REG - Sovereign Metals Ltd - Kasiya Pre-Feasibility Study Results
28/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230928:nRSb9327Na&default-theme=true
RNS Number : 9327N Sovereign Metals Limited 28 September 2023
SOVEREIGN METALS LIMITED
NEWS RELEASE | 28 September 2023
KASIYA PRE-FEASIBILITY STUDY RESULTS
PFS CONFIRMS KASIYA AS A MAJOR CRITICAL MINERALS PROJECT DELIVERING
INDUSTRY-LEADING ECONOMIC RETURNS AND SUSTAINABILITY METRICS
ECONOMIC HIGHLIGHTS
US$1,605M 28% US$415M
After Tax NPV(8) After Tax IRR Ave. Annual EBITDA
US$16Bn US$404/t US$597M
Total Revenue Operating Cost Capex to 1(st) Production
(initial modelled 25 years LOM) (FOB Nacala per tonne of product)
PFS HIGHLIGHTS
· "Market Leader" Position in Two Critical Minerals:
o Positioned to become the world's largest rutile producer at 222kt per annum
for an initial 25 year life-of-mine (LOM)
o Potentially one of the world's largest natural graphite producers outside of
China at 244kt per annum
o Natural rutile facing significant global supply deficit forecast to widen
further considerably in the next 5 years(1)
o Natural graphite market moving into deficit as demand rapidly grows in the
lithium-ion battery and electric vehicle (EV) sectors
o Initial Probable Ore Reserves declared of 538Mt, representing conversion of
only 30% of the total Mineral Resource
o Substantial production rate and mine life upside exists as the PFS modelling
was limited to only 25 years
· Highly Compelling Cost Profile:
o Cash operating costs of US$404/t of product will position Kasiya as the
lowest cost producer of rutile and graphite globally
o Increased capital to first production from the Expanded Scoping Study, is
primarily due to bringing forward capital items previously planned for Stage 2
including a rail spur, full-scale water dam, integrated power and optimised
graphite production, as well as generally enhanced engineering and global cost
inflation
· Industry-Redefining Environmental and Social Advantages:
o Extremely low CO(2)-footprint operation incorporating climate-smart
attributes including hydro-mining with renewables power solution
o CO(2) emissions expected to be lowest in class versus existing and planned
operations and versus alternative synthetic products
o Low-impact operation with mineralisation at surface, zero-strip ratio, low
reagent usage, simple process flowsheet and progressive land rehabilitation
· Strong Support from the Government of Malawi:
o Government of Malawi has applauded the timely investment by Rio Tinto and
marked it as a milestone towards realising the country's aspirations of
growing the mining sector as a priority industry
o PFS demonstrates Kasiya's potential to provide significant socio-economic
benefits for Malawi including fiscal returns, job creation, skills transfer
and sustainable community development initiatives
o With mining being one of the key pillars for growth under Malawi's economic
development strategy (Agriculture, Tourism, Mining - ATM Policy) and the
potential for Kasiya to be a project of national significance, the Government
has constituted an Inter-ministerial Project Development Committee to work
alongside the Company to assist in the permitting processes
· Optimisation with Strategic Investor Rio Tinto to Commence:
o Advancing into an optimisation phase prior to moving to the Definitive
Feasibility Study (DFS) with support from the Company's strategic investor,
Rio Tinto
o Formal establishment of the Technical Committee with Rio Tinto
Managing Director, Dr Julian Stephens commented: "The release of the Kasiya
PFS marks another important step towards unlocking a major source of two
critical minerals required to decarbonise global supply chains and to achieve
Net-Zero.
The Project benefits from existing high-quality infrastructure and inherent
ESG advantages. Natural rutile has a far lower carbon footprint compared to
other titanium feedstocks used in the pigment industry, and natural graphite
is a key component in lithium-ion batteries - crucial to de-carbonising the
global economy.
The high-quality of work completed and the results of the PFS demonstrates
that Kasiya is a globally significant project that has the potential to
deliver a valuable long-term source of low-CO(2) products and generate
substantial economic returns with a forecast average EBITDA of US$415 Million
per annum for the initial 25 years modelled. The Project is well positioned to
be a large scale, multi-generational asset with significant opportunity for
further upside as only 30% of the current mineral resource (MRE) is utilised
in the PFS model.
Kasiya's compelling economics demonstrate the potential for industry-leading
returns, even against the backdrop of global cost inflation.
The Company is looking forward to conducting an optimisation review in
collaboration with new strategic investor, Rio Tinto and progressing to the
Definitive Feasibility Study."
ENQUIRIES
Dr Julian Stephens (Perth) Sam Cordin (Perth) Sapan Ghai (London)
Managing Director
+61(8) 9322 6322
+44 207 478 3900
+61(8) 9322 6322
Nominated Adviser on AIM and Joint Broker
SP Angel Corporate Finance LLP
Ewan Leggat +44 20 3470 0470
Charlie Bouverat
Harry Davies-Ball
Joint Brokers
Berenberg +44 20 3207 7800
Matthew Armitt
Jennifer Lee
Tavistock PR +44 20 7920 3150
To view the announcement in full, please refer to the announcement at
http://sovereignmetals.com.au/announcements/
(http://sovereignmetals.com.au/announcements/) .
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 as it forms part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ('MAR'). Upon the publication of this
announcement via Regulatory Information Service ('RIS'), this inside
information is now considered to be in the public domain.
Source:
1. TZ Minerals International Pty Ltd (TZMI)
KASIYA PFS OUTCOMES
Sovereign Metals Limited (the Company or Sovereign) is pleased to announce the
results of the Pre-Feasibility Study (PFS or Study) for the Company's Kasiya
Rutile-Graphite Project (Kasiya or the Project) in Malawi.
The PFS confirmed Kasiya as potentially a major critical minerals project with
an extremely low CO(2)-footprint delivering major volumes of natural rutile
and graphite while generating significant economic returns.
The PFS is an Association for the Advancement of Cost Engineering
International (AACEI) Class 3 estimate with an accuracy of -20% and +25%.
Table 1: Key Outcomes
Outcome Unit Kasiya
NPV(8) (real post-tax) US$ US$1,605M
NPV(10) (real post-tax) US$ US$1,205M
IRR (post-tax) % 28%
Capital Costs to First Production (Stage 1) US$ US$597M
Expansion Capital (Stage 2) US$ US$287M
Plant relocation US$ US$366M
Operating Costs US$/t mined US$8.74
Operating Costs US$/t product US$404
Revenue to Cost Ratio X 2.8
NPV(8) / Capital Costs to First Production X 2.7
Throughput (Average LOM) Mtpa 21.5
Modelled Life years 25
Annual Production (Average LOM) - rutile ktpa 222
Annual Production (Average LOM) - graphite ktpa 244
Total Revenue (LOM) US$ US$16,121M
Annual Revenue (Average LOM) US$ US$645M
Annual EBITDA (Average LOM) US$/year US$415M
Payback - from start of production years 4.3 years
LARGE-SCALE, LONG-LIFE AND HIGH-MARGIN OPERATION
Kasiya, located in central Malawi, is the largest natural rutile deposit and
second largest flake graphite deposit in the world. Sovereign is aiming to
develop a low-CO(2) and sustainable operation to supply highly sought-after
natural rutile and graphite to global markets.
Kasiya has a geological benefit with both natural graphite and rutile hosted
in soft, friable saprolite material at surface that can be mined,
beneficiated, and purified with a considerably lower carbon footprint than
hard-rock operations or synthetic graphite and synthetic rutile production.
Figure 1: High-level schematic of the planned Kasiya Rutile-Graphite Project
The proposed large-scale operation will process 24 million tonnes of ore per
annum to produce approximately 245kt of natural rutile and 288kt of natural
graphite per annum once at steady state.
The rutile-graphite rich mineralisation will be extracted from surface
utilising cost-effective hydro-mining to depths averaging 15m. Ore is
transported as slurry via a pumping network to a Wet Concentration Plant (WCP)
where a low-energy requirement, chemical-free process produces a Heavy Mineral
Concentrate (HMC). The HMC is transferred to the dry Mineral Separation Plant
(MSP) where premium quality rutile (+95% TiO(2)) is produced via electrostatic
and magnetic separation.
Graphite rich concentrate is collected from the gravity spirals and processed
in a separate graphite flotation plant, producing a high purity, high
crystallinity and high value coarse-flake graphite product.
The Project has excellent surrounding infrastructure including sealed roads, a
high-quality rail line connecting to the deep-water port of Nacala on the
Indian Ocean and hydro-sourced grid power. For the duration of the operation,
rutile and graphite products will be railed directly from a purpose-built rail
dry port at the mine site eastward via the Nacala Logistics Corridor (NLC) to
the port of Nacala.
Based on the build-out strategy, the operation will commence in the southern
section of the Ore Reserve with a 12Mtpa throughput plant which will be
expanded from Year 6 to increase the throughput to 24Mtpa. As the southern
mineralisation is exhausted, a new plant will be constructed in the north and
the second stage WCP moved in order to continue to support 24Mtpa throughput.
CRITICAL RAW MATERIALS
Both rutile and graphite are critical to the world economy as well as crucial
to decarbonisation solutions required to meet "Net-Zero" and other targets set
by policymakers. Titanium and natural graphite have been classified as
critical raw materials by the US and EU due to a combination of their
scarceness and China-controlled supply chains.
Current sources of natural rutile are in decline as several operations'
reserves are depleting concurrently with declining ore grades. These include
Sierra Rutile's (SRL) Mine Area 1 in Sierra Leone and Base Resources' Kwale
operations in Kenya.
Global rutile supply is projected to decline sharply beyond 2023, following
the scheduled closures of Base Resource's Kwale and SRL operations unless mine
life extension is approved (Source: TZ Minerals International Pty Ltd (TZMI).
There are limited new deposits forecast to come online, and hence supply of
natural rutile is likely to remain in structural deficit for the long term,
even with Kasiya at full production.
Figure 2: Previous and forecast global natural rutile supply 2018-2033
*Supply profile only reflects existing operations
(source: TZMI)
Demand for high quality flake graphite and natural rutile is growing due to
global decarbonisation requirements and current and future predicted supply
deficits. Per Benchmark Mineral Intelligence, the demand for anodes grew by
46% in 2022 compared to only 14% growth in natural flake graphite supply.
Figure 3: Graphite demand / supply showing market deficit beginning 2024E
Source: Macquarie Research (March 2023)
LOW-COST OPERATION
Kasiya's low operating costs are achieved through deposit size and grade, zero
strip ratio from surface, location and excellent existing operational
infrastructure. Kasiya is strategically located in close proximity to Malawi's
capital city Lilongwe, providing access to a skilled workforce and industrial
services.
Products will be exported to global markets via the deep water port of Nacala
along the existing Nacala Logistics Rail Corridor (NLC). This existing
infrastructure provides significant capital cost savings for Kasiya compared
to many other undeveloped minerals projects.
Kasiya has an average life-of-mine FOB (Nacala) operating cost of US$404 per
tonne of product produced (rutile plus graphite).
One of the highest Revenue : Cost of Sales Ratios in the Mineral Sands
Industry
The revenue-to-cash cost ratio of 2.8x positions Kasiya in the first quartile
compared to other undeveloped mineral sands operations. The production of high
value natural rutile and graphite delivers strong cashflows with a cash margin
of over 64% for the life of the operation.
The Study has applied conservative pricing assumptions for both products which
still results in a strong position on the revenue to cost ratio metric. This
supports the robustness of the Kasiya operation and its strong profitability
during different pricing environments and the revenue stability of two
different products with different demand drivers.
Figure 4: Revenue to cost ratio of Kasiya and other selected mineral sands
projects
Lowest Cost Flake Graphite Project in the World
Graphite is produced at Kasiya via obtaining a graphite rich concentrate from
the gravity spirals as part of the rutile processing. The graphite rich
concentrate is then processed in a separate standard graphite flotation plant,
producing a high purity, high crystallinity and high value coarse-flake
graphite product.
On an incremental cost basis reflecting graphite production as a co-product to
primary rutile production, the operating cost is US$182 per tonne of graphite
produced (FOB Nacala).
Figure 5: Actual and forecast graphite production (non-Chinese)
LOW CO(2) ADVANTAGE
Kasiya has the potential to provide two products that both have very
favourable low carbon in-use advantages. Benchmark Life Cycle Assessment (LCA)
studies for natural rutile and natural graphite produced from Kasiya* have the
potential for a substantially reduced carbon footprint compared to other
titanium feedstocks and natural graphite products in the market.
Natural rutile (~95% TiO(2)) is the cleanest, purest natural mineral form of
TiO(2) with the other major source being ilmenite (~50% TiO(2)). The genuine
scarcity of natural rutile prompted the titanium industry to develop upgraded
titanium feedstock products from ilmenite that can be used as substitutes for
natural rutile (i.e. synthetic rutile and titania slag).
Two energy and carbon intensive processes are used by major market
participants to produce the upgraded synthetic rutile and titania slag. Both
methods use ilmenite (~FeTiO(3)) as the raw feedstock and are essentially
processes for the removal of iron oxide. The downstream pigment production
process relies heavily on the use of these upgraded titanium feedstocks, each
having an associated substantial environmental impact.
