The piece “Mkango Wabuma Tsopano!! Mkango Resources announces positive pre-feasibility study results for Songwe Hill Rare Earth Project” featured below was initially published in Malawi’s Mining Review Issue Number 17 2014 that was circulated in October 2014.

To learn more about this quarterly publication, edited by Marcel Chimwala, read the post about the “Voice of the mineral sector in Malawi”.

Mkango Wabuma Tsopano!!

Mkango Resources announces positive pre-feasibility study results for Songwe Hill Rare Earth Project

• Net Present Value estimated at US$293-M with an 18-year mine life
• Pre – Feasibility Results have positioned Malawi globally as a potential sustainable rare earth producer

Mkango Resources has announced positive pre-feasibility study results for its Songwe Hill Rare Earth Exploration Project in Phalombe District in Sothern Malawi.

Mkango Resources CEO  Mr Will Dawes explains that the study supports the declaration of a maiden probable mineral reserve estimate of 8.5 million tonnes grading 1.60% total rare earth ore (TREO) for  the project and is based on an open pit operation, using contract mining, with a mine life of 18 years potentially commencing in 2017.

There is potential to significantly expand production or the mine life and for a lower strip ratio given the large additional inferred resource and potential to expand the mineral resource,

says Dawes.

He says the first phase of development envisages production of a high grade, critical and heavy rare earth enriched, purified chemical concentrate for toll treatment or sale, with annual production of approximately 2,840 tonnes per year of REO in concentrate.

The pre-feasibility study has pegged the after-tax net value of the deposit at US$293-million using a 10% nominal discount rate and 36% after-tax internal rate of return based on rare earth oxide (REO) prices equivalent to a total rare earth basket price for Songwe Hill of US$55 per kg of REO, which reflects the removal of a large percentage of cerium during the hydrometallurgical process to enhance the value of the product mix.

The study, which was based on an open pit mining operation, pegs the capital expenditure at US$217-million including a contingency of US$20-million, which Dawes describes as among the lowest in the rare earth sector.

Assuming an additional cost of US$10/kg to account for the cost or discount associated with toll separation or the sale of a mixed chemical concentrate, the study outlines cash operating costs of US$13.4/kg for the first five years of production, increasing to US$17/kg for the remainder of the mine life.

Mkango President Alexander Lemon says:

The results are a major milestone for the company and position Mkango and Malawi as one of the few rare earth companies / countries globally with a pre-feasibility study announced.

There is significant scope to optimise the flow sheet and mining operation and this will be the near term focus going forward, as we move into the next stage.

With the ongoing support of the Ministry of Natural Resources, Energy and Mining as well as the communities surrounding the project, the Nation of Malawi has the potential to be a leading sustainable producer of rare earths on a global scale. We are proud to be spearheading this initiative with the Government and People of Malawi.

Mkango CEO William Dawes comments that the firm is encouraged by the positive outcome of the study, which is an inspiration to take the project to the definitive feasibility study stage.

 This is a major milestone in the development of the project.  Since listing in 2011, Mkango has progressed an early stage exploration project to one of only three rare earth projects in Africa with a Pre-feasibility Study or Feasibility Study announced. We are very encouraged by the Project’s strong returns and relatively low capex (Initial capital expenditure),

says Dawes.

The Songwe Hill project features broad zones of outcropping rare earth mineralisation on the northern slopes of a steep sided hill.

The annual processing capacity was assumed at 500,000 tonnes per year of ore with a view to producing an average of approximately 2,840 tonnes of REO in mixed chemical concentrate per year with a large proportion of the cerium removed during the hydrometallurgical process.

Cerium is currently considered to have challenging market fundamentals and, under Mkango’s current strategy to produce a concentrate, there is a strong economic rationale to remove as much as possible of the cerium from the final concentrate.

It is currently envisaged that the product of the operation in Malawi will be a high grade, heavy and critical rare earth enriched, purified chemical concentrate.

Mkango Resources contracted MSA Group of South Africa to conduct mine design for Songwe Hill based on a conventional open pit mining operation and assumed the use of a contract miner.

The mine plan incorporates the use of stockpiles to manage the grade profile and maximise returns.

As part of the study, a contract mining company visited the Songwe Hill site and was integrally involved in the estimation process.

The rare earths to be mined at Songwe Hill as major revenue drivers include neodymium, dysprosium, praseodymium and europium.

Mkango Resources, which wholly owns the Songwe Hill Project through its subsidiary called Lancaster Exploration, conducted pre-feasibility environmental and social baseline studies of the project in 2013 through contractors Digby Wells of South Africa in consultation with Malawian environmental specialists.

The studies are based on the requirements of the Equator Principles, International Finance Corporation performance standards as well as specific requirements and interpretations of Malawian legislation as provided by the Department of Environmental Affairs.

A project brief for the proposed environmental and social studies for the Environmental, Social and Health Impact Asessment was submitted to Department of Environmental Affairs in the fourth quarter of 2013.

Lemon reports that the Department has responded with suggested Terms of Reference which will be addressed in the Environmental, Social and Health Impact Assessment for the planned Definitive Feasibility Study.

The Songwe Hill Rare Earth Project is accessible by road from Zomba, Malawi’s former capital, and the commercial capital, Blantyre.

Total travel time from Blantyre is approximately 2 hours, which will reduce as infrastructure continues to be upgraded in the area.

The Songwe Hill Rare Earth Deposit is Mkango’s main exploration target, and features carbonatite hosted rare earth mineralisation, which was subjected to previous exploration in the late 1980s.

In parallel, the Corporation is also undertaking regional  and detailed mineral exploration at its second licence area known as Thambani in the district of Mwanza in South Western Malawi where it has identified a number of areas with potential for uranium, zircon, corundum and niobium.

The Corporation’s corporate strategy is to further develop the Songwe Hill rare earth deposit and secure additional rare earth element and other mineral opportunities in Malawi and elsewhere in Africa,

says Lemon.

Mkango Resources is listed on Canada’s TSX Venture Exchange and runs its operations in Malawi through Lancaster Exploration, which has its head office for Malawi operations in Blantyre.

Country Manager for Lancaster Exploration Burton Kachinjika comments that the whole Lancaster team is excited with the coming in of the positive results.

The results are beyond our expectation. With such type of results, we are assured of a great future not only for us as employees of Lancaster Exploration but also for Malawi as a mining investment destination,

says Kachinjika, whose views are shared by the company’s Senior Geologist James Mtegha, Ansel Zabula and Chikondi M.