low-cost producers to capture market share.

Capital Metals' positioning in Sri Lanka offers several macro advantages: proximity to Asian consumption markets, lower labor costs, and government support for mining development as an economic diversification strategy. The company's high-grade resource addresses the industry trend toward selective mining of premium deposits as lower-grade resources become economically marginal.

The regulatory requirement for value-added processing this creates both opportunities and execution risks with mitigation strategies assisted complimented by the local partnership. Success in navigating these requirements could establish Capital Metals as a template for resource development in emerging jurisdictions.