()
Figure 6: Natural rutile versus synthetic rutile and titania slag flowchart
Natural rutile produced at Kasiya has a fraction of the GWP of the alternative
feedstocks. The Global Warming Potential (GWP) for natural rutile concentrate
from Kasiya (0.1 t CO(2)e per tonne) is significantly lower than producing
titania slag in South Africa (2.0 t CO(2)e per tonne) and producing synthetic
rutile via the Becher process in Australia (3.3 t CO(2)e per tonne).
The Scope 1 and 2 emissions comparing the carbon footprint of these three
production routes are shown in Figure 6. The higher GWP for synthetic rutile
is mainly due to the use of coal and other reagents for the upgrading of lower
grade ilmenite to the final synthetic rutile feedstock product.
* LCA conducted on inputs from the Expanded Scoping Study released July 2022.
Figure 7: GWP impact of natural rutile production from Kasiya as a titanium
feedstock vs. alternatives
(Source: Minviro)
Kasiya has the lowest GWP compared with currently known and planned future
natural graphite projects:
· Up to 60% lower than currently reported GWP of graphite producers
and developers, including suppliers to Tesla Inc.
· 3x less polluting than proposed Tanzanian natural graphite
production from hard rock sources
· 6x less polluting than current Chinese natural graphite
production which accounts for up to 80% of current global graphite supply
Figure 8: Global Warming Potential per tonne of graphite product (CO(2)e/t)
(Note: All figures are cradle-to-gate except for Syrah Resources which
includes transportation to the port of Nacala; transportation of Kasiya's
graphite to the port of Nacala would add an estimated incremental 0.04CO(2)e
to its GWP)
Industry's interaction with supply chain participants indicates the
progression towards higher proportions of natural graphite used in battery
anodes will be supported by its lower cost and superior environmental
credentials. The environmental footprint of EVs will become an increasingly
important market consideration as EV penetration accelerates, noting that
synthetic graphite has a carbon footprint orders of magnitude higher than
flake graphite because it is made from needle coke produced from oil and coal
refining via energy intensive processes.
Leading EV producer Tesla Inc.'s (Tesla) "Master Plan 3" outlines its proposed
path to reach a sustainable global energy economy through end-use
electrification and sustainable electricity generation and storage. In the
plan, Tesla suggests that the world would need to produce 10.5Mt of graphite
per year and estimates US$104 Billion of new graphite mining investment is
required to achieve its target (source: Tesla Master Plan 3 (April 2023)).
STRONG GOVERNMENT SUPPORT
The Malawian government identifies mining as one of the sectors that could
potentially generate economic growth for the country. The country has several
significant mineral resources that could be sustainably mined to contribute to
Malawi's economic goals.
Kasiya has the potential to deliver significant social and economic benefits
for Malawi including fiscal returns, job creation, skills transfer and
sustainable community development initiatives.
The Government of Malawi strongly supports Sovereign and its development of
the Kasiya project. Malawi's Minister of Mines and Minerals, The Honourable
Monica Chang'anamuno, recently publicly applauded the timely investment by Rio
Tinto and marked it as a milestone towards realising the country's aspirations
of growing the mining industry as promoted in the Malawi Vision 2063, which
isolates mining as a priority industry.
With mining being one of the key pillars for growth under Malawi's economic
development strategy (Agriculture, Tourism, Mining - ATM Policy) and the
potential for Kasiya to be a project of national significance, the Government
has constituted an Inter-ministerial Project Development Committee to work
alongside the Company to assist in the permitting processes.
INVESTMENT BY RIO TINTO
In July 2023, Rio Tinto made an investment in Sovereign resulting in an
initial 15% shareholding and options expiring within 12 months of initial
investment to increase their position to 19.99%. Under the Investment
Agreement, Rio Tinto will provide assistance and advice on technical and
marketing aspects of Kasiya including with respect to Sovereign's graphite
co-product, with a primary focus on spherical purified graphite for the
lithium-ion battery anode market.
The Company is planning to commence optimisation phase prior to advancing to
the DFS. Sovereign is soon to establish a Technical Committee and commence the
working relationship with Rio Tinto after the publication of this Study.
DISCLOSURES, DISCLAIMERS, MODIFYING FACTORS & SOURCES
DISCLOSURES & DISCLAIMERS
Competent Person Statements
The information in this announcement that relates to Production Targets and
Ore Reserves is based on and fairly represents information provided by Mr Ross
Cheyne, a Competent Person, who is a Fellow Member of The Australasian
Institute of Mining and Metallurgy. Mr Cheyne is employed by Orelogy
Consulting Pty Ltd, an independent consulting company. Mr Cheyne has
sufficient experience, which is relevant to the style of mineralisation and
type of deposit under consideration, and to the activity he is undertaking, to
qualify as a Competent Person as defined in the 2012 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral Resources and
Ore Reserves'. Mr Cheyne consents to the inclusion in the Announcement of the
matters based on his information in the form and context in which it appears.
The information in this announcement that relates to Processing,
Infrastructure and Capital and Operating Costs is based on and fairly
represents information compiled or reviewed by Mr Tomasz Tomicki, a Competent
Person, who is a Fellow Member of The Australasian Institute of Mining and
Metallurgy. Mr Tomicki is employed by DRA Pacific Pty Ltd, an independent
consulting company. Mr Tomicki has sufficient experience that is relevant to
the style of mineralisation and type of deposit under consideration and to the
activities undertaken. Mr Tomicki, consents to the inclusion in the
Announcement of the matters based on his information in the form and context
in which it appears.
The information in this announcement that relates to Metallurgy - rutile is
based on and fairly represents information compiled or reviewed by Mr Tomasz
Tomicki, a Competent Person, who is a Fellow Member of The Australasian
Institute of Mining and Metallurgy. Mr Tomicki is employed by DRA Pacific Pty
Ltd, an independent consulting company. Mr Tomicki has sufficient experience
that is relevant to the style of mineralisation and type of deposit under
consideration and to the activities undertaken. Mr Tomicki, consents to the
inclusion in the Announcement of the matters based on his information in the
form and context in which it appears.
The information in this announcement that relates to Metallurgy - graphite is
based on and fairly represents information compiled or reviewed by Mr John
Fleay, a Competent Person, who is a Fellow Member of The Australasian
Institute of Mining and Metallurgy. Mr Fleay is employed by DRA Pacific Pty
Ltd, an independent consulting company. Mr Fleay has sufficient experience
that is relevant to the style of mineralisation and type of deposit under
consideration and to the activities undertaken. Mr Fleay, consents to the
inclusion in the Announcement of the matters based on his information in the
form and context in which it appears.
The information in this announcement that relates to the Mineral Resource
Estimate is extracted from the announcement entitled 'Kasiya Indicated
Resource Increased by over 80%' dated 5 April 2023 and is based on, and fairly
represents information compiled by Mr Richard Stockwell, a Competent Person,
who is a fellow of the Australian Institute of Geoscientists (AIG). Mr
Stockwell is a principal of Placer Consulting Pty Ltd, an independent
consulting company. The original announcement is available to view on
www.sovereignmetals.com.au. Sovereign confirms that a) it is not aware of any
new information or data that materially affects the information included in
the original announcement; b) all material assumptions included in the
original announcement continue to apply and have not materially changed; and
c) the form and context in which the relevant Competent Persons' findings are
presented in this announcement have not been materially changed from the
original announcement.
Forward Looking Statement
This release may include forward-looking statements, which may be identified
by words such as "expects", "anticipates", "believes", "projects", "plans",
and similar expressions. These forward-looking statements are based on
Sovereign's expectations and beliefs concerning future events. Forward looking
statements are necessarily subject to risks, uncertainties and other factors,
many of which are outside the control of Sovereign, which could cause actual
results to differ materially from such statements. There can be no assurance
that forward-looking statements will prove to be correct. Sovereign makes no
undertaking to subsequently update or revise the forward-looking statements
made in this release, to reflect the circumstances or events after the date of
that release.
Qualified Person
Information disclosed in this announcement has been reviewed by Dr Julian
Stephens (B.Sc (Hons), PhD, MAIG), Managing Director, a Qualified Person for
the purposes of the AIM Rules for Companies.
SUMMARY OF MATERIAL ASSUMPTIONS
Material assumptions used in the estimation of the production target and
associated financial information are set out in the following table.
Table 2: Assumptions
Assumption Input
Maximum accuracy variation - Capital costs -20%/+25%
Maximum accuracy variation - Operating costs -20%/+25%
Minimum LoM 25 years
Annual average throughput (tonnes) - Stage 1 12,000,000
Annual average throughput (tonnes) - Stage 2 24,000,000
Annual throughput (tonnes) - LoM average 21,600,000
Head grade - rutile 1.03%
Recovery - rutile 100%
Product grade (TiO(2)) - rutile 96%
Head grade - graphite 1.66%
Recovery - graphite 67.5%
Product grade (TGC) - graphite 96%
Annual production (average LoM) - rutile (tonnes) 222,000
Annual production (average LoM) - graphite (tonnes) 244,000
USD:AUD 0.67
USD:MWK 0.0010
USD:ZAR 0.0549
Sales Price - rutile (average LoM) US$1,484/t
Sales Price - graphite (average LoM) US$1,290/t
Government Royalty 5% of gross revenue
Vendor Royalty 2% of gross profit
Community Development Fund 0.45% of gross revenue
Stage 1 Capital US$572m
Stage 2 Capital (expansion to 24Mtpa) US$287m
Plant Relocation US$366m
Sustaining Capital US$470m
Operating Costs including royalties (LoM) - FOB Nacala US$404/t
Corporate Tax Rate 30%
Rent Resource Tax (RRT) 15% after-profits
Discount Rate 8%
ORE RESERVE STATEMENT
Orelogy Consulting Pty Ltd (Orelogy) was responsible for the mine planning
component of the PFS for Kasiya. As such Orelogy have developed an Ore Reserve
estimate for Kasiya in accordance with the guidelines of the JORC Code 2012.
The Kasiya MRE released by Sovereign in on 5 April 2023 was used as the basis
for the PFS Ore Reserve estimate. Mineral Resources were converted to Ore
Reserves in line with the material classifications which reflect the level of
confidence within the resource estimate. The Ore Reserve reflects that portion
of the Mineral Resource which can be economically extracted by open pits
utilising a combination of hydro mining and bulldozer methodologies. The Ore
Reserve considers the modifying factors and other parameters detailed in the
relevant sections of the PFS report, including but not limited to the mining,
metallurgical, social, environmental, approvals, tenure, statutory and
financial aspects of the project.
In line with the JORC 2012 guidelines, the Kasiya Probable Ore Reserve is
based on Indicated classified Mineral Resources. There is no Measured
classified Mineral Resource at Kasiya and consequently no Proved Ore Reserve.
The reported MRE is inclusive of the Ore Reserve.
The Ore Reserve includes an allowance for mining dilution and ore loss on the
basis that all material within the shell is classified and extracted as ore.
The open pit geometries developed for the purposes of mine planning, and which
define the subsequent Ore Reserve, are based on Whittle pit shells edited to
comply with practical mining requirements and identified exclusion zones.
The information that relates to Ore Reserves was compiled by Mr Ross Cheyne of
Orelogy who takes overall responsibility for the Ore Reserve as Competent
Person (see Competent Persons Statement above). Mr Cheyne is a Fellow of The
Australasian Institute of Mining and Metallurgy and has sufficient experience,
which is relevant to the style of mineralisation and type of deposit under
consideration, and to the activity he is undertaking, to qualify as Competent
Person in terms of the JORC (2012 Edition).
A site visit was undertaken by Mr Ryan Locke in, a Principal Consultant with
Orelogy, as a nominated representative of the Competent Person.
The Ore Reserve estimate is summarised in Table 3 below, along with the
associated cut-off grade used to define the shell.
Table 3: Ore Reserve for the Kasiya Deposit as of September 2023
Classification Tonnes Rutile Grade Contained Rutile Graphite Grade (TGC) (%) Contained Graphite
(Mt)
(%)
(Mt)
(Mt)
Proved - - - - -
Probable 538 1.03% 5.5 1.66% 8.9
Total 538 1.03% 5.5 1.66% 8.9
Pit Optimisation
An open pit optimisation utilising Whittle™ software was carried out on the
Kasiya deposit using Indicated Mineral Resources only (in line with the JORC
2012 guidelines). The latest parameters available were used to determine the
economic extent of the open pit excavation. The process plant production
parameters were supplied by Sovereign with an initial rate of 12Mtpa and a
ramp up in production from years 5 - 7 to annual rate of 24Mtpa.
The intention to hydro-mine the majority of the defined Ore Reserve means that
there is no ability to selectively mine and all material will be extracted and
sent as plant feed. Therefore, all material within the "shell" will be
extracted and fed to the plant as ore and any interstitial waste and/or
sub-economic grade material will be likewise treated as diluent material.
However, due to the relatively homogenous and continuous nature the orebody,
the quantities of this material will be relatively small and therefore a
simple 5% dilution was applied within the Whittle™ tool.
For the production schedule on which the Ore Reserve is based all material
within the shell was treated as "ore" to ensure the appropriate dilution was
captured.
Mineable Pit Geometries
Based on the cut-off grades applied the mining areas was further interrogated
to determine the potential recoverable mining inventory. The interrogation
process applied the following constraints to determine the bulk mining
boundaries:
· A minimum depth of 5m for the hydro mining method.
· Removal of any small, isolated pits.
· Pit extents limited to mineable areas and to remain outside of
identified exclusion areas wherever reasonably possible. Sovereign identified
all local village areas and areas of cultural or environmental significance
within the potential mining envelope that should not be disturbed during the
mining phase of the Project.
