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#SVML Sovereign Metals – Spott Equity Research Report



Today’s news that Sovereign has secured a 25ktpa (20% of total 122ktpa) premium priced offtake into the welding sector is a great positive as most rutile globally normally goes into pigment with a preference for >75µm material. Key here is that Sovereign’s rutile is among the coarsest globally with d50 of 118µm (~same as Rio / Tronox African ops and much larger than Australian developers), including 94% > 75um. With 28% <150µm, this is saleable into pigment but wouldn’t typically attract a premium—unlike today’s deal. Looking ahead, investors should see MRE coming close to doubling soon as Nsaru ‘next one’ sees maiden resource, followed by a scoping study update. Better still, Sovereign remains a massively high conviction ESG name here not the least given they have 80ktpa graphite byproduct to come. As such, we maintain our BUY rating and our A$1.40/sh PT based on a 0.5xNAV multiple for Kasiya. Our estimates for a fully-funded and fully-diluted NAV at first production of ~A$2.75/sh demonstrate the upside here. That this asset is so far ahead of not just low-value or politically difficult peers, as well as producing assets in Africa, adds a valuable M&A angle. The key to our investment thesis is that investors are exposed to resource growth while this is underway, starting with a 1H22 maiden Nsaru MRE and revised scoping study around mid year.


Premium pricing offtake to welding supply company secured for 25ktpa (20% of total 122ktpa)

Sovereign has signed a Memorandum of Understanding (MoU) for offtake of 25,000tpa of natural rutile (vs. high CO2 synthetic rutile converted from ilmenite by the likes of Rio) to Hascor International Group™, a globally leading distributor to the welding industry. Rutile for the welding industry typically attracts a premium to pigment sales. Sovereign notes bagged rutile’s sales are expected to be priced at a US$500- 600/tonne premium over the bulk market in 2022, leading price growth due to limited alternatives within the welding end-use sector.

Why we like Sovereign Metals

1. Existing 605Mt @ 0.98% rutile comes from just 49km2 of Kasiya
2. Kasiya drilling over 89km2 plus 40km2 at Nsaru points to >1Bt global potential
3. Pure rutile + graphite credits lowers CO2 and adds EV credits addressing ESG agenda
4. On hydropower, hydro mineable, on modern rail to deep-water port with allocation
5. PFS-level Malingunde graphite project adds diversification and second pillar to value


1. 1Q22: Nsaru MRE
2. Mid 2022: Expanded PEA to including Nsaru
3. 2022: Ore to pigment CO2 study


Brock Salier (London) M: +44 7400 666 913 bsalier@sprott.com
Justin Chan (London) M: +44 7554 784 688 jchan@sprott.com
Brandon Gaspar (Toronto) M: +1 437 533 3142 bgaspar@sprott.com
Eleanor Magdzinski (Toronto) M: +1 705 669 7456 emagdzinski@sprott.com




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