Year 2017 Malawi Mining Round Up: Power crisis hits industry
By Deborah Manda
As we wind up the year 2017 and ready to welcome 2018, industry captains have advised the government to address the prevailing electricity crisis that has crippled production in the country’s economic sectors if Malawi is to realize its dream of becoming an investment destination of choice.
The power crisis has reached alarming levels this year with most of the areas staying for more than 24 hours without electricity.
Power utilities Energy Generation Company (EGENCO) and Electricity Supply Corporation of Malawi (Escom) attribute the problem to low water levels in the Shire River, a host to hydro-power stations that produce over 97% of Malawi’s power.
Among the heavy industry’s worst hit is cement production. Mining & Trade Review learnt through interviews with officials from the country’s cement manufacturers Shayona Cement, La Farge Holcim and Cement Products that they have reduced their production because of the power shortages.
The development has culminated into low supply of the commodity which has triggered price increases such that the retail price of a 50kg bag of cement has skyrocketed from around K6000 to K9500.
The power outages have affected us a great deal such that we cannot manufacture enough cement to satisfy the market, so many customers are being sent back because of low production,
said Public relations Officer for Shayona Cement, Rowland Mwalweni.
He said Shayona is, therefore, considering starting using diesel generators to power its heavy machines though the option would make production expensive.
We did not envisage the power outages to reach this far, should this situation prolong we may consider hiring generators,
Before the power outages, Shayana, which is investing in massive expansion at its Kasungu factory, was producing 650 tonnes per day but production has now decreased to an average of 100 tonnes per day as the factory has about two hours of power supply per day.
Solutions to power crisis
Coordinator for Malawi Chamber of Mines and Energy, Grain Malunga, has advised the government to treat the energy crisis as a national emergency and start implementing both long and short term measures.
As a long term solution, government should consider putting up a coal fired power generation plant. We can utilise the local coal resources if we set up a plant in the North, and the government also needs to fast-track the construction of the Kammwamba Coal Fired Power Plant which is strategically positioned to use coal from Moatize if the local resources fail to meet the demand,
The Malawi Government is working with the Government of the People’s Republic of China to put up the Kammwamba Coal Fired Power Plant, which is designed to produce up to 300MW of power in its first phase.
The government has also procured diesel generators as a short team measure to the power crisis and is pursuing plans to build several hydro-power plants in the Shire and other rivers.
Malawi is also working on plans to start importing electricity from Mozambique and Zambia, which will qualify it as an operating member of the Southern Africa Power Pool.
Mining projects feeling the pinch
Besides the cement industry, Malawi’s mining projects continued to struggle in 2017 not only because of the power outages but also the prevailing low commodity prices on the world market.
Kayelekera Uranium Mine in Karonga, the country’s biggest mining investment, remained on care and maintenance with the miner, Australia’s Paladin Energy, waiting for low uranium prices to bounce back in order to resume production.
In the year, there was no news from Globe Metals and Mining on its Kanyika Niobium Project in Mzimba which has stalled as the miner continues to seek project financing to the tune of US$400-million and a market for the products which will include niobium, uranium and tantalum.
Ray of hope
However, there is a ray of hope from the coal industry as Mchenga Coal Mines, which is currently the biggest of the northern region coal miners, reported increased demand for the energy mineral mainly from the tobacco industry.
In the year, ASX listed Sovereign Metals also reported substantial progress for its Malingunde Flake Graphite Project. Currently, the company has secured funds from investors in Australia and the USA to kickstart feasibility studies for the project.
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,
said the Company’s Managing Director, Julian Stephens.
Good news in the year also came from Mkango Resources, a UK firm which holds an exclusive prospecting licence for rare earth elements at Songwe Hill in Phalombe.
In November 2017, Mkango entered into an agreement with Talaxis Limited (“Talaxis”), a wholly owned subsidiary of Hong Kong based Noble Group Limited, whereby, subject to regulatory approval, Talaxis will fully fund a bankable feasibility study for Songwe by investing £12 million (C$20 million) for a 49% interest in the project. (Read page 20 on Mkango’s Malawi projects)
But the year 2017 presented both good and bad news from Makanjira in Mangochi for the mining sector. The good news is that a Chinese firm, Nu Kin, has applied for a mining licence for heavy mineral sands after completing feasibility studies including environmental impact assessment studies.
Illegal gold mining activities taking place in Onga and surrounding rivers represent the bad news aspect for Makanjira. In the year, the Mines Department has unsuccessfully tried to curb the illegal gold panning activities which recently claimed lives of four people who were buried in a fallen tunnel.
We have now planned to employ more serious measures to stop illegal mining. This will involve working with all stakeholders including police and the miners themselves,
said Director for Mines Deaprtment, Atileni Wona.
In the year, chaos also ensued at Chimwadzulu Mine in Ntcheu after government refused to extend a 10-year mining license for a local miner, Nyala. Villagers invaded the mine to scramble for rubies and sapphires which they were selling to foreigners who flooded the area.
The government has, currently, deployed officers from the Malawi Police Service to put the situation under control.
Upstream petroleum industry developments
2017 presented some encouraging news for the upstream petroleum sector. Almost all the companies that hold licences for Blocks 1 to 6 have been active in the year with Hamra Oil for 2 and 3 and Rak Gas (Block 4 and 5) undertaking geological mapping.
Pacific Oil (Block 6) has been studying data for the block acquired by the government through the World Bank and European Union funded airborne geophysical survey while Block 1 tenement holder Sacoil in the year launched a project to sensitise Malawians on the upstream oil industry.
Road sector development
Though in the year, lack of necessary infrastructure has remained a stumbling block to investment, the roads sector has shown substantial progress as Malawi has seen a number of important roads rehabilitated or upgraded.
This piece was initially published in Malawi’s Mining & Trade Review Issue Number 56 (December 2017).