TIDMSVML
RNS Number : 6125R
Sovereign Metals Limited
07 July 2022
SOVEREIGN METALS LIMITED
NEWS RELEASE | 7 July 2022
RUTILE OFFTAKE AND MARKETING ALLIANCE WITH MAJOR JAPANESE
TRADING HOUSE
-- MoU signed with global trading and investment firm for rutile offtake,
marketing and product development for the Kasiya Rutile Project
-- MoU covers offtake and marketing rights for 30,000 tonnes per annum
of natural rutile from Kasiya
-- Marketing alliance will focus on Asia, a key and established growth
market for high-grade titanium feedstocks
-- Key Asian customers have confirmed premium chemical parameters of
Kasiya's natural rutile as part of product quality assessments
-- Asian titanium metal producers have confirmed the suitability of
the Kasiya rutile product
Sovereign Metals Limited (ASX:SVM; AIM:SVML) (the Company or
Sovereign) is pleased to announce that it has entered into a
non-binding Memorandum of Understanding (MoU) with Mitsui & Co
Ltd (Mitsui), one of the largest global trading and investment
companies in Japan. The MoU establishes a marketing alliance and
offtake for 30,000 tonnes of natural rutile per annum from the
Company's world-class Kasiya Rutile Project (Kasiya) in Malawi.
This MoU creates a marketing alliance between the two parties to
jointly market Sovereign's rutile across Asia and other markets.
The alliance will allow Sovereign to leverage off Mitsui's
extensive network and their market-leading understanding of the
titanium industry and global logistics.
Mitsui has shared samples of rutile product from Kasiya with
Asian end-users that have confirmed its premium chemical
specifications should be suitable for use in their titanium sponge
and pigment processes, as a precursor for high-grade,
high-specification titanium metal and pigment production.
Sovereign's Managing Director, Dr Julian Stephens commented:
"The Asia region is a key natural rutile market with all major
end-use sectors well established and further strong growth
forecast. We expect expanding technology developments and
increasing environmental awareness to drive greater demand for
natural rutile. This marketing alliance with a very high-calibre
partner in Mitsui will assist Sovereign to penetrate these
ever-growing markets.
The MoU is non-exclusive and non-binding with no pricing terms
which remains subject to negotiation and execution of a definitive
agreement. The MoU will expire on 31 December 2023 but can be
extended by agreement by both parties should a definitive agreement
not have been reached by that time.
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
RFC Ambrian
Bhavesh Patel / Andrew Thomson +44 20 3440 6800
Joint Brokers
Berenberg +44 20 3207 7800
Matthew Armitt
Jennifer Lee
Optiva Securities +44 20 3137 1902
Daniel Ingram
Mariela Jaho
Christian Dennis
To view the announcement in full, including all illustrations
and figures, please refer to the announcement at
http://sovereignmetals.com.au/announcements/.
ASIA NATURAL RUTILE MARKET
Natural rutile is classified as a high-grade titanium feedstock.
The high-grade titanium feedstock market consumes approximately
2.8Mt of contained titanium dioxide with strong demand driven from
the welding, pigment and titanium metal sectors.
Asia has been identified as a key growth market for high-grade
titanium feedstocks (rutile, synthetic rutile & chloride slag)
with environmental pressures and technology shifts in pigment
production driving the increase in demand.
Pigment
In the pigment industry, major western producers more commonly
use high-grade titanium feedstocks for the chloride process,
whereas Chinese producers generally rely on low-grade sulphate
ilmenite as their main feedstock for the more polluting sulphate
process.
To produce lower quantities of waste products, a shift from the
sulphate process to the cleaner chloride process by several Chinese
pigment producers including LB Group (previously named Lomon
Billions), CITIC and Yibin Tianyuan has resulted in stronger demand
for high-grade titanium feedstocks in China.
Global, independent titanium consultancy, TZ Minerals
International (TZMI) forecasts Chinese chloride-based pigment
capacity to grow around 10% CAGR to reach 1.1 million tonnes by
2030.
Titanium Metal
Titanium metal is an essential component in the aerospace,
military, medical and construction sectors with strong growth
coming from the high-performance, clean-tech, and technology
industries. Titanium metal's combination of corrosion resistance,
excellent weight-to-strength ratio, and very high melting point is
not found with other metals.
Asian titanium metal producers have evaluated Kasiya's natural
rutile product confirming that its premium chemical specifications
should be suitable in their titanium sponge process, a precursor
for high-grade, high-specification titanium metal production.
Although the titanium metal market currently only makes 10% of
natural rutile demand, the segment is expected to grow at over 8%
CAGR. A strong recovery is anticipated as travel restrictions due
to the Covid-19 Pandemic ease and military-related and aerospace
spending rises.
Global production of titanium metals is concentrated across Asia
and eastern Europe.
Welding
Natural rutile is one of the most important constituents of
welding flux, responsible primarily for slag forming properties.
There are very limited alternative raw materials to replace rutile
in welding applications.
Bagged rutile sales into the welding and other non-pigment
sectors achieve significantly better pricing, often with 25%+
premiums to bulk rutile pricing.
Consequently, TZMI, expects bagged rutile sales to fetch
US$500-600 per tonne price premiums over the bulk market in 2022.
TZMI reported bagged rutile sales for Q1 of 2022 were above
US$2,000 per tonne CIF for a number of shipments. TZMI also expects
bagged rutile sales to lead pricing growth as the welding sector
has limited alternatives to natural rutile feedstock input.
About Mitsui & Co.
Mitsui & Co., Ltd (8031: JP) is a global trading and
investment company with a diversified business portfolio that spans
approximately 64 countries in Asia, Europe, North, Central &
South America, The Middle East, Africa and Oceania.
Mitsui has over 5,600 employees and deploys talent around the
globe to identify, develop, and grow businesses in collaboration
with a global network of trusted partners. Mitsui has built a
strong and diverse core business portfolio covering the Mineral and
Metal Resources, Energy, Machinery and Infrastructure, and
Chemicals industries.
About Sovereign Metals
Sovereign Metals Limited (ASX:SVM & AIM:SVML) is an ASX and
AIM-listed company focused on the exploration and development of
its Kasiya rutile project in Malawi.
The Company recently completed an Expanded Scoping Study which
confirmed Kasiya as a large-scale, long-life operation with a
low-cost profile as a significant source of critical raw materials.
Kasiya has the potential to become a major producer of both the
natural rutile and graphite markets whilst contributing
significantly to the economy of Malawi.
Natural rutile is the purest, highest-grade natural form of
titanium dioxide (TiO(2) ) and is the preferred feedstock in
manufacturing titanium pigment and producing titanium metal.
The natural rutile market is in structural deficit with current
supply estimated to decline rapidly by 45% in the next three years,
following the scheduled closures by two major high-grade
producers(1) . A resurgence in demand for titanium pigment and from
the welding sector combined with concurrent supply shortages has
led the CIF China spot prices sharply upwards to over US$2,200 per
tonne(2) .
Sources
1. TZMI
2. Ruidow.com based on Australian Rutile (TiO2>95%, P<0.03%, S<0.03) CIF Tianjin Port
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.
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