MODIFYING FACTORS
The Modifying Factors included in the JORC Code (2012) have been assessed as
part of the Pre-Feasibility Study, including mining, processing,
metallurgical, infrastructure, economic, marketing, legal, environmental,
social and government factors. The Company has received advice from
appropriate experts when assessing each Modifying Factor.
A summary assessment of each relevant Modifying Factor is provided below.
Mining - refer to section entitled 'Mining' in the full Announcement at
http://sovereignmetals.com.au/announcements/.
The Company engaged independent consultants, Orelogy and Fraser Alexander to
carry out the pit optimisations, mine design, scheduling, mining cost
estimation and Ore Reserves for the Study. The proposed mining method is hydro
mining with minor bulldozer assistance. This is considered appropriate for
this style of shallow, soft and friable saprolite-hosted rutile and graphite
mineralisation. This methodology is used across numerous mineral sands
operations, particularly in Africa, and is well suited for this style of
mineralisation.
Metallurgy and Processing - refer to section entitled 'Metallurgy and Process
Design' in the full Announcement at
http://sovereignmetals.com.au/announcements/.
Rutile
The Company completed bulk rutile testwork programs at the globally recognised
AML in Perth, Australia. The latest program was supervised by Sovereign's Head
of Development, Paul Marcos. Mr Marcos is a metallurgist and process engineer
and a mineral sands industry veteran. Bulk test-work programs have confirmed
premium grade rutile can be produced via a simple and conventional process
flow sheet.
Processing engineering was completed by DRA Global who developed the process
plant design and associated cost estimate for the Study. An average product
grade of 96% TiO(2) and 100% recovery to product factor has been applied.
Graphite
The Company has conducted graphite testwork across ALS Laboratory in Perth and
SGS Lakefield in Canada. Veteran graphite metallurgist Oliver Peters, MSc,
P.Eng., MBA (Consulting Metallurgist for SGS and Principal Metallurgist of
Metpro Management Inc.) was engaged to supervise and consult on the testwork
programs. Mr Peters has over 25 years' experience in metallurgy on graphite
and other commodities. He has operated numerous graphite pilot plants and
commissioned a number of full-scale processing facilities.
DRA's Senior Engineer, Stewart Calder and Manager Metallurgy, John Fleay
supervised and advised on sample selection, testwork scope and results from
the latest testwork programs. Both consultants are considered to have the
appropriate capabilities and similarities with the material and the early
stage of the project.
Processing engineering was completed by DRA Global who developed the process
plant design and associated cost estimates for the PFS. Overall average
graphite recovery applied in the model was 67.5%. Gravity recovery ranges
between 73.6% to 86.2%, averaging 77.9% and flotation plant recovery ranges
between 89.2% and 96.1%, averaging 91.4%. Total Graphite (TGC) recovery
average is 72.5%. Overall concentrate grades average 96% C(t) with over 57% of
the graphite flake product being larger than 180µm.
Rutile & Graphite
It is acknowledged that laboratory scale test-work will not always represent
actual results achieved from a production plant in terms of grade, chemistry,
sizing and recovery. Further test-work will be required to gain additional
confidence on specifications and recoveries that will be achieved at
full-scale production.
Overall, the process flow-sheet is conventional for both rutile and graphite
with no novel features or equipment incorporated.
Infrastructure - refer to sections entitled 'Infrastructure', and 'Transport
and Logistics' in the full Announcement at
http://sovereignmetals.com.au/announcements/.
Kasiya is located approximately 40km northwest of Lilongwe, Malawi's capital,
and boasts excellent access to services and infrastructure. The proximity to
Lilongwe gives the project a number of benefits, including access to a large
pool of professionals and skilled tradespeople, as well as industrial
services.
The Company appointed JCM to design a preliminary IPP solution for Kasiya. JCM
is a Canada-headquartered IPP which develops, constructs, owns and operates
renewable energy and storage projects in emerging markets across the globe.
JCM provided an estimated, levelized cost of energy (LOCE) on a Power Purchase
Agreement (PPA).
Logistics cost estimates, including rail and port infrastructure and handling,
were provided by Thelo DB, Nacala Logistics and Grindrod based on market data,
suppliers' quotations, industry databases, industry contacts and consultants'
existing knowledge of southern African transport infrastructure and freight
markets. All consultants are independent with substantial experience in the
management of transport logistics studies in southern Africa.
Marketing - refer to sections entitled 'Marketing Strategy' in the full
Announcement at http://sovereignmetals.com.au/announcements/.
Rutile
The Company engaged market leading TZMI to provide a bespoke marketing report
to support the Study. TZMI is a global, independent consulting and publishing
company specialising in technical, strategic and commercial analyses of the
opaque (non-terminal market) mineral, chemical and metal sectors.
TZMI's assessment has confirmed that, based upon their high-level view on
global demand and supply forecasts for natural rutile, and with reference to
the specific attributes of Kasiya, there is a reasonable expectation that the
product will be able to be sold into existing and future rutile markets.
Given the premium specifications of Kasiya's natural rutile, the product
should be suitable for all major natural end-use markets including TiO(2)
pigment feedstock, titanium metal and welding sectors.
In July 2023, Rio Tinto made an investment in Sovereign resulting in an
initial 15% shareholding and options expiring within 12 months of initial
investment to increase their position to 19.99%. Under the Investment
Agreement, Rio Tinto will provide assistance and advice on technical and
marketing aspects of Kasiya. Also, included under the Investment Agreement,
Rio Tinto has the option to become the operator of Kasiya on commercial
arm's-length terms.
In the event, Rio Tinto elect to be the operator of the Project and for so
long as Rio Tinto remain the operator, Rio Tinto shall have exclusive
marketing rights to market 40% of the annual production of all products from
the Project as identified in the DFS on arm's-length terms.
Rio Tinto's option over operatorship and 40% marketing rights lapse if not
exercised by the earlier of (i) 90 days after the Company announces its DFS
results or 180 days after the announcement of the DFS if Rio Tinto's advises
it needs additional time to consider the exercise of the Rio Tinto's Option or
(ii) Rio Tinto ceasing to hold voting power in the Company of at least 10%.
Graphite
The Company engaged Fastmarkets, a specialist international publisher and
information provider for the global steel, non-ferrous and industrial minerals
markets, to prepare a marketing report for graphite.
Fastmarkets' assessment has confirmed that based upon their high-level view on
global demand and supply forecasts for natural flake graphite, and with
reference to the specific attributes of Sovereign's projects, there is a
reasonable expectation that the product from Sovereign's projects will be able
to be sold into existing and future graphite markets. Given the extremely
low-cost profile and high-quality product, it is expected that output from
Kasiya will be able to fill new demand or substitute existing lower quality /
higher cost supply.
Project considerations taken by Fastmarkets in forming an opinion about the
marketability of product include:
- Low capital costs (incremental)
- Low operating costs
- High quality concentrate specifications
Industry participants confirm that the highest value graphite concentrates
remain the large, jumbo and super-jumbo flake fractions, primarily used in
industrial applications such as refractories, foundries and expandable
products. These sectors currently make up the significant majority of total
global natural flake graphite market by value.
Fastmarkets have formed their opinion based solely upon project information
provided by Sovereign Metals to Fastmarkets and have not conducted any
independent analysis or due diligence on the information provided.
As noted above, Rio Tinto recently made an investment in Sovereign. The
Company and Rio Tinto will work together to qualify Kasiya's graphite product
with a particular focus on supplying the spherical purified graphite segment
of the lithium-ion battery anode market. Rio Tinto has set up a battery
materials business in 2021, including its recently announced plans to set up a
battery testing plant in Melbourne, Australia.
Economic - also refer to sections entitled 'Cost Estimations' and 'Financial
& Economic Analysis' in the full Announcement at
http://sovereignmetals.com.au/announcements/.
Capital estimates for the procress plant have been prepared by DRA global,
together with input from the Company and other contributing consultants using
combinations of cost estimates from suppliers, historical data, benchmarks and
other independent sources. The accuracy of the initial capital cost estimate
for the Project is ±20%.
Capital costs include the cost of all services, direct costs, contractor
indirects, EPCM expenses, non-process infrastructure, sustaining capital and
other facilities used for the mine. Capital costs make provision for
mitigation expenses and mine closure and environmental costs.
Working capital requirements (including contingency) for plant commissioning
and full ramp-up have been included in the headline capital estimate reported
under construction, owner's and start-up costs.
Mining costs have been estimated by Fraser Alexander, a regional leader in
hydro-mining and materials handling. Mining costs have been built up from
first principles based on equipment, vendor, and contractor quotations, local
unit cost rates, and benchmarked costs.
Labor costs have been developed based on a first-principles build-up of
staffing requirements with labour rates benchmarked in Malawi and expatriate
rates benchmarked for professionals from South Africa and other jurisdictions.
A Government royalty of 5% (applied to revenue) and a vendor profit share of
2% (applied to gross profit) has been included in all project economics. A
0.45% royalty (applied to revenue) has been applied for the community
development fund.
Rehabilitation and mine closure costs are included within the reported
operating cost and sustaining capital figures.
A detailed financial model and discounted cash flow (DCF) analysis has been
prepared by the Company in order to demonstrate the economic viability of the
Project. The financial model and DCF were modelled with conservative inputs to
provide management with a baseline valuation of the Project.
The DCF analysis demonstrated compelling economics of the prospective Project,
with an NPV (ungeared, after-tax, at an 8% discount rate) of US$1,605
million, and an (ungeared) IRR of 28%.
Sensitivity analysis was performed on all key assumptions used. The robust
project economics insulate the Kasiya Project from variation in market
pricing, capital expense, or operating expenses. With a rutile and graphite
concentrate price 30% lower than the PFS prices the Project still displays a
positive NPV (ungeared, after-tax, 8% discount rate) of US$636 million and IRR
of 17%.
Payback period for the Project is 4.3 years from the start of production. The
payback period is based on free-cash flow, after taxes.
Sovereign estimates the total capital cost to construct the mine to be US$597m
(which includes a contingency of 17% of direct and indirect costs).
Key parameters are disclosed in the body of the announcement, and include:
- Life of Mine: 25 years
- Discount rate: 8%
- Tax rate: 30%
- Resource Rent Tax (RRT) of 15% after tax profit
- Royalty rate: 5% royalty (Government), 2% of gross profit
(Original Project Vendor) and 0.45% Community Development Fund.
- Pricing: Rutile average price of US$1,484 per tonne and
Graphite average basket price of US$1,290 per tonne
The financial model has been prepared internally by the Company using inputs
from the various expert consultants and has been reviewed by BDO Australia -
Perth, an independent leading accountancy, tax and advisory services firm to
validate the functionality and accuracy of the model.
The Company engaged the services of advisory firm, Argonaut PCF Limited
(Argonaut), with regards to project economics. Argonaut is a financial
advisory firm which specialises in multiple sectors, including metals and oil
& gas. Argonaut is well regarded as a specialist capital markets service
provider and has raised project development funding for companies across a
range of commodities including the industrial and speciality minerals sector.
Following the assessment of a number of key criteria, Argonaut has confirmed
that, on the basis that a DFS arrives at a result that is not materially
negatively different than the PFS as noted above, all in-country government
and regulatory approvals are received, commercial offtake agreements are in
place for the majority of rutile and graphite production for at least the
first five years of mine life, and that there has not been any material
adverse change in financial condition, results of operations, business or
prospects of the Company/or political and business environment in Malawi
and/or financial or capital markets in general, Sovereign should be able to
raise sufficient funding to develop the Project.
In July 2023, Rio Tinto made an investment in Sovereign resulting in an
initial 15% shareholding and options expiring within 12 months of initial
investment to increase their position to 19.99%. Under the Investment
Agreement, is has been agreed with Rio Tinto that if Sovereign is raising debt
finance for the development of the Project, Sovereign and Rio Tinto will
negotiate, in good faith, financing arrangements in order to put in place an
acceptable mine construction funding package.
Since initial exploration of the Kasiya Project in November 2019, the Company
has completed extensive drilling, sampling, metallurgical test-work,
geological modelling and defined an Indicated and Inferred Mineral Resource
Estimate. Over this period, with these key milestones being attained and the
Project de-risked, the Company's market capitalisation has increased from
approximately A$18m to over A$236m. As the Project continues to achieve key
milestones, which can also be significant de-risking events, the Company's
share price could be anticipated to increase.
The Company is debt free and is in a strong financial position, with
approximately A$45m cash on hand (31 August 2023). The current financial
position means the Company is soundly funded to continue into a DFS phase to
further develop the Project.
In July and August 2023, Rio Tinto invested $40.6m to become a strategic
investor of the Company. The investment proceeds will be used to advance
Kasiya and represents a significant step towards unlocking the Project for a
major new supply of low-CO(2)-footprint natural rutile and flake graphite.
Under the Investment Agreement, Rio Tinto will provide assistance and advice
on technical and marketing aspects of Kasiya including with respect to
Sovereign's graphite co-product, with a primary focus on spherical purified
graphite for the lithium-ion battery anode market.
The Company's shares are listed on the ASX and AIM which are premier markets
for growth companies and provides increased access to capital from
institutional and retailed investors in Australia and the UK.
Sovereign has an experienced and high-quality Board and management team
comprising highly respected resource executives with extensive technical,
financial, commercial and capital markets experience. The directors have
previously raised more than A$2bn from capital markets for a number of
exploration and development companies.
