ASX- and Aim-listed Sovereign Metals has stated a modest 9% increase in the capital expenditure required for Stage 1 development of the Kasiya rutile project, in Malawi, combined with a 6% increase in operating costs despite recent inflation rises across the mining industry globally.

The company reports in a definitive feasibility study (DFS) released on April 16 that the project can viably produce 12-million tonnes a year in Stage 1 of its development for a capital cost of $727-million, before doubling to 24-million tonnes a year in Stage 2.

Kasiya is poised to produce 222 000 t/y of rutile and 275 000 t/y of graphite for sustaining capital expenditure of $431-million and operating costs of $450/t over its 25-year lifetime.

This would make the company the world’s largest producer of natural rutile and natural flake graphite, as well as the lowest cost graphite producer globally.

Earnings are estimated to be $476-million a year, while the project could generate revenue of $16-billion over its lifetime – which does not include potential mine life extensions.  

The project has a net present value (NPV) before tax of $2.2-billion and an internal rate of return (IRR) of 23%.

This is assuming rutile prices of $1 670/t and graphite prices of $1 288/t.

The optimised prefeasibility study on the project outlined an NPV of $2.3-billion and IRR of 27%, which has decreased in the DFS, understandably, owing to the rise in costs.

The DFS announcement has triggered Sovereign Metals’ 18.5% shareholder Rio Tinto’s option to become the operator of Kasiya, with Rio holding up to 180 days to exercise the option.

The delivery of the DFS marks a major derisking event for Sovereign Metals and underscores its position as a long-life asset of strategic global importance, says broker SP Angel.

Natural rutile is the purest and highest-grade form of naturally occurring titanium feedstock. According to the US Geological Survey, the country does not currently produce titanium sponge locally and is 100% reliant on imports. Japan supplies about 70% of the US’s titanium sponge imports and Japanese producers themselves depend on securing reliable natural rutile feedstock.

Kasiya's planned 222 000 t/y of natural rutile would represent a significant addition to Western-accessible non-pigment rutile supply, directly addressing the structural feedstock deficit facing the US, Japanese and European titanium industries.

In turn, graphite is essential to lithium-ion battery anodes, refractories and a range of advanced industrial applications. China currently accounts for 77% of the world’s natural graphite production.

Following input from world-class consultancies, Sovereign's highly experienced owners' team, and subject matter experts from Rio Tinto, the DFS has reconfirmed that Kasiya will be a leading future supplier to two distinct strategic critical minerals supply chains and outside of Chinese control.

Notably, the DFS does not include estimates for heavy rare earth production. The Kasiya operation will have scope to produce monazite concentrate recovered from rutile processing – which can include dysprosium, terbium and yttrium.

Sovereign has started a dedicated monazite evaluation programme to assess scale, recovery and economic potential of this revenue stream.