The Directors of Sovereign Metals Limited present their report on Sovereign Metals Limited (“Sovereign” or “the Company” or “Parent”) and the entities it controlled at the end of, or during, the half year ended 31 December 2021 (“Consolidated Entity” or “Group”).
Review of Operations:
Sovereign Metals Limited (ASX: SVM & AIM: SVML) is an ASX and AIM-listed company focussed on the exploration and development of its Kasiya rutile project (Kasiya) in Malawi.
Kasiya is a strategic and globally significant natural rutile deposit with substantial additional resource growth expected. Kasiya’s Mineral Resource Estimate is 605Mt at 0.98% rutile (0.7% cut-off, indicated + inferred).
Sovereign is aiming to develop an environmentally and socially sustainable large-scale operation to supply highly sought-after natural rutile and graphite to global markets. Kasiya has excellent surrounding infrastructure including bitumen roads, a high-quality rail line connecting to the deep-water port of Nacala on the Indian Ocean and hydro-sourced grid power.
Natural rutile is the purest, highest-grade natural form of titanium dioxide (TiO2) and is the preferred feedstock in manufacturing titanium pigment and producing titanium metal. The rutile market fundamentals are robust with current and forecast pricing remaining very strong. In 2021, the market has rebounded strongly with pigment plant utilisation rates returning to pre-pandemic levels. Major producers have noted that very strong demand in the welding market is outstripping supply.
Natural rutile supply is tight with limited new projects coming online in the short to medium term. A resurgence in demand for titanium pigment and from the welding sector combined with concurrent supply shortages has led the CIF China spot prices sharply upwards to over US$2,100 per tonne (Ruidow).
Initial Scoping Study confirms Kasiya as a globally significant natural rutile project
· The initial Scoping Study confirmed a multi-decade operation providing a stable supply of highly sought-after rutile (TiO2) and graphite whilst contributing significantly to the economy of Malawi
· Kasiya is the largest undeveloped rutile deposit in the world and is highly strategic in a market characterised by extreme supply deficit. The Scoping Study demonstrated outstanding results including:
o a 12Mtpa operation producing 122kt rutile and 80kt graphite per annum over a 25 year mine life
o exceptional economics including a post-tax NPV8 of US$861m and post-tax IRR of 36%
o a large-scale operation with a low-cost profile resulting from the deposit’s near surface nature, grade and excellent existing infrastructure
o a low carbon operation with the project to be powered by 100% renewables (hydro and solar)
· The Project is positioned for substantial growth with the current life-of-mine inventory covering only 38% of the drill-defined mineralised footprint. Substantial additional resource growth is expected in early 2022 to enable the Study to be enhanced
· Sovereign is aiming to develop an environmentally and socially sustainable operation to supply natural rutile that can displace carbon, energy & waste intensive alternatives like synthetic rutile and titania slag
Offtake MOU For Premium Priced Rutile Sales to the Welding Sector
· Subsequent to the end of the period, the Company signed an MOU for supply of 25,000 tonnes of natural rutile per annum to Hascor, a market leading global processor and distributor of rutile products for the welding industry
· Pricing of rutile for welding generally attracts significant premiums to bulk rutile prices in the titanium pigment sector
Mineral Resource Estimate (MRE) upgrade to support Scoping Study
· The Company reported a MRE upgrade with over 50% now in the higher confidence Indicated category
· The MRE upgrade was underpinned by results from core drilling, which confirmed the thick, continuous and high-grade nature of the deposit
· The upgraded MRE contains ~3.1Mt of rutile in the Indicated category and ~2.8Mt of rutile in the Inferred category
· Bulk scale metallurgy test-work demonstrated very high recoveries of premium quality rutile products and a high-grade, coarse flake graphite by-product
· World-class specification rutile products ranging from 95.0% to 97.2% TiO2 with low impurities and stand-out recoveries ranging from 100% to 94%
View the full report here