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MALINGUNDE SCOPING STUDY DELIVERS RARE COMBINATION OF EXCEPTIONALLY LOW CAPEX & OPEX

Sovereign Metals Limited (“the Company” or “Sovereign”) is pleased to announce the results of the Scoping Study for the Company’s Malingunde Saprolite-Hosted Graphite Project (“Malingunde Project” or “the Project”) in Malawi. Preliminary economics show the Project has capital and operating costs per unit at the very bottom of the graphite supply cost-curve, at production rates supported by existing market fundamentals.

Scoping Study Parameters - Cautionary Statements

The Scoping Study referred to in this announcement has been undertaken to determine the potential viability of an open pit mine and graphite processing plant constructed onsite at the Malingunde Project and to reach a decision to proceed with more definitive studies. The Scoping Study has been prepared to an accuracy level of ±35%. The results should not be considered a profit forecast or production forecast.

The Scoping Study is a preliminary technical and economic study of the potential viability of the Malingunde Project. In accordance with the ASX Listing Rules, the Company advises it is based on low-level technical and economic assessments that are not sufficient to support the estimation of ore reserves. Further evaluation work including infill drilling and appropriate studies are required before Sovereign will be able to estimate any ore reserves or to provide any assurance of an economic development case.

Approximately 83% of the total production target is in the Indicated resource category with 17% in the Inferred resource category. Approximately 96% of the scheduled throughput over the first four years (the estimated maximum payback period based on downside pricing) of production is in the Indicated category, with 4% in the Inferred category. The Company has concluded that it has reasonable grounds for disclosing a production target which includes a modest amount of Inferred material. However, there is a low level of geological confidence associated with Inferred mineral resources and there is no certainty that further exploration work (including infill drilling) on the Malingunde deposit will result in the determination of additional Indicated mineral resources or that the production target itself will be realised.

The Scoping Study is based on the material assumptions outlined elsewhere in this announcement. These include assumptions about the availability of funding. While Sovereign considers all the material assumptions to be based on reasonable grounds, there is no certainty that they will prove to be correct or that the range of outcomes indicated by the Scoping Study will be achieved.

To achieve the range outcomes indicated in the Scoping Study, additional funding will likely be required. Investors should note that there is no certainty that Sovereign will be able to raise funding when needed. It is also possible that such funding may only be available on terms that dilute or otherwise affect the value of the Sovereign’s existing shares. It is also possible that Sovereign could pursue other ‘value realisation’ strategies such as sale, partial sale, or joint venture of the Project. If it does, this could materially reduce Sovereign’s proportionate ownership of the Project.

The Company has concluded it has a reasonable basis for providing the forward looking statements included in this announcement and believes that it has a reasonable basis to expect it will be able to fund the development of the Project. Given the uncertainties involved, investors should not make any investment decisions based solely on the results of the Scoping Study.

SCOPING STUDY OUTCOMES

The results of the Scoping Study demonstrate the potential for the Malingunde Project to support a very low capital and operating cost operation with annual graphite concentrate production of approximately 44,000 tonnes over an initial mine life of 17 years:

• Total operating costs of approximately US$301 per tonne concentrate (FOB Nacala Port) – at the very bottom of the graphite supply cost curve and the lowest of any reported ASX-listed peer company of scale <300ktpa.
• Total capital cost of US$29 million, (includes 35% contingency) for production of ~44,000 tonnes of concentrate per annum – lowest capital intensity of all peers.
• Very rare combination of low capital and operating costs at a realistic scale of production.
• Payback of under 2 years using conservative graphite pricing assumptions.
• Very low mining costs with the soft saprolite being free-dig with a low strip ratio of 0.5:1.
• Simple process flow sheet with no primary crush or grind, leading to low processing costs and lower capital requirements.
• Simple plant design uses “off the shelf equipment” allowing rapid and cost effective initial construction whilst allowing for future expansion options.
• High quality product with excellent concentrate grades and a very large proportion in the Super-Jumbo and Jumbo categories.
• Project generates significant cash margins even in severe downside global graphite price scenarios:

Sovereign’s Managing Director, Dr Julian Stephens, said “The Scoping Study clearly demonstrates the Project’s very strong commercial potential which is centred on very low operating and capital costs, and revenues derived from a premium product. Importantly, the Project is not reliant on an unrealistically large scale to reduce operating costs and/or overly optimistic graphite pricing forecasts. The very low operating cost nature of the Project provides protection even against extreme downside pricing scenarios.”

