REG - Capital Metals PLC - Significant Capex Reduction for Stage 1 Production

Capital MetalsAnnouncement

02/12/2024 07:15

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RNS Number : 3738O  Capital Metals PLC  02 December 2024

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2 December 2024

 

Capital Metals plc

 

("Capital Metals" or the "Company")

 

Project Update: Significant Capex Reduction for Stage 1 Production

 

Highlights

 

·    Stage 1 capex reduced by approximately one third to $20.9m

·    Reduction through process rationalisation, with further optimisation
expected

·    125,000tpa high grade (>95%) stage 1 HMC production with upside
following drilling

·    Funding discussions ongoing with offtakers, vendor-financiers and
potential local Sri Lankan partners to fund stage 1 Project capex, with
subsequent expansion from operational cashflow

·    Drilling recommencing targeting significant resource increase and
mine plan certainty

·    Service agreements entered into with Mineral Technologies and Access
Group

 

Capital Metals (AIM: CMET), a mineral sands company approaching mine
development stage at the high-grade Eastern Minerals Project in Sri Lanka (the
"Project"), is pleased to provide the following Project update.

 

Over the past six months, the Company has been focused on establishing a
development plan which significantly reduces the circa $30m stage 1 capex from
the May 2022 Preliminary Economic Assessment ("PEA"), whilst expediting
cashflow. Leveraging updated knowledge and implementing numerous process
improvements since the PEA, the Company is pleased to report that the
estimated capex has reduced to $20.9 million, with further optimisation
opportunities identified for potential cost reductions.

 

The targeted initial production of Heavy Mineral Concentrate ("HMC"), based on
the same projected throughput rate in the PEA of 550,000tpa is forecast to be
125,000tpa, with upside based on expected higher grades in the chosen initial
mining area.

 

The Company has also been in active dialogue with offtakers, vendor
financiers, and potential Sri Lankan project partners to finance the Project
in a way that minimises or eliminates the requirement for the Company to raise
market equity for the funding task. This approach is also significantly less
time consuming than traditional project debt.

 

The result of this work is that the Company now has an approach that
fast-tracks production, significantly reduces initial capex, and enables the
Project to become self-funding as quickly as practicable. This strategy also
supports incremental expansions of production capacity and product quality
through various plant value additions over time.

 

Based on the costs in the PEA, which the Company believes are conservative,
the Company is confident of achieving significant operating margins over the
life of the Project. The Company is targeting a Final Investment Decision
("FID") in Q2 2025 in order to commence construction, with an expected
9-12-month construction period until first production.

 

The process rationalisation studies included: eliminating the need to wash the
concentrate (following numerous discussions with potential offtakers) and
reducing associated infrastructure at the port; transitioning to truck and
shovel mining to avoid costly in-pit mining units; and utilising an
off-the-shelf predesigned wet concentrator plant from Mineral Technologies.

 

Summary of First Stage Production Criteria

·    Clean beach sand means minimal screening required

·    Mining rate: 180tph plant feed rate to achieve 550,000tpa

·    Product: high grade HMC of 125,000tpa

·    Loader and truck approach, with tails returned immediately to the
prior mine void

·    3-stage wet concentrator spiral circuit delivering high zircon and
titanium recoveries (>98%)

·    No final product screening necessary to produce high grade HMC
(>95%)

·    Capex requirement: $20.9 million, with the potential for further
optimisation

 

Subsequent phases incorporate: incremental mining rates of up to 1.65Mtpa, and
potentially beyond, subject to expected increases in the resource; a magnetic
separation plant to produce final ilmenite and garnet products and zircon and
rutile in concentrate; and a non-magnetic separation plant in the final stage
to produce final zircon and rutile products in addition to the ilmenite and
garnet.

 

Recommencement of Drilling Activities

Given the Sri Lankan parliamentary elections have concluded and the new
ministers relevant to the Company's activities have been appointed, the
Company is mobilising the drilling rig and team to recommence drilling
activities. The purpose of the drilling is to increase the resource, as well
as to help with design and engineering, mine planning and to obtain greater
geological confidence in the proposed mining areas. Updates will be announced
when appropriate.

