Malawi’s Songwe mining project prospects at $293m

Mkango Resources Limited, a mining company which was doing feasibility studies on Malawi’s Songwe Hill rare earth project has announced that prospects for the site stands at almost US$293 million for a projected 18-year life span.

In a statement which the company has released Chief Executive Officer William Dawes described the results of the feasibility study as a major milestone in the development of the mining project.

“Since listing in 2011, Mkango has progressed an early stage exploration project to one of only three rare earth projects in Africa with a Pre-feasibility Study or Feasibility Study announced. We are very encouraged by the Project’s strong returns and relatively low capex (capital expenditure,” said Dawes.

The feasibility study report indicate that the mining project is capable of realizing US$293 million after-tax net present value (NPV) with its probable mineral reserve estimated at 8.5 million tonnes of rare earth oxide grading 1.6 percent.

The report further stated that using a 10% nominal discount rate, and 36% after-tax internal rate of return (IRR) and based on rare earth oxide (REO) prices equivalent to a total rare earth basket price of US$55.0 per kg is expected.

“The basket (REO) price reflects the selective removal of a large proportion of the cerium during the hydrometallurgical process which enhances the value of the product mix,” says the report.

The initial capital expenditure (Capex) is expected to be at US$217m, including a contingency of US$20m, which the report says is among the lowest in the rare earth sector.

The company further expects cash operating costs to average US$13.4 per kg for the first five years of production and US$17.0 per kg for the entire life of the mine.

“The Study assumes an additional cost of US$10.0 per kg to account for the cost or discount associated with toll separation or the sale of a mixed chemical concentrate,” reads the report.

The Feasibility Study results support the declaration of a maiden Probable Mineral Reserve Estimate of 8.5 million tonnes grading 1.60%.

“(This) is based on an open pit operation, using contract mining, with a mine life of 18 years commencing in 2017,” reads the study report.

The study also shows that there is potential to ‘significantly’ expand production or the mine life and for a lower strip ratio given the large additional Inferred Resource and potential to expand the Mineral Resource.

It adds: “This first phase of development envisages production of a high grade, critical and heavy rare earth enriched, purified chemical concentrate for toll treatment or sale, with annual production of approximately 2,840 tonnes per year of REO in concentrate.”

Mkango Resources Limited is a Canadian based company listed on the Toronto Stock Exchange. As a mineral exploration and development company Mkango Resources focuses on rare earth elements and associated minerals in Malawi.