ENQUIRIES     Dr Julian Stephens – Managing Director

+618 9322 6322  Dominic Allen – Business Development Manager

LOWEST KNOWN CAPITAL PROFILE OF FUTURE GRAPHITE SUPPLY

The results of the study demonstrate the potential for extremely low capital costs and capital intensity. The low capital costs enable extremely fast payback of development capital, even in extreme downside pricing scenarios. This is a significant advantage when seeking potential offtake partners and financing for development.

Figures 1 (a) and (b): Capital cost and capital intensity – project profile1

EXTREMELY LOW, FIRST QUARTILE CASH OPERATING COSTS

The Malingunde Project is projected to have an average life of mine unit operating cost of approximately US$301 per tonne concentrate Free On Board (“FOB”) for its high quality graphite concentrates, producing an average of 44 ktpa.

Production from Malingunde is anticipated to have amongst the very lowest unit operating cost of the future graphite development pipeline, at a scale that can easily be placed into existing traditional markets, primarily in China.

Figure 2: Unit operating cost – project profile1

POTENTIAL FOR LOW COST, HIGH MARGIN OPERATION OF MARKETABLE SCALE

Sovereign is in a unique position of targeting the economic production of graphite without relying on extreme size to achieve economies of scale, or assuming very optimistic product pricing assumptions.

The Company takes a very conservative view on future graphite pricing. The results of the study demonstrate the potential for exceptionally high operating margins and cash flow generation given the low operating costs of the Malingunde Project, in both upside and downside pricing scenarios.

The combination of low opex, low capex and high-quality concentrates enables Sovereign to focus upon initial entry into existing primary end-markets, including refractories and foundries, allowing the product to compete on price point with China; the world’s largest supplier and consumer of natural flake graphite.

The potential for entry into developing markets such as the Lithium-ion battery supply chain are retained as future upside.

Figure 3: Chart of production scale v. opex v. capital intensity of selection of key undeveloped graphite projects1

Figures 4 (a) and (b): Malingunde unit operating cost breakdown; project margin & payback sensitivities at a conservative basket pricing range

1. Source: Company reports. SYR (150Kt) based on years 0-2, SYR (300+) based on year 2+ per Syrah Resources March Quarterly report, 28 April 2017

SCOPING STUDY RESULTS

Sovereign is pleased to report the results of the Scoping Study (“Study”) for the Malingunde Project located in Malawi, near the capital city of Lilongwe. The Scoping Study was managed by Amec Foster Wheeler, a global expert in mining and minerals processing, with input from other specialist consultants and local experts.

The Study is based on the maiden Mineral Resource Estimate (“MRE”) for the Malingunde deposit reported in April 2017, which comprises 65.1Mt @ 7.1% TGC (saprolite, saprock & fresh rock). The MRE includes a high-grade saprolite component of 8.9Mt @ 9.9% (7.5% TGC cut-off) which is the focus of the Study.

The production target generated by the Study is approximately 8.0Mt @ 10.0% TGC over a ~17 year mine life.

Table 1: Key physical and economic results of the Malingunde Scoping Study

Background

In 2015, Sovereign’s in-country geological team made a new and significant graphite discovery at Malingunde using hand auger drilling techniques in an area of no outcrop.

The deposit is located at Malingunde, just 15km south-west of Lilongwe, Malawi’s capital city, with access to enviable infrastructure. It is 25km from operating rail, 20km from a major power sub-station and has plentiful fresh water sources nearby.

Figures 5(a) & (b): Maps showing location of the Malingunde Project

In April 2017, Sovereign reported a maiden Mineral Resource Estimate for the Malingunde saprolite-hosted graphite deposit. Saprolite being the very soft, graphite-bearing, clay-rich oxide material that is formed from intense weathering of the original underlying bedrock.

