Ticker: SVM AU Net cash: A$2m Project: Kasiva, Malingunde
§ Market cap: AS142m Price: ASO. 36/sh Country: Malawi
J*ECOMMEND. (uno:euy RAnNG: *CULATJVE
We think Kasiya is a truty world class asset from size, grade, logistics and metallurgical perspectives, all the more attractive given most market participants haven't heard Of it, something we expect to reverse with the maiden MRE in IH21. Today's 'reminder' of the graphite potential 'in for free' is cream on the cake in our view, not the least given a IOMtpa rutile ROM could generate >40kt pa graphite as a byproduct. We do like Malingunde rather than peers who are reliant on forward integration to achieve prices at multiples of spot. A simple scrubbing of Sovereign's saprolite ore allows margin growth by lowering opex and selling at 'real' prices. However, the Kasiya rutile project is the crown jewel — although quiet over Christmas we expect i) drilling from high-grade core in coming weeks, followed by ii) high-grade extension drilling on the recently tripled footprint, then iii) regional drilling on new targets. However, we see iv) a maiden MRE in IH21 as most important. We would expect a PEA in 2H21, but all targets drilled sofar have found higher grades than the last. If repeated with this round of regional drilling that could drive a new initial-area for mining, a Hollywood problem. We maå'tain our BUY rating and A$O.56/sh PT based on just 5% in-situ valuation lie IJSS60/t rutile vs. spot) over our drilled 275Mt estimate. We expect a high-grade core of 20-40B4t at over 1% rutile to drive the NPV and 'payback the plant' in short order, as a subset of a much larger lower-grade resource (we previously saw up to 1Bt in undrilled areas), with perhaps a core —200Mt driving the mine plan in an optimised PEA
Highlights graphite project and rutile vs. ilmenite green
credentials;
IH21 maiden rutile MRE
Sovereign has announced it will progress its Malingunde graphite project in parallel with its world-class rutile asset, noting recent improvements in the graphite market. That project has a 2018 PFS, with an ESIA now nearing completion. The soft fre-dig saprolite host rock drives a lower carbon footprint, and ultimately lower costs than hard-rock mines. The company similarly notes that compared to ilmenite, rutile has a similarly lower carbon footprint than higher-energy •upgraded' feedstocks such as synthetic rutile (from ilmenite) or titanium slag.
Why we like Sovereign Metals
I. Pure rutile deposit increases margin. addresses downstream ESG requirements
2.§Unique metallogenesis drives large grain size and premium low-deleterious product
3.§On hydro power, hydro mineable, on modern rail to deep-water port with allocation
4.§PFS-level Malingunde graphite project adds diversification and second pillar to value
5.§Potential 'province scale' discovery with 8,000krn2 of unique geology largely undrilled
Catalysts
1.§IQ2i: High-grade core, high-grade extension, and regional greenfield drill results
2.§IH21: Maiden JORC compliant resource estimate for Kasiya
3.§2H21: scpe PEA
Sehr sehr positiv für eine Analyse! |
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