Resource Potential and Infrastructure

26 April 2021 

Capital Metals plc

("CMET" or the "Company")

Resource Potential and Infrastructure

Capital Metals plc (AIM: CMET) is a natural resources company focused on the development of the Eastern Minerals Project in Sri Lanka ("the Project"), one of the highest-grade mineral sands' projects globally. The Company is pleased to provide the following background information on the resource potential and robust supporting infrastructure that underline the Project's long term viability.

Highlights

●    The Project currently has a JORC Resource of 17.2 Mt with an average grade of 17.6% Total Heavy Minerals ("THM"), an estimate that makes it one of the highest-grade mineral sands' deposits in the world.

●    The current Resource estimate is based on auger drilling that has not penetrated more than three metres deep. Limited sonic drilling so far undertaken offers compelling indication of deeper mineralisation, including showings of 26.3% and 26.6% THM at respective depths of 14 and 8 metres.

●    Further potential exists beyond the narrow coastal strip - accounting for only 6% of the total Project area - that has been the primary focus of drilling to date. Initial exploration suggests potential for significant mineralisation further inland.

●    The Resource's expected high grade will reduce capital expenditure - less material needs to be mined and processed to access commercial minerals.

●    The Project is just 30 km drive along a network of sealed roads from a commercial port, making possible the smooth transfer of mined minerals for shipping to international markets.

The Current Resource

The Project's 84 km2 licence area on Sri Lanka's eastern seaboard has a JORC Resource of 17.2 Mt with an average grade of 17.6% Total Heavy Minerals, an estimate making it one of the highest-grade mineral sands' deposits in the world, with nearly three times the average grade of comparable projects. 85% of the Resource estimate is classified in the JORC code's higher level Measured and Indicated categories.

Opportunities to Upgrade the Resource

Although the current estimate - based on 1,643 shallow auger drill holes totalling 2,621 metres of drilling - is sufficient for a mine, CMET believes compelling opportunities exist to significantly upgrade the Resource.

The inherent physical limitations of auger drilling mean the Project area has so far only been drilled to an average depth of three metres. Exploratory sonic drilling undertaken by the Company in 2018 indicated that mineralisation continues at deeper levels across much of the Resource, results including holes recording 26.3% THM at a depth of 14 metres and 26.6% at eight metres. The consistently high grades so far recorded suggest the Resource may be free of the coatings on sand grains that make it harder for standard equipment to efficiently recover valuable minerals, and to rehabilitate the land after mining.

Further potential exists beyond the narrow coastal strip that has been the primary focus of drilling to date, a 100 to 300 metre wide north-south corridor running alongside the sea that accounts for only 6% of the total Project area. The Project's bounds extend up to two to three kilometres inland, covering terrain that may encompass marine sediments.

The limited drilling as yet undertaken further inland suggests significant mineralisation. This territory, a series of shallow lagoons and estuarine habitats, is readily accessible to environmentally sensitive drilling, with minimal need to disturb vegetation prior to mining.

Plans for Future Exploration

After raising £2 million in January CMET is funded for various drilling programmes that would explore more of the Project area, and at greater depth.

The Company, having made applications for nine additional exploration licenses covering a further 623 km2, is discussing field access arrangements with local land owners and is undertaking a development study and economic analysis - due for completion by the end of H1 2020 - that will look ahead to a mining operation targeting an estimated yearly production of 1.65 million tonnes ("Mt").

CMET anticipates the successful conclusion of the current Environmental Impact Assessment, and the subsequent granting of an Industrial Mining License that will allow the Company to conclude ongoing discussions with potential offtake partners, and enter into agreements involving a prepayment or financing arrangement. At this point funding will also be sought for the estimated USD 35 million cost of constructing onsite facilities capable of processing around 1.65Mt a year.

A wet concentrator plant will be used to separate the heavy minerals from the silica sands, creating a Heavy Mineral Concentrate ('HMC') that will be processed at a dry plant where the zircon, garnet, rutile and ilmenite elements will be separated from non-commercial silica sands. The expected high grade of the THM would allow CMET to build a small and less expensive mine than would otherwise be required, as less material would need to be mined and processed to make the concentrate. Construction is scheduled to begin in Q4 2021, with first production in H1 2022.

A Robust Infrastructure Already in Place

The Company expects to further reduce its capital expenditure by taking advantage of the robust infrastructure already in place, connecting the Project through a network of sealed roads to a commercial port at Oluvil, just 30 kilometres north of the licence area.

The Project is located in the Eastern Province of Sri Lanka, approximately 220 kilometres east of the country's capital city Colombo. It can be accessed from a network of existing sealed roads that join with the national highway, ensuring smooth transfer of mined HMC to the port.

Oluvil Port opened in 2013 as part of the Sri Lankan government's ongoing programme to upgrade the country's infrastructure. The port, which is currently being used by the regional fishing industry, offers facilities and shipping capacity - 8,000 to 10,000 tonnes to a depth of 11 metres - that easily fulfil CMET's requirements. The port has all the essential infrastructure to serve as a commercial harbour, being equipped with grid power, scheme water, offices, workshops, storage facilities, and residential quarters, and secure perimeter walls and fencing.

The Company is in discussion with the Sri Lankan Port Authority ('SLPA') to use the port for its operations, where it intends to construct a dry mineral separation plant to separate the HMC into value added minerals before shipping.  CMET has offered to assist SLPA with any required dredging of accumulated sands resulting from long shore drift for the benefit of all users of the port, including commercial shipping and the local fishing industry.

For further information, please visit www.capitalmetals.com or contact: 

Glossary:

Auger Drilling:    is done with a helical screw which is driven into the ground with rotation; the earth is lifted up the borehole by the blade of the screw. Used in soil, soft unconsolidated formations, or weak weathered rock

JORC:              the JORC Code provides minimum standards for public reporting to ensure that investors and their advisers have all the information they would reasonably require for forming a reliable opinion on the results and estimates being reported. The current version is dated 2012

Sonic Drilling:    an advanced form of drilling which employs the use of high-frequency, resonant energy generated inside the Sonic head to advance a core barrel or casing into subsurface formations.

THM:                Total Heavy Minerals

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