Progress on the ground and development update

19 July 2021 

Capital Metals plc

("CMET" or the "Company")

Progress on the ground

Commitment to the development of the local economy

and environmentally responsible mining

Capital Metals plc (AIM: CMET), 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, is pleased to provide a further progress update on activities on the ground in Sri Lanka.

Our Sri Lanka management team has held several meetings with the relevant government authorities and report that good progress is being made with the environmental process, and the Company is expecting further news on this in the coming weeks.

In addition, CMET is pleased to provide the following background information on the Project's potential to open new economic opportunities in eastern Sri Lanka, and the Company's work with local communities and commitment to ecologically sensitive production procedures that ensure all mining areas are fully rehabilitated.

 Highlights - Benefits to Community from development of the Project

●    New high quality construction, mining and processing work for local workers, and demand for local contracting services.

●    Community initiatives include waste disposal programmes, ongoing financial and logistical support for a new pre-school, new drinking water infrastructure, sponsorship of female entrepreneurship, and Covid-19 support.

●    Full consultation with the local community on any potential environmental impact from the Project, and commitment to state-of-the-art mineral sands processing integrating land rehabilitation into the mining process.

Contributing to Sri Lanka's economic development

The Project has been greatly assisted by the Sri Lankan government's investment in the Eastern Province's infrastructure. A network of sealed roads connects the licence area to Oluvil Port, just 30 kilometres north of the initial mining area, which opened in 2013 as part of the Sri Lankan government's ongoing programme to upgrade the country's infrastructure, with assistance from foreign investors.

The Oluvil Port was constructed for both the regional fishing industry and commercial shipping including facilities and shipping capacity - 8,000 to 10,000 tonnes to a depth of 11 metres, which is suitable for CMET's requirements. The port is well equipped with the infrastructure necessary to serve as a commercial harbour, including grid power , scheme water, office, workshop, storage facility, residential quarters, and secure perimeter walls and fencing.

The Oluvil Port has been operating for the local fishing industry but used only intermittently for commercial shipping.  Due to the low level of activity at the Port, there is now a significant volume of sand that has filled due to the coastal currents depositing sand in the harbour.  As a result, the fishing industry's access has been restricted.  The Project is looking to become an anchor tenant and user of the port and would undertake regular dredging to keep the Port operational for all users of the Port.

In turn, the Project promises to create high quality jobs for local workers, and to act as a catalyst for local services. The Company's construction, mining and processing work will employ local workers, who will be trained and supported by local and foreign mining expertise. Demand for contractor services is expected to create a multiplier effect benefiting the wider economy and skills/knowledge transfer to the local work force. Taxes and royalties flowing from CMET's operations will generate government revenues for reinvestment in Sri Lanka's continued economic development. The Country will also benefit from foreign direct investment to bring the mine in to production and export earnings from the sale of the products into the international market.

Work with the local community

The economic activity stimulated by the Project will be complemented by the Company's ongoing engagement with the Eastern Province's local community. CMET has already demonstrated its commitment to the coastal environment in which it will operate by organising beach cleaning programmes with community leaders, including the Sivan temple at Thambiluvil, with the collected plastic waste transported to the local council refuse centre for ecological disposal.

For the past three years, the Company has sponsored a new pre-school in the village of Umiri, currently supporting 15 students and two teachers, where residents have struggled for years for the resources to secure a good education for their children. CMET has worked in partnership with the local authority and village council to furnish a village hall with new furniture, stationery and equipment, and provides ongoing support through building maintenance, payment of school staff salaries, replenishment of school stationery, transportation, and the supply of safe drinking water through drier months. The Company is currently working with the village to provide long term drinking water facilities.

CMET is working closely with local communities in another village within the Project area, , Srivallipuram, to empower female entrepreneurs supplying furniture, chairs, and other essentials for the Women's Rural Development Society. One initiative helps members of the Society and other local women embrace sustainable agricultural practices through home gardening and small-scale farming projects.

The Company is also contributing to local efforts to manage the impact of Covid-19. Many families have needed financial support to continue to pursue their livelihoods. CMET has worked with community leaders to source and distribute dry ration packages for 65 families, ensuring the operation adheres to guidelines set by local health authorities. At all times the Company's work is designed to complement the wider programmes run by local and national governments and international development agencies.

Environmentally sensitive mining

CMET is committed to pursuing a state-of-the-art mineral sands mining process that will respect the coastline along which the Project will operate.

The Project's commercial mineral sands, including zircon, the titanium ores rutile and ilmenite, and garnet, will be extracted using proven non-chemical processing methods. The proposed mining method is staged mining of small 150m x 50 m cells, with each cell continuously rehabilitated after mining and then fully available for alternative uses such as agriculture and tourism, or to remain as a wilderness.

Well regulated mineral sands programmes integrate land rehabilitation into the mining process. The shallow depth of mineral sands deposits allow them to be mined using conventional surface mining methods including bulldozers, excavators and trucks. Topsoil, subsoil and clay is removed and stockpiled separately to allow it to be progressively returned after the mining process. The mineral sand deposit is then removed from the ground and then pumped as a slurry to a processing plant where the valuable heavy minerals are separated from the sand. The waste sand (mostly silica) is pumped back to the mining cell, where it is returned to the ground. Subsoil and topsoil are then replaced and the land rehabilitated back to its original use.

CMET's economics will be enhanced by the Project's expected high grades. The Project has a JORC Resource of 17.2 Mt with an average grade of 17.6% Total Heavy Minerals (THM), 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. Low levels of slimes - the fine grained material that attaches to the mineral sands - are expected, minimising the resources required for operations to separate commercial from non-commercial materials. Only 10% of the Project area has been drilled to date so increasing the resource estimate through further drilling is an important objective for the Company.

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

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

THM:                Total Heavy Minerals

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