From SP Angel in LondonSovereign Metals* (SVML LN) 45p, Mkt Cap...

From SP Angel in London
Sovereign Metals* (SVML LN) 45p, Mkt Cap £267m – Interim report highlights rapid progress in optimisation and advance towards new JORC resource and DFS(Sovereign currently holds 100% of the Kasiya project. Malawi has 10% free carry right. Rio Tinto holds 19.9% of Sovereign Metals)STRONG BUY
– Valuation 55pOptimised Pre-Feasibility Study completed in January highlights significant value in January vs September 2023 US$: Throughput: 12mtpa for Stage 1 rising to 24mtpa in Stage 2ProductionRutile: 222,000tpa vs 222,000tpa – no change to throughput or productionGraphite: 233,000tpa vs 244,000tpaFinancial metricsCapex (Stage 1): $665m vs $597m eg for years 1 to 4. Shows a relatively minor upliftCapex (LoM): $1,127m vs $1,250m – for life of mine.Sustaining capex: $397m vs $470 – shows a significant reductionOperating costs: $423/t of production vs $404/t FOB port of Nacala. – again a relatively small upliftRevenue $640mpa vs $645mpaRevenue (total LoM): $16,367m vs $16,121mEBITDA: $409m vs $405m – highlights a rise in value of the overall projectNPV@8: $2,322m vs $2,419m pre-taxIRR: 27% vs 32% pre-taxAssumptions: Rutile: US$1,490/t (Iluka report rutile at $1,662/t today for Q4 for 95% grade rutile)Graphite: US$1,290/tRehabilitation studies show positive results with local farmers able to farm land in the first subsequent growing season after mining and rehabilitation.Rio Tinto also invested a further A$18.5m in Sovereign Metals to raise their shareholding to 19.9% in July 2024.Graphite: quality testing shows “Kasiya graphite concentrate with performance characteristics comparable to highest quality natural graphite battery material produced by dominant Chinese anode manufacturers”“graphite concentrate produced from Kasiya exhibits prerequisite characteristics for selling graphite to the refractory materials sector”“Kasiya's graphite also has the key characteristics required for use in expandable (fire retardant) and expanded (gaskets, seals, and brake lining) applications”Infill Drillingrilling completed for upgrade the Mineral resource estimate with a new JORC resource due in the coming monthsTailings:Tailings are to be replaced into the ground with separate sand and fines streams being pumped to a conventional tailings storage facility ready for backfilling in the rehabilitation.Mud farming, as used by Rio Tinto at Weipa in Queensland, of the on the tailings storage accelerates dewatering reducing tailings volumes by 44%.Waterry mining and mud farming cuts the scale of the water storage dam with water collected from the greater catchment area.Power:Hybrid hydro-generated grid power plus solar power system solution.Sovereign notes: “Malawi grid reliability has improved since completion of the PFS and is expected to further improve considerably with the commissioning of the country's first HV transmission interconnector to Mozambique in Q2 2025.”Interim financials (A$) to end December:Interest income $1m vs $1m yoyExploration cost $16.4 vs $5.0m yoyCorporate & admin $0.8 vs 0.6m yoyBusiness development $1m vs $1m yoyShare based payment expenses $1.9m vs $1.1mPre-tax loss of $19.5 vs $7m yoy

Conclusion: Management are making rapid progress towards publication of the DFS and the full financing of the Kasiya mine. We are not aware of any other similar rutile projects in the world and would be surprised if Rio Tinto did not move to take control over the mining and finance of the Kasiya mine.*SP Angel act as Nomad and broker to Sovereign Metals. The analyst has visited the Kasiya mine site. Compare your pathetic information Ray 223 with a real professional. Going forward I really wouldn't waste peoples time with that sort of blah.