TIDMSVML
RNS Number : 5803E
Sovereign Metals Limited
31 October 2022
SOVEREIGN METALS LIMITED
NEWS RELEASE 31 OCTOBER 2022
SEPTEMBER 2022 QUARTERLY REPORT
Sovereign Metals Limited (Company or Sovereign) (ASX:SVM &
AIM:SVML) is pleased to provide its quarterly report for the period
ended 30 September 2022.
HIGHLIGHTS
Kasiya Rutile Project PFS well underway with all major programs
commenced
-- Sovereign is progressing the Pre-Feasibility Study (PFS) on
the Kasiya Rutile Project (Kasiya), an industry-leading major
source of critical raw materials in Malawi.
-- The PFS will build on the Expanded Scoping Study (ESS) which
confirmed Kasiya as one of the world's largest and potentially
lowest cost producers of natural rutile and natural graphite with a
carbon-footprint substantially lower than other current and planned
producers.
-- The PFS is on track to be completed in H1 2023 with all major
works packages now well underway.
Air-core drilling identified high-grade mineralisation at
depth
-- Drilling results from the Company's deeper air-core (AC)
program confirmed rutile-graphite mineralisation extends at depth
beneath previously designed ESS mining pit shells.
-- Substantial zones of high-grade rutile mineralisation to
depth beneath initial planned open pit shells (main areas averaging
15m depth).
-- These newly defined high-grade rutile and graphite
mineralisation at depths >15m is consistent and occurs in
coherent blocks.
-- Identification of high-grade mineralisation at depth is
expected to contribute to the Mineral Resource Estimate (MRE)
update targeted for Q1 2023.
Offtake MoU and Market Alliance with major Japanese trader
-- In July 2022, Memorandum of Understanding ( MoU )
(non-binding) signed 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. The alliance will allow
Sovereign to leverage off Mitsui's extensive network and their
market-leading understanding of the titanium industry and global
logistics.
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
KASIYA - THE LARGEST RUTILE DEPOSIT IN THE WORLD
Kasiya, located in central Malawi, is the largest natural rutile
deposit and one of the largest flake graphite deposits in the
world. Sovereign is aiming to develop an environmentally and
sustainable operation to supply highly sought-after natural rutile
and graphite to global markets.
Kasiya is planned to be a conventional operation using
traditional and well-developed processes used across the globe on
numerous mineral sands and graphite operations.
The proposed large-scale operation will process soft, friable
mineralisation that occurs from surface in an area with excellent
access and water availability. Kasiya has high quality surrounding
infrastructure including hydro-sourced grid power, bitumen roads
and recently upgraded rail lines connecting to the deep water of
ports of Nacala and Beira on the Indian Ocean.
Sovereign is progressing the PFS which will build on the on the
ESS, released in June 2022, with targeted completion in H1
2023.
The ESS confirmed Kasiya as potentially one of the world's
largest and lowest cost producers of natural rutile and natural
graphite with a carbon-footprint substantially lower than current
alternatives. The ESS showed outstanding results including:
-- a two-stage development (stage 2 self-funded) with full
production at 24Mtpa throughput producing 265kt rutile and 170kt
graphite per annum with a 25 year mine life
-- exceptional economics including a post-tax NPV(8) of US$1,537m and post-tax IRR of 36%
-- a large-scale operation with a low-cost profile resulting
from the deposit's near surface nature, high-grade, conventional
processing flowsheet and excellent existing infrastructure
-- conservative assumptions applied with long-term prices used
discounted against current spot prices
The natural rutile market is in structural deficit with current
global supply estimated to decline 45% in the next three years.
Graphite demand set to soar as electric vehicle production is
forecast to increase 12-fold by 2040(1) .
Kasiya is considered to be a highly strategic project and a
potential major source of raw materials deemed critical to the
decarbonisation of the global economy while significantly
contributing to the social and economic development of Malawi.
During the quarter, Kasiya received a special mention by His
Excellency Dr Lazarus McCarthy Chakwera, President of the Republic
of Malawi, during his address at the 77th session of The United
Nations General Assembly in New York endorsing the global
significance of the Project.
