African enterprise: Malawi boosts infrastructure to back mineral businesses, By James Brewer
UK-educated, much travelled businessman Will Dawes says of his latest country of operation: “Malawi is a great place to work. There is a favourable political backdrop, and improving infrastructure.” The UK market, he says, is beginning to understand Africa better.
Mr Dawes is chief executive of Mkango Resources, a company listed on Canada’s TSX-Venture exchange and focused on exploring for rare earth elements and zircon in Malawi.
Alexander Lemon, president of Mkango Resources, says: “Malawi has potential to be the largest rare earth producer in Africa, with a number of rare earth deposits and significant infrastructure developments underway.”
Malawi, formerly Nyasaland, elicits little attention in the wider business world and to casual visitors it can feel a little like 1950s Britain (apart from its sub-tropical climate).
Progress in mineral exploration led by Mkango could help sharpen the focus on Malawi, which is set to benefit from outside investment more generally. Already the Brazilian group Vale is backing a $4.4bn upgrade of the rail line that runs through southern Malawi on its way to what will be a new coal terminal at Nacala, a natural deep water port in northern Mozambique. Due to be completed by the third quarter of 2014, the line starts from Mozambique’s Tete province and geography dictates its route through the territory of Malawi.
Nacala, which has a deeper draught than the established port of Beira, is expected to begin full port operations in 2015, serving handymax, panamax and capesize ships.
In relation to mining development, Malawi has a successful track record and its new president, Mrs Joyce Banda, has taken up the reins in a businesslike way after the previous incumbent died. “She is really transforming the country. International relations had broken down to a certain extent, but she is reinvigorating the process, ” said Mr Dawes at a London presentation, organised by Nick Fuller & Associates, of his company’s strategy.
Mrs Banda came to office in April 2012 and is the country’s first female president. Earlier in her career she set up several companies and founded the National Association of Business Women. Forbes has listed her as the most powerful woman in Africa, and number 71 in the equivalent world ranking.
There is a big variation in terms of economic outlook for the individual rare earths, and Mr Dawes said: “We are focused on the rare earths geared to clean energy demand.” Critical rare earths such as neodymium, dysprosium, terbium, europium and yttrium are essential for clean energy and high tech applications.
Also important in Mkango’s strategy is zircon, a mineral which is nearly as old as the Earth, and which is used to strengthen the resistance of ceramics and tiles; in bricks that line furnaces; in foundries; and to produce zirconium based chemicals for the nuclear industry.
Mkango’s southeast Malawi licences cover 1, 751 sq km of the Chilwa alkaline province, with the target area Songwe Hill, first mapped geologically half a century ago. “Without the technology we have now, it was incredible how skilled the geologists were in identifying the mineralisation, ” said Mr Dawes. “It gives us a head start in terms of exploration.” Little work was done for the last 20 years, but now Mkango has carried out detailed drilling. The company shipped in its drilling equipment from Canada via Beira – one container for a rig and two for spare parts.
Resource estimates have significantly exceeded original expectations and the company says that they provide a strong platform for accelerated development of the project. Production is estimated to be two to three years away.
Songwe is accessible by road from Zomba, the former capital, and Blantyre, the principal commercial town of Malawi and one of the oldest urban centres in eastern and southern Africa. Total travel time from Zomba is about an hour and a half, and this will reduce as infrastructure continues to be upgraded. It is not possible to reach Malawi directly by air from outside Africa, but there are regional services from Johannesburg (a one and a half hour flight to Blantyre) and Nairobi.
Mkango Resources began trading in January 2011 and its corporate strategy is to fast track scoping and feasibility studies which will result in the production of rare earths at Songwe Hill as soon as possible.
It is operating in Malawi throughout the year. The wet season is from November or December to March or April, when heavy rain and insects can be a nuisance, but a Canadian team “who do a fantastic job” drills throughout the season and thanks to good infrastructure is able to work throughout the year
In an important step forward, Mkango has just published its NI 43-101 technical report and mineral resource estimate on the Songwe project prepared for it by independent consultants. National Instrument 43-101 Standards of Disclosure for Mineral Projects is the barometer for information accuracy required by Canadian securities administrators.
Next steps for the company are to complete metallurgical scoping test work, with a view to commencing production on an accelerated timescale. The ultimate mining operation has potential to produce at least 5, 000 tonnes per year of rare earth oxides.
Mr Lemon said: “Malawi’s favourable political backdrop, its excellent geological potential and improving infrastructure, including major rail, road and power developments, together with the continued support of the Government of Malawi and its Ministry of Energy and Mines, the Mines Department and Geological Survey, provide a very strong basis for development of this important mineral resource and for Mkango’s continued growth in the region.”
In a talk on the sector background, Chris Ecclestone, London-based principal mining strategist for Hallgarten & Co, which advises hedge funds on portfolio management, said that the processing of rare earths can be very complicated – some have to go through 80 or more phases. “Rare earths are all about chemistry, chemistry, chemistry.”
Mr Ecclestone said that many of the world’s current rare earth projects have very long lead times, but added that there are going to be more and more applications invented for rare earths.
Mr Ecclestone explained that not all rare earths are rare – some are more typical in the earth’s crust than copper. In the markets, the major Chinese producers had realised that grabbing market share was unprofitable and was squandering resources – now they were justified in hanging on to their product. He believed that following a dip in price, it was going to start rising again for most products.