As a result, the Board has a high level of confidence that the Project will be
able to secure funding in due course, having particular regard to:
1. Required capital expenditure;
2. Sovereign's strategic partner relationship with Rio Tinto;
3. Sovereign's market capitalisation;
4. Recent funding activities by directors in respect of other resource
projects;
5. Recently completed funding arrangements for similar or larger scale
development projects;
6. The range of potential funding options available;
7. The favourable key metrics generated by the Kasiya Project;
8. Ongoing discussions for potential offtake agreements; and
9. Investor interest to date.
Environmental, Social, Legal and Governmental - refer to section entitled
'Environmental & Social Impact' in the full Announcement at
http://sovereignmetals.com.au/announcements/.
Sovereign is committed to conduct its activities in full compliance to the
requirements of national regulations, its obligations under international
conventions and treaties and giving due consideration to international best
practices and policies. The Company has appointed an experienced environmental
consultant to manage the ESIA process, and environmental and social baseline
studies have commenced with appropriately qualified independent experts. The
Company has also completed a high-level risk assessment to identify major
environmental and social risks which could affect the development of the
Project, along with mitigating strategies to allow identified risks to be
addressed early in the project design phase.
The Company has embarked on several community engagement exercises in the area
and there is a general positive acceptance of the Project. Social
responsibility/RAP costs totalling US$92m have been included in this Study, as
well as a 0.45% revenue royalty for the community development fund.
Based on the current assessments and commenced ESIA, the Company believes
there are no environmental issues currently identified that cannot be
appropriately mitigated in accordance with standard practices adopted for the
development of mining projects.
Subject to further positive technical studies, Sovereign intends to apply for
a ML to secure mineral deposits for mining. Under the Mines Act there are
certain requirements, milestones and approvals required prior to submission of
a ML application. At this point of Kasiya's development, the Company notes no
known issues or impediments obtaining a ML under normal course of business.
Under the current Mines Act, The Government of Malawi shall have the right,
but not the obligation, to acquire, directly or through a Government nominee,
without cost, a free equity ownership interest of up to ten percent (10%) in
any mining project that will be subject to a large-scale mining licence
(>5Mt mined per annum or >US$250m Capex).
As previously noted by the Company, the Government of Malawi has proposed a
new Mines and Minerals Bill (2023) (New Bill) which has been passed by the
Malawian Parliament and received Presidential Assent, though awaits
publication in the Malawi Gazette before coming into force. If approved, the
New Bill will replace the current Mines Act. The New Bill introduces
amendments to improve transparency and governance of the mining industry in
Malawi. Sovereign notes the following updates in the New Bill which may affect
the Company in the future: (i) ELs may be granted for an initial period of 5
years with the ability to extend by 3 years on two occasions (total 11 years);
(ii) the Malawian Government maintains a right to free equity ownership (as
discussed above) for large-scale mining licences but the New Bill proposes to
remove the free government equity ownership percentage with the right to be a
negotiation matter; and (iii) A new Mining and Regulatory Authority will be
responsible for implementing the objectives of the New Bill.
In a Press Release issued on 20 July 2023, the Government of Malawi has
publicly applauded the timely investment by Rio Tinto and marked it as a
milestone towards realising the country's aspirations of growing the mining
industry as promoted in the Malawi Vision 2063, which identifies mining as a
priority industry.
The Government's statement confirms its commitment to ensuring the growth of
the mining sector through deliberate initiatives aiming at establishing a
conducive investment environment in the sector.
APPENDIX 1 - JORC CODE, 2012 EDITION - TABLE 1
SECTION 1 - SAMPLING TECHNIQUES AND DATA
Criteria JORC Code explanation Commentary
Sampling Techniques Nature and quality of sampling (e.g. cut channels, random chips, or specific Hand Auger (HA) samples are composited based on regolith boundaries and sample
specialised industry standard measurement tools appropriate to the minerals chemistry generated by hand-held XRF (pXRF). Each 1m of sample is dried and
under investigation, such as down hole gamma sondes, or handheld XRF riffle-split to generate a total sample weight of 3kg for analysis, generally
instruments, etc). These examples should not be taken as limiting the broad at 2 - 5m intervals. This primary sample is then split again to create a 3kg
meaning of sampling. composite to provide a 1.5kg sample for both rutile and graphite analyses.
Infill Push-Tube (PT) core drilling is sampled routinely at 2m intervals by
compositing dried and riffle-split half core. A consistent, 1.5kg sample is
generated for both the rutile and graphite determination.
Air-Core (AC) samples are composited based on expertly logged regolith
boundaries. Each 1m of sample is dried and riffle-split to generate a total
sample weight of 3kg for analysis, generally at 2m intervals. This primary
sample is then split again to provide a 1.5kg sample for both rutile and
graphite analyses.
Include reference to measures taken to ensure sample representivity and the Drilling and sampling activities are supervised by a suitably qualified
appropriate calibration of any measurement tools or systems used. company geologist who is present at all times. All drill samples are
geologically logged by the geologist at the drill site/core yard.
Each sample is sun dried and homogenised. Sub-samples are carefully riffle
split to ensure representivity. The 1.5kg composite samples are then
processed.
An equivalent mass is taken from each sample to make up the composite. A
calibration schedule is in place for laboratory scales, sieves and field XRF
equipment.
Placer Consulting Pty Ltd (Placer) Resource Geologists have reviewed Standard
Operating Procedures (SOPs) for the collection and processing of drill samples
and found them to be fit for purpose and support the resource classifications
as applied to the Mineral Resource Estimate (MRE). The primary composite
sample is considered representative for this style of rutile mineralisation.
Aspects of the determination of mineralisation that are Material to the Public Logged mineralogy percentages, lithology/regolith information and TiO(2)%
Report. In cases where 'industry standard' work has been done this would be obtained from pXRF are used to assist in determining compositing intervals.
relatively simple (e.g. 'reverse circulation drilling was used to obtain 1 m Care is taken to ensure that only samples with similar geological
samples from which 3 kg was pulverised to produce a 30 g charge for fire characteristics are composited together.
assay'). In other cases more explanation may be required, such as where there
is coarse gold that has inherent sampling problems. Unusual commodities or
mineralisation types (e.g. submarine nodules) may warrant disclosure of
detailed information.
Drilling Techniques Drill type (e.g. core, reverse circulation, open‐hole hammer, rotary air A total of 1,357 HA holes for 12,643m have been drilled to date at the Kasiya
blast, auger, Bangka, sonic, etc) and details (e.g. core diameter, triple or Rutile Deposit to obtain samples for quantitative determination of recoverable
standard tube, depth of diamond tails, face‐sampling bit or other type, rutile and Total Graphitic Carbon (TGC).
whether core is oriented and if so, by what method, etc).
A PT infill drilling programme, designed to support this resource estimate
upgrade, was completed. An additional 234 core holes for 2,368.5m were
included in the updated MRE. The total PT holes contributing to the updated
MRE are 488 for 4,669m.
A total of 182 AC holes for 4,404m were completed in six locations across the
Kasiya deposit deemed likely to fall into mining pit areas. The results are
included in this updated MRE.
Placer has reviewed SOPs for HA, PT and AC drilling and found them to be fit
for purpose and support the resource classifications as applied to the MRE.
Sample handling and preparation techniques are consistent for PT and coring
samples.
Two similar designs of HA drilling equipment are employed. HA drilling with
75mm diameter enclosed spiral bits (SOS) with 1m long steel rods and with 62mm
diameter open spiral bits (SP) with 1m long steel rods. Drilling is oriented
vertically by eye.
Each 1m of drill sample is collected into separate sample bags and set
aside. The auger bits and flights are cleaned between each metre of sampling
to avoid contamination.
Core-drilling is undertaken using a drop hammer, Dando Terrier MK1. The
drilling generated 1m runs of 83mm PQ core in the first 2m and then
transitioned to 72mm core for the remainder of the hole. Core drilling is
oriented vertically by spirit level.
AC drilling was completed by Thompson Drilling utilising a Smith Capital 10R3H
compact track-mounted drill. The drilling is vertical and generates 1m samples
with care taken in the top metres to ensure good recoveries of the high-grade
surface material. Each 1m sample bag is immediately transported back to
Sovereign's field laydown yard where they await processing.
Drill Sample Recovery Method of recording and assessing core and chip sample recoveries and results Samples are assessed visually for recoveries. The configuration of drilling
assessed. and nature of materials encountered results in negligible sample loss or
contamination.
HA and PT drilling is ceased when recoveries become poor once the water table
has been reached. Water table and recovery information is included in
lithological logs.
Core drilling samples are actively assessed by the driller and geologist
onsite for recoveries and contamination.
AC drilling recovery in the top few metres are moderate to good. Extra care is
taken to ensure sample is recovered best as possible in these metres.
Recoveries are recorded on the rig at the time of drilling by the geologist.
Drilling is ceased when recoveries become poor or once Saprock or refusal has
been reached.
Measures taken to maximise sample recovery and ensure representative nature of The Company's trained geologists supervise drilling on a 1 team 1 geologist
the samples. basis and are responsible for monitoring all aspects of the drilling and
sampling process.
For PT drilling, core is extruded into core trays; slough is actively removed
by the driller at the drilling rig and core recovery and quality is recorded
by the geologist.
AC samples are recovered in large plastic bags. The bags are clearly labelled
and delivered back to sovereign's laydown yard at the end of shift for
processing.
Whether a relationship exists between sample recovery and grade and whether No relationship is believed to exist between grade and sample recovery. The
sample bias may have occurred due to preferential loss/gain of fine/coarse high percentage of silt and absence of hydraulic inflow from groundwater at
material. this deposit results in a sample size that is well within the expected size
range.
No bias related to preferential loss or gain of different materials is
observed.
Logging Whether core and chip samples have been geologically and geotechnically logged Geologically, data is collected in detail, sufficient to aid in Mineral
to a level of detail to support appropriate Mineral Resource estimation mining Resource estimation.
studies and metallurgical studies.
All individual 1m HA intervals are geologically logged, recording relevant
data to a set log-chief template using company codes. A small representative
sample is collected for each 1m interval and placed in appropriately labelled
chip trays for future reference.
All individual 1m PT core intervals are geologically logged, recording
relevant data to a set log-chief template using company codes.
Half core remains in the trays and is securely stored in the company
warehouse.
All individual AC 1-metre intervals are geologically logged, recording
relevant features.
data to a set log-chief template using company codes. A small representative
sample is collected for each 1-metre interval and placed in appropriately
labelled chip trays for future reference.
Whether logging is qualitative or quantitative in nature. Core (or costean, All logging includes lithological features and estimates of basic mineralogy.
channel, etc.) photography. Logging is generally qualitative.
The PT core is photographed dry, after logging and sampling is completed.
The total length and percentage of the relevant intersection logged 100% of samples are geologically logged.
Sub-sampling techniques and sample preparation If core, whether cut or sawn and whether quarter, half or all core taken. Due to the soft nature of the material, core samples are carefully cut in half
by hand tools.
If non-core, whether riffled, tube sampled, rotary split, etc. and whether HA, PT and AC hole samples are dried, riffle split and composited. Samples are
sampled wet or dry. collected and homogenised prior to splitting to ensure sample representivity.
~1.5kg composite samples are processed.
An equivalent mass is taken from each primary sample to make up the composite.
The primary composite sample is considered representative for this style of
mineralisation and is consistent with industry standard practice.
For all sample types, the nature, quality and appropriateness of the sample Techniques for sample preparation are detailed on SOP documents verified by
preparation technique. Placer Resource Geologists.
Sample preparation is recorded on a standard flow sheet and detailed QA/QC is
undertaken on all samples. Sample preparation techniques and QA/QC protocols
are appropriate for mineral determination and support the resource
classifications as stated.
Quality control procedures adopted for all sub-sampling stages to maximise The sampling equipment is cleaned after each sub-sample is taken.
representivity of samples.
Field duplicate, laboratory replicate and standard sample geostatistical
analysis is employed to manage sample precision and analysis accuracy.
Measures taken to ensure that the sampling is representative of the in situ Sample size analysis is completed to verify sampling accuracy. Field
material collected, including for instance results for field duplicates are collected for precision analysis of riffle splitting. SOPs
duplicate/second-half sampling. consider sample representivity. Results indicate a sufficient level of
precision for the resource classification.
Whether sample sizes are appropriate to the grain size of the material being The sample size is considered appropriate for the material sampled.
sampled.
Quality of assay data and laboratory tests The nature, quality and appropriateness of the assaying and laboratory Rutile
procedures used and whether the technique is considered partial or total.
The Malawi onsite laboratory sample preparation methods are considered
quantitative to the point where a heavy mineral concentrate (HMC) is
generated.
Final results generated are for recovered rutile i.e, the % mass of the sample
that is rutile that can be recovered to the non-magnetic component of a HMC.
Heavy liquid separation (HLS) of the HM is no longer required and a HM result
is not reported in the updated MRE. The HMC prepared via wet-table, gravity
separation at the Lilongwe Laboratory provides an ideal sample for subsequent
magnetic separation and XRF.
All 8,855 samples (not incl. QA) included in the MRE update received the
following workflow undertaken on-site in Malawi;
· Dry sample in oven for 1 hour at 105℃
· Soak in water and lightly agitate
· Wet screen at 5mm, 600µm and 45µm to remove oversize and slimes
material
· Dry +45µm -600mm (sand fraction) in oven for 1 hour at 105℃
7,904 of the 8,855 samples received the following workflow undertaken on-site
in Malawi
· Pass +45µm -600mm (sand fraction) across wet table to generate a
HMC.