KASIYA AIR-CORE DRILLING
A 191-hole AC drilling program at the Kasiya rutile deposit was
completed in two phases from May to August 2022. The program was
divided into an initial 32-hole sighter phase and a second more
expansive 159-hole phase. To date, the results for the first 32
holes and a further 61 holes of the second phased have been
reported.
The drilling was completed on a nominal 200m x 200m grid spacing
targeting upgrading of mineralisation into the Indicated category
which could convert to Probable Reserves as part of the forthcoming
PFS.
A total of 91 drill-holes for 2,112m were reported with results
from the remaining 98 holes for 2,548m pending.
The AC results reported to date confirm that rutile
mineralisation is continuous in many pit areas from surface down to
the top of saprock, normally between 20m and 30m from surface.
Results reveal the potential for mining pits to be extended at
depth to the top of saprock in numerous areas.
The initial sighter phase of the AC drilling program (32 holes)
focused on mineralised corridors where high-grade rutile
mineralisation was hypothesised to persist at depth. These results
showed that the mineralisation is pervasive throughout the
saprolite zones with many holes showing mineralisation with 20-30m
thickness from surface.
Once validated, the Company shifted its focus to a second phase
concentrating on depth extensions to the early-scheduled mining pit
shells. Pit 15 revealed the most pronounced, deep mineralised
corridor, illustrated in the 1.4km long cross-section.
Coarse flake graphite is present in all AC holes in association
with rutile mineralisation. Graphite grades appear to improve with
depth averaging +2% TGC in numerous holes.
PFS ACTIVITIES
All major activities for Kasiya's PFS have commenced under the
guidance of globally recognised consultants. Programs underway
include:
-- Infill drilling to upgrade the entire resource to the
Indicated category - now complete with majority of results
pending
-- Mining trade-off study examining hydro-mining vs dozer mining options
-- Pit optimisation and design
-- Pumping testwork, modelling and design
-- Tailings disposal testwork and design
-- Rehabilitation work programs and modelling
-- Preliminary hydrogeological pilot and test boreholes
-- Continued metallurgical test-work focused on the planned first 10 years of mining
-- Environmental screening assessments
OFFTAKE AND MARKETING ALLIANCE
In July 2022, Sovereign entered into a non-binding MoU with
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 project.
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.
The Company is continuing product marketing with further offtake
MOUs expected to be executed in the near-term.
RELATED PARTY PAYMENTS
During the quarter ended 30 September 2022, the Company made
payments of $287,000 to related parties and their associates. These
payments relate to existing remuneration arrangements (executive
salaries, director fees, superannuation and bonuses of $170,000),
business development services ($30,000) and provision of serviced
office facilities, company secretarial services and administration
services ($87,000).
MINING EXPLORATION EXPITURES
During the quarter, the Company made the following payments in
relation to mining exploration activities:
Activity A$'000
------------------------------------------------------- --------
Drilling (950)
Assaying and Metallurgical Test-work (295)
Studies and Reserve/Resource Estimation (386)
Field Supplies, Equipment, Vehicles (43)
Malawi Operations - Site Office, Personnel and Travel (586)
Total as reported in Appendix 5B (2,260)
------------------------------------------------------- --------
There were no mining or production activities and expenses
incurred during the quarter ended 30 September 2022.
Competent Person Statement
The information in this announcement that relates to the Mineral
Resource Estimate is extracted from the announcement dated 5 April
2022. The 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 announcement; b) all material
assumptions included in the 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 report
have not been materially changed from the announcement.
Table 1: Kasiya Mineral Resource Estimate at 0.7% Rutile Cut-off
Mineral Resource Category Material Tonnes (millions) Rutile Rutile Tonnes (millions) Total Contained Graphite (TGC) TGC Tonnes (millions) RutEq.
