The piece “Mining investors ask for incentives” featured below was initially published in Malawi’s Mining Review Issue Number 28 2015 that is circulating this August 2015.

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

Mining investors ask for incentives

• Malawi must see foreign investors as partners in development and nurture them-Walker

By Marcel Chimwala

There is need for the Malawi Government to put in place appropriate incentives for investors in the mining sector if Malawi is to realize its dream of making a paradigm shift from agro-based to mineral based economy, a representative of the private sector said at the Malawi Investment Forum.

Paladin Africa General Manager, Mr. Greg Walker, who made a presentation on the business environment in Malawi from a mining investor’s perspective, said Malawi, which is currently reviewing its archaic mining legislation including the Mines and Minerals Act of 1981, must focus on creating attractive conditions for foreign investors, not just on industry regulation.

Good legislation is necessary, but that is just the start. You have to become an effective and efficient regulator. See foreign investors as partners in development and nurture them. Value what you already have. Others will judge Malawi on its treatment of operational investors. Be aware of what others offer. Botswana is a good role model – Zimbabwe is not,

said Walker, whose firm owns the Kayelekera Uranium Mine in Karonga, which is Malawi’s largest mining investment.

He said Malawi will be able to compete for foreign direct investment (FDI) with other countries globally if it puts in place incentives that give the country a competitive edge against fellow nations yearning for FDI.

Mr. Walker noted that in the internationally recognised Fraser Institute Annual Survey of Mining Companies which rates 122 jurisdictions around the world based on geological attractiveness and government policy encouragement for exploration and investment, Malawi was considered in 2014 but not included due to insufficient response.

This must change by next year if the country is to be considered a viable mining destination for global investors,

he told the delegates at the mining conference that was held as part of the Investment Forum.

Mr. Walker also mentioned high levels of corruption as one of the areas the country has to look at if it is to attract investment.

Malawi first appeared on Transparency International’s (TI) Corruption Perceptions Index in 1998 – and ranked 45th of 99 countries surveyed. In 2010, Malawi ranked 85th. Today Malawi has slipped to 110th – a trend that can and must be reversed,

he said.

Mr. Walker observed that Paladin’s experience in doing business in Malawi shows that there is need for strong    government support to attract FDI.

He cited a robust security of tenure, unambiguous discovery-to-development rights, a clear fiscal and regulatory framework – stability period, appropriate incentives for investment, statement of support for project development terms, and ongoing project mentorship as some of the key attributes required to create a thriving mining investment environment.

Mr. Walker said:

Social mandate is important but not absolutely essential. Government must take into account national interest considerations. Managing community expectations requires Government intervention.

He also urged the government to ensure that there is supply of adequate, reliable and reasonably priced power to support mining investments.

Our experience with Kayelekera indicates that self-generation of electricity is a major cost impediment,

he said.

Mr. Walker explained that Malawi’s target should be to attract 8-10 additional junior prospecting companies to invest in exploration in the next 10 years.

Exploration is the life blood of discovery as without exploration, there will be no further discoveries and without discoveries, there will be no further development,

he said.

Mr. Walker said Paladin would like to see more foreign investment in the resources sector in Malawi and as one way of fulfilling that objective, the company is supporting the establishment of the Chamber of Mines and Energy of Malawi to promote the growth and strengthening of the industry.

We need to work together to promote a “mining culture” in Malawi so people better understand the social and economic benefits that resource development brings,

he said.

Paladin Energy, which is listed on both Australian and Toronto Stock exchanges, has an 85% controlling interest in the Kayelekera Uranium Mine with the Malawi Government owning the remaining 15%.

The company acquired the Kayelekera deposit, which was discovered by the Central Electricity Generating Board of Great Britain, in 2005 when it commenced a Bankable Feasibility Study that was followed by an Environmental Impact Assessment in 2006.

In 2007, Paladin Africa signed a Development Agreement with the Malawi Government which issued a mining licence but legal actions by non-governmental organisations opposed to the development of the project delayed project start-up for 9 months.

In 2008, the firm commenced the US$ 300M Construction Phase and subsequently launched production in 2009.

Production at Kayelekera was suspended in 2014 due to sustained losses which came about due low prices resulting from low demand of the yellow cake in the aftermath of the Fukushima Nuclear Disaster in Japan which lead to the closure of many nuclear power plants in Asia.

Consequently, Paladin placed Kayelekera on Care and Maintenance after an expenditure of US$620M and is eagerly waiting for prices to rebound.

Malawi launched a Mines and Minerals Policy in March 2013 which seeks to turn the country from an agro-based to mineral based economy.

The country hopes to fulfill this dream through the exploitation of various minerals including uranium, heavy mineral sands, strontianite, rare earth minerals, phosphate, bauxite, gypsum, vermiculite, precious and semi precious stones, limestone, dimension stones, silica sands, sulphides and coal.

There is also potential for discovery of sizeable quantities of oil and gas and other high value minerals including gold, platinum group minerals and diamonds.