· Dry HMC in oven for 30 minutes at 105℃
Bag HMC fraction and send to Perth, Australia for quantitative chemical and
mineralogical determination.
951 of the 8,855 samples received the following workflow undertaken at Perth
based Laboratories (superseded).
· Split ~150g of sand fraction for HLS using Tetrabromoethane (TBE,
SG 2.96g/cc) as the liquid heavy media to generate HMC. Work undertaken at
Diamantina Laboratories.
4,738 of the 8,855 samples received magnetic separation undertaken at Allied
Mineral Laboratories in Perth, Western Australia.
· Magnetic separation of the HMC by Carpco magnet @ 16,800G
(2.9Amps) into a magnetic (M) and non-magnetic (NM) fraction.
4,117 of the 8,855 samples received magnetic separation undertaken on-site in
Malawi.
· Magnetic separation of the HMC by Mineral Technologies Reading
Pilot IRM (Induced Roll Magnetic) @ 16,800G (2.9Amps) into a magnetic (M) and
non-magnetic (NM) fraction.
All 8,855 routine samples received the following chemical analysis in Perth,
Western Australia.
· The routine NM fractions are sent to ALS Metallurgy Perth for
quantitative XRF analysis. Samples receive XRF_MS and are analysed for:
TiO(2,) Al(2)O(3,) CaO, Cr(2)O(3), Fe(2)O(3), K(2)O, MgO, MnO, SiO(2),
V(2)O(5), ZrO(2,) HfO(2.)
Graphite
8,078 graphite samples are processed at Intertek-Genalysis Johannesburg and
Perth via method C72/CSA.
A portion of each test sample is dissolved in dilute hydrochloric acid to
liberate carbonate carbon. The solution is filtered using a filter paper and
the collected residue is the dried to 425°C in a muffle oven to drive off
organic carbon. The dried sample is then combusted in a Carbon/ Sulphur
analyser to yield total graphitic or TGC.
An Eltra CS-800 induction furnace infra-red CS analyser is then used to
determine the remaining carbon which is reported as TGC as a percentage.
For geophysical tools, spectrometers, handheld XRF instruments, etc., the Acceptable levels of accuracy and precision have been established. No pXRF
parameters used in determining the analysis including instrument make and methods are used for quantitative determination.
model, reading times, calibrations factors applied and their derivation, etc.
Nature of quality control procedures adopted (e.g. standards, blanks, Sovereign uses internal and externally sourced wet screening reference
duplicate, external laboratory checks) and whether acceptable levels of material inserted into samples batches at a rate of 1 in 20. The externally
accuracy (i.e. lack of bias) and precision have been established. sourced, certified standard reference material for HM and Slimes assessment is
provided by Placer Consulting.
An external laboratory raw sample duplicate is sent to laboratories in Perth,
Australia as an external check of the full workflow. These duplicates are
produced at a rate of 1 in 20.
Accuracy monitoring is achieved through submission of certified reference
materials (CRM's). ALS and Intertek both use internal CRMs and duplicates on
XRF analyses.
Sovereign also inserts CRMs into the sample batches at a rate of 1 in 20.
Three Rutile CRMs are used by Sovereign and range from 35% - 95% TiO(2).
Three Graphite CRMs are used by Sovereign and range from 3% - 25% TGC.
Analysis of sample duplicates is undertaken by standard geostatistical
methodologies (Scatter, Pair Difference and QQ Plots) to test for bias and to
ensure that sample splitting is representative. Standards determine assay
accuracy performance, monitored on control charts, where failure (beyond 3SD
from the mean) may trigger re-assay of the affected batch.
Examination of the QA/QC sample data indicates satisfactory performance of
field sampling protocols and assay laboratories providing acceptable levels of
precision and accuracy.
Acceptable levels of accuracy and precision are displayed in geostatistical
analyses to support the resource classifications as applied to the estimate.
Verification of sampling & assaying The verification of significant intersections by either independent or Results are reviewed in cross-section using Datamine Studio RM software and
alternative company personnel. any spurious results are investigated. The deposit type and consistency of
mineralisation leaves little room for unexplained variance. Extreme high
grades are not encountered.
The use of twinned holes. Twinned holes are drilled across a geographically dispersed area to determine
short-range geological and assay field variability for the resource
estimation. Twin drilling is applied at a rate of 1 in 20 routine holes.
Twin paired data in all drill methods represent ~4% of the database included
in the updated MRE. Substantial comparative data between different drilling
types and test pit results are also available but not referenced in the MRE.
Documentation of primary data, data entry procedures, data verification, data All data are collected electronically using coded templates and logging
storage (physical and electronic) protocols. software. This data is then imported to a cloud hosted Database and validated
automatically and manually.
A transition to electronic field and laboratory data capture has been
achieved.
Discuss any adjustment to assay data. Assay data adjustments are made to convert laboratory collected weights to
assay field percentages and to account for moisture.
QEMSCAN of the NM fraction shows dominantly clean and liberated rutile grains
and confirms rutile is the only titanium species in the NM fraction.
Recovered rutile is defined and reported here as: TiO(2) recovered in the +45
to -600um range to the NM concentrate fraction as a % of the total primary,
dry, raw sample mass divided by 95% (to represent an approximation of final
product specifications). i.e recoverable rutile within the whole sample.
Location of data points Accuracy and quality of surveys used to locate drill holes (collar and A Trimble R2 Differential GPS is used to pick up the collars. Daily capture at
down-hole surveys), trenches, mine workings and other locations used in a registered reference marker ensures equipment remains in calibration.
Mineral Resource estimation.
No downhole surveying of any holes is completed. Given the vertical nature and
shallow depths of the holes, drill hole deviation is not considered to
significantly affect the downhole location of samples.
Specification of the grid system used. WGS84 UTM Zone 36 South.
Quality and adequacy of topographic control. The digital terrane model (DTM) was generated by wireframing a 20m-by-20m
lidar drone survey point array, commissioned by SVM in March 2022. Major
cultural features were removed from the survey points file prior to generating
the topographical wireframe for resource model construction. The ultra-high
resolution 3D drone aerial survey was executed utilising a RTK GPS equipped
Zenith aircraft with accuracy of <10cm ground sampling distance (GSD).
Post-processing includes the removal of cultural features that do not reflect
material movements (pits, mounds, etc)
The DTM is suitable for the classification of the resources as stated.
Data spacing & distribution Data spacing for reporting of Exploration Results. The HA collars are spaced at nominally 400m along the 400m spaced drill-lines
with the PT holes similarly spaced at an offset, infill grid. The resultant
200m-by-200m drill spacing (to the strike orientation of the deposit) is
deemed to adequately define the mineralisation in the MRE.
The AC collars are spaced on a 200m x 200m grid which is deemed to adequately
define the mineralisation.
The PT twin and density sample holes are selectively placed throughout the
deposit to ensure a broad geographical and lithological spread for the
analysis.
Whether the data spacing and distribution is sufficient to establish the The drill spacing and distribution is considered to be sufficient to establish
degree of geological and grade continuity appropriate for the Mineral Resource a degree of geological and grade continuity appropriate for the Mineral
and Ore Reserve estimation procedure(s) and classifications applied. Resource estimation.
Kriging neighbourhood analysis completed using Supervisor software informs the
optimal drill and sample spacing for the MRE. Based on these results and the
experience of the Competent Person, the data spacing and distribution is
considered adequate for the definition of mineralisation and adequate for
Mineral Resource Estimation.
Whether sample compositing has been applied. Individual 1m auger intervals have been composited, based on lithology, at 2 -
5m sample intervals for the 1,357 HA holes. 488 PT core holes have been
sampled at a regular 2m interval to provide greater control on mineralisation
for the Indicated Resource.
Individual 1m intervals have been composited, based on lithology, at a max 2m
sample interval for the 182 AC holes.
The DH Compositing tool was utilised in Supervisor software to define the
optimal sample compositing length. A 2m interval is applied to the MRE.
Orientation of data in relation to geological structure Whether the orientation of sampling achieves unbiased sampling of possible Sample orientation is vertical and approximately perpendicular to the
structures and the extent to which this is known considering the deposit type orientation of the mineralisation, which results in true thickness estimates,
limited by the sampling interval as applied. Drilling and sampling are carried
out on a regular square grid. There is no apparent bias arising from the
orientation of the drill holes with respect to the orientation of the deposit.
If the relationship between the drilling orientation and the orientation of There is no apparent bias arising from the orientation of the drill holes with
key mineralised structures is considered to have introduced a sampling bias, respect to the orientation of the deposit.
this should be assessed and reported if material.
Sample security The measures taken to ensure sample security Samples are stored in secure storage from the time of drilling, through
gathering, compositing and analysis. The samples are sealed as soon as site
preparation is complete.
A reputable international transport company with shipment tracking enables a
chain of custody to be maintained while the samples move from Malawi to
Australia. Samples are again securely stored once they arrive and are
processed at Australian laboratories. A reputable domestic courier company
manages the movement of samples within Perth, Australia.
At each point of the sample workflow the samples are inspected by a company
representative to monitor sample condition. Each laboratory confirms the
integrity of the samples upon receipt.
Audits or reviews The results of any audits or reviews of sampling techniques and data The CP Richard Stockwell has reviewed and advised on all stages of data
collection, sample processing, QA protocol and Mineral Resource Estimation.
Methods employed are considered industry best-practice.
Perth Laboratory visits have been completed by Mr Stockwell. Field and
in-country lab visits have been completed by Mr Stockwell in May 2022. A high
standard of operation, procedure and personnel was observed and reported.
Sovereign Metals Managing Director Julian Stephens and Exploration Manager
Samuel Moyle have been onsite in Malawi numerous times since the discovery of
the Kasiya Deposit.
SECTION 2 - REPORTING OF EXPLORATION RESULTS
Criteria Explanation Commentary
Mineral tenement & land tenure status Type, reference name/number, location and ownership including agreements or The Company owns 100% of the following Exploration Licences (ELs) and Licence
material issues with third parties such as joint ventures, partnerships, Applications (APLs) under the Mines and Minerals Act 2019, held in the
overriding royalties, native title interests, historical sites, wilderness or Company's wholly-owned, Malawi-registered subsidiaries: EL0561, EL0492,
national park and environment settings. EL0609, EL0582, EL0545, EL0528, EL0657 and APL0404.
A 5% royalty is payable to the government upon mining and a 2% of net profit
royalty is payable to the original project vendor.
No significant native vegetation or reserves exist in the area. The region is
intensively cultivated for agricultural crops.
The security of the tenure held at the time of reporting along with any known The tenements are in good standing and no known impediments to exploration or
impediments to obtaining a licence to operate in the area. mining exist.
Exploration done by other parties Acknowledgement and appraisal of exploration by other parties. Sovereign Metals Ltd is a first-mover in the discovery and definition of
residual rutile and graphite resources in Malawi. No other parties are, or
have been, involved in exploration.
Geology Deposit type, geological setting and style of mineralisation The rutile deposit type is considered a residual placer formed by the intense
weathering of rutile-rich basement paragneisses and variable enrichment by
elluvial processes.
Rutile occurs in a mostly topographically flat area west of Malawi's capital,
known as the Lilongwe Plain, where a deep tropical weathering profile is
preserved. A typical profile from top to base is generally soil ("SOIL" 0-1m)
ferruginous pedolith ("FERP", 1-4m), mottled zone ("MOTT", 4-7m), pallid
saprolite ("PSAP", 7-9m), saprolite ("SAPL", 9-25m), saprock ("SAPR", 25-35m)
and fresh rock ("FRESH" >35m).
The low-grade graphite mineralisation occurs as multiple bands of graphite
gneisses, hosted within a broader Proterozoic paragneiss package. In the
Kasiya areas specifically, the preserved weathering profile hosts significant
vertical thicknesses, from near surface, of graphite mineralisation.
Drill hole information A summary of all information material to the understanding of the exploration All intercepts relating to the Kasiya Deposit have been included in public
results including a tabulation of the following information for all Material releases during each phase of exploration and in this report. Releases
drill holes: easting and northings of the drill hole collar; elevation or RL included all collar and composite data and these can be viewed on the Company
(Reduced Level-elevation above sea level in metres of the drill hole collar); website.
dip and azimuth of the hole; down hole length and interception depth; and hole
length There are no further drill hole results that are considered material to the
understanding of the exploration results. Identification of the broad zone of
mineralisation is made via multiple intersections of drill holes and to list
them all would not give the reader any further clarification of the
distribution of mineralisation throughout the deposit.
If the exclusion of this information is justified on the basis that the No information has been excluded.
information is not Material and this exclusion does not detract from the
understanding of the report, the Competent Person should clearly explain why
this is the case
Data aggregation methods In reporting Exploration Results, weighting averaging techniques, maximum All results reported are of a length-weighted average of in-situ grades. The
and/or minimum grade truncations (e.g. cutting of high-grades) and cut-off resource is reported at a range of bottom cut-off grades in recognition that
grades are usually Material and should be stated. optimisation and financial assessment is outstanding.
A nominal bottom cut of 0.7% rutile is offered, based on preliminary
assessment of resource product value and anticipated cost of operations.
