TSXV and AIM-listed Mkango Resources sits in a rather unique position amongst its junior rare earths peers – who are focused on bringing mines into production but struggling to secure funding to do so.
Not only does Mkango Resources have the financial backing of a prestigious partner – Talaxis – the company is investigating the potential to bring a large-scale mine to market as well as the delivery of separated rare earth metals, CEO WILLIAM DAWES tells LAURA CORNISH.
Mkango’s Songwe Hill rare earth project, located in southern Malawi, could potentially move into construction towards the start of 2021 – upon completion of a bankable feasibility study (BFS) – which is currently underway – and a positive set of results.
While funding raising is the typical process that follows the completion of a BFS before any project can get off the ground, Mkango’s partnership with Talaxis should eliminate that critical step entirely.
Founded in 2016 and backed by global supply chain business Noble Group, Talaxis (currently a 49% shareholder in the Songwe Hill project) has not only provided the necessary funding to complete the BFS but also has the option to increase its interest to 75% by arranging funding for 100% of the project’s development costs.
With a focus on technology metals, and more specifically rare earths, Talaxis is the ideal company to help move Songwe Hill into production. What other rare earths junior can boast such a prestigious financially sound partner?
What Songwe Hill is and what it could be
A pre-feasibility study for Songwe Hill, completed in 2015, was focused on a 500 000 tpy operation to produce 2 800 tpa of rare earth oxide in concentrate over an 18-year lifespan for a cost of US$216 million.
“Subsequent to this study, we completed a major drilling programme which resulted in a 60% increase in Songwe Hill’s measured and indicated resources, 95% of which are potentially accessible by open pit – less than 160 m below surface,” Dawes points out.
The combined measured and indicated mineral resource estimate now totals 21 Mt, at a grade of 1.41% TREO (total rare earth oxides).
“On the back of our significantly larger resource, which still remains open at depth, our BFS will look to establish the feasibility of building a larger operation – potentially double our original 500 000 tpm throughput design plan. The enlarged resource may also support a longer mine life,” Dawes continues.
While the potential to double the size of Songwe Hill is an exciting proposition, the BFS will also evaluate options to produce not just a mixed rare earth concentrate but to separate the minerals completely – most importantly neodymium (Nd) and praseodymium (Pr) – which account for 35% of production but is over 80% of the value.
In October, Mkango Resources appointed DRA Global company SENET to conduct and complete the BFS – which as mentioned is scheduled to be completed by the end of 2020.
“SENET is a lead engineering firm with substantial experience in Africa and in the delivery of hydro-metallurgical plants. Given these credentials and having established a working relationship with the company over various aspects of our project, we were pleased to move forward with the appointment,” Dawes shares.
“And our priority is to do conduct the BFS properly, with the right people and expertise to deliver a robust project at the right size.”
With the right project parameters in place, Songwe Hill will move into construction following completion of the BFS and Talaxis’ decision to increase its stake in the project.
Dawes notes that the construction period should take approximately 18 months to deliver mine and process plant – meaning it could produce first concentrate towards the end of 2022. The establishment of a separation plant will likely be in Europe or possibly the Middle East.
Understanding the downstream market potential
The success of a rare earths miner, or any miner, to a large extent is also determined by their understanding of end user markets and how they are changing.
Nd/Pr are both key components of rare earth permanent magnet motors for electric vehicles – a market sector whose growth is accelerating rapidly. An anticipated increase in Nd/Pr demand deficit which will naturally drive up the value of these metals.
While this dynamic will boost the value of Songwe Hill, Mkango Resources has again taken its downstream market understanding one step further.
Mkango Resources has established a “downstream technology business”, again in partnership with Talaxis which is looking at technologies that will underpin a sustainable rare earths supply in the future.
In September this year, Mkango’s 75.5% subsidiary Maginito (focused on rare earth alloy and magnet technologies) has signed an investment term sheet and one-year exclusivity agreement with HyProMag, a private company focused on rare earth magnet recycling. The rationale for the transaction includes potential synergies, such as blending of primary production originating from Songwe Hill with recycled production from HyProMag, as well as enhanced marketing flexibility and access to markets for rare earth permanent magnets.
HyProMag has licenced a patented process for extracting and demagnetising Nd iron boron (NdFeB) alloy powders from magnets embedded in scrap and redundant equipment named HPMS (hydrogen processing of magnet scrap). This was originally developed within the Magnetic Materials Group at the University of Birmingham.
Subject to completion of definitive agreements and due diligence, Maginito will invest £300 000 for an initial 25% interest in HyProMag and provide a £200 000 convertible loan facility, both of which will be fully funded from Maginito’s existing cash resources. Maginito will have an option to increase its interest in HyProMag to up to 49%, and the first right to supply any primary rare earth raw materials for blending with recycled materials, if required, and to market the magnetic end products.
Maginito’s initial £300 000 investment of will fully satisfy HyProMag’s matched funding requirements for the three year, £2.6 million Innovate UK grant funded project, “Rare-Earth Recycling for E-Machines”, which aims to establish a pilot rare earth magnet recycling facility at Tyseley Energy Park, Birmingham and includes Advanced Electrical Machines Research and the Birmingham University as collaborators.
Moving forward with confidence
While Nd and Pr prices are fairly flat at present, they will increase when forecast demand for these metals kicks in. “Electric vehicle demand will increase by order of magnitude over the next few years and then we’ll see prices start to move,” Dawes confirms.
Because Songwe Hill is one of very few advanced stage projects in the rare earths sector, the project and company is well positioned to benefit from the expected change in market dynamics.
“We have a world-class project in our hands and we will take it through to operation, sustainably and according to the highest standards, while delivering substantial benefit to the Malawi economy through local employment and local content. We have long-standing experience working in the country and will continue to maintain and build our relationships further as we take this project forward,” Dawes concludes.