LONDON (ShareCast) - (Sharecast News) - Capital Metals updated the market on the Eastern Minerals heavy mineral sands project in Sri Lanka on Wednesday, which it described as "one of the highest-grade" mineral sands projects globally, which was "closely approaching" final investment decision.

The AIM-traded firm said its board and local management team were monitoring the economic and political developments in Sri Lanka.

It said it expected that recent political changes should enable change to occur more rapidly, with increased international cooperation and an overriding requirement to encourage foreign investment and job creation in the country.

The local management team's focus had been on advancing discussions with the Geological Survey and Mines Bureau (GSMB) to advance the industrial mining licence (IML) and, as there were currently limited field activities, the day-to-day operations had been largely unaffected.

"The company is in continual contact with the GSMB for the purposes of obtaining the IML, and the board has been encouraged by recent ongoing levels of interaction," the directors said in their statement.

"The board believes all relevant stakeholders are focused on achieving this objective in an expedient manner despite the current economic and political situation."

IHC Mining, meanwhile, was continuing its metallurgical process test work study, which would enable the confirmation and refining of process flowsheets defined in the IHC development study and provide updated product specifications to assist with ongoing discussions with off-takers.

In cooperation with the company's technical team, the laboratory of the GSMB was currently analysing the mineral assemblage of the total heavy minerals from the 2021 drilling programme, which would provide the specific details on percentage and grade of ilmenite, zircon, rutile, and garnet.

It would also provide further data on mineral assemblage to complement the metallurgical process test work study results.

The completion of that analysis had been impacted by the energy and fuel shortages in Sri Lanka, Capital Metals noted.

Discussions with the Sri Lanka Ports Authority (SLPA) for the use of Oluvil Port for processing infrastructure and export facilities were ongoing, and negotiations continuing.

"The current situation continues to be very challenging for all Sri Lankans and we are therefore even more focussed on maintaining our support for our local staff and the project communities during this time," said chief executive officer Michael Frayne.

"Clearly the award of the IML will be pivotal in unlocking the value of the project.

"Whilst we cannot control the timing of its issuance, we remain in regular and constructive dialogue with the relevant authorities and are responding to frequent information requests, which we believe is a positive indication of progress."

Frayne said that in a similar vein, the support the firm was seeing from the SLPA for usage of the Oluvil Port was "reassuring", given the "significant benefit" it would provide to the local community and the project.

"We believe the Sri Lankan government and departments recognise the critical necessity to accelerate the development of foreign direct investment and export income generating projects like ours.

"We continue to have positive discussions with prospective off-takers who are interested in our products, with the objective that such parties will form a significant part of the future capex funding package."

The project remained "one of the highest-grade" mineral sands projects globally, Michael Frayne added.

"Demand for our products is strong and we share a common interest with Sri Lanka in bringing the Eastern Minerals Project into production."

At 1043 BST, shares in Capital Metals were up 2.02% at 4.95p.

Reporting by Josh White at Sharecast.com.

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