The soft, near surface, coarse flake and high-grade nature of the resource presents the opportunity for low operating and capital costs, whilst producing a premium quality graphite concentrate. The low cost-base will allow Sovereign to target existing traditional industrial markets (refractory, foundry, expandable etc.) whilst retaining potential future upside in demand driven by the emerging lithium ion battery sector.

Scoping Study Consultants

The Study uses information and assumptions provided by a range of independent specialist consultants, including the following who have contributed to the key components of the Scoping Study:

Table 2: Key study consultants

Geology and Mineral Resource Estimate

The Malingunde saprolite-hosted graphite deposit is the result of millions of years of tropical weathering of primary graphitic gneisses. Most of the silicate minerals other than quartz have been altered to clay, resulting in a soft, friable saprolite horizon averaging about 25m vertical thickness from surface. Graphite is also unreactive in this weathering environment, with the large graphite flakes preserved in the clay dominant matrix.

The maiden Mineral Resource Estimate for the Malingunde deposit was undertaken by CSA Global and confirmed it as world’s largest reported soft saprolite-hosted graphite resource. The MRE underpinning the production target, classified as Indicated and Inferred, was prepared by a competent person and was reported in accordance with the JORC Code (2012 Edition) on 18th April 2017.

The total MRE is 65.1Mt @ 7.1% TGC at a 4% TGC lower cut-off grade and comprises:

• 28.8Mt of saprolite @ 7.1% TGC;
• 17.0Mt of saprock @ 7.0% TGC;
• 19.3Mt of fresh rock @ 7.0% TGC.

At an increased 7.5% TGC lower cut-off grade, the saprolite-only resource is 8.9Mt @ 9.9% TGC

Additional and substantial exploration potential also exists within the a very large 3,788km2 ground package, containing numerous other saprolite prospects discovered but not yet drilled out.

Table 3: Malingunde maiden JORC Mineral Resource Estimate at 4.0% cut-off grade

Table 4: Malingunde maiden JORC Mineral Resource Estimate at 7.5% TGC cut-off grade

Mining & Production Target

The geometry of the Malingunde deposit is one of several high-grade, shallow to moderate north-east dipping mineralised zones. Sovereign is targeting the near surface, soft saprolite portion of the resource to a maximum of approximately 25m vertical depth. This results in a number of long, shallow open pits in the mining plan (Figure 6).

Pit optimisations were completed by Amec Foster Wheeler based on maximum production of 45,000 tonnes of concentrate per annum rather than on an optimised throughput analysis. A cut-off grade of 7% TGC was selected which results in production target of approximately 44,000 tonnes of graphite concentrate per annum over 17 years life-of-mine. This equates to an average of approximately 475,000 tonnes of ore processed per year, totalling circa 8.0mt @ 10.0% TGC over the life of mine.

A schedule was developed that progressively mines material from north-west to south-east. Importantly, over the initial four years of production, the 96% of material processed is in the Indicated category. Over the life of mine, 83% of material processed is in the Indicated category. A further breakdown of resource categories processed over the life of mine is shown below:

• Years  1 – 4  ~96% Indicated, ~4% Inferred
• Years  5 – 8  ~97% Indicated, ~3% Inferred
• Years  9 – 12  ~93% Indicated, ~7% Inferred
• Years  13 – 17 ~46% Indicated, ~54% Inferred

There is significant opportunity to increase the mine life beyond 17 years by processing lower grade material or by discovering additional high-grade resources within reasonable trucking distance to the proposed processing plant.

A contract mining strategy was selected to mitigate project risk, although operational management will be retained by Sovereign personnel.

Figure 6: Oblique view looking down and to the west of optimized pit shells containing the production target material (red), and showing the additional resource (blue) that does not fall within the pit shells

Tailings Management

The Tailings Management Facility (TMF) for the Project was designed to safely contain the life of mine estimated tailings of 7.3 Mt.  The characteristics of the tailings produced have not yet been confirmed and therefore a conservative approach to the deposited density has been adopted assuming a final settled density of 1.15 t/m3.

