Sovereign Metals (ASX:SVM) - US-Aligned Strategy Reshapes $750M Kasiya Funding Plan

Sapan Ghai (0:00)

Hi, I'm Sapan Ghai. I'm Chief Commercial Officer of Sovereign Metals.

Sovereign Metals is developing the Kasiya Critical Minerals Project in Malawi. We intend to develop this and supply US and US allied nations with becoming the largest and lowest cost producer of the titanium mineral rutile, the largest and lowest cost producer of graphite, and one of the lowest cost producers of a heavy rare earths concentrate tube.

Matt (0:29)

Sapan, good to see you.

Sapan Ghai (0:30)

It's been a while.

Matt (0:31)

For sure, a lot has changed. I know you just hoffered it about it from Washington, so I appreciate you making the time. I think ultimately, folks are going to want to try and ask that, how if and how the business plan has changed, and ultimately, who funds, bills and buys from you?

Sapan Ghai (0:49)

Yeah.

Good question and probably the most pertinent question that I get asked these days. We were approached by US State Department, I know there's maybe about nine months ago or so, with a view of how solving the equation for how do we get these molecules that we have in the ground in Malawi, how do we process those in Malawi into a leading commodity, a leading product, which can be used in end uses in the US. So whether that's aerospace-grade titanium for the titanium industry, whether that's defense-grade titanium, whether that's graphite for the industrial base of the US that's growing, graphite for the battery space. Now that we found these heavy rare-earth concentrates, how we can essentially refine those and metalize those into elements for the US.

Matt (1:51)

Okay. So let's look, and I'll come, we'll get into the detail. And I kind of want to keep a high up thinking at the moment.

When you're in Washington, obviously, there's, they are on my drink, you know, they have kind of changed the face of the metal sector at the moment, especially kind of critical minerals, security minerals, as they like to call it over there. When you're in Washington, titanium, graphite, heavy rare is all relevant at the moment. But what are you thinking in terms of the types of products that they're actually looking for, and what form could they potentially be buying from you?

Sapan Ghai (2:28)

Yeah, look, we've done all the end-use analysis to the point where we know the titanium mineral that we have in the ground can be converted into the titanium metal in Japan that is then used by your Lockheed Martins, your Boeings, to create, you know, the airframes of an F-35 all the way through to a 747 or all the equivalents these days.

We've done all that work. So I can tell you today, for example, that what we have in the ground or what we will be producing for the first 25 years at Kasiya is the equivalent of one over 50,000 fighter jets, you know, that's the strategic importance of the titanium mineral there. On the graphite side, you know, we've done the work to understand, does our graphite fit in well with the industrial base for the US? Now what I mean there is 70% of our graphite is what's called refractory grade or industrial grade graphite. That ends up lining the insides of your electric arc furnaces for smelting, copper, steel, aluminium. So as long as we're doing that and we're processing and we're refining in, you know, the US and US alloy nations, they'll need that graphite and we can provide that currently at all. It comes from China and we can produce it at a lower cost than China to date. So for that sake, and we can actually produce more than anyone else on the planet as well. So you know, given that context, you can understand why our project and the company is becoming strategically very important to everyone.

Matt (4:11)

And then obviously, we have a rare earths and that's going to be a new component to what you've been talking about, isn't it?

Sapan Ghai (4:16)

Yeah, look, we've got, there's a lot going on around rare earths these days, right?

You can dig up your backyard, Matt, and you'll find some NDPR somewhere, right? So it's not really rare.

As Robert Friedland says, rare earths are not really rare and they're not really earths. Right? And that's probably correct about those light rare earths, your NDPRs and all those lower value rare earths. The important notion here is that the importance is around the heavy rare earths. So these are things like dysprosium, terbium, yttrium.

Their prices have gone up in the last two years, anything between 40 percent to 4,000 percent. That's the importance. Take yttrium, for example. You can go on alibaba.com today and buy yttrium oxide, a kilo of it, for about 70 pounds. Or you can, and that's Chinese yttrium. Or you can go in the north of the UK and buy it. You can buy 10 grams of yttrium for 42 pounds. So on a kilo basis, you can understand that dichotomy between the Chinese and non-Chinese rare earths and what it means to get a supply of non-Chinese rare earths. Our concentrate, so our rare earths product, will have enough yttrium, for example, to supply 35% of the US requirement. Now that yttrium mainly goes into jet engine coatings. So the last thing you want on your plane or on your fighter jet is when you put the afterburners on for it to melt the entire plane. That's not going to be a good luck for anyone. And the way you get around that is you apply what's known as a yttrium zirconium coating to the jet engine. So we'd be able to supply 35% of that today. 100% of the heavy rare earths required by the US currently come from China.