TSX-V and AIM-listed Mkango Resources believes its Malawi-based Songwe Hill rare earths project delivers on the fundamentals necessary to ensure its success.The global rare earth market is undergoing massive change as a result of low prices which has already seen a number of marginal producers shut their doors.
While limited supply will push prices upwards in the future, driven by an increasing demand for clean technologies, those projects with attractive geological and geographical fundamentals will deliver the greatest rewards for their stakeholders.
Mkango Resources believes its Songwe Hill project delivers on these fundamental requirements in abundance.
Bringing Malawi’s rare earths industry to account
The Mkango Resources (Mkango) founding team members, comprising CEO and executive director William Dawes and President and executive director Alexander Lemon, are devoted to moving the company’s primary Songwe Hill rare earths project (located in south east Malawi) up the value curve.
The company has been working in the country for the last 10 years and in 2010 secured the exclusive licence to fully explore and determine its potential value. Today, its long-term efforts in the country have seen Songwe Hill emerge as the most advanced rare earths project in the country.
“Malawi has long been known as a rare earths mineral province with significant potential. In fact a lot of areas in the country, including Songwe Hill, were drilled and explored in the late 1980s by the Japanese groups, JICA and MMAJ,” Dawes points out.
It was the historical data records for the project area that piqued Mkango’s interest – “we took on the Songwe Hill tenement with a +-1.4 Mt resource based a drilled depth of just 50 m. Having evaluated this data, we saw the potential to expand the resource both laterally and to depth.”
In January 2011 Mkango was listed on the TSX-V and, together with subsequent rounds, raised a total of C$13 million. This enabled it to complete two further drilling programmes, increase the resource substantially to 32 Mt (inferred and indicated) and complete extensive metallurgical work, culminating in a pre-feasibility study (PFS) subsequently updated in November last year.
And the project has been advancing quickly beyond this point. Having successfully listed on London’s AIM market in June this year, the company raised an additional £1 million in order to complete further optimisation work on the project which will position the group to secure partnerships and off-take arrangements. It is now officially the only rare earths focused company listed on the London Stock Exchange.
Attractive economics - already
The PFS study for Songwe Hill suggests an 18 year open pit mining operation processing around 500 000 tpa to produce approximately 2 840 tpa of rare earth oxides in purified chemical concentrate – from just the indicated portion of the total resource.
US$216 million in capital expenditure is earmarked to achieve this and according to Dawes is at the lower end of the rare earth cash start-up spectrum, “which gives us a huge competitive advantage in the rare earths space.”
There is also massive upside potential on the project as additional resources are proven and ore body extensions investigated. “For the purposes of the pre-feasibility study, the mine plan only focuses on the indicated resource and equates inferred resources with waste material despite being mineralised. If this material can be upgraded to indicated or measured categories through further drilling, it would add further value to the project and lower our strip ratio as well.”
While mineralogy plays a major role in the overall viability of rare earth projects, so does geography, and Songwe Hills’ location can definitely be considered a mining ‘hot spot’.
“Our proximity and access to a number of major infrastructure developments - rail, road, port and power – puts us in a strong position versus our rare earth junior peers. Malawi has a new railway line in the south of the country, a paved road network, a new dry port project (for the railway line) and significant power development projects in the pipeline.”
And while the Malawian government has assured Mkango that it will provide the project with access to grid electricity, the company is also intent on ensuring its own flexibility in this regard. Dawes explains that in addition to diesel-driven back up power gensets, Songwe Hill’s design plan incorporates a sulphuric acid plant which can be used to co-generate power thereby reducing the company’s total external power requirement.
Songwe Hill is not ‘short’ when it comes to mineralogy either and in fact offers a rather unique and highly favourable mineralogy.
Its dominant rare earth element-bearing minerals are synchysite (similar to bastnaesite) and apatite (a fertilizer mineral). This particular apatite is anomalously enriched in heavy rare earths compared to apatites in most other carbonatite deposits – a geological peculiarity that was the subject of a Mkango sponsored PhD research project.
“The combination of both mineralogies offers us exposure to and significant quantities of both the light (Neodymium and Praseodymium) and heavy (Dysprosium and Terbium) rare earth magnet metals,” Dawes reveals.