Where aggregate intercepts incorporate short lengths of high-grade results and No data aggregation was required.
longer lengths of low-grade results, the procedure used for such aggregation
should be stated and some typical examples of such aggregations should be
shown in detail.
The assumptions used for any reporting of metal equivalent values should be Rutile Equivalent (RutEq)
clearly stated.
Formula: ((Rutile Grade x Recovery (100%) x Rutile Price (US$1,484/t) +
Graphite Grade x Recovery (67.5%) x Graphite Price (US$1,290/t)) / Rutile
Price (US$1,484/t)).
Commodity Prices:
· Rutile price: US$1,484/t
· Graphite price: US$1,290/t
Metallurgical Recovery to Product:
· Rutile Recovery: 100%
· Graphite Recovery: 67.5%
All assumptions taken from this Study and with discussion and Modifying
Factors included in this document.
Relationship between mineralisation widths & intercept lengths These relationships are particularly important in the reporting of Exploration The mineralisation has been released by weathering of the underlying, layered
Results. gneissic bedrock that broadly trends NE-SW at Kasiya North and N-S at Kasiya
South. It lies in a laterally extensive superficial blanket with high-grade
zones reflecting the broad bedrock strike orientation of ~045° in the North
of Kasiya and 360° in the South of Kasiya.
If the geometry of the mineralisation with respect to the drill hole angle is The mineralisation is laterally extensive where the entire weathering profile
known, its nature should be reported. is preserved and not significantly eroded. Minor removal of the mineralised
profile has occurred in alluvial channels. These areas are adequately defined
by the drilling pattern and topographical control for the resource estimate.
If it is not known and only the down hole lengths are reported, there should Downhole widths approximate true widths limited to the sample intervals
be a clear statement to this effect (e.g. 'down hole length, true width not applied. Mineralisation remains open at depth and in areas coincident with
known'. high-rutile grade lithologies in basement rocks, is increasing with depth.
Graphite results are approximate true width as defined by the sample interval
and typically increase with depth.
Diagrams Appropriate maps and sections (with scales) and tabulations of intercepts Refer to figures in this report and in previous releases. These are accessible
should be included for any significant discovery being reported. These should on the Company's webpage.
include, but not be limited to a plan view of the drill collar locations and
appropriate sectional views.
Balanced reporting Where comprehensive reporting of all Exploration Results is not practicable, All results are included in this report and in previous releases. These are
representative reporting of both low and high-grades and/or widths should be accessible on the Company's webpage.
practiced to avoid misleading reporting of exploration results.
Other substantive exploration data Other exploration data, if meaningful and material, should be reported Limited lateritic duricrust has been variably developed at Kasiya, as is
including (but not limited to: geological observations; geophysical survey customary in tropical highland areas subjected to seasonal wet/dry cycles.
results; geochemical survey results; bulk samples - size and method of Lithological logs record drilling refusal in just under 2% of the HA/PT drill
treatment; metallurgical test results; bulk density, groundwater, geotechnical database. No drilling refusal was recorded above the saprock interface by AC
and rock characteristics; potential deleterious or contaminating substances. drilling.
Slimes (-45 µm) averages 46wt% in the Indicated Resource at a 0.7% rutile
bottom cut. Separation test work conducted at AML demonstrates the success in
applying a contemporary mineral sands flowsheet in treating this material and
achieving excellent rutile recovery.
Sample quality (representivity) is established by geostatistical analysis of
comparable sample intervals.
Several generations of QEMSCAN analysis of the NM performed at ALS Metallurgy
fraction shows dominantly clean and liberated rutile grains and confirms
rutile is the only titanium species in the NM fraction.
Further work The nature and scale of planned further work (e.g. test for lateral extensions Further AC drilling will allow the definition of a more extensive
or depth extensions or large-scale step-out drilling). saprock-interface basement and should continue to deliver additional resources
below the HA/PT-drilled regions.
A greater understanding of the lithological character and extent of those
basement units, where high-grade (>1%) rutile persists at the saprock
interface, may assist in focussing further resource definition and exploration
targeting.
Further metallurgical assessment is suggested to characterise rutile quality
and establish whether any chemical variability is inherent across the deposit.
Trialling drill definition at a 100m spacing is suggested for Measured
Resource assessment.
Diagrams clearly highlighting the areas of possible extensions, including the Refer to diagrams in the body of this report and in previous releases. These
main geological interpretations and future drilling areas, provided this are accessible on the Company's webpage.
information is not commercially sensitive.
SECTION 3 - ESTIMATION AND REPORTING OF MINERAL RESOURCES
Criteria JORC Code explanation Commentary
Database integrity Measures taken to ensure that data has not been corrupted by, for example, Data are manually entered into database tables according to SOPs and
transcription or keying errors, between its initial collection and its use for conforming to company field names and classifications. These are then migrated
Mineral Resource estimation purposes. to Datashed5 cloud-hosted database managed internally by the Company with
validation and quarantine capability. Relevant tables from the database are
exported to csv format and forwarded to Placer for independent review.
Data validation procedures used. Validation of the primary data include checks for overlapping intervals,
missing survey data, missing assay data, missing lithological data, missing
and mis-matched (to Lithology) collars.
Statistical, out-of-range, distribution, error and missing data validation is
completed by Placer on data sets before being compiled into a de-surveyed
drill hole file and interrogated in 3D using Datamine Studio RM software.
All questions relating to the input data are forwarded to the client for
review and resolution prior to resource estimation.
Site visits Comment on any site visits undertaken by the Competent Person and the outcome Perth Laboratory visits have been completed by the Competent Person, Mr
of those visits. Richard Stockwell. Field and in-country lab visits were complete over a 1-week
period in May 2022. A high standard of operation, procedure and personnel was
observed and reported.
If no site visits have been undertaken indicate why this is the case. Not applicable
Geological interpretation Confidence in (or conversely, the uncertainty of) the geological There is a high degree of repeatability and uniformity in the geological
interpretation of the mineral deposit. character of the Kasiya Deposit demonstrated by lithological logging of AC, PT
core and HA samples. Satellite imagery and airborne geophysical data provided
guidance for interpreting the strike continuity of the deposit.
Drill hole intercept logging and assay results (AC, PT and HA), stratigraphic
interpretations from drill core and geological logs of drill data have formed
the basis for the geological interpretation. The drilling exclusively targeted
the SOIL, FERP, MOTT and SAPL weathering horizons, with no sampling of the
SAPR and below the upper level of the fresh rock (FRESH) domain.
Nature of the data used and of any assumptions made. No assumptions were made.
The effect, if any, of alternative interpretations on Mineral Resource No alternative interpretations on Mineral Resource Estimation are offered.
estimation.
The use of geology in guiding and controlling Mineral Resource estimation. The mineral resource is constrained by the drill array plus one interval in
each of the X, Y and Z axes.
The topographical DTM constrains the vertical extent of the resource. Rutile,
enriched at surface by deflation and elluvial processes, is constrained
internally by a hard boundary at the base of the SOIL and FERP horizons that
overly the (generally less-mineralised) MOTT and SAPL horizons. In this way,
continuity of rutile, observed in surface drilling results, is honoured
between drill lines rather than being diluted by averaging with underlying,
lower-grade material.
The base to mineralisation is arbitrarily designated at effective drill depth
plus one (average sample width) interval in the Z orientation in HA/PT
drilling. The effective drill depth is where HA drilling intersects the static
water table, rather than being a true depth to un-mineralised basement. Deeper
drilling using the AC method has shown rutile enrichment persists to bedrock
and a material resource increase is anticipated upon application of this
method to a broader area.
A base to mineralisation of BOH plus 2.7m (-2.7 RL) is retained for this
estimate, where drilled by HA/PT methods. This basement horizon is interpreted
on 200m north sections and accounts for artifacts of ineffective drilling
terminating in soil or ferp horizons. It is applied consistently to both
Indicated and Inferred resource areas.
AC drilling has accurately defined depth to basement at the saprock interface,
which has been modelled where intersected in the updated MRE.
The factors affecting continuity both of grade and geology. Rutile grade is generally concentrated in surface regolith horizons. Deposit
stratigraphy and weathering is consistent along and across strike. Rutile
grade trend is oriented at 45 degrees at Kasiya North and 360 degrees at
Kasiya South, which mimics the underlying basement source rocks and residual
topography. Rutile varies across strike as a result of the layering of
mineralised and non-mineralised basement rocks.
Dimensions The extent and variability of the Mineral Resource expressed as length (along The Kasiya mineralised footprint strikes NE - SW and currently occupies an
strike or otherwise), plan width, and depth below surface to the upper and area of about 201km(2).
lower limits of the Mineral Resource.
Depth to basement is described previously.
Estimation and modelling techniques The nature and appropriateness of the estimation technique(s) applied and key Datamine Studio RM and Supervisor software are used for the data analysis,
assumptions, including treatment of extreme grade values, domaining, variography, geological interpretation and resource estimation. Key fields are
interpolation parameters and maximum distance of extrapolation from data interpolated into the volume model using a range of parameters and
points. If a computer assisted estimation method was chosen include a interpolation methods to establish best fit for the deposit. For the Kasiya
description of computer software and parameters used. MRE update, the Inverse Distance weighting (power 4) method was seen to
perform a superior interpolation of informing data and replication of the
high-value and thin, surface (SOIL/FERP) grade distribution. This was assisted
by the (customary) application of a Dynamic Anisotropy search, informed by the
results of variography, Suitable limitations on the number of samples and the
impact of those samples, was maintained.
Extreme grade values were not identified by statistical analysis, nor were
they anticipated in this style of deposit. No top cut is applied to the
resource estimation.
Interpolation was constrained by hard boundaries (domains) that result from
the geological interpretation.
The availability of check estimates, previous estimates and/or mine production This is the fourth MRE for the Kasiya Deposit.
records and whether the Mineral Resource estimate takes appropriate account of
such data. Bulk-scale test work has been completed and results support the view of the
Competent Person that an economic deposit of readily separable, high-quality
rutile is anticipated from the Kasiya Deposit. The recovery of a coarse-flake
graphite by-product was achieved by the test work.
The assumptions made regarding recovery of by-products. A graphite co-product was modelled as recoverable TGC.
Estimation of deleterious elements or other non-grade variables of economic No significant deleterious elements are identified. A selection of assay,
significance (e.g. sulphur for acid mine drainage characterisation). magnetic separation and XRF results are modelled and are reported.
In the case of block model interpolation, the block size in relation to the The average parent cell size used is equivalent to the average drill hole
average sample spacing and the search employed. spacing within the Indicated Resource (200m*200m). Cell size in the Z-axis
is established to cater for the composite sample spacing and definition of the
Topsoil domain. This resulted in a parent cell size of 200m x 200m x 3m for
the volume model with 5 sub-cell splits available in the X and Y axes and 10
in the Z axis to smooth topographical and lithological transitions. Both
parent cell and sub-cell interpolations were completed and reported. The
sub-cell interpolation was again applied to this MRE as it better reflected
the geological interpretation and a reasonable graduation of informing data
through intermediate cell areas.
A Topsoil horizon has been defined at 0.3m thickness throughout the Indicated
Resource area to support anticipated ore reserve calculation and mining
studies. Topsoil is disclosed separately but remains in the MRE in recognition
of advanced rehabilitation studies in the PFS by Agreenco.
Any assumptions behind modelling of selective mining units. No assumptions were made regarding the modelling of selective mining units.
The resource is reported at an Indicated level of confidence and is suitable
for optimisation and the calculation of a Probable Reserve.
Any assumptions about correlation between variables. No assumptions were made regarding the correlation between variables.
Description of how the geological interpretation was used to control the Interpolation was constrained by hard boundaries (domains) that result from
resource estimates. the geological interpretation.
Discussion of basis for using or not using grade cutting or capping. Extreme grade values were not identified by statistical analysis, nor were
they anticipated in this style of deposit. No top cut is applied to the
resource estimation.
The process of validation, the checking process used, the comparison of model Validation of grade interpolations was done visually In Datamine by loading
data to drill hole data, and use of reconciliation data if available. model and drill hole files and annotating, colouring and using filtering to
check for the appropriateness of interpolations.
Statistical distributions were prepared for model zones from both drill holes
and the model to compare the effectiveness of the interpolation. Distributions
of section line averages (swath plots) for drill holes and models were also
prepared for each zone and orientation for comparison purposes.
The resource model has effectively averaged informing drill hole data and is
considered suitable to support the resource classifications as applied to the
estimate.
Moisture Whether the tonnages are estimated on a dry basis or with natural moisture, Tonnages are estimated on a dry basis. No moisture content is factored.
and the method of determination of the moisture content.
Cut-off parameters The basis of the adopted cut-off grade(s) or quality parameters applied. The resource is reported at a range of bottom cut-off grades in recognition
that optimisation and financial assessment is outstanding.
A nominal bottom cut of 0.7% rutile is offered, based on preliminary
assessment of resource value and anticipated operational cost.
Mining factors or assumptions Assumptions made regarding possible mining methods, minimum mining dimensions Hydro-mining has been determined as the optimal method of mining for the
and internal (or, if applicable, external) mining dilution. It is always Kasiya Rutile deposit. The materials competence is loose, soft, fine and
necessary as part of the process of determining reasonable prospects for friable with no cemented sand or dense clay layers rendering it amenable to
eventual economic extraction to consider potential mining methods, but the hydro-mining. It is considered that the strip ratio would be zero or near
assumptions made regarding mining methods and parameters when estimating zero.