For the Scoping Study it was decided to adopt a conservative strategy that includes a fully HDPE lined facility leaving the option for a non-HDPE lined facility or in pit deposition as opportunities that could be adopted should future testing of the materials prove that contamination is not an issue.

Metallurgy

Sovereign engaged SGS Canada to conduct an initial bench scale laboratory flotation test-work program on samples obtained from the Malingunde deposit. The primary objective of the program was to investigate the metallurgical response of the shallow saprolite-hosted mineralisation as part of the early stage project evaluation.

Overall, a simple process flowsheet with no primary crush or grind was shown to produce both excellent concentrate purity and outstanding flake distribution from the soft, saprolite-hosted graphite mineralisation.

Once the flowsheet was optimised, numerous variability tests were carried out on samples from varied lateral and vertical locations within the deposit. Overall, the variability testwork shows relatively consistent results across the deposit with 48%-78% of the concentrate in the super jumbo, jumbo and large size fractions (i.e. +149µm). Concentrate grades consistently range between 96% and 99% C(t), with the latest tests showing results in the higher part of that range i.e. +98% C(t) with numerous fractions reaching +99% C(t).

For the purposes of the Scoping Study, conservative assumptions of average 97% C(t) and recovery of 90% for concentrates produced over the life of mine have been used (Table 5).

Table 5: Malingunde flotation test results – Scoping Study inputs

Process Design

The design of the processing plant is based on the SGS test-work and best practise in similar operations. Importantly, the process requires no upfront crushing or grinding of the ore, a material advantage over hard-rock graphite deposits.

The basic flowsheet is summarised below and also shown in Figure 7:

• The plant feed will be delivered by front-end-loader (FEL) to the feed bin and a via transfer conveyor to the rotary scrubber.
• Plant feed is processed through the scrubber fitted with a 3mm aperture trommel screen and oversize material is conveyed to a dump.
• Scrubber undersize is pumped to the rougher flotation section for processing. Rougher tailings will be pumped to the tailings thickener.
• Rougher concentrate will be scrubbed in a stirred-media mill.
• The concentrate undergoes cleaner flotation stages. Cleaner tailings will be pumped to the tailings thickener.
• Cleaner concentrate will be briefly attritioned before screening to break the froth. Each of the streams, +100 mesh and -100 mesh, will be treated individually in similar attritioning and flotation sections. Tailings will be pumped to the tailings thickener.
• The final concentrate from the +100 mesh and -100 mesh streams will be combined, thickened, and filtered in a filter press.
• The filtered concentrate will be dried using a diesel-fired, rotary dryer.
• Dried product will be screened and bagged for despatch and sale.
• Water from the tailings thickener will be recycled. Thickener underflow will be pumped to a tailings storage facility.

Figure 7: Basic process flowsheet for Malingunde

Infrastructure

Malingunde is located approximately 20km south west of Lilongwe, Malawi’s capital, and boasts excellent access to services and infrastructure. The site will be serviced by an unsealed road, which will access the main Malawian M1 highway at Lilongwe.

The proximity to Lilongwe gives the project a number of benefits, including access to a large pool of professionals and skilled tradespeople located just 20km away in Lilongwe. This removes the requirement for site accommodation and construction camps. Additionally, product is only required to be hauled a short distance by road to the existing and underutilised operational intermodal rail siding at Kanengo.

In addition, the Malawi transmission authority ESCOM maintains a major electricity sub-station 21 km to the north-east of Malingunde. Whilst on site power generation has been assumed as the base case in the Scoping Study, investigations into access to grid power will be undertaken in future phases of study, providing the opportunity to further reduce operating costs.

Water is relatively plentiful in the immediate area and, subject to hydrogeological and hydrology investigation, the site is likely to be able to source sufficient water within the project area.

