Editorial: Transparency key to success of Kangakunde

EDITORIAL

Transparency key to success of Kangakunde

Studies have shown that Malawi is endowed with rare earth minerals, the 17 elements which are dubbed “The Vitamins of modern industry,” due to their importance in modern technological applications.

Demand for these elements with irreplaceable properties has been rising particularly in the areas of energy efficiency and high technology as alternative energy systems such as wind power generation, fuel cells, hydrogen storage and rechargeable batteries as well as the permanent magnets used in electric and hybrid electric vehicles rely on rare earths.

As reported in our main article, Malawi is in a position to benefit from the growing market for rare earths through sustainable exploitation of its deposits including Kangunkunde in Balaka, which is a proven large unexploited rare earth source outside the People’s Republic of China which dominates production of the metals.

Over the years, a court wrangle has prevented the development of the mine as the original exclusive prospective licence holder, South African geologist Michael Saner sued the government for snubbing his application to renew his EPL.

Instead of renewing Saner’s licence, the government in 2003 granted the mineral rights to Rare Earths Company, which was believed to have links with the then Bakili Muluzi administration.

In 2006, Rare Earths sold the mineral rights to ASX-listed firm, Lynas Corporation at US$4-million, but though the deal received the blessing of the late Bingu Wa Mutharika’s administration, Saner obtained an injunction from the court restraining the granting of the mineral rights to any other party other than himself.

Using the courts, Saner has been pushing the Malawi Government to pay him US$100-million for damages plus sunk costs, legal costs and interest.

Now it seems there is light at the end of the tunnel as after 15-years of legal wrangling, Saner has signed a consent agreement with the Malawi Government to amicably resolve the issue and pave way for investment by ASX-listed miner Lindian Resources, which is in the process of acquiring 75% Kangankunde shareholding from Saner.

We welcome the news as a good development for Malawi to develop its rare earth mining industry, which has the potential to turn around the economy of this impoverished nation whose overdependence on rain-fed agriculture has proved disastrous over the years due to the effects of climate change.

However, the Kangankunde story should act as a lesson to politicians not to abuse their powers to interfere with granting of mineral licences as such cases cost the government money which could be used for social services.

Such cases also slow down development of mines which would benefit the country’s economy and surrounding rural communities through corporate social responsibility.

Kangankunde should present a lesson to government to conduct a due diligence on an applicant for mineral rights before granting the licence.

In this case, we are saying the government should have investigated the capacity of Saner to develop the tenement before granting the licence to such a speculator.

Above all, the Kangankunde scenario should enlighten the government and mining companies on the need for transparency when sealing mining deals.   Definitely, one would question how Rare Earths Company managed to get government approval to sell the Kangankunde licence to Lynas Corporation at a whooping US$4-million while the issue was in court? Was Capital Gains tax paid and how much?

Certainly, as Malawi advances with this worthwhile project, we will need the government and the mining companies involved to be transparent to allay any fears and suspicion of corrupt dealings.

There should also be transparency by the company and the government must scale up its monitoring of environmental issues as some of the minerals at Kangankunde are radioactive.

***

This piece was initially published in Malawi’s Mining & Trade Review Issue Number 66 (October 2018).

The full edition is available for download here. This monthly publication is edited by Marcel Chimwala.

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