27/07/2023

Sovereign Metals Limited (SVML)

1. Rio Tinto invested A$40.4m (£21m) in Sovereign for 15% shareholding at A$0.486 per Share (25p)
2. The proceeds from this strategic investment are to fund the advancement of Kasiya to a mine focused on the development of a worldclass, low-CO2-footprint mine capable of supplying to the titanium pigment, titanium metal and lithiumion battery industries.
3. Kasiya’s in Malawi is the most significant critical mineral discoveries in recent times with 18m tonnes and a 50 year mine life.
4. The Pre-Feasibility Study (PFS) is due by 30^th September 2023
5. The Definitive Feasibility Study (DFS) is due by 31 October 2025
6. This funding, assuming a $2m per-month burn rate, could be sufficient to reach the DFS

Exploration, Feasibility into Product

Sovereign hold deposits for two critical minerals to decarbonisation targets. Kasiya, located in central Malawi, is the largest natural rutile deposit (purest natural form of titanium) and one of the largest flake graphite deposits in the world

SVML is aiming to develop a sustainable operation to supply highly sought after natural rutile and graphite to global markets. An Expanded Scoping Study (ESS) released in June 2022 by the Company confirmed Kasiya as potentially one of the world’s largest and lowest cost producers of natural rutile and natural graphite with a global warming potential substantially lower than other existing and planned operations.

The Company is in the advanced stages of a Pre-Feasibility Study (PFS) for Kasiya which will build on the on the ESS. The Company expects to announce the outcomes of the PFS in the coming months estimated 30^th September 202

Comment: The studies underway de-risk the project over the next 2 years and signals the end of the exciting and risky exploration upside.  As it becomes a valuable mine the shares should adjust positively shareholder base adjusts. The key aspect for the bulls here is that the shares are currently half the value of their peak last year at 53.5p – well before the transformational investment and validation of mining giant Rio Tinto.

As we have seen with Empire Metals, even in current stock market conditions a stock will almost inevitably beat the pre-good news peak, once investors have finished kicking the tyres on the new fundamentals. 50p plus, the pre-Rio peak can now be regarded as even a modest destination for SVML shares over the rest of the summer.