Communicators

Sovereign Metals: September 2018 Quarterly Report

Sovereign Metals Limited (“the Company” or “Sovereign”) is pleased to present its quarterly report for the period ended 30 September 2018. The Company is focused on the world-class Malingunde Saprolite Hosted Graphite Project in Malawi.

HIGHLIGHTS:

Finalisation of Pre-feasibility Study at Malingunde.

-        During the quarter the Company was engaged in the final phases of the pre-feasibility study (“PFS”) for Malingunde and expects to be in a position to announce the results in early to mid-November.

-        The PFS builds on the outstanding results delivered in the 2017 Scoping Study and has been completed to a high technical standard based on well-validated inputs and low costs utilising the saprolite advantage.

Bulk Sample Drilling for Pilot Program

-        Bulk drilling program completed: 100 tonnes of ore extracted to be used for a pilot plant program to produce bulk graphite concentrates and for further validation of the flowsheet at scale.

-        The Company is actively engaged in offtake discussions with a number of Tier 1 potential offtake partners. The pilot program has been driven by significant demand from these organisations as they seek greater quantities of product for continuation and upscaling of testing and qualification.

High Grade Rutile Recovered from Graphite Tailings

-        The Company identified the potential to produce rutile as a valuable co-product from the graphite tailings via a simple process flowsheet using traditional flotation for graphite and typical mineral sands separation methods for rutile.

-        Rutile (TiO2 95%-97%) and leucoxene (TiO2 70%-92%) are high-value, premium natural titanium products normally produced from heavy mineral sands deposits which are commonly consumed in the pigment industry (paint, paper, cosmetics, plastics).

99.9995% purity graphite confirms suitability for multiple downstream applications

-        Sovereign demonstrated the ability to produce ultra-high purity levels of 99.9995 % C from Malingunde natural crystalline flake graphite.

-        Ultra-high purity graphite is used in downstream applications such as lithium-ion batteries, aerospace, electronics and nuclear energy.

ENQUIRIES    Dr Julian Stephens – Managing Director    

+618 9322 6322  Sam Cordin – Business Development Manager

MALINGUNDE PFS UPDATE

Sovereign is completing the final stages of the pre-feasibility study (PFS) for the Malingunde saprolite-hosted graphite project and expects to announce the results in early to mid-November.

The PFS study examined a number of options in order to identify the optimal production scenario that meets the requirements for low upfront capital costs and very low life-of-mine operating costs whilst producing premium, coarse flake graphite products.

BULK SAMPLE DRILLING FOR PILOT PROGRAM AT MALINGUNDE

The bulk drilling program was completed in September 2018 extracting over 100 tonnes of representative soft saprolite graphite ore from Malingunde.

The Company has shipped ~40 tonnes of the material to SGS Lakefield in Canada for production of high-quality flake graphite concentrates at a pilot plant scale. The pilot plant program is based on Malingunde’s simple and robust process flowsheet that requires no primary crush or grind and no chemical or heat purification to produce high-quality graphite concentrates with over 60% greater than 150µm in size. The test-work will also serve to further validate the flowsheet for detailed plant design in the upcoming DFS.

Figure 1. Bulk spiral auger drilling and sampling of the soft, saprolite ore at Malingunde

The Company has engaged with a diverse range of potential off-takers across a number of industrial sectors and global locations. To date, concentrate samples have been provided to a significant number of potential partners for assessment. Larger quantities of sample are now being requested by a number of these groups in order to validate and qualify Sovereign’s flake graphite concentrates for their particular requirements.

Industry participants confirm that the highest value graphite concentrates remain the large, jumbo and super-jumbo flake fractions, primarily used in industrial applications such as refractories, foundries and expandable products. These sectors currently make up the significant majority of total global natural flake graphite market by value.

The Malingunde Project’s bias to large, jumbo and super-jumbo flake concentrates has resulted in the Company receiving significant interest from potential purchasers of these high-value graphite products. Sovereign is pursuing credible sales agreements with these respected organisations to support the project’s development.

HIGH GRADE RUTILE RECOVERED FROM GRAPHITE TAILINGS

During recent chemical analyses of bulk graphite metallurgical samples for flotation test-work from Malingunde it was noted that TiO2 levels were significantly elevated. It was hypothesised that the elevated TiO2 may be due to the presence of rutile and/or leucoxene, as the Company had previously identified rutile within its Duwi graphite deposit, some 30km to the north-east of Malingunde.

