Electricity woes slow Malawi mining sector take off

Malawi Government has admitted that failure for the country to produce enough energy is affecting the taking off of most of the mining projects which the country is banking on to spruce up its ailing economy.

Currently the country’s sole electricity producer Electricity Corporation of Malawi (ESCOM) produces only 350 megawatts while the mining industry alone currently requires a total of 752 megawatts to operate.

Malawi Government has issued hundreds of mining licences and is touting the sector as the next big thing after tobacco but all this might end up just being a joke as the energy currently on supply is  not just enough to cope up with the demands of the mining sector.

According to a paper by the Ministry of Natural Resources, Energy and Mining, has discosed that several multi-billion kwacha mining projects are failing to start in earnest due to inadequate energy as the country’s derisory capacity to generate electricity frustrates investments in the sector.

Recently, the eratic energy supply saw the only active uranium mining project by Australian compnay Paladin Energy at Kayerekera in the northern district of Karonga being shut down.

The uranium mining project which needed 12 megawatts has been operating using diesel generated engines to produce its own power on site, a development that raised operatin g costs for the mine.

Apart from the uranium mining project several other projects are on hold due to lack of enough energy.

One such project is the heavy mineral sands mining and processing that needs 500 megawatts. One of the sand mining site in Mangochi requires 300MW while and 200MW is wanted at another sand mining site in Salima.

The ministry’s paper also disclosed that bauxite mining and processing in Mulanje is delaying to start due to power supply shortage as it requires 150 megawatts.

A similar challenge has paralysed niobium mining and processing, which requires 15 megawatts while rare earth mining and processing has a demand of 20 megawatts.

The ministry says that what this means is that Malawi’s mineral wealth would not benefit the country in the near future until additional generation capacity avenues are found.

President of Geologists Association of Malawi Hilton Banda expressed fears that lack of ready electricity to enable investors to operate mines has greatly weakened government’s ability to negotiate for a better deal as operators use the energy gap as an excuse for unfavourable deals including ridiculous tax-breaks that cost
government billions of kwacha.

“In negotiating mining licences, a country needs to have three essential things. These include exploration information, energy and experts in that field. Without these three, it is difficult for a country to come out with a better deal,” he said.

Banda said apart from archaic information of the minerals presence the country is endowed with, lack of enough experts in mining Malawi has also too little energy to drive the mining sector.

“Most of the mining information in the country is outdated. It will improve with the exploration exercise that took place early this year. The country has moved in to train a lot of people in mining engineering and production. However, our challenge still is with the energy sector,”  he said.

Paladin Energy Malawi general manager Greg Walker said his company has always wanted to have Kayelekera Uranium Mine connected to the Escom national power grid but this has not been successful.

“This would be good for Escom, Kayelekera and Malawi. It would reduce operating costs at Kayelekera; provide Escom with a major new industrial base-load customer, save foreign exchange by substituting locally produced hydro-electric power for imported diesel generation and reduce greenhouse gas emissions,” said Walker.

Walker said the absence of grid power has increased the operating cost structure of Kayelekera Mine by $4-$5/lb.

Secretary for Energy and Mining Ben Botolo admits that it is difficult to pursue mining with the current level of electricity the country is producing.

He said the energy issue ranks highly on all mining negotiations.

“The mining venture becomes financially unviable if you use diesel as the main source of energy in a mining undertaking,” he said.

Added Botolo: “It is with this reason that government is looking at different ways of enhancing our electricity generation capacity. Government is looking at hydro, thermal, wind and solar as other means of enhancing generation capacity.”

He disclosed that some of the areas under study for possible electricity generation include Fufu on South Rukuru River with potential capacity of about 120 megawatts, Mpatamanga Gorge with a capacity of 300 megawatts, Kholombidzo Falls with capacity of 150 megawatts, Chimugonda with a capacity of 60 megawatts, Kammwamba thermal power plant with capacity of 300 megawatts.

Botolo said there are also independent power producers (IPP) such as Intra Energy with a capacity of 120 megawatts MW.

In total, Malawi has potential to produce over 2 100 megawatts enough to drive the mining sector and support other industries such as manufacturing and large-scale farming.

Botolo claimed government might meet the energy needs of the mining industry as most companies are, as of now, still at the prospecting and exploration stages.

“It is only Paladin that is involved in actual mining. However, there is need to enhance our sources of power since there will be extra pressure from mining companies after release of the airborne survey sometime in January-February 2015,” he said.

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