The market for product from the world’s best natural rutile discovery in 50 years is hot indeed, with Sovereign Metals inking a 25,000tpa MoU with Hascor to supply product from its Kasiya mine into the welding industry.

That’s a big deal since it means Sovereign Metals (ASX:SVM) will have access to the significant premiums on offer for bagged rutile, which according to consultant TZ Minerals  International will fetch US$500-600/t premiums over the bulk market in 2022.

Strong demand from the welding market is outstripping supply, outpacing other segments of the 2.8Mtpa market for the high grade titanium feedstock, which also supplies pigment and titanium metals markets.

Some bagged rutile sales in Q1 2022 have been agreed at close to US$2100-2200/t CIF, with bagged sales leading pricing growth because welders have few alternatives to natural rutile feedstock.

The MoU is a major milestone as the first from Sovereign’s Kasiya project in Malawi, where Sovereign boasts a world class resource of 605Mt at 0.98% rutile.

Hascor is a multinational ferroalloy and metal powder supplier, as well as a major supplier of natural rutile products for the welding industry with production and distribution centres across five continents.

“We are very excited to have signed this MoU with a major rutile supplier like Hascor about a future offtake agreement and to provide input on marketing for our premium rutile products from Kasiya,” Sovereign managing director Julian Stephens said.

“Hascor is a market leader in natural rutile product development and distribution for the welding industry across five continents.

“The offtake MoU with Hascor points to the quality and strategic nature of our world-class Kasiya Rutile Project.”

Kasiya a rare beast

The non-binding memorandum of understanding will see Sovereign deliver up to 25,000t of natural rutile per annum to Hascor and their existing clients over five years from the start of nameplate production at Kasiya.

Hascor will also bring its experience in the field to the table, giving Sovereign strategic advice on marketing and product development.

The MoU is currently non-binding and subject to negotiation and execution of a definitive agreement, but pricing will be linked to market prices for the premium welding sector. It will expire at the end of 2023, but can be extended by the agreement of both parties if a definitive offtake deal has not been reached.

The premium chemical parameters of Kasiya’s natural rutile product indicates it’s suitable for all end markets.

The project will be coming into development as a structural supply deficit continues to widen.

A scoping study in December indicated Kasiya would produce 122,000t of natural rutile and 80,000t of graphite a year over a 25 year mine life at an operating cost of US$352/t, generating US$161m in annual EBITDA over the life of mine.

That is at life of mine average prices of US$1,346/t (US$1475/t for bagged sales), well below current prices.

Supply-demand dynamics could get even more stretched, with supply expected to fall 70% between 2017 and 2030, auguring well for Kasiya’s status as a major undeveloped, low CO2 source of natural rutile.

 

 

 

This article was developed in collaboration with Sovereign Metals, a Stockhead advertiser at the time of publishing.

 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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