William Dawes, Chief Executive Officer, Mkango Resources Ltd., (TSX-V: MKA)

Mkango Resources plans to spearhead rare earth development in Malawi.

William_Dawes-BLOGCould you provide us with an overview of Mkango Resources Ltd. (TSX-V: MKA) and your reason for choosing to explore in Malawi rather than in other countries on the African continent?

WD: Mkango Resources Ltd. has been working in Malawi for the past seven years, first in a joint venture capacity, and ultimately as license-holders. Our first license is the Phalombe License in south eastern Malawi, where our flagship project is located, the Songwe Hill Rare Earth Project. Our second license is at Thambani, western Malawi, where we have a team conducting ground radiometric surveys and other exploration work, focusing on a range of commodities: uranium, zircon, rare earths and gold targets. Management evaluated a large number of projects throughout Central Asia and the Middle East, as well as other countries in Africa before deciding to focus on Malawi based on the country’s mineral potential as well as its ease of doing business for an exploration company.

You recently completed the NI 43-101 Technical Report and Mineral Resource Estimate at the Songwe Hill Rare Earth Project. What is the corporate strategy and timeline for the development of this project?

WD: We first reviewed the historical data, which was largely generated out of exploration work completed in the late 1980s by the Japanese International Cooperation Agency (JICA) and the Metal Mining Agency of Japan (MMAJ), in conjunction with the Geological Survey of Malawi. Over two phases, we drilled 38 drill holes to a maximum depth of around 350 meters, which resulted in the filing of a NI 43-101 Technical Report and Mineral Resource Estimate, which included a significant indicated resource component. As a result of the size of the indicated resource, we do not anticipate conducting any additional drilling prior to releasing the pre-feasibility study, as the indicated resource is sufficient enough to support a substantial mine life. We are currently conducting mine planning, as well as processing and test work. Processing will be the key determinant of the project’s economics. Extensive mineralogical studies and metallurgical scoping test work has been carried out over the last three years, and we are now focused on optimizing the metallurgical flow sheet. In July 2013 we announced a base case metallurgical flow sheet and the results of proof of concept test work, which produced two high-grade products at a bench scale, a high-grade mixed rare earth carbonate product and a cerium depleted, heavy rare earth enriched mixed rare earth hydroxide product.

Songwe Hill is located in a rare earths mineral province covering southern Malawi, whose mineral potential has been known since the 1950s.Mkango has a number of advantages compared to other rare earth projects internationally. Our infrastructure-related costs are likely to be competitive, and Malawi is a stable place to operate, with weather conditions that allow us to work all year round. Our mineralogy is also very favorable for processing. In addition, we can reap synergies from Malawi’s regional mining neighbors, such as Mozambique or South Africa. The African continent overall is well-positioned to become a major rare earths producer.

What sort of investments is Mkango Resources making in the communities surrounding your projects; the eastern parts of Malawi are significantly less developed and do stand to benefit from industrial expansion in the area?

WD: During the last few months we have focused on completing our environmental and social pre-feasibility study, which is integral to moving the project to the production stage. As the project moves through the feasibility stages to production, our social development programs will be scaled up and once in production we anticipate that the project will bring significant benefits to local communities. During the exploration stage, we initiated a number of programs to benefit the local communities. Water boreholes were drilled and refurbished in the local area, one of which is located in the nearest village to the project near a primary school, which has greatly improved access to water. We also have a soybean program, which aims to boost agricultural production and food security in the surrounding communities. We originally donated soybean seeds to 300 families: each family received 10 kg of seeds, which allowed them to produce between 300 and 400 kg of soy. Soybeans do not require fertilizer, so the costs of farming the crop are lower. When the families collect their crops, they return the original 10 kilograms, which we then pass on to another family, and they also give 10 kilograms of seeds to their neighbor. The excess seed is either kept for food supply or sold on the local market. The project was developed in consultation with local chiefs after discussing the main concerns and challenges in the area. With regard to infrastructure, we also refurbished and constructed roads and bridges, which will facilitate access to markets and other areas for the local communities. Lastly, we have also provided schools with basic supplies, such as notebooks, pens and footballs. We continue to discuss further projects with the local chiefs and plan to leave a positive legacy in the region.

As one of the larger private investors in the mining sector in Malawi, what is your assessment of the procedural aspects of operating a project, such as the taxation and legal framework?

WD: The procedure for commencing an exploration project has been relatively transparent. If you follow the government’s procedures, and you fulfill your commitments to them, the system works well. If Malawi continues to demonstrate that it is an attractive place for exploration and mining investment, we see potential for a large mining industry developing in the country given the significant mineral potential, in particular for rare earths.

What is your assessment of Malawi’s infrastructure, including its roads, railway and the availability of power and their impact on the overall cost of your operations?

WD: One of the benefits of working in Malawi is that the infrastructure is not too challenging: our project is only a two hour drive from Malawi’s major commercial center, Blantyre, and following refurbishment of roads and bridges, we have year-round access to the sites. We probably have better infrastructure and access than some projects located in North America or in Canada, where weather conditions can be a challenge. The new railway line is also likely to facilitate the import and export of materials in and out of Malawi, and will also boost development of the country’s power sector. Most of the power is currently produced by hydroelectric plants, but the railway line is likely to facilitate the development of coal-fired power stations. There are many power projects in the planning stages, and hopefully the mining projects being established at the moment will soon be able to transition from using diesel-powered generation.

Do you believe investors are sufficiently informed about the opportunities in Malawi’s mining industry? What would be your final message to international investors about Malawi’s potential?

WD: Investors are beginning to understand Malawi’s mineral potential, and we are making efforts to promote both our project and the country as a mining jurisdiction. Success stories will be the best advertisement for the country’s potential. It will also be crucial for Malawi to be competitive compared to its neighbors in terms of its fiscal regime in order to attractive new investment. Historically, Malawi’s major focus in terms of development was the agricultural sector, so its mining sector is relatively underdeveloped compared to neighboring countries. Through the Mining Governance and Growth Support Project, the World Bank, European Union and France are assisting development of the mining sector, and this will hopefully help close the gap. Mkango Resources plans to spearhead rare earth development in Malawi, and we hope to be the first rare earth producer in Malawi, and possibly on the continent.

This article was produced as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.

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