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Gloomy future for Kayelekera

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Lengthy talks, no agreement. Having learnt bitter lessons from the skewed agreement with Paladin, government is pulling all the necessary strings to ensure its uranium benefits Malawians long at last…

Government has suspended talks with Lotus Resources Limited, a company that took over ownership and management of Kayerekera Uranium Mine, following continued disagreements over the Mining Development Agreement (MDA).

The suspension is casting a dark shadow on the possibility of the mining firm starting its operations in two months as earlier envisaged.

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MDAs are long-term investment agreements between national governments, principally in the developing world, and mining companies for the development of specific mineral deposits.

A source privy to the discussions has told us that government has asked the Australian Stock Exchange-listed mining firm to either bow down to the terms that Malawi is offering or completely pave the way for another investor.

Resumption of the mine, which was put on Care and Maintenance in 2014, depends on the said agreement, following reports that uranium prices on the global market have started going up, averaging at about $70 per pound.

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But Principal Secretary in the Ministry of Mining Joseph Mkandawire claimed in an interview on Thursday that the discussions took a break because of the presence of the International Monetary Fund (IMF) delegation that is in the country.

“We are discussing fiscal matters at this point and Secretary to Treasury is our main advisor on that. He and the rest of the finance team are busy with the IMF,” Mkandawire said.

But our source ministry, who opted for anonymity, said one of the contentious issues that the two parties have not agreed on is a tax waiver that Lotus wants on importation of diesel that they use to power their generators.

The source said the mining firm also wants a reduction on the Corporate Income Tax percent. from 30 percent to 27.5.

A Corporate Income Tax is imposed on the profits that a company makes.

“They are giving government a condition to connect them to the national grid or get a tax waiver on the diesel that they use for generators, but that is impractical because the only money that government has been able to get from that mine when Paladin was operating it is the tax on the diesel,” the source said.

According to the source, Lotus Resources Limited is also asking for a 10-year stability period from five that were given to Paladin.

This is a window that an investor is given to recover from loans it obtained to invest and in this case it is the mining venture.

Government has, however, put its foot down Paladin throughout the years of its operations, Paladin declared losses, leaving government helpless and that they do not want a repeat of the scenario.

Paladin, the sources said, also used to under-declare the volumes of the Uranium that they were mining and that government barely monitored their accounts, a thing which they want to correct with Lotus.

“The duty waivers they are negotiating for are unnecessary. It is not prudent for government to exempt them from Resource Rate Tax, for instance. I will tell you that they are looking for a Debt Equity Ratio of 9:1 while government prefers 3:1,” the sources said.

We tried to contact the Company’s General Manager Mike Hoey, but the voice on the other end said Hoey had travelled and asked for a questionnaire.

“Mike is outside the country but we are still discussing with government. I will send you an address, send your questions there,” he said but never provided the said email address.

In their Quarterly Activities Report ended March 31, 2022 Lotus Resources Limited states that it had cash of $8.5 million (unaudited), exclusive of restricted cash of $13.5 million.

“No mining or development activities were carried out during the quarter. A scheduled payment relating to the acquisition of the project of $2.7 million was made during the quarter,” the report reads.

M e a n w h i l e , Chairperson for the Natural Resources Justice Network, Kossam Munthali, said Malawi should learn from the past and critically pay attention to the licensing conditions of the company.

G o v e r n m e n t information shows that Lotus has a five-year renewable licence which they got after Paladin’s expired in 2021, after being given consent to divert its 85 percent interest in the mine to Lotus Resources Limited.

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