Figure 8: Map of regional infrastructure in proximity to Malingunde

Logistics

The basis and cost build-up for product export logistics comprises the following:

• Road transport of bagged product from the mine site to the Kanengo rail head in Lilongwe
• Packing bags into shipping containers at Kanengo and periodic loading onto lightweight rail wagons
• Rail transport to Nacala port
• Storage and loading onto seaborne container carriers

Rail freight cost estimates were provided by Central East African Railways (“CEAR”), the existing rail concessionaire and rail operator. The rail concession is operated as a joint venture between Mitsui & Co., Ltd, Vale SA and the Malawi and Mozambique Governments. CEAR have advised that there is available capacity to accommodate Malingunde concentrates.

Other transport cost estimates were provided by Grindrod Rail Consultancy Services (Pty) Ltd (“Grindrod”) based on market data, industry databases, industry contacts and Grindrod’s existing knowledge of the southern African infrastructure market.

Figure 9: Map highlighting the Nacala rail corridor from Lilongwe to Nacala port

Environmental & Social Impact Assessment

Environmental and social scoping level studies and an opportunities and constraints assessment were completed by Amec Foster Wheeler. These studies also included identifying any additional activities required to comply with the Equator Principles and the IFC Performance Standards.

The Project location in relation to the environmental and social setting is important and will inform project alternatives, assist in evaluating project trade-offs, in the developing management and mitigating measures to be implemented and inform the feasibility of the Project in terms of cost related to environmental and social drivers.

A detailed hydrological and a hydrogeological investigation has now commenced. This will include a hydro-census to determine the sources of drinking water used by communities. Hydrogeological investigation will assist in determining potential impacts of the mining activity and tailings disposal.

The loss of the soil resource for agriculture could be significant for the community in the area. An agricultural capability assessment will be carried out upfront as the outcome of this will furthermore inform the resettlement study and requirements.

The natural environment in the area of influence has been extensively transformed by agricultural activities and settlements. A two-season baseline fauna and flora study has commenced and will also examine wetlands and the status of riparian vegetation. For the purpose of aquatic biodiversity, a two-season specialist investigation has commenced as part of the ESIA process.

A small village is located over the south-eastern end of the project area. The impacts on these inhabitants will be assessed as part of the overall ESIA for the Project, whilst negotiations on relocation will be conducted through consultation with the communities as part of any future resettlement process.  The current mine plan begins in the north, and hence mining is not expected to affect the village in the south-east until year 11 in the mining schedule.

A baseline noise and air quality monitoring programme will be commenced shortly as part of the ESIA process.  The findings of these studies will guide the requirements for noise abatement and dust control requirements.

Marketing

Global Graphite Demand

Flake (or crystalline) graphite is the term for a form of natural carbon with a layered structure of particles which have a flat and thin morphology and graphitisation of between 95-100%.

The primary end-market for flake graphite is the refractory, foundries and crucible sector which consumed approximately 70% (620,000 tonnes) of flake graphite production in 2016. The refractory industry is the volume driver for flake graphite, with foundries and crucibles offering smaller markets for higher purity graphite products. The major product flake graphite is consumed in is magnesia-carbon bricks, a mainstream, global refractory brick which is used in the steel industry.

The battery sector is the main emerging market for flake graphite. Greater capacity batteries, such as those required for electric vehicles, are expected to drive significant demand for graphite over the coming years.

Global Graphite Supply

China is the world’s leading producer of natural flake graphite, supplying approximately 75% of the market in 2016. Brazil, India, Canada and North Korea were estimated to have collectively contributed an additional 25% of global production.

For the past two years, flake graphite supply has outstripped market demand. The anticipated emergence of major new-end-markets has failed to deliver the volume of sales which many in the industry had anticipated. This has been matched by weak demand from traditional industrial markets which have suffered as a result of the ongoing global economic downturn.

With a number of junior projects looking to come online over the next two years, greater demand will be required from both traditional and emerging end-markets in order to prevent greater supply congestion and further downward price pressures.

Marketing Strategy

Sovereign is targeting a very simple mining and processing operation, selling reasonable volumes of very high-quality graphite concentrates into existing markets. Sovereign is not actively considering the construction and operation of highly technically challenging and expensive downstream processing operations, such as a spherical graphite plant.