The Company undertook a program to test the hypothesis that elevated TiO2 levels at Malingunde were due to the presence of rutile and /or leucoxene, and if so, whether it may be recoverable as a saleable co-product to the graphite operation.

The test-work program has shown that overall recovered grades of TiO2 from raw ore into rutile-leucoxene concentrates, was 0.86% (South Composite).

Concentrates produced to date from these initial sighter tests (78% to 90% TiO2) highlight the potential for the commercial production of leucoxene/rutile concentrate as a co-product produced from the graphite tailings. Further work needs to be undertaken to determine if high grade +95% TiO2 rutile concentrates can be produced from the Malingunde tailings material.

Thin section petrography shows that the rutile grains are well-liberated and internally clean with only rare inclusions. Gangue minerals observed in the concentrate included well-liberated grains of quartz, plagioclase and kyanite. These observations indicate that further, focussed metallurgical test-work would have a good chance of being able to achieve higher recoveries and TiO2 grades in concentrates.

Recovery of rutile-leucoxene from Malingunde tails will be further investigated as a possible, future extension to the proposed graphite operation at Malingunde. The Company intends to undertake further studies to determine whether sufficient additional project value could be added by incorporating a small plant to recover rutile-leucoxene from the graphite tails.

MALINGUNDE HIGH PURITY TEST WORK RESULTS

Downstream application test work at Malingunde has produced ultra-high purity levels of 99.9995 % C from Malingunde natural crystalline flake graphite. The purification process utilises a simple high temperature process, which as a result of inherent uniqueness of the Malingunde flake graphite, requires low energy input to efficiently achieve some of the highest purity graphite in the world.

Table 1. LOI950-Platinum crucible data with thermally purified graphite from Malingunde.

The exceptionally high carbon purity and very low levels of critical impurities indicate that this material meets prerequisites for commercialization in the value-added marketspace. One of the targeted market uses of the flake is the advanced Li-ion battery sector. Standard Li-ion battery anodes are currently >99.95 %C, so Sovereign’s purified material could lead to superior electrochemical performance. Another major market for ultra-high purity graphite is in nuclear science, namely for pebble bed modular reactors.

The next steps in the downstream processing test work program will focus on milling and classification of the purified flake into spheronised graphite products for Li-ion battery anodes and other high-end electrical and electrochemical applications. This will be followed by electrochemical cell testing to examine the purified, spheronised material’s performance (i.e. reversible, irreversible capacity and irreversible capacity loss, etc.).

CARPENTARIA JOINT VENTURE

Mount Isa Mines (MIM), a Glencore Company, continues to manage and sole fund exploration on all tenements comprising the Carpentaria Joint Venture (“CJV”). Sovereign currently holds a 25.65% diluting interest in the tenements.

CHANGE OF COMPANY SECRETARY

Mr Lachlan Lynch has been appointed Company Secretary of the Company following the resignation of Mr Clint McGhie effective today. Mr Lynch is a Chartered Accountant, who commenced his career at a large international accounting firm and is currently a Financial Controller for the Apollo Group.

The board would like to thank Mr McGhie for his excellent service to the Company.

Competent Person Statements

The information in this report that relates to Exploration Results is extracted from an announcement on 14 August 2018. This announcement is available to view on www.sovereignmetals.com.au. The information in the original announcement that related to Exploration Results was based on, and fairly represents, information compiled by Dr Julian Stephens, a Competent Person who is a member of the Australian 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 announcement.

The information in this report that relates to Metallurgical Results is extracted from an announcement on 14 August 2018. This announcement is available to view on www.sovereignmetals.com.au. The information in the original announcement that related to Metallurgical Results was based on, and fairly represents, information compiled by Mr Gavin Diener, a Competent Person who is a member of the AusIMM. Mr Diener is the Chief Operating Officer of TZMI, an independent mineral sands consulting company and is not a holder of any equity type in Sovereign Metals Limited. Mr Diener 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 announcement.

The information that relates to previous Downstream Testwork Results is extracted from an announcement on 19 July 2018. This announcement is available to view on www.sovereignmetals.com.au. The information in the original announcement that related to Downstream Testwork Results was based on, and fairly represents, information provided to 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 the President of Metpro Management Inc and 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 announcement.

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.

Appendix 1: Summary of mining tenements

As at 30 September 2018, the Company had an interest in the following tenements:

Beneficial percentage interests in Farm-out agreements disposed during the quarter ending 30 September 2018: