New operator for the Kayerekera Uranium mine, Hyle Metals, will conduct a fresh feasibility study to re-engineer mine processes before re-opening it within two years.
Deputy Director of Mines, Peter Chilumanga, said in a response to an emailed questionnaire that production will not commence immediately because the new company will have to take due diligence of the current Kayerekera standing position.
“Using that information, they [the firm] has promised to undertake a thorough feasibility study to re-engineer all the mine processes with a view to successfully opening again in the shortest possible time.
“It is in their interest to ensure that this commences as soon as possible. Preferably within two years,” Chilumanga said.
Last year, dual-listed miner, Paladin Energy Limited, announced intentions to offload its 85 percent stakes in the Kayelekera mine, a move that attracted mixed reactions.
The company is selling-off its shares to Hyle Metals, a subsidiary of Lotus Resources, a joint venture with Chichewa Resources.
The Malawi Government owns the remaining 15 percent stakes.
Chilumanga said the interest is to get the mine on stream again so that the benefits accrued from the mine start trickling again into the economy.
When operational, Kayerekera led to increase of contribution in the mine sector from 1.2 percent to 5 percent.
Chilumanga said the government is leaving no stone unturned to ensure that the sale process goes on smoothly and all potential negative loopholes are sealed.
He said the government will ensure that the government and public interests are not prejudiced by this sale.
“Government is and has indeed been conducting a thorough due diligence on the company with a view to ensuring that the company has the right financial capital, technical competence and experience to bring back the project on stream,” Chilumanga said.
The government granted Paladin mining licence in April 2007 for a period of 15 years following the signing of a Development Agreement. Construction commenced in June 2007 and was completed in April 2009.
Paladin’s stake in Kayelekera will be sold for $5 million, comprising $200,000 in cash and $4.8 million in Hylea shares to be issued to Paladin.
This will include $1.8 million upon completion, which is subject to a 12-month voluntary escrow, as well as $3 million on the third anniversary of completion.
The issue price will be based on the lower of the 30-day volume-weighted average price at the time of issue, or the price of Hylea capital raising in the 90 days preceding.
Paladin suspended production at its Kayelekera Uranium Mine in 2014 for a care and maintenance exercise.
However, low uranium prices on the global market forced the miner not to resume production, thenceforth.
For years, the Kayerekera mine has been perceived by some as a white elephant to the Malawi Government and its people, as other commentators were saying the state ventured in a hasty and raw deal.
Media reports suggested that by 2017, Malawi lost about K19.6 billion through tax exemptions and royalties in the Uranium mining deal, quoting a Berlin-based consultancy firm, OpenOil.
But the report was quashed by the then minister of Finance, Goodall Gondwe, who said the figure was way too high.