Mineral Resources may not always be rigorous. Where this is the case, this
should be reported with an explanation of the basis of the mining assumptions Dilution is considered to be minimal as mineralisation commonly occurs from
made. surface and mineralisation is generally gradational with few sharp boundaries.
Recovery parameters have not been factored into the estimate. However, the
valuable minerals are readily separable due to their SG differential and are
expected to have a high recovery through the proposed, conventional wet
concentration plant.
Metallurgical factors or assumptions The basis for assumptions or predictions regarding metallurgical amenability. Rigorous metallurgical testwork on rutile and graphite recoverability and
It is always necessary as part of the process of determining reasonable specifications has been completed on numerous bulk samples since 2018.
prospects for eventual economic extraction to consider potential metallurgical
methods, but the assumptions regarding metallurgical treatment processes and Rutile recovered to product is modelled at 100% and graphite recovered to
parameters made when reporting Mineral Resources may not always be rigorous. product is modelled at 67.5%.
Where this is the case, this should be reported with an explanation of the
basis of the metallurgical assumptions made. Both products have best-in-class chemical and physical specifications.
Refer to text for further details.
Environmental factors or assumptions Assumptions made regarding possible waste and process residue disposal A large portion of the Mineral Resource is confined to the SOIL, FERP and MOTT
options. It is always necessary as part of the process of determining weathering domains, and any sulphide minerals have been oxidised in the
reasonable prospects for eventual economic extraction to consider the geological past. Therefore, acid mine-drainage is not anticipated to be a
potential environmental impacts of the mining and processing operation. While significant risk when mining from the oxidised domain.
at this stage the determination of potential environmental impacts,
particularly for a greenfields project, may not always be well advanced, the
status of early consideration of these potential environmental impacts should
be reported. Where these aspects have not been considered this should be The Kasiya deposit is located within a farming area and has villages located
reported with an explanation of the environmental assumptions made. along the strike of the deposit. Sovereign holds regular discussions with
local landholders and community groups to keep them well informed of the
status and future planned directions of the project. Sovereign has benefited
from maintaining good relations with landowners and enjoys strong support from
the community at large.
Kasiya is in a sub-equatorial region of Malawi and is subject to heavy
seasonal rainfall, with rapid growth of vegetation in season. Substantial
vegetation or nature reserve is absent in the area.
Bulk density Whether assumed or determined. If assumed, the basis for the assumptions. If Density was calculated from 310 full core samples taken from geographically
determined, the method used, whether wet or dry, the frequency of the and lithologically-diverse sites across the deposit. Density is calculated
measurements, the nature, size and representativeness of the samples. using a cylinder volume wet and dry method performed by Sovereign in Malawi
and calculations verified by Placer Consulting.
Density data was loaded into an Excel file, which was flagged against
weathering horizons and mineralisation domains. These results were then
averaged, by domain and applied to the MRE.
The bulk density for bulk material must have been measured by methods that As above.
adequately account for void spaces (vughs, porosity, etc.), moisture and
differences between rock and alteration zones within the deposit.
Discuss assumptions for bulk density estimates used in the evaluation process An average density of 1.65 t/m(3) was determined for the total weathering
of the different materials. profile.
This incorporates and average density of 1.39 t/m(3) for the SOIL domain, 1.58
t/m(3) for the FERP domain, 1.66 t/m(3) for the MOTT domain, 1.69 t/m(3) for
the PSAP domain, 1.97 t/m(3) for the SAPL domain, and 1.95 t/m(3) for the LAT
domain. Density data are interpolated into the resource estimate by the
nearest neighbour method.
Classification The basis for the classification of the Mineral Resources into varying Classification of the MRE is at an Indicated and Inferred category. Minor
confidence categories. regions of unclassified material occur in sparsely drilled, typically
extraneous regions of the mineralised area. These are excluded from the
resource inventory.
Inferred classification is attributed to those areas with drilling spaced at
400m x 400m. Indicated classification is attributed to those areas with
drilling spaced at 200m x 200m.
Whether appropriate account has been taken of all relevant factors (i.e. All available data were assessed and the competent person's relative
relative confidence in tonnage/grade estimations, reliability of input data, confidence in the data was used to assist in the classification of the Mineral
confidence in continuity of geology and metal values, quality, quantity and Resource.
distribution of the data).
Whether the result appropriately reflects the Competent Person's view of the Results appropriately reflects a reasonable and conservative view of the
deposit deposit.
Audits or reviews The results of any audits or reviews of Mineral Resource estimates. Independent audit of the MRE construction was contracted to Datamine Australia
by Placer prior to delivery to SVM. A third party is engaged by SVM for a
further verification of the MRE.
Discussion of relative accuracy/ confidence Where appropriate a statement of the relative accuracy and confidence level in Substantial additional mineralisation was expected to occur below the
the Mineral Resource estimate using an approach or procedure deemed effective depth of HA and PT drilling. This has been confirmed by the deeper
appropriate by the Competent Person. For example, the application of AC drilling.
statistical or geostatistical procedures to quantify the relative accuracy of
the resource within stated confidence limits, or, if such an approach is not A high-degree of uniformity exists in the broad and contiguous lithological
deemed appropriate, a qualitative discussion of the factors that could affect and grade character of the deposit. Drilling technique have been expertly
the relative accuracy and confidence of the estimate. applied and data collection procedures, density assessments, QA protocols and
interpretations conform to industry best practice with few exceptions.
Assay, mineralogical determinations and metallurgical test work conform to
industry best practice and demonstrate a rigorous assessment of product and
procedure. The development of a conventional processing flowsheet and
marketability studies support the classification of the Kasiya Resource.
The statement should specify whether it relates to global or local estimates, The estimate is global.
and, if local, state the relevant tonnages, which should be relevant to
technical and economic evaluation. Documentation should include assumptions
made and the procedures used.
These statements of relative accuracy and confidence of the estimate should be No production data are available to reconcile model results.
compared with production data, where available.
SECTION 4 - ESTIMATION AND REPORTING OF ORE RESERVES
Criteria Explanation Commentary
Mineral Resource estimate for conversion to Ore Reserves Description of the Mineral Resource estimate used as a basis for the The Minerals Resource Estimate ("MRE") declared on 5 April 2023 underpins the
conversion to an Ore Reserve. Ore Reserve. Sovereign engaged independent geological and mining consultants
Placer to complete the MRE for the Kasiya deposit.
The principal resource geologist Mr Richard Stockwell is highly experienced
Clear statement as to whether the Mineral Resources are reported additional with more than 25 years in resource estimation and mine geology. Mr Richard
to, or inclusive of, the Ore Reserves. Stockwell is a Competent Person for the purposes of the MRE as defined and in
accordance with the JORC Code 2012.
The MRE as reported in this document is inclusive of the Ore Reserve declared
in this document. The Ore Reserve does not include Inferred Mineral Resources.
Site visits Comment on any site visits undertaken by the Competent Person and the outcome Site visits have been carried out by the following personnel:
of those visits.
· Mr Ryan Locke, as representative for the Competent Person Mr
Ross Cheyne for the JORC Reserve Estimate has been to site on multiple site
visits prior to and since the discovery of the Kasiya Deposit.
· Mr Richard Stockwell, the Competent Person for the JORC
Mineral Resource Estimate and a representative of Placer Consulting Pty Ltd
has conducted one site visit.
· Mr Samuel Moyle, the Competent Person for Exploration Results
and Exploration Manager of Sovereign Metals Ltd has conducted multiple site
visits since the discovery of the Kasiya deposit;
Study status The type and level of study undertaken to enable Mineral Resources to be The technical and financial information in this release is at PFS-level
converted to Ore Reserves. enabling the declaration of Ore Reserves. The studies carried out have
determined a mine plan that is technically achievable and economically viable
The Code requires that a study to at least Pre-Feasibility Study level has with all material Modifying Factors having been considered.
been undertaken to convert Mineral Resources to Ore Reserves. Such studies
will have been carried out and will have determined a mine plan that is The Ore Reserve was underpinned by a mine plan detailing mining locations, ore
technically achievable and economically viable, and that material Modifying and waste quantities; plant feed quantities and plant head grades. Scheduling
Factors have been considered. was undertaken in annual and quarterly periods.
Mine planning activities included an updated pit optimisation, development of
mineable pit geometries, scheduling, mining cost estimation and financial
analysis in order to confirm the ability to economically mine the Kasiya Ore
Reserve.
Modifying factors considered during the mine planning process included pit
slope design criteria, mining costs, mining dilution and ore loss, processing
recoveries, processing costs, selling costs, general and administration costs
and product price.
Cut-off parameters The basis of the adopted cut-off grade(s) or quality parameters applied. Pit cut-off grades varied between 0.7% and 0.9% rutile with cut-offs selected
to provide the most tonnage whilst minimising the pit footprint to have as
little environmental/social impact as possible.
The selected cut-off grades are above the final project breakeven cut-off
grade of approximately 0.40% rutile.
Mining factors or assumptions The method and assumptions used as reported in the Pre-Feasibility or The Kasiya MRE released by Sovereign in on 5 April 2023 was used as the basis
Feasibility Study to convert the Mineral Resource to an Ore Reserve (i.e. for the PFS Ore Reserve estimate. Mineral Resources were converted to Ore
either by application of appropriate factors by optimisation or by preliminary Reserves in line with the material classifications which reflect the level of
or detailed design). confidence within the resource estimate. The Ore Reserve reflects that portion
of the Mineral Resource which can be economically extracted by open pits
The choice, nature and appropriateness of the selected mining method(s) and utilising a combination of hydro mining and limited truck/shovel
other mining parameters including associated design issues such as pre-strip, methodologies. The Ore Reserve considers the modifying factors and other
access, etc. parameters detailed in the relevant sections of the PFS report, including but
not limited to the mining, metallurgical, social, environmental, approvals,
The assumptions made regarding geotechnical parameters (e.g. pit slopes, stope tenure, statutory and financial aspects of the project.
sizes, etc.), grade control and pre-production drilling.
In line with the JORC 2012 guidelines, the Kasiya Probable Ore Reserve is
The major assumptions made and Mineral Resource model used for pit and stope based on Indicated classified Mineral Resources. There is no Measured
optimisation (if appropriate). classified Mineral Resource at Kasiya and consequently no Proved Ore Reserve.
Inferred classified material is not included in the Ore Reserve and therefore
The mining dilution factors used. is not considered for mining.
The mining recovery factors used. The reported MRE is inclusive of the resources converted to Ore Reserves.
Any minimum mining widths used. The Ore Reserve includes an allowance for mining dilution and ore loss on the
basis that all material within the shell is classified and extracted as ore.
The manner in which Inferred Mineral Resources are utilised in mining studies
and the sensitivity of the outcome to their inclusion. The open pit geometries developed for the purposes of mine planning, and which
define the subsequent Ore Reserve, are based on Whittle pit shells edited to
The infrastructure requirements of the selected mining methods. comply with practical mining requirements and identified exclusion zones.
Selection of Mining method
The mining options were evaluated in detail during the PFS to determine the
best suited mining method for the operation. The criteria for selection were
based not only on capital and operating cost, but ESG considerations and
infrastructure requirements. Sovereign performed testwork on ROM material and
conducted an independent assessment and trade-off analysis for all possible
mining methods. The outcomes of this work resulted in hydro mining being
determined as the optimal method for mining the Kasiya rutile- graphite
deposit. Due to the consistent particle size distribution through the reserve,
favourable operating and capital costs, low carbon footprint and air pollution
(low dust and no diesel emissions) as well as the support of infrastructure
and water availability within the project designated footprint.
Hydro-mining is defined as the excavation of material from its in-situ state
using pressurised water. A stream of high-pressure water is directed at the
ore with the purpose of mechanically breaking and softening the material so
that it can be carried away by the created gravitational slurry flow. The
mineralisation at Kasiya is largely homogenous and has relatively consistent
physical properties throughout the MRE and contained Ore Reserve. The material
competence is described as loose and friable, soft and well weathered with no
cemented particles or dense clay layers. The particle size distribution (PSD)
is favourable for hydro-mining due to its high content of -45µm fines and the
fines component effectively increases the viscosity of the slurry created,
which enhances the slurry's ability to carry sand and heavy mineral particles.
Hydro mining is a proven technology and has been successfully applied on heavy
mineral sand operations in Africa. Hydro mining for the PFS is based on the
block-mine and top-down methodologies. The top-down operational method has
advantages in terms of safety, achieving and maintaining design slurry
densities, achieving and maintaining design production rates and ease of
planning and control.
Sovereign Mining engaged Fraser Alexander, a highly experienced mining
contractor and consultancy specialising in hydro-mining to provide engineering
and cost inputs for hydro-mining in the PFS.
Dry mining methods are required where hydro mining is inefficient and will be
required to push approximately 11% of the Ore Reserve. These are the "basin"
of the hydro mining areas which need selective "floor clean-up" mining.
Pit Optimisation
An open pit optimisation utilising Whittle™ software was carried out on the
Kasiya deposit using Indicated Mineral Resources only (in line with the JORC
2012 guidelines). The latest parameters available were used to determine the
economic extent of the open pit excavation. The process plant production
parameters were supplied by Sovereign with an initial rate of 12mtpa and a
ramp up in production from years 5 - 7 to an annual rate of 24Mtpa.