Sovereign is focusing upon initial entry into existing primary end-markets, including refractories and foundries. This will be enabled through very low-cost production, allowing Malingunde concentrates to compete on price point with China, the world’s largest supplier of natural flake graphite.

It is noted that test work of Malingunde concentrates and market assessments are being conducted in parallel to enable Sovereign to capitalise on future growth in demand in lithium-ion battery demand.

Marketability of Malingunde Product

Sovereign engaged Metal Bulletin Research (“Metal Bulletin”), a specialist international publisher and information provider for the global steel, non-ferrous and industrial minerals markets, to assess the marketability of Malingunde graphite product.

Metal Bulletin’s scoping level assessment has confirmed that based upon their high level view on global demand and supply forecasts for natural flake graphite, and with reference to the specific attributes of the Malingunde Project, there is a reasonable expectation that the product will be able to be sold into existing and future graphite markets. Given the extremely low cost profile and high quality product, it is expected that output from Malingunde will be able to fill new demand or substitute existing lower quality / higher cost supply. This will be confirmed through more detailed examination in the next phase of study.

Project considerations taken into account by Metal Bulletin in forming an opinion about the marketability of Malingunde flake graphite include:

• Modest production target.
• Low capital costs.
• Low operating costs.
• High quality concentrate specifications.

Economics

Operating Costs

Graphite operations processing saprolite-hosted material have historically been the world’s lowest cost producers of natural flake graphite concentrates. Sovereign’s forecast mine gate cost of $236/t and FOB cost of $301/t would place it at the very lowest end of the global cost curve.

The Project operating costs are summarised in Table 6.

Table 6: Study operating cost summary

Capital Costs

The initial capital cost to develop and commence production at Malingunde has been estimated at US$29m (which includes a 35% contingency allowance applied to most items), equating to a capital intensity of approximately US$660 per tonne of annual plant output capacity.

This places Malingunde at the very lowest end of the future supply pipeline in terms of both absolute capital and capital intensity, with a much smaller funding requirement when compared to global peers.

The Project capital costs are summarised in Table 7.

Table 7: Study capital cost summary

Financial Modelling

Whilst a net present value has not been released as part of the Scoping Study, a comprehensive financial model underpins many metrics, including the capital payback sensitivity. Key parameters include:

• Life of Mine: 17 years
• Discount rate: 10%
• Tax rate: 30%
• Royalty rate: 5%
• Pricing: Various sensitivities per Tables 10 – 12

Sensitivity Analysis

The Study was prepared at a ±35% level of accuracy to investigate the technical and economic parameters of a natural flake graphite operation at Malingunde.

Key inputs into the economic assessment of the Project have been tested by the sensitivities summarised in tables 8 to 12:

Table 8: Operating cost sensitivity

Table 9: Capital cost sensitivity

Table 10: Margin sensitivity to product pricing

Table 11: Capital payback sensitivity to product pricing

Table 12: Annual gross margin sensitivity to product pricing

Next steps

Based on the outstanding results of the Scoping Study, the Company plans to proceed to the next feasibility study stage; the details of which will be released to the market shortly. It is anticipated that the next phase of study will include:

• Comprehensive metallurgical and processing test work program with the aim of producing significant concentrate volumes for evaluation by potential offtake partners. This program is scheduled to commence shortly and will define the design criteria for the process plant and confirm the selected process flowsheet and equipment selection.
• An infrastructure assessment program aimed at identifying opportunities to enhance the project economics through further capital and operating cost reductions.
• Examination of tailings disposal methodology. Significant capital and operating cost savings may be possible through reconfiguration of the tailings disposal process via either unlined tailings dams or deposition of tailings back into exhausted pits.
• Environmental and social monitoring and assessments. The Company has already commenced environmental and community/social baseline studies in order to progress approvals processes.
• Further exploration. Exploration for additional high grade resources along strike from Malingunde has commenced. An infill drilling program to upgrade the resource classification and increase the overall resource base at the main Malingunde deposit is planned for September 2017.
• Ongoing marketing studies will further define target customer markets, preferred product specifications and supply and demand forecasts. The Company continues to work with potential Asian and European offtake partners to in order to secure future offtake agreements and partnerships.
• Continued engagement with logistics partners and potential providers with the intent to secure an optimal transport solution for graphite concentrates.
• Commencement of meaningful discussions with finance providers with the intent of securing funding for the development and construction of the Malingunde Project.