Grade*
(%) (%) (%)
Indicated 662 1.05% 6.9 1.43% 9.5 1.76%
============================ ============================ ======== ========================== ================================ ======================= ========
Inferred 1,113 0.99% 11.0 1.26% 14.0 1.61%
============================ ============================ ======== ========================== ================================ ======================= ========
Total 1,775 1.01% 18.0 1.32% 23.4 1.67%
============================ ============================ ======== ========================== ================================ ======================= ========
* RutEq. Formula: Rutile Grade x Recovery (98%) x Rutile Price
(US$1,308/t) + Graphite Grade x Recovery (62%) x Graphite Price
(US$1,085/t) / Rutile Price (US$1,308/t). All assumptions are taken
from this Study ** Any minor summation inconsistencies are due to
rounding
The information in this announcement that relates to Production
Targets, Processing, Infrastructure and Capital and Operating
Costs, is extracted from the announcement dated 16 June 2022
entitled 'Kasiya Expanded Scoping Study Results'. Sovereign
confirms that: a) it is not aware of any new information or data
that materially affects the information included in the
announcement; b) all material assumptions and technical parameters
underpinning the Production Target, and related forecast financial
information derived from the Production Target included in the
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 presentation have not been
materially modified from the Announcement.
The information in this announcement that relates to the
Metallurgy is extracted from the announcement dated 7 December
2021. The 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 announcement; b) all material
assumptions included in the 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 report
have not been materially changed from the announcement.
The information in this announcement that relates to the
Exploration Results is extracted from the announcement dated 8
September 2022 and 26 October 2022. The announcements are 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 announcements; b) all
material assumptions included in the announcements 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 report have not been materially changed from the
announcements.
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.
To view this announcement in full, including all illustrations
and figures, please refer to www.sovereignmetals.com.au
APPIX 1: SUMMARY OF MINING TENEMENTS
As at 30 September 2022, the Company had an interest in the
following tenements:
Licence Holding Entity Interest Type Licence Renewal Expiry Term Licence Area Status
Date Date(1) (km(2) )
EL0609 MML 100% Exploration 25/09/2024 25/09/2028 440.5 Granted
========= ================ ========= ============ ================= ================= ================ ========
EL0582 SSL 100% Exploration 15/09/2023 15/09/2027 285.0 Granted
========= ================ ========= ============ ================= ================= ================ ========
EL0372 SSL 100% Exploration N/A 13/03/2022(2) 729.2 Granted
========= ================ ========= ============ ================= ================= ================ ========
EL0492 SSL 100% Exploration 29/01/2023 29/01/2025 935.4 Granted
========= ================ ========= ============ ================= ================= ================ ========
EL0528 SSL 100% Exploration 27/11/2021(3) 27/11/2025 16.2 Granted
========= ================ ========= ============ ================= ================= ================ ========
EL0545 SSL 100% Exploration 12/05/2022(3) 12/05/2026 53.2 Granted
========= ================ ========= ============ ================= ================= ================ ========
EL0561 SSL 100% Exploration 15/09/2023 15/09/2027 124.0 Granted
========= ================ ========= ============ ================= ================= ================ ========
RL0012 NGX 100% Retention N/A 26/07/2026 6.0 Granted
========= ================ ========= ============ ================= ================= ================ ========
RL0032 SSL 100% Retention N/A 4/10/2027 24.64 Granted
========= ================ ========= ============ ================= ================= ================ ========
Notes:
SSL: Sovereign Services Limited, MML: McCourt Mining Limited
& NGX Exploration Limited
(1) An exploration licence (EL) covering a preliminary period in
accordance with the Malawi Mines and Minerals Act (No 8. Of 2019)
(Mines Act) is granted for a period not exceeding three (3) years.
Thereafter two successive periods of renewal may be granted, but
each must not exceed two (2) years. This means that an EL has a
potential life span of seven (7) years. ELs that have come to the
end of their term can be converted by the EL holder into a
retention licence (RL) for a term of up to 5 years subject to
meeting certain criteria.
(2) Prior to expiry of EL0372, the Company applied for the grant
of a mining licence (ML) and a RL over separate parts of EL0372.
Under the Mines Act, an EL term automatically extends until the ML
application has been processed and/or granted.
(3) EL0528 and EL0545 currently under application for
renewal.
