Malawi’s Mining, Oil and Gas News #30: September & October 2017

Malawi's mining, oil and gas news

Malawi’s Mining, Oil and Gas News #30

September & October 2017

Load shedding started in earnest in September. Sign up here for ESCOM’s updates. The impact of this situation has not been quantified (let me know if you have a study or two), but the President called for ‘patience‘ and said on Sunday that ‘Blackouts will be history in this country and I can promise that‘.

Average demand is 300MW, while production is at about 145-150MW at present, according to ESCOM letter with the latest load shedding schedule. This is roughly a third less than current grid capacity, which covers only 10% of the population, although that figure probably could do with updating and reducing.

Agreements have now been signed with China Gezhouba Group for Kam’mwamba Coal-Fired Power Plant Project that is expected to produce 300MW. The government has also said that it will sign a 30-year agreement with Brazilian mining house Vale for the supply of coal from its Mozambican project, adding that this will not prevent procurement of coal that is locally produced. Another Brazilian company, Costa Negócios, has expressed interest in Malawi’s agriculture and mining sectors. However, given the absence of serious investment and maintenance for several decades in energy, it will be a long time before the electricity situation is resolved, and according to Cement Products Limited Chair Aslam Gaffar, ‘our only biggest challenge is electricity supply‘.

ASX-listed exploration company Sovereign Metals reported good news in September and October for its Malingunde Graphite Project. First, receiving an endorsement of governmental support from mining minister Aggrey Masi, and then signing an MoU with Central East African Railways (CEAR), an infrastructure and logistics consortium which Vale SA and Mitsui & Co. Ltd operate and have significant ownership. The MoU, a precursor to a binding agreement, covers the provision of rail freight, port access & port handling services. And finally, the company is successfully raising capital towards a feasibility study. Dr Julian Stephens, Sovereign’s Managing Director commented,

We are delighted to have raised funds to complete all technical disciplines required to proceed to a final investment decision at Malingunde. The significant institutional support received from Australia and the United States highlights the demand for
simple, low-cost projects in the rapidly expanding graphite space.

Mkango Resources, another junior exploration company, also reported that it closed a £500,000 placing With Talaxis.

On the other hand, Paladin, which is in administration, continues to face serious challenges:

Paladin collapsed into administration in July, as reported by The Australian at the time, after its French offtake partners EdF wanted the company to come up with $US277m for the reimbursement of uranium offtake pre-payments.

As a secured lender, EdF would appear to be at the front of the creditors’ queue should Paladin go under.

Shares in Paladin have been suspended since early last month, when they were changing hands at just 4.7c each.

A decade ago, it was trading at more than $8 a share.

And exploration company Globe Metals & Mining and government have been taken to court by Kanyika residents ‘for failing to compensate them after they were asked to relocate to pave the way for establishment of a niobium mine in the area‘. At present, the company remains in the exploration stage given the depressed niobium prices, currently seeking to sign off-take agreements, and the high cost of operating a mine at the site. The company negotiated a Mining Development Agreement with government but it remains unsigned.

At the end of September, Oxfam Malawi held a public debate on how Malawi’s extractives can contribute to development and SacOil held a training for government officials on hydrocarbons. Malawi’s Petroleum Policy is currently being drafted and should be released in November, according to Nyasa Times. This would be very swift compared to the Mines and Minerals Bill, which we have been told will be tabled at the ‘next sitting of parliament’ since April 2015. Civil society continues to call for its swift enactment.

Nkhotakota District Executive Committee recently requested Hamra Oil to put on hold geophysical mapping until an Environmental Social Impact Assessment (ESIA) was presented to the committee. It is wise to be cautious. Nevertheless, this ESIA was in fact already conducted and presented to the public in 2014 by Surestream Petroleum when it held the majority share in the same petroleum blocks. This ESIA is still valid for activities Hamra is currently conducting. That said, some people in Nkhotakota are now happy with the project following meetings with the company. Kanyenda Area Development Committee, Senior Group Village Headman Kalewa who represented Senior Chief Kanyenda said:

We had fears that the exploration exercise would destroy environment like fish and trees but now that we hear there will be no environmental destruction, we are happy for the project.

We only ask Hamra Oil representatives to keep us updated and keep their promise of promoting social responsibility by providing a certain percentage of the money that will be generated to us through the council if at all oil and gas are found during the exercise.

According to consultant with Hamra Oil, Grain Malunga, Hamra will soon start surveying in Karonga District and has engaged an Area Development Committee in Nkhata Bay. Malunga played down concerns that the world is moving towards phasing out the use of oil (for example, France, among many nations, has placed a future bans on the sale and production of petrol and diesel cars coming into effect in 20 years). Malunga said:

If we find oil and gas in the lake, it will be to our advantage because whatever happens, Malawi will still be using the fuel driven vehicles until some more years to come.

Editor of Nyasa Times also came out in strong support of oil. He’s probably getting ahead of himself given that exploration remains in the very early stages, and we haven’t cleaned up our public financial system enough which is necessary if we are to benefit as a nation from resource revenues.

Other problems emerged with the ongoing dispute between Malawi and Tanzania over the Lake Malawi boundary that flared up following Malawi’s issuance of petroleum licences. It emerged that some original documents held by the Malawian government pertaining to the dispute were missing. Principal Secretary Isaac Munlo in the Ministry of Foreign Affairs and International Cooperation told the Parliamentary Public Accounts Committee that this was ‘due to chaotic filing system of documents and lack of systems of data keeping‘. However, the ever-ready Minister of Information and Communications Technology, Nicholas Dausi, responded that the ‘government is in custody of all the relevant paper work in line with all boundaries of the country‘.

Malawi’s online mining cadastre portal now maps the petroleum exploration licences.

In personal news, I have taken on a new role with the Tax Justice Network as Anglophone African Hub Researcher and continue, among other activities, with the School of Data as an Open Contracting Mentor for Hivos and ARTICLE 19’s Open Up Contracting programme.

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