Conclusion

Sovereign is pleased to present a Scoping Study that clearly demonstrates the Malingunde Project’s strong commercial potential, centred on very low operating and capital costs, with product revenues generated from a very high-quality product.

The Study validates Sovereign’s strategy of exploring for soft, saprolite-hosted graphite mineralisation, with the aim of delivering:

1. Very low operating costs
2. Very low capital costs
3. Very simple mining & processing operations
4. Targeting entry to existing markets, with battery markets as future upside

Importantly, the Project is not reliant on large scale to reduce operating costs, enabling Sovereign to focus on placing quantities of product into primary end-markets, including refractories and foundries, at a scale that can be absorbed by existing demand. This marketing strategy will be enabled through the very low-cost production, allowing Malingunde concentrates to compete on price point with China, the world’s largest supplier of natural flake graphite.

The delivery of a capital estimate significantly below peers (in both absolute and capital intensity terms) puts Sovereign in a very strong position to engage in discussions around future financing of the Project.

Additionally, the very low operating cost nature of the Project provides protection, and ensures profitability, even in extreme downside pricing scenarios.

Competent Person Statements

The information in this Announcement that relates to Exploration Results is extracted from announcements on 29 August 2016, 12 October 2016, 26 November 2016, 18 January 2017, 21 February 2017 and 15 March 2017. These announcements are available to view on www.sovereignmetals.com.au. The information in the original announcements related to Exploration Results were based on, and fairly represent, information compiled by Dr Julian Stephens, a Competent Person who is a member of the Australasian Institute of Geoscientists (AIG). Dr Stephens is the Managing Director of Sovereign Metals Limited and a holder of shares, options and performance rights in Sovereign Metals Limited. Dr Stephens has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcements.

The information in this Announcement that relates to Mineral Resources is extracted from an announcement dated 18 April 2017. This announcement is available to view on www.sovereignmetals.com.au. The information in the original ASX Announcement that related to Mineral Resources was based on, and fairly represents, information compiled by Mr David Williams, a Competent Person, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Williams is employed by CSA Global Pty Ltd, an independent consulting company. Mr Williams has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration, and to the activity he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcement.

The information in this Announcement that relates to Metallurgical Testwork Results (Section: Metallurgy), is extracted from announcements dated 23 November 2016 and 27 February 2017. These announcements are available to view on www.sovereignmetals.com.au. The information in the original announcements that related to Metallurgical Testwork Results was based on, and fairly represents, information compiled by Mr Oliver Peters, M.Sc., P.Eng., MBA, who is a Member of the Professional Engineers of Ontario (PEO), a ‘Recognised Professional Organisation’ (RPO) included in a list promulgated by the ASX from time to time. Mr Peters is a consultant of SGS Canada Inc. (“SGS”). SGS is engaged as a consultant by Sovereign Metals Limited. Mr Peters has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking, to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcements. The Company confirms that the form and context in which the Competent Person’s findings are presented have not been materially modified from the original market announcements.

The information in this Announcement that relates to Mining, Processing, Infrastructure, Production Targets, and Capital and Operating Costs are based on and fairly represent information compiled or reviewed by Mr David Dodd, who is a Fellow of the Southern Africa Institute of Mining and Metallurgy. Mr Dodd is a consultant to Amec Foster Wheeler. Mr Dodd has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activities undertaken. Mr Dodd consents to the inclusion in the Announcement of the matters based on his information in the form and context in which it appears.

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.

SUMMARY OF MODIFYING FACTORS AND MATERIAL ASSUMPTIONS

Material assumptions used in the estimation of the production target and associated financial information are set out in the following table.