Appendix 5B
Mining exploration entity or oil and gas exploration entity
quarterly cash flow report
Name of entity
-----------------------------------------------------
Sovereign Metals Limited
ABN Quarter ended ("current quarter")
--------------- ----------------------------------
71 120 833 427 30 September 2022
----------------------------------
Consolidated statement of cash Current quarter Year to date
flows (3 months)
$A'000 $A'000
1. Cash flows from operating
activities
1.1 Receipts from customers - -
1.2 Payments for
(a) exploration & evaluation (2,260) (2,260)
(b) development - -
(c) production - -
(d) staff costs (530) (530)
(e) administration and corporate
costs (376) (376)
1.3 Dividends received (see note - -
3)
1.4 Interest received 71 71
1.5 Interest and other costs of - -
finance paid
1.6 Income taxes paid - -
1.7 Government grants and tax - -
incentives
1.8 Other - Business Development (170) (170)
---------------- -------------
Net cash from / (used in)
1.9 operating activities (3,265) (3,265)
----------------- ----------------------------------- ---------------- -------------
2. Cash flows from investing
activities
2.1 Payments to acquire or for:
(a) entities - -
(b) tenements - -
(c) property, plant and equipment - -
(d) exploration & evaluation - -
(e) investments - -
(f) other non-current assets - -
2.2 Proceeds from the disposal
of:
(a) entities - -
(b) tenements - -
(c) property, plant and equipment - -
(d) investments - -
(e) other non-current assets - -
2.3 Cash flows from loans to other - -
entities
2.4 Dividends received (see note - -
3)
2.5 Other (provide details if - -
material)
---------------- -------------
2.6 Net cash from / (used in)
investing activities - -
----------------- ----------------------------------- ---------------- -------------
3. Cash flows from financing
activities
3.1 Proceeds from issues of equity
securities (excluding convertible
debt securities) - -
3.2 Proceeds from issue of convertible - -
debt securities
3.3 Proceeds from exercise of - -
options
Transaction costs related
to issues of equity securities
3.4 or convertible debt securities (34) (34)
3.5 Proceeds from borrowings - -
3.6 Repayment of borrowings - -
3.7 Transaction costs related - -
to loans and borrowings
3.8 Dividends paid - -
3.9 Other (provide details if - -
material)
---------------- -------------
Net cash from / (used in)
3.10 financing activities (34) (34)
----------------- ----------------------------------- ---------------- -------------
4. Net increase / (decrease)
in cash and cash equivalents
for the period
Cash and cash equivalents
4.1 at beginning of period 18,894 18,894
Net cash from / (used in)
operating activities (item
4.2 1.9 above) (3,265) (3,265)
Net cash from / (used in)
investing activities (item
4.3 2.6 above) (34) (34)
4.4 Net cash from / (used in) - -
financing activities (item
3.10 above)
Effect of movement in exchange
4.5 rates on cash held (8) (8)
---------------- -------------
Cash and cash equivalents
4.6 at end of period 15,587 15,587
----------------- ----------------------------------- ---------------- -------------
5. Reconciliation of cash and Current quarter Previous quarter
cash equivalents $A'000 $A'000
at the end of the quarter
(as shown in the consolidated
statement of cash flows) to
the related items in the accounts
5.1 Bank balances 1,062 1,322
5.2 Call deposits 14,525 17,572
5.3 Bank overdrafts - -
5.4 Other (provide details) - -
---------------- -----------------
Cash and cash equivalents
at end of quarter (should
5.5 equal item 4.6 above) 15,587 18,894
----------------- ----------------------------------- ---------------- -----------------
6. Payments to related parties of the entity Current quarter
and their associates $A'000
Aggregate amount of payments to related
parties and their associates included in
6.1 item 1 287
----------------
6.2 Aggregate amount of payments to related -
parties and their associates included in
item 2
----------------
Note: if any amounts are shown in items 6.1 or 6.2, your quarterly
activity report must include a description of, and an explanation
for, such payments.
7. Financing facilities Total facility Amount drawn
Note: the term "facility' amount at quarter at quarter end
includes all forms of financing end $A'000
arrangements available to $A'000
the entity. Add notes as necessary
for an understanding of the
sources of finance available
to the entity.
