Sovereign Metals forges transport deal for graphite project

By Trevor Hoey. Published at Oct 3, 2017, in Mining

This product is classified as ‘very high risk’ in nature due to its location and geopolitical situation of the region. FinFeed advises that extra caution should be taken when deciding whether to engage in this product, however if you are not sure whether it is suitable for you we suggest you seek independent financial advice.

Emerging African graphite producer, Sovereign Metals (ASX:SVM) has negotiated an infrastructure term sheet agreement with Central East African Railways (CEAR), an infrastructure and logistics consortium in which Vale SA and Mitsui & Co. Ltd have significant ownership, with both parties also involved in the operational management of the transport facilities.

The agreement covers the provision of rail freight, port access and port handling services by CEAR to SVM for graphite concentrates produced from the Malingunde Project, subject to a binding agreement expected to be formalised 30 June, 2018.

Under the terms of the agreement, ore will be transported via the Nacala Corridor which spans a length of 988 kilometres from Kanengo to the deepwater port of Nacala as indicated below.

Graphite sovereign metals

Rail corridor runs within 25 kilometres of Malingunde

The Nacala logistics corridor has an interesting history as it was essential for the expansion of Vale and Mitsui’s coal extraction activities in the Tete region of Mozambique. US$1.2 billion has been invested to date and a further US$460 million is expected to be invested in port and rail facilities to increase the general cargo throughput capacity.

Importantly for SVM, the railway travels through Malawi and includes an operating rail line north to Lilongwe, passing within 25 kilometres of SVM’s Malingunde project.

This is an important development as it provides SVM with a secure and efficient pathway for the transport of its graphite concentrates in partnership with two world class organisations.

SVM highlighted that the signing of the agreement was a significant milestone in advancing the development of the exceptionally low-cost, high-quality natural flake graphite project at Malingunde.

Commenting on the development, SVM Managing Director Dr Julian Stephens said, “The signing of the term sheet with such reputable multinational partners is a very important step for Sovereign, and we are delighted to have such experienced operators assisting us in advancing the Malingunde Project”.

Agreement exceeds management’s projections

Under the agreement, services will be provided over a 20 year period for the movement of up to 100,000 tonnes per annum of concentrates, providing upside to SVM’s initial target of 44,000 tonnes per annum.

This covers the initial 17 year mine life of the project. Given that a single train can transport up to 84 containers at one time, SVM will only require one train movement every two weeks.

SVM’s scoping study considered production of approximately 44,000 tonnes per annum of graphite concentrates, equating to the movement of approximately 2000 twenty-foot shipping containers per year.

CEAR will supply and maintain all infrastructure, equipment and personnel required to provide the services. As a means of comparison, the Malingunde scoping study logistics cost estimate was circa US$65 per tonne free on board (FOB), based on indicative pricing for the services.

The graphite space has been in favour since August with shares in ASX 200 player Syrah Resources (ASX: SYR) surging approximately 40 per cent from circa $2.50 to $3.75. This appears to have rubbed off on some of the smaller players in the sector, with shares in SVM increasing 20 per cent in recent weeks.



S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

Publishers Notice

The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.

Thanks for subscribing!