 

Service Agreements

The Company is pleased to announce that it has entered into service agreements
with Mineral Technologies, a global leading mineral process solutions,
services and equipment specialist headquartered in Queensland, Australia, and
Access Group, a Sri Lanka-based engineering and construction firm. Both
partners will support different aspects of the engineering and design of the
Project necessary to reach the FID.

 

Mineral Technologies will focus on key technical aspects, with both companies
leveraging their expertise to develop capex requirements to support a FID. It
is envisaged Mineral Technologies will become the supplier of a pre-designed
Flex Series plant for Stage 1. Capital Metals, in conjunction with Mineral
Technologies, will work with Access Group to build in-country capacity and
capabilities, incorporating local skills and creating jobs. In line with this
approach, the teams are exploring options to fabricate key equipment,
including the structural framework for the spiral plant, in Sri Lanka.

 

Greg Martyr, Executive Chairman of Capital Metals, commented:

 

"The team has worked diligently with consultants across all aspects of Project
delivery to arrive at a materially reduced capex estimate for the first stage
of production of $20.9 million, without compromising throughput, which very
pleasingly is expected to produce at least 125,000tpa of high grade, very
clean HMC which we know will be well received by offtakers.

 

We are delighted with where we have got to on costings - it reinforces the
simplicity of the Project. The enabler for this is the high-grade nature of
the resource, which allows for simple mining and associated lower capex and
opex, to achieve high plant recoveries and grades with a reduced environmental
footprint.

 

Based on ongoing discussions, we are confident this quantum is eminently
fundable, predominantly through prepayments with offtakers, vendor financiers
and potential local Sri Lankan project partners, aligned with an objective to
make the FID in Q2 next year. We look forward to working with our suppliers to
refine the costings and reach FID while simultaneously advancing discussions
with the alternate financing parties.

 

 

We are also pleased that the parliamentary elections have concluded peacefully
in Sri Lanka. Not only does this mean that we are now able to recommence our
drilling campaign, but we are also anticipating a very positive period in Sri
Lanka with the National People's Power party looking to build on its election
success with the capacity for positive decisions to assist the economy, in
particular with new investment in projects creating new jobs and strong
foreign currency inflows."

 

For further information, please visit www.capitalmetals.com
(http://www.capitalmetals.com) or contact:

 

 Capital Metals plc                           Via Vigo Consulting

 Greg Martyr (Executive Chairman)
 Vigo Consulting (Investor Relations)         +44 (0)20 7390 0234

 Ben Simons / Peter Jacob                     capitalmetals@vigoconsulting.com (mailto:capitalmetals@vigoconsulting.com)
 SPARK Advisory Partners (Nominated Adviser)  +44 (0)20 3368 3550

 Neil Baldwin / James Keeshan / Adam Dawes
 Tavira Financial                             +44 (0)20 7100 5100

 Jonathan Evans / Oliver Stansfield

 

About Capital Metals

 

Capital Metals is a UK company listed on the London Stock Exchange (AIM:
CMET). We are developing the Eastern Minerals Project in Sri Lanka,
approximately 220km east of Colombo, containing industrial minerals including
ilmenite, rutile, zircon, and garnet. The Project is one of the highest-grade
mineral sands projects globally, with potential for further grade and resource
expansion. In 2022, a third-party Preliminary Economic Assessment provided a
Project NPV of US$155-235m based on existing resources, with further
identified optimisation potential. We are committed to applying modern mining
practices and bringing significant positive benefits to Sri Lanka and the
local community. We expect over 300 direct new jobs to be created and over
US$130m in direct government royalties and taxes to be paid.

 

Visit our website:

www.capitalmetals.com (http://www.capitalmetals.com)

 

Follow us on social media:

 

X (formerly Twitter): @MetalsCapital (https://twitter.com/MetalsCapital)

LinkedIn: @Capital Metals plc (https://uk.linkedin.com/company/capitalmetals)

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