7.1 Loan facilities - -
------------------- ----------------
7.2 Credit standby arrangements - -
------------------- ----------------
7.3 Other (please specify) - -
------------------- ----------------
7.4 Total financing facilities - -
------------------- ----------------
7.5 Unused financing facilities available at -
quarter end
----------------
7.6 Include in the box below a description of each facility
above, including the lender, interest rate, maturity date
and whether it is secured or unsecured. If any additional
financing facilities have been entered into or are proposed
to be entered into after quarter end, include a note providing
details of those facilities as well.
----------------- ---------------------------------------------------------------------------
-
-----------------
8. Estimated cash available for future operating $A'000
activities
Net cash from / (used in) operating activities
8.1 (item 1.9) (3,265)
8.2 (Payments for exploration & evaluation classified -
as investing activities) (item 2.1(d))
8.3 Total relevant outgoings (item 8.1 + item (3,265)
8.2)
8.4 Cash and cash equivalents at quarter end 15,587
(item 4.6)
8.5 Unused finance facilities available at quarter -
end (item 7.5)
--------
8.6 Total available funding (item 8.4 + item 15,587
8.5)
--------
Estimated quarters of funding available
8.7 (item 8.6 divided by item 8.3) 4.8
--------
Note: if the entity has reported positive relevant outgoings
(ie a net cash inflow) in item 8.3, answer item 8.7 as
"N/A". Otherwise, a figure for the estimated quarters
of funding available must be included in item 8.7.
8.8 If item 8.7 is less than 2 quarters, please provide answers
to the following questions:
8.8.1 Does the entity expect that it will continue to
have the current level of net operating cash flows for
the time being and, if not, why not?
-------------------------------------------------------------------
Answer: Not applicable
-------------------------------------------------------------------
8.8.2 Has the entity taken any steps, or does it propose
to take any steps, to raise further cash to fund its operations
and, if so, what are those steps and how likely does it
believe that they will be successful?
-------------------------------------------------------------------
Answer: Not applicable
-------------------------------------------------------------------
8.8.3 Does the entity expect to be able to continue its
operations and to meet its business objectives and, if
so, on what basis?
-------------------------------------------------------------------
Answer: Not applicable
-------------------------------------------------------------------
Note: where item 8.7 is less than 2 quarters, all of
questions 8.8.1, 8.8.2 and 8.8.3 above must be answered.
----------------- -------------------------------------------------------------------
Compliance statement
1 This statement has been prepared in accordance with accounting
standards and policies which comply with Listing Rule 19.11A.
2 This statement gives a true and fair view of the matters disclosed.
Date: 31 October 2022
Authorised by: Company Secretary
(Name of body or officer authorising release - see note 4)
Notes
1. This quarterly cash flow report and the accompanying activity
report provide a basis for informing the market about the entity's
activities for the past quarter, how they have been financed and
the effect this has had on its cash position. An entity that wishes
to disclose additional information over and above the minimum
required under the Listing Rules is encouraged to do so.
2. If this quarterly cash flow report has been prepared in
accordance with Australian Accounting Standards, the definitions
in, and provisions of, AASB 6: Exploration for and Evaluation of
Mineral Resources and AASB 107: Statement of Cash Flows apply to
this report. If this quarterly cash flow report has been prepared
in accordance with other accounting standards agreed by ASX
pursuant to Listing Rule 19.11A, the corresponding equivalent
standards apply to this report.
3. Dividends received may be classified either as cash flows
from operating activities or cash flows from investing activities,
depending on the accounting policy of the entity.
4. If this report has been authorised for release to the market
by your board of directors, you can insert here: "By the board". If
it has been authorised for release to the market by a committee of
your board of directors, you can insert here: "By the [name of
board committee - eg Audit and Risk Committee]". If it has been
authorised for release to the market by a disclosure committee, you
can insert here: "By the Disclosure Committee".
5. If this report has been authorised for release to the market
by your board of directors and you wish to hold yourself out as
complying with recommendation 4.2 of the ASX Corporate Governance
Council's Corporate Governance Principles and Recommendations, the
board should have received a declaration from its CEO and CFO that,
in their opinion, the financial records of the entity have been
properly maintained, that this report complies with the appropriate
accounting standards and gives a true and fair view of the cash
flows of the entity, and that their opinion has been formed on the
basis of a sound system of risk management and internal control
which is operating effectively.
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