“The advantage is that both synchysite and apatite are easy to leach at low temperatures. This is a significant benefit versus the other common light and heavy rare earth minerals, monazite and xenotime, respectively, which generally require higher temperatures to crack.”
The project ‘sweetener’ is the country itself Dawes adds. “Government are highly supportive of assisting us move this project into development and production. It is a cost effective jurisdiction and easy to access. Its general weather patterns also enable us to work on site all year round.”
The immediate future will see Mkango continue with optimisation work to demonstrate the advantages of its cost position. “The PFS identified a number of areas where we can reduce operating costs and by tweaking the flow sheet, improving recoveries and looking at different product strategies, I believe we can significantly lower costs – so I am confident we will be a low capex and opex operation.”
Evaluating and securing partnerships is the second priority and a step that would accelerate the completion of a full feasibility study and then the development stage.
Dawes says a feasibility study will take about 12-18 months to complete and construction a further 18 months.
“At the feasibility stage, we will evaluate all options for the project including partial separation, but the base case is to produce a purified, Cerium-depleted, high grade chemical concentrate. Ultimately, we are focused on achieving maximum magnet metal recovery with the lowest operating cost capitalising on our favourable rare earth mix, mineralogy and Malawi’s infrastructure benefits.”
The market will recover
Like most commodities, the rare earths sector has been severely impacted by low prices which have resultantly seen an attrition of development and exploration projects across the globe. “Consequently, the number of companies with an advanced stage project still focused on moving their project forward is very few."
"The rare earth-dominant Chinese market is also changing drastically. Not only is most of their production marginal or making a loss, but their cost base (labour for example) is increasing and their environmental legislation tightening. The Chinese government is also consolidating the sector and clamping down on illegal production. The potential for supply to be constrained moving forward is likely due to these circumstances,” Dawes outlines.
From a demand perspective, over 50% of rare earth demand is geared to clean technology – wind turbines, hybrid electric vehicles, catalytic applications, etc. – as well as new technologies.
The global demand for these products and technologies will continue to escalate and drive demand for rare earths. “Knowing when the market will turn is the key point of uncertainty but I remain optimistic on the outlook for the sector, particularly for the magnet rare earth metals.”
“In essence, Mkango’s interest lies in ‘good projects where we can add value’ which are geared to the low carbon or green/new economy - and rare earths feature at the top of the list. We are also keen to capitalise on synergies in Malawi both in the rare earth sector and in other industries.”
Dawes explains that there are three known additional large carbonatite rare earths deposits in the country which could results in opportunities for synergies down the line. The company also owns a uranium project in south west Malawi which to date has revealed some “interesting results”.
Mkango announced in June this year that it is in the process of acquiring new airborne geophysical data covering the majority of its Phalombe (in which Songwe Hill is incorporated) and Thambani (uranium) exclusive prospecting licences in Malawi from the Malawi Geological Survey.
The nationwide airborne geophysical survey is part of a $25 million World Bank funded project. The airborne geophysical component of the project comprises high resolution airborne geophysics flown at 250 m spacing; uranium, potassium and thorium radiometric surveys; magnetic surveys, gravity surveys and raw data production.
On 15 June 2016, Hon. Bright Msaka SC, Malawi's Minister for Natural Resources, Energy and Mining launched the five-year Geological Mapping and Mineral Assessment Project (GEMMAP) in Lilongwe, which encompasses ground truthing of the airborne geophysical survey.
The Government of France is supporting the project, which aims to acquire geo-scientific and mineral occurrence data to be used to promote and maximise the mining sector's contribution to the country's socio-economic development.
Malawi was last mapped in the 1950s and 1960s using aerial photography with very limited follow up ground work. GEMMAP is being implemented by a consortium of the Malawian Geological Survey, French Geological Survey (BRGM), Council for Geosciences of South Africa and the Geological Survey of Finland (GTK).
To date, Mkango has announced the results of initial interpretation of data on two thirds of its Thambani licence confirming major uranium radiometric anomalies and highlighting a number of magnetic anomalies previously unidentified which provide an excellent focus for future exploration of niobium-tantalum.
“Radiometrics is an effective tool for rare earth and uranium exploration and will help us determine additional exploration potential for both our project licences,” Dawes highlights.