The intention to hydro-mine the majority of the defined Ore Reserve means that
there is no ability to selectively mine and all material will be extracted and
sent as plant feed. Therefore, all material within the "shell" will be
extracted and fed to the plant as ore and any interstitial waste and/or
sub-economic grade material will be likewise treated as diluent material.
However, due to the relatively homogenous and continuous nature the orebody,
the quantities of this material will be relatively small and therefore a
simple 5% dilution was applied within the Whittle™ tool to approximate this
assumption.
For the PFS, an overall slope angle of 20 degrees has been applied within the
optimisation, in line with a conservative stable angle for a mineral sands
operation.
Mineable Pit Geometries
Based on the cut-off grades applied, the optimization shells were further were
further refined to develop a mineable geometry. The process applied the
following constraints:
- A minimum depth of 5m for the hydro mining method.
- Removal of any small, isolated pits.
- Pit extents limited to mineable areas and to remain outside of
identified exclusion areas wherever reasonably possible. Sovereign identified
all local village areas and areas of cultural or environmental significance
within the potential mining envelope that should not be disturbed during the
mining phase of the Project.
Metallurgical factors or assumptions The metallurgical process proposed and the appropriateness of that process to Rutile
the style of mineralisation.
Sovereign completed bulk rutile testwork programs at the globally recognised
Whether the metallurgical process is well-tested technology or novel in AML in Perth, Australia. The latest program was supervised by Sovereign's Head
nature. of Development, Paul Marcos. Mr Marcos is a metallurgist and process engineer
and a mineral sands industry veteran. Bulk test-work programs have confirmed
The nature, amount and representativeness of metallurgical test work premium grade rutile can be produced via a simple and conventional process
undertaken, the nature of the metallurgical domaining applied and the flow sheet.
corresponding metallurgical recovery factors applied.
Processing engineering was completed by DRA Global who developed the process
Any assumptions or allowances made for deleterious elements. plant design and associated cost estimate for the Study. An average product
grade of 96% TiO(2) with 100% recovery to rutile product was assumed for the
The existence of any bulk sample or pilot scale test work and the degree to PFS.
which such samples are considered representative of the orebody as a whole
Graphite
For minerals that are defined by a specification, has the ore reserve
estimation been based on the appropriate mineralogy to meet specifications? Sovereign has conducted graphite testwork across ALS Laboratory in Perth and
SGS Lakefield in Canada. Veteran graphite metallurgist Oliver Peters, MSc,
P.Eng., MBA (Consulting Metallurgist for SGS and Principal Metallurgist of
Metpro Management Inc.) was engaged to supervise and consult on the testwork
programs. Mr Peters has over 25 years' experience in metallurgy on graphite
and other commodities. He has operated numerous graphite pilot plants and
commissioned a number of full-scale processing facilities.
DRA's Senior Engineer, Stewart Calder and Manager Metallurgy, John Fleay
supervised and advised on sample selection, testwork scope and results from
the latest testwork programs. Both consultants are considered to have the
appropriate capabilities and similarities with the material and the early
stage of the project.
An average product grade of 96% C(t) with 67.5% recovery to product was
assumed for the PFS.
Rutile & Graphite
It is acknowledged that laboratory scale test-work will not always represent
actual results achieved from a production plant in terms of grade, chemistry,
sizing and recovery. Further test-work will be required to gain additional
confidence of specifications and recoveries that will be achieved at
full-scale production.
Overall, the process flow-sheet is conventional for both rutile and graphite
with no novel features or equipment incorporated.
Environmental The status of studies of potential environmental impacts of the mining and An Environmental Impact Assessment (ESIA) is currently commencing with
processing operation. Details of waste rock characterisation and the reference to applicable Malawian and international environmental and social
consideration of potential sites, status of design options considered and, permitting and baseline requirements for the Kasiya Project.
where applicable, the status of approvals for process residue storage and
waste dumps should be reported. Sovereign is committed to conduct its activities in full compliance to the
requirements of national regulations, its obligations under international
conventions and treaties and giving due consideration to international best
practices and policies. Sovereign has appointed an experienced environmental
consultant to manage the ESIA process, and environmental and social baseline
studies have commenced with appropriately qualified independent experts.
Sovereign has also completed a high-level risk assessment to identify major
environmental and social risks which could affect the development of the
Project, along with mitigating strategies to allow identified risks to be
addressed early in the project design phase.
Sovereign has embarked on several exercises with the communities in the area
and there is a general positive acceptance of the Project.
Based on the current assessments and commenced ESIA, the Competent Person
believes there are no environmental issues currently identified that cannot be
appropriately mitigated in accordance with standard practices adopted for the
development of mining projects.
Infrastructure The existence of appropriate infrastructure: availability of land for plant Kasiya is located approximately 40km northwest of Lilongwe, Malawi's capital,
development, power, water, transportation (particularly for bulk commodities), and boasts favourable access to services and infrastructure. The proximity to
labour, accommodation; or the ease with which the infrastructure can be Lilongwe gives the project access to a large pool of professionals and skilled
provided, or accessed. tradespeople, as well as industrial services.
Sovereign appointed JCM to design a preliminary IPP solution for Kasiya. JCM
is a Canada-headquartered IPP which develops, constructs, owns and operates
renewable energy and storage projects in emerging markets across the globe.
JCM provided an estimated, levelized cost of energy (LOCE) on a Power Purchase
Agreement (PPA).
Logistics cost estimates, including rail and port infrastructure and handling,
were provided by Thelo DB, Nacala Logistics and Grindrod based on market data,
suppliers' quotations, industry databases, industry contacts and the
consultant's existing knowledge of southern African transport infrastructure
and freight markets.
The above consultants are independent with appropriate experience in the
management of transport logistics studies in southern Africa.
Costs The derivation of, or assumptions made, regarding projected capital costs in Capital estimates for the procress plant have been prepared by DRA Global,
the study. together with input from Sovereign and other contributing consultants using
combinations of cost estimates from suppliers, historical data, benchmarks and
The methodology used to estimate operating costs. other independent sources. The accuracy of the initial capital cost estimate
for the Project is -20% and +25%.
Allowances made for the content of deleterious elements.
Capital costs include the cost of all services, direct costs, contractor
The derivation of assumptions made of metal or commodity price(s), for the indirects, EPCM expenses, non-process infrastructure, sustaining capital and
principal minerals and co- products. other facilities used for the mine. Capital costs make provision for
mitigation expenses and mine closure and environmental costs.
Derivation of transportation charges.
Working capital requirements (including contingency) for plant commissioning
The basis for forecasting or source of treatment and refining charges, and full ramp-up have been included in the headline capital estimate reported
penalties for failure to meet specification, etc. under construction, owner's and start-up costs.
The allowances made for royalties payable, both Government and private. Mining costs have been estimated by Fraser Alexander, a regional leader in
hydro-mining and materials handling. Mining costs have been built up from
first principles based on equipment, vendor, and contractor quotations, local
unit cost rates, and benchmarked costs.
Labor costs have been developed based on a first-principles build-up of
staffing requirements with labor rates benchmarked in Malawi and expatriate
rates benchmarked for professionals from South Africa and other jurisdictions.
A Government royalty of 5% (applied to revenue) and a vendor profit share of
2% (applied to gross profit) has been included in all project economics. A
0.45% royalty (applied to revenue) has been applied for the community
development fund.
Rehabilitation and mine closure costs are included within the reported
operating cost and sustaining capital estimates.
Revenue factors The derivation of, or assumptions made regarding revenue factors including Sales pricing for both products is based on current market analysis by an
head grade, metal or commodity price(s) exchange rates, transportation and independent party (see below)
treatment charges, penalties, net smelter returns, etc.
The derivation of assumptions made of metal or commodity price(s), for the
principal metals, minerals and co-products.
Market assessment The demand, supply and stock situation for the particular commodity, Sovereign obtained independent market assessments for both products.
consumption trends and factors likely to affect supply and demand into the
future. Rutile
A customer and competitor analysis along with the identification of likely Sovereign engaged market leading TZMI to provide a bespoke marketing report to
market windows for the product. support the Study. TZMI is a global, independent consulting and publishing
company which specialises in technical, strategic and commercial analyses of
Price and volume forecasts and the basis for these forecasts. the opaque (non-terminal market) mineral, chemical and metal sectors.
TZMI's assessment has confirmed that, based upon their high-level view on
global demand and supply forecasts for natural rutile, and with reference to
the specific attributes of Kasiya, there is a reasonable expectation that the
product will be able to be sold into existing and future rutile markets.
Given the premium specifications of Kasiya's natural rutile, the product
should be suitable for all major natural end-use markets including TiO(2)
pigment feedstock, titanium metal and welding sectors.
Graphite
Sovereign engaged Fastmarkets, a specialist international publisher and
information provider for the global steel, non-ferrous and industrial minerals
markets, to prepare a marketing report for graphite.
Fastmarkets' assessment has confirmed that based upon their high-level view on
global demand and supply forecasts for natural flake graphite, and with
reference to the specific attributes of Sovereign's projects, there is a
reasonable expectation that the product from Sovereign's projects will be able
to be sold into existing and future graphite markets. Given the extremely
low-cost profile and high-quality product, it is expected that output from
Kasiya will be able to fill new demand or substitute existing lower quality /
higher cost supply.
Project considerations taken by Fastmarkets in forming an opinion about the
marketability of product include:
- Low capital costs (incremental)
- Low operating costs
- High quality concentrate specifications
Industry participants confirm that the highest value graphite concentrates
remain the large, jumbo and super-jumbo flake fractions, primarily used in
industrial applications such as refractories, foundries and expandable
products. These sectors currently make up the significant majority of total
global natural flake graphite market by value.
Fastmarkets have formed their opinion based solely upon project information
provided by Sovereign Metals to Fastmarkets and have not conducted any
independent analysis or due diligence on the information provided.
Economic The inputs to the economic analysis to produce the net present value (NPV) in Key parameters are disclosed in the body of the announcement, and include:
the study, the source and confidence of these economic inputs including
estimated inflation, discount rate, etc - Life of Mine: 25 years
NPV ranges and sensitivity to variations in the significant assumptions and - Discount rate: 8%
inputs.
- Tax rate: 30%
- Resource Rent Tax (RRT) of 15% after tax profit
- Royalty rate: 5% royalty (Government), 2% of gross
profit (Original Project Vendor) and 0.45% Community Development Fund.
- Pricing: Rutile average price of US$1,484 per tonne
and Graphite average basket price of US$1,290 per tonne
The PFS financial model has been prepared internally by Sovereign using inputs
from the various expert consultants and has been reviewed by BDO Australia -
Perth, an independent leading accountancy, tax and advisory services firm to
validate the functionality and accuracy of the model.
NPV sensitivity to costs and price were assessed utilising the Project
financial model developed by Sovereign. As is the case for most
commodity-based projects, the NPV is most sensitive to changes in price, with
a +/-30% price variation generating a +/-60% variation in
project value. It is moderately sensitive to operating cost changes, with a
+/-30% cost change producing a -/+ 18% fluctuation in value. Approximately 4%
of this value change is attributable to mining costs, 5% to logistics costs
and the remaining 9% to processing/labour/G&A related costs. The project
is less sensitive to capital cost changes, with a +/-30% variation in capital
affecting NPV by -/+10%.
Social The status of agreements with key stakeholders and matters leading to social Sovereign expects to enter into a Community Development Agreement ("CDA") with
license to operate. the surrounding communities. Significant engagement with these communities has
occurred over the exploration phases and is ongoing ahead of negotiation of
the CDA which is expected to be concluded during the DFS stage.
Other To the extent relevant, the impact of the following on the project and/or on No identifiable naturally occurring risks have been identified to impact the
the estimation and classification of the Ore Reserves: Kasiya Ore Reserve.
Any identified material naturally occurring risks. Sovereign has no existing binding offtake agreement in place.
The status of material legal agreements and marketing arrangements. Sovereign is yet to apply for a Mining Licence ("ML") covering the footprint
of the project, however it is not anticipated for there to be any objections
The status of government agreements and approvals critical to the viability of in obtaining the necessary government approvals.
the project, such as mineral tenement status and government and statutory
approvals. There must be reasonable grounds to expect that all necessary
Government approvals will be received within the timeframes anticipated in the
Pre-Feasibility or Feasibility study. Highlight and discuss the materiality of
any unresolved matter that is dependent on a third party on which extraction
of the reserve is contingent.
Classification The basis for the classification of the Ore Reserves into varying confidence The Kasiya PFS Ore Reserves comprise Indicated Mineral Resource material
categories. Whether the result appropriately reflects the Competent Person's converted to "Probable" reserves.
view of the deposit. The proportion of Probable Ore Reserves that have been
derived from Measured Mineral Resources (if any). In line with JORC 2012 guidelines, Inferred Mineral Resource material has not
been included.
100% of the Kasiya PFS Ore Reserve is in the Probable Reserves category.
Audit or reviews The results of any audits or reviews of Ore Reserve estimates. No external audits or reviews have been carried out to date.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END UPDGDGDCCGDDGXIRecent news on Sovereign Metals
See all newsREG - Sovereign Metals Ltd - March 2025 Quarterly Report
AnnouncementREG - Sovereign Metals Ltd - DFS Geotechnical Programs in Progress
AnnouncementREG - Sovereign Metals Ltd - Holding(s) in Company
AnnouncementREG - Sovereign Metals Ltd - Sovereign Completes A$40 Million Placement
AnnouncementREG - Sovereign Metals Ltd - Response to Media Speculation
Announcement