Globe Metals to scout for Niobium buyers in Malawi

Globe Metals and Mining Limited, the Australian based company that is set to mine Niobium at Kanyika in Malawi’s northern district of Mzimba  in 2015, says its major commercial consideration is customers for this rare metal.

The company said the fact that Niobium is not listed on the London Metals Exchange is a huge challenge since the company has to scout for buyers on its own.

“We will be looking for one or two cornerstone steel mills, probably in China to provide Ferro-niobium off take agreements,” Globe Metals and Mining Limited Managing Director Mark Sumich said.

Kanyika mine

Sumich said this would underwrite cash flows, which will in turn support project debt financing in the development package.

“We are already investigating these opportunities, leveraging our relationship with ECE as a portal into partners, financiers and customers,” he said.

According to Sumich, the company’s major huddle is electricity supply since the mine is located in rural area.

“It is about 2 ½ hours outside Lilongwe (Malawi’s capital) off the main north-south trunk route. It is flat country and relatively sparsely populated. Water is present on site, and power will be diesel generated. We’ll investigate alternative power sources over time – but our key priority is to bring the project into production and bring value to our shareholders,” he said.

Sumich also said before the project goes into production in 2015, his company will also have to reach a Development agreement with the Malawi government.

“This is a trade-off between the Government of Malawi acquiring equity in the project in exchange for fiscal concessions to the Project. The final key hurdle is the grant of the mining licence, which we will apply for upon completion of the definitive feasibility study (DFS) in 2012,” he said.

 Global niobium market

Sumich said the global market is currently about 60,000 tonnes of metal growing at 10% per annum.

“The market therefore has plenty of room to accommodate Globe’s 3,000 tonnes of production, A$200 million in annual revenues and 40% margins – the key parameters upon which our paybacks and returns are based,” he said.

He noted that China makes up around 25-30% of current consumption and easily more than 50% of the growth – but provides only 2% of the production.

The two key producers are in Brazil and Canada.

Physical features and commercial attraction of niobium

Niobium gives enhanced tensile strength and flexibility to steel, allowing weight reduction. About 500 grams per tonne will triple tensile strength. Applications for sophisticated steels include automotive, civil engineering products and oil and gas pipeline.

About 90% of niobium is used as an additive to create high quality steels, demand for niobium is linked directly to growing steel markets.

Globe Metals and Mining Limited said the increasing sophistication of developing nations such as China and India is driving growth in niobium, in excess of steel growth, as these countries’ demand for sophisticated steels increases.

The company said these excellent dynamics are likely to continue for the foreseeable future and are supported by a consistent 15 to 20 year historical trend.

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