Mineral sands explorer Sovereign Metals (ASX: SVM) is aiming to become a new force in rutile, eager for its potentially large-scale African project to gain from growing market demand and supply scarcity.
The company’s primary strategy is to develop the large and high-grade Kasiya rutile deposit in Malawi, which it believes could potentially supply a significant portion of the supply deficit in the global rutile market.
Speaking with Small Caps, Sovereign managing director Dr Julian Stephens said the focus this quarter is on defining a maiden rutile resource estimate at Kasiya, which is expected to be released in the June period.
“Kasiya is shaping up to be a very large, high-grade rutile deposit that may well become one of the largest primary rutile deposits in the world,” he said.
Meanwhile, renewed interest from the lithium-ion battery sector has moved the company to re-examine its Malawian graphite assets as well – particularly its prefeasibility-level Malingunde project.
Sovereign noted this was a due to “recent improvements in the graphite market and an increasing level of enquiries from investors and other market participants”.
“Spherical graphite with suitable benchmark specifications for lithium-ion battery anodes can be produced from Malingunde concentrates, providing the potential to sell into the rapidly growing lithium-ion battery markets,” Dr Stephens explained.
Flagship rutile project
Sovereign’s flagship project is the large, high-grade and at-surface Kasiya rutile deposit in central Malawi, in an area which the company believes has the potential to be a “globally significant” rutile province.
Earlier this month, the company announced results from a phase eight 70-hole drilling program, which further extended and defined the mineralised footprint.
“This drilling has served to increase and further define the very high-grade, near-surface rutile zones occurring within a central core area where drilling is at 400m by 400m spacing or closer,” Dr Stephens said.
“These areas will be targeted for further, near-future infill drilling and metallurgical variability test-work in order to support our maiden mineral resource estimate and scoping study,” he added.
As mentioned above, Sovereign anticipates delivering the maiden mineral resource estimate in the second quarter of 2021. It is expected to cover about half of the extensive 66sq km mineralised footprint.
The company’s other ongoing work in 2021 includes the continuation of mining and tailings studies, which will feed into the future scoping study.
Sovereign has also mentioned it would investigate and test for a potential coarse-flake graphite by-product from Kasiya in light of renewed market interest.
A scarce commodity
Rutile is the purest, highest-grade and rarest naturally-occurring form of titanium dioxide.
It is the preferred feedstock in manufacturing titanium pigment (used in paints, coatings and plastics) and producing titanium metal. Titanium also has specialty uses including welding electrodes, commercial aerospace and military applications.
“Rutile is normally produced as a co-product from mineral sands mines that may be dominated by ilmenite and zircon. Pure rutile deposits are really scarce and there has been no new discoveries in the last couple of decades, hence the importance of the Kasiya discovery for the global rutile and the overall titanium dioxide market,” Dr Stephens said.
Two comparable projects to Kasiya make up almost a third of global rutile production: Iluka Resources’ (ASX: ILU) Sierra Rutile mine in Sierra Leone, which hosts a current reserve of 272 million tonnes at 1.1% rutile; and Base Resources’ (ASX: BSE) Kwale mineral sands project in Kenya, which hosts a 40Mt reserve at 0.44% rutile but also produces ilmenite and zircon.
A major advantage of rutile is it has a much lower carbon footprint compared to ilmenite in the pigment process.
“You don’t have to upgrade natural rutile in any way for it to be fed straight into the pigment-making process. Hence, much less power is used and much less waste is produced, as well as far fewer carbon units per tonne of titanium dioxide pigment is produced [compared to ilmenite],” Dr Stephens said.
“We believe the Kasiya project could create a structural change in the market, whereby more rutile availability would start to displace ilmenite,” he added.
The rutile market
Rutile prices are currently around US$1,200 per tonne (A$1,550/t) and Sovereign pointed out that forecast medium and long-term pricing should remain “very strong”, citing “robust” market fundamentals.
“Global supplies of natural rutile are in structural deficit, with limited new deposits forecast to come online in the short to medium term. Global supply is continuing to decline, as a number of current operations deplete reserves and mine declining ore grades,” the company noted.
According to Dr Stephens, there is currently in the order of a 150,000t supply shortage in the global rutile market.
“If you had a good deposit, you’d be producing because the market will take all of it.”
He said an increased focus by governments and businesses on environmental, social and corporate governance (ESG) and the reduction of carbon emissions is expected to drive “significant growth” in the rutile market.
“We see ourselves as potentially one of the major future suppliers of the global rutile market.”
Attraction to Malawi
Sovereign’s portfolio covers about 3,500sq km of ground in central Malawi, described by the company as a “stable, transparent jurisdiction” with “exceptional” existing infrastructure including grid power, paved roads, an established labour pool and “plentiful” fresh water sources.
“Malawi is an ex-British colony with English as the official language and a really friendly government and people. Although it’s a small country and landlocked, we have an operating rail line within 10km of the deposit and grid power nearby as well,” Dr Stephens said.
This rail line is the recently refurbished 912km Nacala Logistics Corridor network, which passes through Malawi from western Mozambique to the port of Nacala on Mozambique’s north coast.
While built for the main purpose of transporting coal from Mozambique mines to the port, the line also provides a low-cost logistics solution to connect Sovereign’s Kasiya project to global rutile markets, with Sovereign having an MOU already in place with the rail concessionaire
Renewed interest in graphite
At the start of February, Sovereign announced it will be advancing its Malawi graphite assets in parallel with rutile following growing market interest. However, Dr Stephens made it clear to Small Caps that rutile remains the company’s focus.
“We’re trying to work out the best way to create value for shareholders with our graphite projects at the moment,” he said.
The company owns 100% of a portfolio of graphite deposits including the Malingunde saprolite-hosted graphite project, for which a pre-feasibility study was published in 2018. The study demonstrated strong economics for flake graphite production and showed the project sits at “the very bottom of the global graphite cost curve”.
In addition, downstream application test work produced ultra-high purity 99.9995% graphite compared to the current standard lithium-ion battery anodes of 99.5% graphite. Sovereign said its higher purity material could lead to superior electrochemical performance.
“With electric vehicle demand booming globally, the company is considering strategic options relating to vertical integration into lithium-ion battery anode production to capture the anode value chain,” Sovereign said.
According to the company, demand for lithium-ion batteries is being driven by sustainability targets and legislation, consumer needs, and more affordable electric vehicles.
The United Kingdom has legislated that petrol and diesel cars will not be sold after 2030 and according to Bloomberg estimates, electric vehicles will make up 10% of global passenger vehicle sales by 2025 and increase up to 58% in 2040.
“Greater capacity batteries, such as those required for these electric vehicles, are expected to drive significant and growing demand for natural flake graphite over the coming years,” Sovereign forecast.
Meanwhile, graphite demand is predicted to exceed global supply by 400,000t as early as 2026.
“New production is needed to come online to meet the strong growth market,” Sovereign stated.
The company said it is nearing submission of its mining licence application for Malingunde and the environmental and social impact assessment is also nearing completion.